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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1)
OR SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRAVELERS PROPERTY CASUALTY CORP.
(Name of Subject Company (Issuer))
THE TRAVELERS INSURANCE GROUP INC.
CITIGROUP INC.
TRAVELERS PROPERTY CASUALTY CORP.
(Names of Filing Persons (Offerors))
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CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
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893939108
(CUSIP Number of Class of Securities)
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Charles O. Prince, III, Esq.
Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Telephone: (212) 559-1000
(Name, address and telephone number of
person authorized to receive notices
and communications on behalf of filing persons)
Copy to:
Eric J. Friedman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telephone: (212) 735-3000
CALCULATION OF FILING FEE
Transaction Valuation*: $ 2,370,843,831 Amount of Filing Fee: $474,169
- --------
* Estimated for purposes of calculating the amount of the filing fee only.
This calculation assumes the purchase of all outstanding shares of Class
A common stock, par value $.01 per share, of Travelers Property Casualty
Corp. (the "Company Common Stock" or the "Shares"), at a price per Share
of $41.50 in cash. As of March 21, 2000, there were 57,128,767 Shares
outstanding. The amount of the filing fee, calculated in accordance with
Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals
1/50th of one percent of the value of the transaction.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount previously paid: Not applicable Filing Party: Not applicable
Form or registration No.: Not applicable Date Filed: Not applicable
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[X] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
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This Tender Offer Statement on Schedule TO relates to the third-party
tender offer by The Travelers Insurance Group Inc., a Connecticut corporation
(the "Purchaser") and an indirect wholly owned subsidiary of Citigroup Inc., a
Delaware corporation ("Parent"), to purchase all of the issued and outstanding
shares of Class A common stock, par value $.01 per share (the "Common Stock" or
the "Shares"), of Travelers Property Casualty Corp., a Delaware corporation
(the "Company"), at a purchase price of $41.50 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated March 23, 2000 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (a)(1)(A), and in the
related Letter of Transmittal (the "Letter of Transmittal"), a copy of which is
attached hereto as Exhibit (a)(1)(B) (which, together with the Offer to
Purchase, as amended or supplemented from time to time, constitute the
"Offer").
The information in the Offer to Purchase, including all schedules and
annexes thereto, is hereby expressly incorporated herein by reference in
response to all the items of this Schedule TO, except as otherwise set forth
below.
ITEM 1. SUMMARY TERM SHEET.
The information set forth in the SUMMARY TERM SHEET in the Offer to
Purchase is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company is Travelers Property Casualty Corp.,
a Delaware corporation. The Company's executive offices are located at One
Tower Square, Hartford, Connecticut 06183, telephone, (212) 277-0111.
(b) The class of securities to which this statement relates is the Class A
common stock, par value $.01 per share, of which 57,128,767 Shares were issued
and outstanding as of March 21, 2000. The information set forth on the cover
page and in the INTRODUCTION of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in THE TENDER OFFER Section 6 ("Price Range
of Shares; Dividends") of the Offer to Purchase is incorporated herein by
reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) This Tender Offer Statement is filed by Parent and the Purchaser. The
information set forth in THE TENDER OFFER Section 8 ("Certain Information
Concerning Parent and the Purchaser") of the Offer to Purchase and on Schedule
I thereto is incorporated herein by reference.
(b) The information set forth in THE TENDER OFFER Section 8 ("Certain
Information Concerning Parent and the Purchaser") of the Offer to Purchase and
on Schedule I thereto is incorporated herein by reference.
(c) The information set forth in THE TENDER OFFER Section 8 ("Certain
Information Concerning Parent and the Purchaser") of the Offer to Purchase and
on Schedule I thereto is incorporated herein by reference. During the last five
years, none of the Purchaser or Parent or, to the best knowledge of the
Purchaser or Parent, any of the persons listed on Schedule I to the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
such laws. Unless otherwise noted, the persons listed on Schedule I to the
Offer to Purchase are citizens of the United States.
ITEM 4. TERMS OF THE TRANSACTION.
The information set forth in the Offer to Purchase is incorporated herein
by reference.
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ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(a) The information set forth in SPECIAL FACTORS ("Related Party
Transactions") of the Offer to Purchase is incorporated herein by reference.
Except as disclosed above in this Item 5(a), during the past two years, there
have been no transactions that would be required to be disclosed under this
Item 5(a) between any of the Purchaser or Parent or, to the best knowledge of
the Purchaser and Parent, any of the persons listed on Schedule I to the Offer
to Purchase, and the Company or any of its executive officers, directors or
affiliates.
(b) The information set forth in the INTRODUCTION, SPECIAL FACTORS
("Background of this Offer") and SPECIAL FACTORS ("The Merger Agreement") of
the Offer to Purchase is incorporated herein by reference. Except as set forth
in the INTRODUCTION, SPECIAL FACTORS ("Background of this Offer") and SPECIAL
FACTORS ("The Merger Agreement") of the Offer to Purchase, there have been no
material contacts, negotiations or transactions during the past two years which
would be required to be disclosed under this Item 5(b) between any of the
Purchaser or Parent or any of their respective subsidiaries or, to the best
knowledge of the Purchaser and Parent, any of those persons listed on Schedule
I to the Offer to Purchase and the Company or its affiliates concerning a
merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a), (c)(1), (4)-(7) The information set forth in the INTRODUCTION,
SPECIAL FACTORS ("Background of this Offer"), SPECIAL FACTORS ("The Merger
Agreement"), SPECIAL FACTORS ("Purpose and Structure of the Offer and the
Merger; Reasons of Parent for the Offer and the Merger"), SPECIAL FACTORS
("Plans for the Company After the Offer and the Merger; Certain Effects of the
Offer") and Section 10 ("Dividends and Distributions") of the Offer to Purchase
is incorporated herein by reference.
(c)(2)-(3) Not applicable.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The information set forth in THE TENDER OFFER Section 9 ("Source and
Amount of Funds") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the INTRODUCTION and THE TENDER OFFER
Section 8 ("Certain Information Concerning Parent and the Purchaser") of the
Offer to Purchase is incorporated herein by reference.
(b) The information set forth on Schedule II to the Offer to Purchase is
incorporated herein by reference.
ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The information set forth in the INTRODUCTION and THE TENDER OFFER Section
12 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. FINANCIAL STATEMENTS.
Not applicable.
ITEM 11. ADDITIONAL INFORMATION.
(a) The information set forth in SPECIAL FACTORS ("The Merger Agreement"),
SPECIAL FACTORS ("Plans for the Company After the Offer and Merger; Certain
Effects of the Offer") and THE TENDER OFFER Section 14 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
3
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(b) The information set forth in the Offer to Purchase and Letter of
Transmittal is incorporated herein by reference.
ITEM 12. EXHIBITS.
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(a)(1)(A) Offer to Purchase dated March 23, 2000.
(a)(1)(B) Recommendation Statement on Schedule 14D-9 of the Company, dated March 23, 2000.
(a)(1)(C) Letter of Transmittal.
(a)(1)(D) Notice of Guaranteed Delivery.
(a)(1)(E) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees.
(a)(1)(F) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(1)(G) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(1)(H) Summary Advertisement as published on March 23, 2000.
(a)(1)(I) Text of press release issued by Travelers Property Casualty Corp., dated March 21, 2000.
(a)(1)(J) Text of press release issued by Citigroup Inc., dated March 21, 2000.
(a)(1)(K) Letter to shareholders from Jay S. Fishman, Chairman and Chief Executive Officer of
Travelers Property Casualty Corp., dated March 23, 2000.
(a)(5)(A) Complaint of Howard Vogel against Travelers Property Casualty Corp., Robert I. Lipp, Jay
S. Fishman, Frank J. Tasco, Dudley C. Mecum II, Arthur Zankel, Kenneth J. Bialkin,
Sanford I. Weill, Leslie B. Disharoon and Citigroup Inc., filed in the Court of Chancery in
the State of Delaware on March 21, 2000.
(a)(5)(B) Complaint of Joseph Leone against Travelers Property Casualty Corp., Citigroup, Inc., Jay
S. Fishman, Sanford I. Weill, Robert I. Lipp, Kenneth Bialkin, Leslie B. Disharoon, Dudley
C. Mecum II, Frank J. Tasco, and Arthur Zankel, filed in the Court of Chancery in the
State of Delaware on March 21, 2000.
(a)(5)(C) Complaint of Leslie Susser against Travelers Property Casualty Corp., Sanford J. Weill, Jay
S. Fishman, Robert I. Lipp, Frank J. Tasco, Dudley C. Mecum II, Arthur Zankel, Kenneth
J. Bialkin, Leslie B. Disharoon and Citigroup Inc., filed in the Court of Chancery of the
State of Delaware on March 21, 2000.
(a)(5)(D) Complaint of George Schore against Travelers Property Casualty Corp., Citigroup Inc., Jay
S. Fishman, Sanford I. Weill, Robert I. Lipp, Kenneth Bialkin, Leslie B. Disharoon, Dudley
C. Mecum II, Frank J. Tasco, and Arthur Zankel, filed in the Court of Chancery in the
State of Delaware on March 21, 2000.
(a)(5)(E) Pages F-1 through F-10 of the Annual Report on Form 10-K of Travelers Property
Casualty Corp. for the year ended December 31, 1999 (incorporated by reference to the
Form 10-K of Travelers Property Casualty Corp., filed with the Securities and Exchange
Commission on March 13, 2000 (file No. 001-14328)).
(b) None.
</TABLE>
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(c)(1) Opinion of Morgan Stanley & Co. Incorporated to the Special Committee of the Board of
Directors of the Company, dated March 21, 2000 (included as Annex B of the Offer to
Purchase filed herewith as Exhibit (a)(1)(A)).
(c)(2) Materials presented by Morgan Stanley & Co. Incorporated to the Special Committee of
the Board of Directors of Travelers Property Casualty Corp.
(d)(1) Agreement and Plan of Merger dated as of March 22, 2000, by and among Citigroup Inc.,
The Travelers Insurance Group Inc. and Travelers Property Casualty Corp. (included as
Annex A of the Offer to Purchase filed herewith as Exhibit (a)(1)(A)).
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as Annex C of the Offer
to Purchase filed herewith as Exhibit (a)(1)(A)).
(g) None.
(h) None.
</TABLE>
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
The information set forth in the INTRODUCTION, SPECIAL FACTORS ("Interests
of Certain Persons in the Offer and the Merger"), SPECIAL FACTORS ("Plans for
the Company After the Offer and the Merger; Certain Effects of the Offer"), THE
TENDER OFFER Section 11 ("Certain Effects of the Offer on the Market for the
Shares"), SPECIAL FACTORS ("Purpose and Structure of the Offer and the Merger;
Certain Effects of the Offer"), THE TENDER OFFER Section 5 ("Certain United
States Federal Income Tax Consequences"), SPECIAL FACTORS ("Recommendation of
the Special Committee and the Company Board; Fairness of the Offer and the
Merger"), SPECIAL FACTORS ("Opinion of Financial Advisor"), SPECIAL FACTORS
("Position of Parent and the Purchaser Regarding Fairness of the Offer and the
Merger"), THE TENDER OFFER Section 13 ("Certain Conditions to the Offer"),
SPECIAL FACTORS ("Background of this Offer"), SPECIAL FACTORS ("The Merger
Agreement"), THE TENDER OFFER Section 13 ("Certain Conditions to the Offer"),
SPECIAL FACTORS ("Beneficial Ownership of Common Stock") and SPECIAL FACTORS
("Transactions and Arrangements Concerning the Shares") of the Offer to
Purchase and on Schedule II to the Offer to Purchase is incorporated herein by
reference.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
SCHEDULE TO AND SCHEDULE 13E-3
CITIGROUP INC.
By: /s/ Charles O. Prince, III
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Name: Charles O. Prince, III
Title: General Counsel and Corporate
Secretary
THE TRAVELERS INSURANCE GROUP INC.
By: /s/ Irwin Ettinger
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Name: Irwin Ettinger
Title: Senior Vice President
SCHEDULE 13E-3
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ Jay S. Fishman
-------------------------------------
Name: Jay S. Fishman
Title: Chief Executive Officer and
President
Date: March 23, 2000
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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(a)(1)(A) Offer to Purchase dated March 23, 2000.
(a)(1)(B) Recommendation Statement on Schedule 14D-9 of the Company, dated March 23, 2000.
(a)(1)(C) Letter of Transmittal.
(a)(1)(D) Notice of Guaranteed Delivery.
(a)(1)(E) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(1)(F) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(1)(G) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(1)(H) Summary Advertisement as published on March 23, 2000.
(a)(1)(I) Text of press release issued by Travelers Property Casualty Corp., dated March 21, 2000.
(a)(1)(J) Text of press release issued by Citigroup Inc., dated March 21, 2000.
(a)(1)(K) Letter to shareholders from Jay S. Fishman, Chairman and Chief Executive Officer of
Travelers Property Casualty Corp., dated March 23, 2000
(a)(5)(A) Complaint of Howard Vogel against Travelers Property Casualty Corp., Robert I. Lipp,
Jay S. Fishman, Frank J. Tasco, Dudley C. Mecum II, Arthur Zankel, Kenneth J.
Bialkin, Sanford I. Weill, Leslie B. Disharoon and Citigroup Inc., filed in the Court of
Chancery in the State of Delaware on March 21, 2000.
(a)(5)(B) Complaint of Joseph Leone against Travelers Property Casualty Corp., Citigroup Inc.,
Jay S. Fishman, Sanford I. Weill, Robert I. Lipp, Kenneth Bialkin, Leslie B. Disharoon,
Dudley C. Mecum II, Frank J. Tasco, and Arthur Zankel, filed in the Court of Chancery
in the State of Delaware on March 21, 2000.
(a)(5)(C) Complaint of Leslie Susser against Travelers Property Casualty Corp., Sanford J. Weill,
Jay S. Fishman, Robert I. Lipp, Frank J. Tasco, Dudley C. Mecum II, Arthur Zankel,
Kenneth J. Bialkin, Leslie B. Disharoon and Citigroup Inc., filed in the Court of
Chancery of the State of Delaware on March 21, 2000.
(a)(5)(D) Complaint of George Schore against Travelers Property Casualty Corp., Citigroup, Inc.,
Jay S. Fishman, Sanford I. Weill, Robert I. Lipp, Kenneth Bialkin, Leslie B. Disharoon,
Dudley C. Mecum II, Frank J. Tasco, and Arthur Zankel, filed in the Court of Chancery
in the State of Delaware on March 21, 2000.
(a)(5)(E) Pages F-1 through F-10 of the Annual Report on Form 10-K of Travelers Property
Casualty Corp. for the year ended December 31, 1999 (incorporated by reference to the
Form 10-K of Travelers Property Casualty Corp., filed with the Securities and Exchange
Commission on March 13, 2000 (File No. 001-14328)).
(b) None.
</TABLE>
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EXHIBIT NO. DESCRIPTION
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(c)(1) Opinion of Morgan Stanley & Co. Incorporated to the Special Committee of the Board
of Directors of the Company, dated March 21, 2000 (included as Annex B of the Offer
to Purchase filed herewith as Exhibit (a)(1)(A)).
(c)(2) Materials presented by Morgan Stanley & Co. Incorporated to the Special Committee of
the Board of Directors of Travelers Property Casualty Corp.
(d)(1) Agreement and Plan of Merger dated as of March 22, 2000, by and among Citigroup
Inc., The Travelers Insurance Group Inc. and Travelers Property Casualty Corp.
(included as Annex A of the Offer to Purchase filed herewith as Exhibit (a)(1)(A)).
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as Annex C of the
Offer to Purchase filed herewith as Exhibit (a)(1)(A)).
(g) None.
(h) None.
</TABLE>
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EXHIBIT (a)(1)(A)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
AT
$41.50 NET PER SHARE
BY
THE TRAVELERS INSURANCE GROUP INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THIS OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER,
DATED AS OF MARCH 22, 2000, BY AND AMONG CITIGROUP INC. ("PARENT"), THE
TRAVELERS INSURANCE GROUP INC. (THE "PURCHASER") AND TRAVELERS PROPERTY
CASUALTY CORP. (THE "COMPANY").
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF THE BOARD,
(A) UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND THE
PURCHASER), (B) UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (C)
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER
AGREEMENT AND THE MERGER.
MORGAN STANLEY & CO. INCORPORATED, FINANCIAL ADVISOR TO THE SPECIAL
COMMITTEE, HAS DELIVERED AN OPINION TO THE SPECIAL COMMITTEE ON BEHALF OF THE
BOARD OF DIRECTORS TO THE EFFECT THAT THE CONSIDERATION TO BE RECEIVED BY THE
COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND ITS SUBSIDIARIES) IN THE OFFER
AND THE MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS. SEE
"SPECIAL FACTORS--OPINION OF FINANCIAL ADVISOR."
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE TENDER
OFFER--SECTION 13. CERTAIN CONDITIONS TO THE OFFER."
IMPORTANT
Any stockholder desiring to tender all or any portion of such
stockholder's shares of Class A common stock, par value $.01 per share, of the
Company (the "Shares" or the "Company Common Stock") should either (i) complete
and sign the enclosed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal, have such
stockholder's signature thereon guaranteed (if required by Instruction 1 to the
Letter of Transmittal), mail or deliver the Letter of Transmittal (or a
facsimile thereof) and any other required documents to the Depositary (as
defined herein) and either deliver the certificates for such Shares along with
the Letter of Transmittal to the Depositary or tender such Shares pursuant to
the procedures for book-entry transfer set forth in "THE TENDER OFFER--Section
3. Procedures for Tendering Shares" or (ii) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee to tender such Shares.
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The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
The Information Agent for the Offer is:
Innisfree M&A Incorporated
March 23, 2000
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ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, OR WHO CANNOT DELIVER ALL REQUIRED DOCUMENTS TO THE DEPOSITARY
PRIOR TO THE EXPIRATION OF THE OFFER, MAY TENDER SUCH SHARES BY FOLLOWING THE
PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN "THE TENDER OFFER--SECTION 3.
PROCEDURES FOR TENDERING SHARES."
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials
may be directed to Innisfree M&A Incorporated (the "Information Agent") or
Salomon Smith Barney Inc. (the "Dealer Manager") at their respective addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
Stockholders may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
--------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
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SUMMARY TERM SHEET ....................................................................... 1
INTRODUCTION ............................................................................. 4
SPECIAL FACTORS .......................................................................... 6
Background of this Offer ................................................................ 6
Recommendation of the Special Committee and the Company Board; Fairness of the Offer and
the Merger ............................................................................ 7
Opinion of Financial Advisor ............................................................ 9
Company Budget Information and Financial Projections .................................... 10
Position of Parent and the Purchaser Regarding Fairness of the Offer and the Merger ..... 11
Purpose and Structure of the Offer and the Merger; Reasons of Parent for the Offer and
the Merger ............................................................................ 11
Plans for the Company After the Offer and the Merger; Certain Effects of the Offer ...... 12
The Merger Agreement .................................................................... 13
Dissenters' Rights ...................................................................... 18
Beneficial Ownership of Common Stock .................................................... 21
Transactions and Arrangements Concerning the Shares ..................................... 22
Related Party Transactions .............................................................. 22
Interests of Certain Persons in the Offer and the Merger ................................ 24
THE TENDER OFFER ......................................................................... 25
1. Terms of the Offer; Expiration Date ................................................. 25
2. Acceptance for Payment and Payment for Shares ....................................... 26
3. Procedures for Tendering Shares ..................................................... 27
4. Withdrawal Rights ................................................................... 29
5. Certain U.S. Federal Income Tax Consequences ........................................ 30
6. Price Range of Shares; Dividends .................................................... 31
7. Certain Information Concerning the Company .......................................... 31
8. Certain Information Concerning Parent and the Purchaser ............................. 32
9. Source and Amount of Funds .......................................................... 33
10. Dividends and Distributions ......................................................... 33
11. Certain Effects of the Offer on the Market for the Shares ........................... 33
12. Fees and Expenses ................................................................... 34
13. Certain Conditions to the Offer ..................................................... 34
14. Certain Legal Matters ............................................................... 35
15. Miscellaneous ....................................................................... 37
SCHEDULE I ............................................................................... I-1
1. Directors and Executive Officers of Parent .......................................... I-1
2. Directors and Executive Officers of the Purchaser ................................... I-5
3. Directors and Executive Officers of the Company ..................................... I-5
SCHEDULE II .............................................................................. II-1
ANNEX A -- AGREEMENT AND PLAN OF MERGER, DATED AS OF MARCH 22, 2000,
BY AND AMONG CITIGROUP INC., THE TRAVELERS INSURANCE
GROUP INC. AND TRAVELERS PROPERTY CASUALTY CORP. .............................. A-1
ANNEX B -- OPINION OF MORGAN STANLEY & CO. INCORPORATED .................................. B-1
ANNEX C -- EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE STATE
OF DELAWARE RELATING TO THE RIGHTS OF DISSENTING
STOCKHOLDERS PURSUANT TO SECTION 262 .......................................... C-1
</TABLE>
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SUMMARY TERM SHEET
The Travelers Insurance Group Inc., an indirect wholly owned subsidiary of
Citigroup Inc., is offering to purchase all the outstanding shares of Class A
common stock of Travelers Property Casualty Corp. for $41.50 per share in cash.
The following are some of the questions that you, as a stockholder of Travelers
Property Casualty, may have and answers to those questions. We urge you to
carefully read the remainder of this Offer to Purchase and the accompanying
Letter of Transmittal because the information in this summary is not complete
and additional important information is contained in the remainder of this
Offer to Purchase and the accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase all the outstanding shares of Class A common stock
of Travelers Property Casualty is being made by The Travelers Insurance Group,
a Connecticut corporation and an indirect wholly owned subsidiary of Citigroup.
As of the date hereof, The Travelers Insurance Group beneficially owns
328,020,170 shares of the Company's Class B common stock which are immediately
convertible into 328,020,170 shares of Class A common stock and which represent
approximately 85% of the outstanding common stock of the Company and
approximately 98% of the voting power thereof. The Travelers Insurance Group is
a holding company with no business operations.
Citigroup, a Delaware corporation, is a diversified holding company whose
businesses provides some 100 million consumers, corporations, governments and
institutions in 100 countries with a broad range of financial products and
services, including consumer banking and credit, corporate and investment
banking, insurance, securities brokerage and asset management. The 1998 merger
of Citicorp and Travelers Group brought together such brand names as Citibank,
Travelers, Salomon Smith Barney, Commercial Credit (now named CitiFinancial),
and Primerica under Citigroup's trademark red umbrella.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase all of Travelers Property Casualty's
outstanding Class A common stock.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $41.50 per Share, net to you in cash. If you are
the record owner of your Shares and you tender your Shares to us in the Offer,
you will not have to pay brokerage fees or similar expenses. If you own your
Shares through a broker or other nominee, and your broker tenders your Shares
on your behalf, your broker or nominee may charge you a fee for doing so. You
should consult your broker or nominee to determine whether any charges will
apply. See the "INTRODUCTION" and "THE TENDER OFFER--Section 3. Procedures for
Tendering Shares."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Citigroup, the parent company of The Travelers Insurance Group, will
provide us with sufficient funds from its own resources to purchase all Shares
validly tendered and not withdrawn in the Offer and to provide funding for the
second-step merger of a newly formed subsidiary of The Travelers Insurance
Group with and into Travelers Property Casualty which is expected to follow the
successful completion of the Offer. We anticipate that all of these funds will
be obtained from existing resources, including utilization of existing
commercial paper facilities and internally generated funds of Citigroup and its
subsidiaries. The Offer is not conditioned upon any financing arrangements. See
"THE TENDER OFFER--Section 9. Source and Amount of Funds."
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
We do not think our financial condition is relevant to your decision
whether to tender in the Offer because the form of payment consists solely of
cash, and all of our funding will come from existing resources, including
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utilization of existing commercial paper facilities and internally generated
funds of Citigroup and its subsidiaries. Additionally, the Offer is not subject
to any financing condition. See "THE TENDER OFFER-- Section 9. Source and
Amount of Funds."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on
Wednesday, April 19, 2000, to decide whether to tender your Shares in the
Offer. Further, if you cannot deliver everything that is required in order to
make a valid tender by that time, you may be able to use a guaranteed delivery
procedure, which is described later in this Offer to Purchase. See "THE TENDER
OFFER--Section 3. Procedures for Tendering Shares."
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the Merger Agreement, we can extend the Offer. We
have agreed in the Merger Agreement that we may extend the Offer from time to
time until June 30, 2000 if certain conditions to the Offer have not been
satisfied.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the Offer, we will inform Citibank, N.A. (which is the
Depositary for the Offer) of that fact, and will make a public announcement of
the extension, not later than 9:00 a.m., New York City time, on the next
business day after the day on which the offer was scheduled to expire.
HOW DO I TENDER MY SHARES?
To tender your Shares, you must deliver the certificates evidencing your
Shares, together with a completed Letter of Transmittal, to Citibank, N.A., the
Depositary for the Offer, not later than the time the Offer expires. If your
Shares are held in street name (that is, through a broker, dealer or other
nominee), the Shares can be tendered by your nominee through The Depository
Trust Company. If you cannot get something that is required to the Depositary
by the expiration of the Offer, you may get a little extra time to do so by
having a broker, bank or other fiduciary who is a member of the Securities
Transfer Agent Medallion Program or other eligible institution to guarantee
that the missing items will be received by the Depositary within three New York
Stock Exchange, Inc. trading days. However, the Depositary must receive the
missing items within that three- day trading period.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered Shares at any time until the Offer
has expired and, if we have not agreed to accept your Shares for payment by May
21, 2000, you can withdraw them at any time after such time until we do accept
your Shares for payment. This right to withdraw will not apply to any
subsequent offering period. See "THE TENDER OFFER--Section 1. Terms of the
Offer; Expiration Date."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw Shares you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the Shares.
WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER?
The Board of Directors of the Company, based upon the unanimous
recommendation of the Special Committee, (i) unanimously determined that each
of the Offer and the Merger is fair to and in the best interests of the
Company's stockholders (other than Citigroup and The Travelers Insurance Group),
(ii) unanimously approved the Offer, the Merger and the Merger Agreement and
the transactions contemplated by the Merger Agreement, and (iii) unanimously
recommends that you tender your Shares in the Offer and approve and adopt the
Merger Agreement and the Merger.
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FOLLOWING THE TENDER OFFER WILL TRAVELERS PROPERTY CASUALTY CORP. CONTINUE AS A
PUBLIC COMPANY?
No. If the Merger takes place, Travelers Property Casualty will no longer
be publicly owned. Even if the Merger does not take place, if we purchase all
the tendered Shares, there may be so few remaining stockholders and publicly
held Shares that the Shares will no longer be eligible to be traded on the New
York Stock Exchange, Inc. or other securities markets, there may not be a public
trading market for the Shares and Travelers Property Casualty may cease being
required to comply with SEC rules governing publicly-held companies.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF NOT ALL THE PUBLICLY TRADED
SHARES OF TRAVELERS PROPERTY CASUALTY ARE TENDERED IN THE OFFER?
Yes. Following the Offer, a subsidiary of The Travelers Insurance Group to
be formed for such purpose will be merged with and into Travelers Property
Casualty. If the Merger takes place, Travelers Property Casualty will become a
privately owned company, and all of the remaining stockholders of Travelers
Property Casualty (other than Citigroup and The Travelers Insurance Group) will
receive $41.50 per Share in cash (or any other higher price per Share which is
paid in the Offer).
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the Merger described above takes place, stockholders not tendering in
the Offer will receive the same amount of cash per Share which they would have
received had they tendered their Shares in the Offer. Therefore, if the Merger
takes place, the only difference to you between tendering your Shares and not
tendering your Shares is that you will be paid earlier if you tender your
Shares in the Offer. However, if for some reason the Merger does not take
place, the number of stockholders and of Shares which are still in the hands of
the public may be so small that there will no longer be an active public
trading market (or, possibly, any trading market) for the Shares. Also, as
described above, Travelers Property Casualty may cease being required to comply
with the SEC rules relating to publicly held companies.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On March 20, 2000, the last trading day before we announced the companies'
agreement on the Offer and the Merger, the last sale price of the Shares
reported on the NYSE was $33.6875 per Share. On March 22, 2000, the last full
trading day prior to the commencement of the Offer, the last sale price of the
Shares reported on the NYSE was $41.00 per Share. We advise you to obtain a
recent quotation for the Shares in deciding whether to tender your Shares.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Innisfree M&A Incorporated at (212) 750-5833 (call collect)
or (888) 750-5835 (call toll free) or Salomon Smith Barney at 1-800-996-7920
(call toll free). Innisfree M&A Incorporated is acting as the information agent
for our Offer and Salomon Smith Barney is acting as the Dealer Manager for our
Offer. See the back cover of this Offer to Purchase.
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To the Holders of Class A Common Stock
of Travelers Property Casualty Corp.:
INTRODUCTION
The Travelers Insurance Group Inc., a Connecticut corporation (the
"Purchaser"), hereby offers to purchase all the outstanding shares of Class A
common stock, par value $.01 per share (the "Shares" or the "Company Common
Stock"), of Travelers Property Casualty Corp., a Delaware corporation (the
"Company"), at $41.50 per Share, net to the seller in cash (the "Offer Price"),
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together, as they may
be amended from time to time, constitute the "Offer"). The Purchaser is an
indirect wholly owned subsidiary of Citigroup Inc., a Delaware corporation
("Parent"). As of the date hereof, the Purchaser beneficially owned 328,020,170
shares of the Company's Class B common stock, par value $.01 per share (the
"Class B Common Stock"), which are immediately convertible at the option of
Parent into 328,020,170 Shares and represent approximately 85% of the
outstanding common stock of the Company and approximately 98% of the voting
power thereof. Tendering stockholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Purchaser pursuant to the
Offer. The Purchaser will pay all charges and expenses of Salomon Smith Barney
Inc., as the Dealer Manager (the "Dealer Manager"), Innisfree M&A Incorporated,
as the Information Agent (the "Information Agent"), and Citibank, N.A., as the
Depositary (the "Depositary"), incurred in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BASED UPON
THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF
THE COMPANY BOARD (THE "SPECIAL COMMITTEE"), (A) UNANIMOUSLY DETERMINED THAT
EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND THE PURCHASER),
(B) UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (C) UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER.
MORGAN STANLEY & CO. INCORPORATED ("MORGAN STANLEY"), FINANCIAL ADVISOR TO
THE SPECIAL COMMITTEE, HAS DELIVERED AN OPINION TO THE SPECIAL COMMITTEE ON
BEHALF OF THE COMPANY BOARD TO THE EFFECT THAT THE CONSIDERATION TO BE RECEIVED
BY THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND ITS SUBSIDIARIES) IN THE
OFFER AND THE MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH
STOCKHOLDERS. SEE "SPECIAL FACTORS--OPINION OF FINANCIAL ADVISOR."
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE TENDER OFFER--
SECTION 13. CERTAIN CONDITIONS TO THE OFFER."
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 22, 2000 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company. Pursuant to the Merger Agreement, as soon as
practicable after the completion of the Offer and the satisfaction or waiver of
the conditions set forth in the Merger Agreement, the Purchaser intends to
transfer all of the Shares purchased by it in the Offer and all of the shares
of Class B Common Stock held by the Purchaser to a newly-formed, wholly owned
subsidiary of the Purchaser ("Merger Sub"). Merger Sub will then be merged with
and into the Company (the "Merger") in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"). Following the
Merger, the Company shall be the surviving corporation (the "Surviving
Corporation") and the separate existence of Merger Sub shall cease. At the
effective time of the Merger (the "Effective Time"), (i) each issued and
outstanding Share (other than Shares held by Parent and the Purchaser (except
for Shares held in a fiduciary or similar capacity on behalf of third parties
or held on account of a debt previously contracted) and Shares held by
stockholders who have properly exercised dissenters' rights (the "Dissenting
Shares") under the DGCL) will be converted into and represent the right to
receive the Offer Price
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(the "Merger Consideration"), and (ii) each share of common stock, par value
$.01 per share, of Merger Sub (the "Merger Sub Common Stock"), then issued and
outstanding will be converted into and become one share of common stock of the
Surviving Corporation ("Surviving Corporation Common Stock"). See "SPECIAL
FACTORS--The Merger Agreement" for a description of the Merger and the Merger
Agreement.
If the Purchaser owns 90% or more of the outstanding Shares as a result of
the Offer and continues to hold at least 90% of the outstanding Class B Common
Stock, then the Purchaser intends to transfer all of the Shares purchased by
the Purchaser in the Offer and its Class B Common Stock to Merger Sub and cause
Merger Sub to effect the Merger as a "short-form" merger under the DGCL,
without a vote of the stockholders of the Company (a "Short-Form Merger"). If
following the purchase of Shares pursuant to the Offer, the Purchaser owns in
the aggregate less than 90% of the Shares outstanding, the Purchaser has agreed
to convert such number of shares of Class B Common Stock into Company Common
Stock to the extent that, after giving effect to such conversion, Parent and
the Purchaser would own in the aggregate the number of Shares necessary to
effect a Short-Form Merger. If a vote of the stockholders of the Company is
necessary to effect the Merger, each of Parent and the Purchaser have agreed in
the Merger Agreement to vote or cause to be voted all Shares owned by it and
its subsidiaries in favor of the approval and adoption of the Merger Agreement
and the Merger. See "SPECIAL FACTORS--The Merger Agreement."
The Purchaser has been advised by the Company that, to the best of the
Company's knowledge, all of the Company's officers and directors, other than
those individuals, if any, for whom the tender of Shares could cause them to
incur liability under the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or to the extent their
shares are Restricted Shares (as defined in the Merger Agreement), currently
intend to tender all Shares owned by them pursuant to the Offer. See "SPECIAL
FACTORS--Interests of Certain Persons in the Offer and the Merger."
The information contained in this Offer to Purchase concerning the
Company, including, without limitation, information about the deliberation of
the Company Board and the Special Committee in connection with the Offer and
the Merger and the opinion of Morgan Stanley, the Special Committee's financial
advisor, was supplied by the Company. Neither of Parent nor the Purchaser takes
any responsibility for the accuracy of such information.
STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES.
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SPECIAL FACTORS
BACKGROUND OF THIS OFFER
In February 1999, Parent began to examine strategic alternatives with
respect to Parent's ownership interest in the Company including: (i) proposing
that the Company expand its buyback program with respect to the Shares through
a possible tender offer by the Company for Shares; (ii) the sale of the
Company; (iii) the acquisition of the publicly-held Shares; and (iv) continuing
its ownership interest in the Company at current levels. Parent retained
Salomon Smith Barney to render financial advisory and investment banking
services to Parent in connection with the review of Parent's alternatives with
respect to Parent's ownership interest in the Company.
On March 3, 2000, at a meeting of the Company Board, a representative of
Parent advised the Company Board that Parent was examining strategic
alternatives with respect to its ownership position in the Company. The Company
Board determined that in view of possible conflicts of interest, it was
advisable to form the Special Committee, consisting of Leslie B. Disharoon and
Frank J. Tasco, neither of whom are employed by or affiliated with the Company
(except in their capacities as directors) or Parent or any of its affiliates,
to examine on behalf of the Company its strategic alternatives. Mr. Disharoon
was appointed as Chairman of the Special Committee. The Special Committee was
authorized by the Company Board to retain legal and financial advisors to
assist it in its examination and to receive, study, negotiate and make
recommendations to the Company Board in connection with any proposed
transaction from Parent.
Subsequently, the Special Committee hired outside counsel and, on March
10, 2000, the Special Committee retained Morgan Stanley to act as financial
advisor to the Special Committee.
From approximately March 11, 2000 through March 19, 2000, the Special
Committee and its advisors reviewed certain public and non-public information
with respect to the Company. The Special Committee asked Morgan Stanley to
prepare an analysis as to the range of values of the Shares to assist it in
evaluating potential strategic alternatives. During this time, Morgan Stanley
also discussed with the management of the Company the business, financial
condition and prospects of the Company.
At a regularly scheduled meeting of the Company Board on March 20, 2000,
the members of the Special Committee updated the Company Board on the status of
its work and informed the Company Board that it was meeting with its financial
advisor later that day to discuss the outcome of its review. Following the
meeting of the Company Board, the Special Committee met with its legal and
financial advisors on March 20, 2000 to discuss Morgan Stanley's valuation of
the Shares.
Prior to this meeting, the Chairman of the Special Committee had been
informally advised by a representative of Parent that Parent's management was
prepared to recommend to Parent's Board of Directors that Parent make an offer
to acquire the publicly-held Shares at a price no higher than the mid to high
$30's. Following a presentation from Morgan Stanley as to its evaluation of the
value range of the Shares and discussion among the Special Committee and its
legal and financial advisors, a representative of the Special Committee was
instructed by the Special Committee to inform Parent's representatives that the
Special Committee believed that a price of $42.00 would be necessary in order
for the Special Committee to approve a transaction. Representatives of Parent
indicated that they would not be willing to pay $42.00 per share and reiterated
their proposal to pay a price in the mid to high $30's. Following further
discussions and negotiations with the Special Committee and its
representatives, representatives of Parent indicated a willingness to recommend
to Parent's Board that Parent propose to acquire the publicly-held Shares at a
price of $41.50 per Share in cash but stated that they would not be willing to
recommend that Parent pay a higher price. The Special Committee consulted with
its advisors and determined, based in part upon the advice of Morgan Stanley,
that $41.50 per Share was a fair price and that accepting an offer at that
price would be in the best interests of the public stockholders of the Company,
and determined to advise Parent that it would recommend that the Company's
stockholders accept such an offer, if one were made by Parent.
On the morning of March 21, 2000, at a regularly scheduled meeting, the
Board of Directors of Parent authorized management to make a proposal to
acquire all of the publicly-held Shares at a price of $41.50 per
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Share. Parent promptly communicated its formal proposal to the members of the
Special Committee. Morgan Stanley issued its opinion that, as of March 21,
2000, the Offer Price of $41.50 per share was fair from a financial point of
view to the stockholders of the Company (other than Parent and its
subsidiaries). See "SPECIAL FACTORS--Opinion of Financial Advisor."
The Company instructed the NYSE that material news regarding the Company
was likely to be issued shortly. The NYSE halted trading in the Company Common
Stock pending release of the announcement regarding the Offer and the Merger.
Parent and the Company issued press releases regarding the proposal.
During the afternoon of March 21, 2000, there was a special meeting of the
full Company Board. All directors, including both members of the Special
Committee, were present in person at the meeting, as well as Morgan Stanley and
representatives of Skadden, Arps, Slate, Meagher & Flom LLP and Wachtell,
Lipton, Rosen & Katz, as Parent's and the Special Committee's respective legal
advisors. The Special Committee discussed the negotiations with representatives
of Parent and indicated that it accepted and approved Parent's offer to acquire
the publicly-held Shares at a price of $41.50 per Share, found such price to be
fair and in the best interests of the Company and its stockholders (other than
Parent and the Purchaser) and recommended that the Company Board approve the
proposed transaction and that Company's stockholder accept the Offer and
approve the Merger. The Company's management reviewed the terms of the
transaction and Morgan Stanley summarized the detailed analysis that it had
presented to the Special Committee and advised the Company Board of the opinion
it had rendered with respect to the proposed transaction. The members of the
Company Board then discussed with Company management, the members of the
Special Committee, their advisors and its advisors the recommendation of the
Special Committee and various other matters relating to the proposed
transaction. After deliberation and consideration, the Company Board
unanimously determined to accept the Special Committee's recommendation and
concluded that the Offer and the Merger are fair to and in the best interests
of the Company and its stockholders (other than Parent and the Purchaser),
approved the Offer and Merger, and recommended that the Company's stockholders
accept the Offer and tender their Shares and approve the Merger.
On March 22, 2000, Parent, the Purchaser and the Company entered into the
Merger Agreement.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD; FAIRNESS OF THE
OFFER AND THE MERGER
Recommendation of the Special Committee and the Company Board
The Company. On March 21, 2000, the Special Committee unanimously
determined that each of the Offer and the Merger is fair to and in the best
interest of the stockholders of the Company (other than Parent and the
Purchaser), unanimously determined to recommend that the Company Board approve
and adopt the Offer and the Merger and to unanimously determined to recommend
to the Company's stockholders that they accept the Offer and tender their
Shares pursuant to the Offer and approve the Merger. At a meeting held on March
21, 2000, the Company Board unanimously determined to accept the Special
Committee's recommendation and determined that each of the Offer and the Merger
is fair to and in the best interests of the stockholders (other than Parent and
the Purchaser), unanimously approved and adopted the Offer and the Merger, and
unanimously determined to recommend that the Company's stockholders accept the
Offer and tender their Shares pursuant to the Offer and approve the Merger.
Fairness of the Offer and the Merger
The Special Committee. In reaching the conclusions described above, the
Special Committee considered a number of factors, including but not limited to
the following:
(i) the opinion of Morgan Stanley that, based upon and subject to the
assumptions and limitations set forth therein, the $41.50 per Share cash
consideration to be received by the Company's stockholders (other than
Parent and its subsidiaries) in the Offer and Merger is fair from a
financial point of view to such stockholders, see "SPECIAL FACTORS--Opinion
of Financial Advisor";
(ii) the presentations of Morgan Stanley that involved various
valuation analyses of the Company, see "SPECIAL FACTORS--Background of this
Offer" and "SPECIAL FACTORS--Opinion of Financial Advisor";
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(iii) the fact that the terms of the Offer were determined through
arm's-length negotiations between Parent and the Special Committee and its
financial and legal advisors, all of whom are unaffiliated with Parent, and
the judgment of the Special Committee and Morgan Stanley that, based upon
the negotiations that had transpired, a price higher than $41.50 per Share
could not likely be obtained and that further negotiations with Parent
could cause Parent to abandon the transaction, or possibly to commence a
tender offer at a price less than $41.50 per Share;
(iv) the Company's business, financial condition, results of
operations, prospects, current business strategy, competitive position in
its industry and general economic and stock market conditions;
(v) the historical market prices of the Shares and recent trading
activity of the Shares, including the fact that the $41.50 per Share price
represents a premium in excess of 23% over the closing sale price on the
NYSE on March 20, 2000, the last full trading day prior to the time the
Company announced it had approved the Offer by Parent, and a premium in
excess of 30% over the price, see "SPECIAL FACTORS--Opinion of Financial
Advisor";
(vi) Parent's ownership of approximately 85% of the currently
outstanding common stock of the Company and the effects of such ownership
on the alternatives available to the Company; the fact that Parent had
considered certain alternatives with respect to its ownership interest in
the Company and determined to offer to acquire the publicly-held Shares;
and the fact that, as a practical matter, no such alternatives potentially
available to the Company could be effected without the support of Parent;
and the consequences of continuing to operate the Company as a
majority-owned subsidiary of Parent;
(vii) the fact that there are no unusual requirements or conditions to
the Offer and the Merger; and the fact that Parent has the financial
resources to consummate the Offer and the Merger expeditiously;
(viii) the fact that the consideration to be paid in the Offer and the
Merger to holders of Shares is all cash;
(ix) the fact that the transaction has been structured to include a
first-step cash tender offer for all of the outstanding Shares, thereby
enabling stockholders who tender their Shares to promptly receive $41.50
per Share in cash, and the fact that any public stockholders who do not
tender their Shares will receive the same cash price per Share in the
subsequent Merger;
(x) the possible conflicts of interest of certain directors and
members of management of both the Company and Parent discussed below under
"SPECIAL FACTORS--Interests of Certain Persons in the Offer and the
Merger"; and
(xi) the fact that stockholders who do not tender their Shares
pursuant to the Offer will have the right to dissent from the Merger and to
demand appraisal of the fair value of their Shares under the DGCL, whether
or not a shareholder vote is required, see "SPECIAL FACTORS--Dissenters'
Rights."
The Company Board. In reaching its determinations referred to above, the
Company Board considered the following factors, each of which, in the view of
the Company Board, supported such determinations: (i) the conclusions and
recommendations of the Special Committee; (ii) the factors referred to above as
having been taken into account by the Special Committee, including the receipt
by the Special Committee of the opinion of Morgan Stanley that, based upon and
subject to the assumptions stated therein, the $41.50 per Share to be received
by the stockholders of the Company (other than Parent and its subsidiaries) in
the Offer and the Merger is fair from a financial point of view to such
holders, and the analysis presented by Morgan Stanley to the Company Board; and
(iii) the fact that the Offer Price and the terms and conditions of the Merger
Agreement were the result of arm's-length negotiations between the Special
Committee and Parent.
The members of the Company Board, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of
the business, financial condition and prospects of the Company, and based upon
the advice of financial and legal advisors.
The Company Board, including the members of the Special Committee,
believes that the Offer and Merger are procedurally fair because, among other
things: (i) the Special Committee consisted of independent directors appointed
to represent the interests of stockholders (other than Parent and the
Purchaser); (ii) the Special
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Committee retained and was advised by its own independent legal counsel; (iii)
the Special Committee retained and was advised by Morgan Stanley, as its
independent financial advisor, to assist it in evaluating a potential
transaction with Parent and the Purchaser; (iv) the nature of the deliberations
pursuant to which the Special Committee evaluated the Offer and the Merger and
alternatives thereto; (v) the fact that the $41.50 per Share price resulted
from active arm's-length bargaining between representatives of the Special
Committee, on the one hand, and representatives of Parent, on the other; and
(vi) the fact that the Special Committee is a mechanism well established under
Delaware law to ensure fairness in transactions of this type.
The Company Board and the Special Committee recognized that the Merger is
not structured to require the approval of a majority of the stockholders of the
Company other than Parent and the Purchaser, and that the Purchaser currently
has sufficient voting power to approve the Merger without the affirmative vote
of any other stockholder of the Company.
The Special Committee and the Company Board also recognized that, while
consummation of the Offer and the Merger will result in all stockholders (other
than Parent and the Purchaser) being entitled to receive $41.50 in cash for
each of their Shares, it will eliminate the opportunity for current
stockholders (other than Parent and the Purchaser) to participate in the
benefit of increases, if any, in the value of the Company's business following
the Merger. Nevertheless, the Special Committee and the Company Board concluded
that this fact did not justify foregoing the receipt of the immediate cash
premium represented by the $41.50 per Share price.
Neither the Special Committee nor the Company Board considered the
liquidation of the Company's assets and neither considered liquidation to be a
viable course of action based on Parent's desire for the Company to continue to
conduct its business as a subsidiary of Parent. Therefore, no appraisal of
liquidation values was sought for purposes of evaluating the Offer and the
Merger.
In view of the wide variety of factors considered in connection with their
evaluation of the Offer and the Merger, neither the Special Committee nor the
Company Board found it practicable to, and did not, qualify or otherwise
attempt to assign relative weights to the specific factors they considered in
reaching their determinations.
The foregoing discussion of the information and factors considered and
given weight by the Special Committee and the Company Board is not intended to
be exhaustive but is believed to include all material factors considered by the
Special Committee and the Company Board.
THE COMPANY BOARD, BASED UPON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL
COMMITTEE, (A) UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN
PARENT AND THE PURCHASER), (B) UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
AND (C) UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER
AGREEMENT AND THE MERGER.
OPINION OF FINANCIAL ADVISOR
Morgan Stanley has acted as financial advisor to the Special Committee in
connection with the Offer and the Merger, as described under "SPECIAL
FACTORS--Background of this Offer." On March 21, 2000, Morgan Stanley delivered
its opinion to the Special Committee on behalf of the Company Board that, as of
the date of such opinion, the $41.50 per Share in cash to be received by the
holders of Shares (other than Parent and its subsidiaries) in the Offer and the
Merger is fair from a financial point of view to such stockholders.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY DATED MARCH 21,
2000 (THE "FINANCIAL ADVISOR OPINION"), WHICH SETS FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
THE OPINION, IS ATTACHED HERETO AS ANNEX B AND IS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS OF THE COMPANY ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY.
9
<PAGE>
In arriving at its opinion, Morgan Stanley, among other things:
o reviewed certain publicly available financial statements and
other information regarding the Company;
o reviewed internal financial statements and other financial and
operating data concerning the Company prepared by the Company's
management;
o reviewed financial projections prepared by the Company's
management;
o reviewed stock price and trading activity information for the
Shares;
o compared the financial performance of the Company and the prices
and trading activity of the Shares with those of certain other
publicly traded companies and their securities that it deemed
comparable to the Company and the Shares;
o reviewed the publicly available financial terms of certain
purchase transactions that it deemed comparable to the Offer and
the Merger;
o reviewed actuarial reports prepared by the Company with respect
to reserve adequacy of the Company;
o participated in discussions and negotiations among
representatives of the Company and the Purchaser and their
financial and legal advisors; and
o performed such other analyses and reviewed such other documents
as it deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied, without
independent verification, upon the accuracy and completeness of the information
reviewed by or discussed with it. With respect to financial projections, Morgan
Stanley assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of the Company. Morgan Stanley did not make any independent valuation or
appraisal of the Company's assets or liabilities and it was not provided with
any independent valuations or appraisals. In arriving at its opinion, Morgan
Stanley was not authorized to solicit, and it did not solicit, interest from
any party with respect to the acquisition of the Company or any of its assets.
Morgan Stanley's opinion was necessarily based on information available to it
as of, and economic, market and other conditions as in effect on, the date of
the opinion.
MORGAN STANLEY'S ADVISORY SERVICES AND OPINION WERE PROVIDED FOR THE
INFORMATION OF THE SPECIAL COMMITTEE ON BEHALF OF THE COMPANY BOARD IN ITS
EVALUATION OF THE OFFER AND THE MERGER AND THE OPINION IS NOT INTENDED TO BE,
NOR DOES IT CONSTITUTE, A RECOMMENDATION TO ANY HOLDER OF SHARES AS TO WHETHER
SUCH HOLDER SHOULD TENDER SHARES IN THE OFFER OR VOTE IN FAVOR OF THE MERGER,
IF APPLICABLE.
In connection with rendering its opinion, Morgan Stanley made a
presentation to the Special Committee on March 20, 2000 with respect to the
material analyses performed by Morgan Stanley in evaluating the fairness of the
offer price. The following is a summary of the material aspects of that
presentation, which includes information presented in tabular format. IN ORDER
TO UNDERSTAND FULLY THE FINANCIAL ANALYSES USED BY MORGAN STANLEY, THE TABLES
MUST BE READ TOGETHER WITH THE TEXT THAT ACCOMPANIES THEM. THE TABLES ALONE DO
NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. The following
quantitative information, to the extent it is based on market data, is, except
as otherwise indicated, based on market data as it existed at or prior to March
20, 2000, and is not necessarily indicative of current or future market
conditions.
Executive Summary. Morgan Stanley reviewed for the Special Committee the
Company's strategic position within the insurance industry, noting among other
things its highly-regarded management, its top-tier market position in key
products, its 3-year average return on equity percentage of 15.1% compared to
the Company's property and casualty insurance peer group median 3-year return
on equity of 10.9%, and its 3-year operating income growth of 9.0% compared to
the Company's property and casualty insurance peer group median 3-year
operating income growth of 5.7%. Morgan Stanley also noted, however, the
Company's depressed equity market valuation, which it believed to be a
reflection of, among other things, the overall property and casualty insurance
sector's deterioration of pricing and top-line growth, reduction in reserve
margins, accumulation of excess capital and general lack of investor interest
in the sector. Morgan Stanley noted that the sector's difficulties have
resulted in a sector price to earnings ratio of only 39.7% of the S&P 500 as of
March 17, 2000 compared to the 59.4% ratio at the time of the Company's initial
public offering in 1996.
10
<PAGE>
Comparable Company Analysis. Morgan Stanley compared certain financial
information of the Company with the following companies, which Morgan Stanley
believed to be appropriate for comparison: America International Group, Inc.;
The Chubb Corporation; CNA Financial Corporation; The Hartford Financial
Services Group, Inc.; The St. Paul Companies, Inc.; The Allstate Corporation;
Ohio Casualty Corporation and SAFECO Corporation. The financial information
compared included market capitalization, current per share stock price, price
as a percentage of the previous 52-weeks' high and low sales prices, the ratio
of price to estimated earnings per share for 2000 and 2001, the ratio of price
to book value per share, the ratio of price to adjusted book value per share,
five year projected growth rates, return on average equity based on 2000 median
earnings estimates by Institutional Brokers Estimate System ("IBES"), a data
service that monitors and publishes a compilation of earnings estimates
regarding companies of interest to institutional investors produced by selected
research analysts, the ratio of debt to total capital and the ratio of debt
plus the value of outstanding redeemable and tax-deductible preferred stock to
total capital. The market price information used in this analysis was as of
March 16, 2000. Balance sheet information was as of December 31, 1999, except
for the balance sheet information of the Company and Ohio Casualty, which was
as of December 31, 1999. The earnings per share estimates used were based on
estimates as of March 16, 2000 by IBES.
This data provided a framework for an analysis of indicative public market
trading values that led to the following:
<TABLE>
<CAPTION>
TRADING RANGE
RELEVANT TO
COMPARABLE COMPANY MORGAN STANLEY'S IMPLIED
TRADING RANGE ANALYSIS VALUE RANGE
-------------------- ------------------ -----------------
<S> <C> <C> <C>
2000 IBES MEDIAN 7.0x -- 11.0x 9.5x -- 10.5x $34.68 -- $38.33
EARNINGS PER SHARE
2001 IBES MEDIAN 6.0x -- 10.0x 8.5x -- 9.5x $33.58 -- $37.53
EARNINGS PER SHARE
2000 MANAGEMENT 7.0x -- 11.0x 9.5x -- 10.5x $36.00 -- $39.79
ESTIMATED
EARNINGS PER SHARE
2001 MANAGEMENT 6.0x -- 10.0x 8.5x -- 9.5x $32.75 -- $36.60
ESTIMATED
EARNINGS PER SHARE
DECEMBER 31, 1999 1.00x -- 1.50x 1.40x -- 1.50x $32.49 -- $34.81
BOOK VALUE PER
SHARE
</TABLE>
The foregoing analysis implied a valuation reference range for the Shares
of $33.00 to $38.00.
Going Private Premiums Analysis. Morgan Stanley compared certain financial
and ownership information with respect to the transaction with the same
information with respect to certain other "going private" transactions
including transactions in the insurance industry that Morgan Stanley believed
to be appropriate for comparison: Allmerica Financial Corporation's acquisition
of Citizens Corporation; Orion Capital Corporation's acquisition of Guaranty
National Corporation; American General Corporation's acquisition of Western
National Corporation; Anthem Insurance Companies Inc.'s acquisition of Acordia,
Inc.; Zurich Centre Investment Limited's acquisition of Zurich Reinsurance
Centre Holdings, Inc.; Allmerica Financial Corporation's acquisition of
Allmerica Property & Casualty Companies Inc.; Conseco, Inc.'s acquisition of
CCP Insurance Inc.; Conseco, Inc.'s acquisition of Bankers Life Holdings
Corporation; Berkshire Hathaway Inc.'s acquisition of GEICO Corporation; and
SCOR S.A.'s acquisition of SCOR U.S. Corporation. The financial information
compared included the per share consideration paid in the transaction, the
aggregate consideration paid in the transaction and the premium of the price
per share paid in the acquisition over (a) the unaffected market price per
share of the target, (b) the market price on the day prior to the public
announcement and (c) the all-time high market price. The ownership information
compared was the ownership position of the acquiror prior to the going private
transaction.
11
<PAGE>
Morgan Stanley observed the following for the insurance industry
transactions and the general transactions (including the insurance industry
transactions):
<TABLE>
<CAPTION>
PREMIUM OF THE PRICE PER SHARE OVER
----------------------------------------------------------------------
PRICE DAY PRIOR TO
UNAFFECTED MARKET PRICE ANNOUNCEMENT ALL-TIME HIGH PRICE
------------------------- ------------------- --------------------
<S> <C> <C> <C>
MEAN (ALL TRANSACTIONS) ........... 24.7% 21.1% (19.9%)
MEDIAN (ALL TRANSACTIONS) ......... 21.3 19.0 (11.1)
MEAN (INSURANCE INDUSTRY
TRANSACTIONS) .................... 24.3 22.1 (4.6)
MEDIAN (INSURANCE
INDUSTRY TRANSACTIONS) ........... 24.3 20.3 (2.0)
</TABLE>
Morgan Stanley then determined the going private premium analysis implied
a value reference range for the Shares of $40.00 to $48.00, based on a public
market trading range for the Shares of $33.00 to $38.00 and representative
premiums of transaction price to public market trading range in the precedent
going private transactions of 10.0%, 20.0% and 30.0%.
Discounted cash flow analysis. Morgan Stanley performed a discounted cash
flow analysis to calculate the present value of the stand-alone unlevered free
cash flows that the Company would generate from January 1, 2000 through
December 31, 2010 assuming that the Company's operating performance would be as
reflected in a model developed by Morgan Stanley after consultation with the
Company's management.
Morgan Stanley discounted the estimated unlevered free cash flows provided
by the model using discount rates of 10.0%, 10.5% and 11.0%. Morgan Stanley
calculated terminal values based on price to earnings multiples of 11 times
estimate GAAP earnings in 2011, 12 times estimated GAAP earnings in 2011 and 13
times estimated GAAP earnings in 2011, and then discounted these terminal
values using the discount rates of 10.0%, 10.5% and 11.0%. The implied range of
values calculated by Morgan Stanley for the Shares derived from the discounted
cash flows analysis ranged from approximately $40.00 to $47.00 per Share.
Morgan Stanley also performed sensitivity analyses of its discounted cash flow
model by varying certain measures of profitability, operating leverage and
assumed revenue growth rates.
The model developed by Morgan Stanley incorporated certain estimates and
projections of the Company's management as to the potential future financial
performance of the Company, including the following estimates with respect to
the 2000 and 2001 fiscal years (in millions):
<TABLE>
<CAPTION>
FISCAL YEAR 2000 (ESTIMATED) FISCAL YEAR 2001 (ESTIMATED)
<S> <C> <C>
Revenues ..................... $ 10,529.50 $ 11,037.50
Losses and Expenses .......... 8,596.90 8,955.40
Federal Income Tax ........... 472.60 532.10
Operating Income ............. 1,460.00 1,550.00
</TABLE>
The Company does not, as a matter of course, make public forecasts or
projections as to future revenues, earnings or other income statement data,
including the information set forth above, and such information was not
prepared with a view to public disclosure. However, in connection with Parent's
controlling interest in the Company, Parent or its affiliates have received
certain analyses prepared by the Company including the budget information
provided above. Such information has been included in this document for the
limited purpose of giving the Company's stockholders access to financial
projections by the Company's management available to Parent in connection with
its consideration of the Offer and considered by Morgan Stanley in rendering
its opinion. Information of this type is based on estimates and assumptions
that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the Company's control. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth above.
12
<PAGE>
Other Analyses. Morgan Stanley also conducted certain other analyses that
it deemed relevant including:
o compared the performance of the Shares to the performance of the
S&P 500 since the Company's initial public offering in April 1996
(noting that the Shares had performed comparably to the S&P 500
during the two years following the Company's initial public
offering but that the Shares had lagged significantly behind the
S&P 500 since that time);
o compared the performance of the Shares to the performance of the
S&P 500 over the 52 weeks prior to March 17, 2000 (noting that
the Shares had generally lagged behind the S&P 500 during that
period);
o compared the performance of the Shares to the performance of the
companies in the property and casualty insurance sector, the
performance of the S&P 500 and the performance of the S&P
Financial Index (noting that the performance of the property and
casualty insurance sector had lagged significantly behind the
performance of the S&P 500 and the S&P Financial Index);
o reviewed the historical next-twelve-month price to earnings ratio
and historical price to book value per share ratio from 1990 to
March 17, 2000 for the property and casualty insurance sector
generally and from the time of the Company's initial public
offering to March 17, 2000 for the Company (noting that the ratio
of next-twelve-months price to earnings for the sector had
declined from a mean range of 11.0x to 14.0x for the 2-year
period from June 1996 to August 1998 to a mean range of 8.0x to
11.0x for the 2-year period from September 1998 to March 17,
2000, and that the ratio of price to book value per share for the
sector for those periods had declined from a mean range of 1.75x
to 2.50x to a mean range of 1.25x to 1.75x); and
o compared the price to 2000 estimated earnings ratios, the price
to 2001 estimated earnings ratios, price to book value per share
ratios and 2000 estimated return on equity percentage for: the
Company; certain peer companies in the property and casualty
insurance sector; and the mean figures for the Company and the
sector combined (all prices as of March 17, 2000) (noting that
the Company had a price to 2000 estimated earnings ratio and a
price to 2001 estimated earnings ratio below the mean figure for
the Company and the sector combined, but that it had a price to
book value per share ratio and 2000 estimated return on equity
above the mean figure for the Company and the sector combined).
Morgan Stanley and the members of the Special Committee discussed the
foregoing analyses and the value ranges for the Shares indicated by each of
them. Based on the foregoing, Morgan Stanley concluded that the summary
indicative value range for the Shares was $38.00 to $48.00.
The preceding discussion is a summary of the material financial analyses
furnished by Morgan Stanley to the Special Committee, but it does not purport
to be a complete description of the analyses performed by Morgan Stanley or of
its presentation to the Special Committee. The preparation of financial
analyses and fairness opinions is a complex process involving subjective
judgments, and is not necessarily susceptible to partial analysis or summary
description. Morgan Stanley made no attempt to assign specific weights to
particular analyses or factors considered, but, rather, made qualitative
judgments as to the significance and relevance of all the analyses and factors
considered and determined to give its fairness opinion as described above.
Accordingly, Morgan Stanley believes that its analyses, and the summary set
forth above, must be considered as a whole, and that selecting portions of the
analyses and of the factors considered by Morgan Stanley, without considering
all of the analyses and factors, could create a misleading or incomplete view
of the processes underlying the analyses conducted by Morgan Stanley and its
opinion. With regard to the comparable companies analyses summarized above,
Morgan Stanley selected comparable public companies on the basis of various
factors, including the size and similarity of the line of business; however, no
company utilized as a comparison in these analyses summarized above is
identical to the Company. As a result, these analyses are not purely
mathematical, but also take into account differences in financial and operating
characteristics of the subject companies and other factors that could affect
the public trading value of the subject companies to which the Company is being
compared. In its analyses, Morgan Stanley made numerous assumptions with
respect to the Company, industry performance, general business, economic,
market and financial conditions, and other matters, many of which are beyond
the control of the Company. Any estimates contained in Morgan Stanley's
13
<PAGE>
analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by these analyses. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which
companies may actually be sold. Because these estimates are inherently subject
to uncertainty, none of the Company, the Special Committee, the Company's board
of directors, Morgan Stanley or any other person assumes responsibility if
future results or actual values differ materially from the estimates.
Morgan Stanley's analyses were prepared solely as part of Morgan Stanley's
analysis of the fairness of the Offer Price and were provided to the Special
Committee in that connection. The opinion of Morgan Stanley was only one of the
factors taken into consideration by the Special Committee in making its
determination to recommend that the Company Board approve the Offer and the
Merger. The opinion of Morgan Stanley was not intended to be and does not
constitute a recommendation to any holder of the Shares as to whether any such
holder should tender the Shares in the Offer or, if applicable, vote in favor
of the Merger.
The Special Committee retained Morgan Stanley based upon its experience
and expertise. Morgan Stanley is a nationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
Morgan Stanley is a full service securities firm engaged in securities
trading and brokerage activities, financing and financial advisory services in
addition to its investment banking activities. In the ordinary course of its
trading, brokerage, and financing activities, Morgan Stanley or its affiliates
may at any time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the accounts of its customers, in debt or
equity securities or senior loans of the Company, the Purchaser or their
affiliates.
Pursuant to Morgan Stanley's engagement letter, the Company agreed to pay
Morgan Stanley an advisory fee upon commencement of its engagement of $350,000
for the first month of the assignment and up to $75,000 per month for each
month thereafter. The Company also agreed to pay an opinion fee of $5,000,000
upon and in connection with delivering its fairness opinion. If the Offer is
completed, the Company has agreed to pay Morgan Stanley a transaction fee
against which the advisory and opinion fees will be credited. The transaction
fee will be calculated by multiplying 0.40% times the total dollar value of the
consideration paid for acquiring the publicly held Shares. The full transaction
fee is payable at the time at which 95% or more of the Company's Common Stock
is controlled by the Purchaser and its affiliates. In addition, the Company
also has agreed to reimburse Morgan Stanley for its reasonable travel and other
out-of-pocket expenses incurred in connection with its engagement and to
indemnify Morgan Stanley against certain liabilities and expenses relating to
or arising out of its engagement
A copy of the Morgan Stanley opinion is included as Exhibit (c)(1) to the
Schedule TO. A copy of Morgan Stanley's presentation to the Special Committee
on March 20, 2000 is included as Exhibit (c)(2) to the Schedule TO.
POSITION OF PARENT AND THE PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE
MERGER
Parent and the Purchaser believe that the consideration to be received by
the Company's stockholders (other than Parent and the Purchaser) pursuant to
the Offer and the Merger is fair to and in the best interests of the Company's
stockholders (other than Parent and the Purchaser). Parent and the Purchaser
base their belief on the following factors: (i) the conclusions and
recommendations of the Special Committee that each of the Offer and the Merger
is fair to and in the best interests of the Company, (ii) the fact that the
Offer and the Merger and the other terms and conditions of the Merger Agreement
were the result of arm's length, good faith negotiations between the Special
Committee and Parent and their respective advisors, (iii) the fact that the
Company Board received an opinion from Morgan Stanley that the $41.50 per Share
in cash to be received by the holders of Shares (other than Parent and its
subsidiaries) in the Offer and the Merger is fair from a financial point of
view to such stockholders, (iv) the historical and projected financial
performance of the Company and its financial results, (v) the fact that the
consideration to be paid in the Offer represents a premium of in excess of 23%
over the reported closing sale price on the last full trading day prior to the
announcement of the proposed transaction and a premium in excess of 30% over
the one-month average closing
14
<PAGE>
sale price, (vi) the fact that the consideration to be paid in the Offer
represents a multiple of 1.80 times the Company's December 31, 1999 book value
per share, and (vii) the Offer and the Merger will each provide consideration to
the stockholders entirely in cash.
Parent or the Purchaser did not find it practicable to assign, nor did
it assign, relative weights to the individual factors considered in reaching its
conclusion as to fairness. The liquidation of the Company's assets was not
considered to be a viable course of action based on Parent's desire for the
Company to continue to conduct its business as a subsidiary of Parent.
Therefore, no appraisal of liquidation value was sought for purposes valueing
the Shares. Although Salomon Smith Barney generally assisted Parent in this
transaction and, in particular, advised Parent on bidding and negotiating
strategies, participated in negotiations with Morgan Stanley and analyzed the
Company's projections and assumptions thereto, Salomon Smith Barney did not
deliver a fairness opinion as to the $41.50 per Share to be received by the
stockholders of the Company (other than Parent and the Purchaser) and did not
provide Parent with any reports, opinions or appraisals.
The foregoing discussion of the information and factors considered and
given weight by Parent and the Purchaser is not intended to be exhaustive but
is believed to include all material factors considered by Parent and the
Purchaser.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF PARENT FOR THE
OFFER AND THE MERGER
The purpose of the Offer and the Merger is for Parent to increase its
ownership of the outstanding common stock of the Company from approximately 85%
to 100%. Upon the consummation of the Merger, the Company will become an
indirect wholly owned subsidiary of Parent. The acquisition of Shares not owned
by Parent, the Purchaser or their subsidiaries has been structured as a cash
tender offer followed by a cash merger in order to effect a prompt and orderly
transfer of ownership of the Company from the public stockholders to Parent and
provide stockholders with cash for all of their Shares.
The determination to proceed with the Offer and the Merger at this time
would also, in the view of Parent, afford the Company's stockholders an
opportunity to dispose of their shares at a premium over market prices. Parent
determined that the acquisition of the publicly-held Shares would be accretive
to Parent's earnings and would provide Parent with additional flexibility in
the management of its capital. In addition, Parent noted that causing the
Company to be privately-held would reduce the periodic reports required to be
filed with the SEC, would reduce management's commitment of resources with
respect to procedural and compliance requirements of a public company and would
reduce costs associated with the Company's obligations and reporting
requirements under the securities laws.
Parent has concluded that the Offer and the Merger, including the $41.50
per Share in cash to be received by stockholders of the Company (other than
Parent and the Purchaser), are fair to the holders of the Shares (other than
Parent and the Purchaser) based upon the factors described above under
"--Position of Parent and the Purchaser Regarding Fairness of the Offer and the
Merger."
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE
OFFER
Pursuant to the Merger Agreement, upon completion of the Offer, Parent and
the Purchaser intend to effect the Merger in accordance with the Merger
Agreement. See "SPECIAL FACTORS--The Merger Agreement."
Except as otherwise described in this Offer to Purchase, Parent has no
current plans or proposals or negotiations which relate to or would result in:
(i) other than the Merger, an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Company; (ii) any purchase,
sale or transfer of a material amount of assets of the Company; (iii) any
change in the management of the Company or any change in any material term of
the employment contract of any executive officer; or (iv) any other material
change in the Company's corporate structure or business; provided, however, the
Company has announced its intention to acquire the fidelity and surety business
of Reliance Group Holding, Inc.
Nevertheless, Parent may initiate a review of the Company and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the Merger in order best to organize and integrate the activities of
the Company and Parent.
15
<PAGE>
In particular, Parent may study the possibility of changing the Company Board
by changing the number or term of directors, may also consider material changes
in the present dividend rate and policy, indebtedness and capitalization of the
Company and may consider pursuing acquisition opportunities through the
Company. In particular, Parent expressly reserves the right to make any changes
that it deems necessary or appropriate in light of its review or in light of
future developments.
As a result of the Offer, the direct and indirect interest of Parent in
the Company's net book value and net earnings will increase to the extent of
the number of Shares acquired under the Offer. Following consummation of the
Merger, Parent's indirect interest in such items will increase to 100% and
Parent and its subsidiaries will be entitled to all benefits resulting from
that interest, including all income generated by the Company's operations and
any future increase in the Company's value and the right to elect all members
of the Company Board. Similarly, Parent will also bear the risk of losses
generated by the Company's operations and any decrease in the value of the
Company after the Merger. Upon consummation of the Merger, the Company will
become a privately-held corporation. Accordingly, stockholders will not have
the opportunity to participate directly in the earnings and growth of the
Company after the Merger and will not have any right to vote on corporate
matters. Similarly, stockholders will not face the risk of losses generated by
the Company's operations or decline in the value of the Company after the
Merger.
Following the consummation of the Merger, the Shares will no longer be
quoted on the NYSE. In addition, the registration of the Shares under the
Exchange Act is expected to be terminated upon application by the Company to
the SEC if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. Accordingly, following the Merger
there will be no publicly-traded common stock of the Company outstanding. See
"THE TENDER OFFER--Section 11. Certain Effects of the Offer on the Market for
the Shares."
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF MATERIAL PROVISIONS OF THE MERGER AGREEMENT,
WHICH IS ATTACHED AS ANNEX A TO THIS OFFER TO PURCHASE. SUCH SUMMARY IS NOT A
COMPLETE DESCRIPTION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MERGER AGREEMENT. CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THE FOLLOWING
SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.
The Offer. Pursuant to the Merger Agreement, the Purchaser is obligated to
commence the Offer no later than the fifth business day following public
announcement of the Merger Agreement. Following the satisfaction or waiver of
the conditions to the Offer, Parent shall cause the Purchaser to accept for
payment, in accordance with the terms of the Offer, all Shares which have been
validly tendered and not withdrawn pursuant to the Offer as soon as legally
permitted after the commencement thereof. The obligations of the Purchaser to
commence the Offer and to accept for payment and to pay for any Shares tendered
pursuant to the Offer is subject only to the conditions specified in "THE
TENDER OFFER--Section 13. Certain Conditions to the Offer."
Although the Purchaser has expressly reserved the right to amend or make
changes in the terms and conditions of the Offer, the Merger Agreement provides
that, without the written consent of the Company, the Purchaser shall not (i)
decrease the Offer Price or change the form of consideration to be paid in the
Offer, (ii) impose any additional conditions to the Offer from those set forth
in Annex A to the Merger Agreement, or (iii) otherwise amend the Offer in a
manner that would adversely affect the holders of Shares.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions of the Merger Agreement, the Purchaser intends to form Merger Sub
and transfer all of the Shares purchased by the Purchaser in the Offer and, if
necessary, the Class B Common Stock held by the Purchaser, to Merger Sub.
Merger Sub will then be merged with and into the Company in accordance with the
applicable provisions of the DGCL as soon as practicable after the satisfaction
or waiver of the conditions to the Merger set forth in the Merger Agreement.
Following the Merger, the Company shall be the Surviving Corporation and the
separate corporate existence of Merger Sub shall cease. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of
Shares, (i) each Share issued and outstanding immediately prior to the
Effective Time (other than (x) shares held in the Company's treasury or owned
by Parent or the Purchaser (except for Shares held by Parent or any of its
affiliates in a fiduciary or similar capacity on behalf of third
16
<PAGE>
parties or held on account of a debt previously contracted) (all of which will
be cancelled), and (y) Dissenting Shares) will be converted into and represent
the right to receive the Merger Consideration, and (ii) each share of Merger
Sub common stock issued and outstanding immediately prior to the Effective Time
will be converted into one share of Surviving Corporation Common Stock.
If the Purchaser owns in the aggregate at least 90% of the Shares
outstanding as a result of the purchase of Shares pursuant to the Offer, the
Purchaser, Parent and the Company have agreed to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the satisfaction or waiver of the conditions to the Merger
set forth in the Merger Agreement without a meeting or vote of stockholders of
the Company, in accordance with Section 253 of the DGCL. However, if as a result
of the purchase of Shares pursuant to the Offer, the Purchaser owns in the
aggregate less than 90% of the Shares outstanding, the Purchaser has agreed to
convert such number of shares of Class B Common Stock into Shares and contribute
such Shares to Merger Sub to the extent that, after giving effect to such
conversion, the Purchaser will own in the aggregate the number of Shares
necessary to effect a Short-Form Merger.
The Merger Agreement also provides that (i) the Certificate of
Incorporation and the Bylaws of the Company in effect upon consummation of the
Merger shall be the Certificate of Incorporation and Bylaws of the Surviving
Corporation, (ii) the directors of the Company immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation
until their respective successors are duly elected or appointed and qualified
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, and (iii) the officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation and Bylaws
of the Surviving Corporation.
Stockholders Meeting. The Company has agreed in the Merger Agreement that,
if required by applicable law, the Company will (i) duly call, give notice of,
convene and hold a special meeting of stockholders as soon as practicable
following the acceptance for payment and purchase of Shares by the Purchaser
pursuant to the Offer to consider and vote upon the approval and adoption of
the Merger Agreement and the Merger, (ii) prepare and file with the SEC a
preliminary proxy or information statement relating to the Merger Agreement and
the Merger, and (iii) include in the proxy statement the recommendations of the
Special Committee and the Company's Board that the stockholders of the Company
vote in favor of the approval and adoption of the Merger Agreement and the
Merger, except to the extent that the Special Committee or the Company's Board
shall have determined in good faith, based on the advice of its outside
counsel, that such recommendation would violate its fiduciary duties under
applicable law.
Interim Operations. The Company has agreed that, prior to the Effective
Time, except as otherwise expressly contemplated by the Merger Agreement or
unless Parent will otherwise agree in writing or unless such action will have
been approved by a majority of the entire Company Board, (i) the business of
the Company and its subsidiaries will be conducted only in, and the Company and
its subsidiaries will not take any action except in, the ordinary and usual
course of business consistent with past practice; (ii) the Company and its
subsidiaries will use their reasonable best efforts to keep available the
services of its and their present officers and key employees and to preserve
the good will of those having business relationships with any of them. Prior to
the Effective Time none of the Company or any of its subsidiaries will,
directly or indirectly, without the prior written consent of the Purchaser:
(a) declare or pay any dividend or make any distribution with respect to
any shares of its capital stock;
(b) purchase or otherwise acquire or propose to purchase or otherwise
acquire, any outstanding share of its capital stock;
(c) propose or adopt any amendments to its charter documents or bylaws;
(d) issue, sell, pledge, dispose of or encumber any capital stock of the
Company or of any of its subsidiaries except as required pursuant to
the Capital Accumulation Plan, the Agency Capital Accumulation Plan,
the Elite Share Program or the Compensation Plan for Non-Employee
Directors or the Travelers Group 401(k) Savings Plan or pursuant to
the conversion of Class B Common Stock;
(e) except in the ordinary course of business and consistent with past
practice, sell, pledge, dispose of or encumber any of its material
assets;
17
<PAGE>
(f) incur any long-term indebtedness for borrowed money or issue any debt
securities in a material amount or assume, guarantee or endorse any
material obligations of any other person except for obligations of any
wholly owned subsidiary;
(g) approve, adopt or amend any agreement, plan, program or arrangement
which provides any benefits to any employee of the Company;
(h) except in the ordinary and usual course of business consistent with
past practice, increase, directly or indirectly, the compensation of
any employee of the Company;
(i) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any person; or
(j) authorize or propose any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
Indemnification and Insurance. Parent and the Company have agreed that all
rights to indemnification now existing in favor of the present or former
directors or officers of the Company or any of its subsidiaries as provided in
the Company's Certificate of Incorporation and Bylaws, or in the certificate or
articles of incorporation, by-laws or similar documents of any of such
subsidiaries, in effect as of the date of the Merger Agreement, with respect to
matters occurring prior to the Effective Time, shall survive the Merger and
continue in full force and effect after the Effective Time. To the maximum
extent permitted by law, such indemnification will be mandatory rather than
permissive, and the Company or the Surviving Corporation, as the case may be,
have agreed to advance expenses in connection with such indemnification. Parent
and the Company have further agreed that all rights to indemnification now
existing in favor of the present or former directors or officers of the Company
or any of its subsidiaries in any indemnification agreement between such person
and the Company or any such subsidiary, as the case may be, will survive the
Merger and continue in full force and effect in accordance with the terms of
such agreement.
From and after the Effective Time, Parent and the Surviving Corporation
have agreed to jointly and severally, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now or
who becomes prior to the Effective Time a director of the Company against all
losses, expenses (including reasonable attorney's fees and expenses), claims,
damages, liabilities and, subject to the proviso of the next sentence, amounts
paid in settlement, to the extent they are based on or arise out of or pertain
to the transactions contemplated by the Merger Agreement. In the event of any
such loss, expense, claim, damage, liability or settlement (whether or not
arising before the Effective Time), (i) Parent and the Surviving Corporation
have agreed to pay the reasonable fees and expenses of counsel selected by the
director seeking indemnification pursuant to the Merger Agreement, which
counsel will be reasonably satisfactory to Parent and the Surviving
Corporation, promptly after statements therefor are received and otherwise
advance to such directors upon reimbursement of documented expenses reasonably
incurred, (ii) any determination required to be made with respect to whether
such directors' conduct complies with the standards set forth in the DGCL and
any applicable provisions of the Company's Certificate of Incorporation or
By-Laws will be made by independent counsel mutually acceptable to Parent, the
Surviving Corporation and such directors; provided, however, that neither
Parent nor the Surviving Corporation will be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
The directors seeking indemnification pursuant to the Merger Agreement as a
group may retain one law firm with respect to each related matter except to the
extent there is, in the opinion of counsel to a director under applicable
standards of professional conduct, a conflict on any significant issue between
positions of such director and any other director seeking indemnification
pursuant to the Merger Agreement.
Parent or the Surviving Corporation will maintain in effect for six years
from the Effective Time, to the extent available, the current directors' and
officers' liability insurance policies maintained by Parent or the Surviving
Corporation covering those directors and officers of the Company who are
currently covered by such policies (provided that Parent or the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not less favorable to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time.
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<PAGE>
In the event the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or any substantial portion 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 such party assume the
indemnification obligations of such party as contemplated by the Merger
Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including among
others, representations as to due organization and existence, capitalization,
corporate authority, no violation of charter or by-laws, debt instruments or
material agreements of the Company or applicable law resulting from the Offer
and the Merger, accuracy of the Company's public filings, including financial
statements, absence of any material adverse change in the Company's business,
absence of undisclosed liabilities, and the accuracy of information included in
certain materials in connection with the Transaction.
Conditions to the Merger. The Merger Agreement provides that the
respective obligations of Parent, the Purchaser and the Company to consummate
the Merger are subject to the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions: (a) the Merger Agreement
and the Merger shall have been approved and adopted by the requisite vote of
the stockholders of the Company, if required by applicable law; (b) no
governmental entity or federal or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which materially
restricts, prevents or prohibits consummation of the Merger or the other
transactions contemplated by the Merger Agreement; provided, however, that the
parties shall use their reasonable best efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted; and (c) Parent,
the Purchaser or their affiliates shall have purchased Shares pursuant to the
Tender Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
prior to or after approval by the stockholders of the Company:
(a) by mutual written consent of the Special Committee, on behalf of
the Company, and Parent and the Purchaser;
(b) by either Parent or the Special Committee on behalf of the Company
if (i) the Purchaser shall not have purchased the Shares pursuant to the
Offer on or before June 30, 2000; provided, however, that this right to
terminate the Merger Agreement will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (ii) any court of competent jurisdiction or other
governmental entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) by Parent and the Purchaser if, prior to the purchase of Shares
pursuant to the Offer, the Special Committee or the Company Board shall
have (including by amendment to the Schedule 14D-9) withdrawn or modified,
in a manner adverse to the Purchaser, its approval or recommendation of the
Offer, the Merger or the Merger Agreement in a manner adverse to the
Purchaser or shall have resolved to do any of the foregoing; or
(d) by the Special Committee on behalf of the Company if due to an
occurrence or circumstance, not involving a breach by the Company of its
obligations under the Merger Agreement, which would result in a failure to
satisfy any of the conditions set forth in "THE TENDER OFFER--Section 13.
Certain Conditions to the Offer," or otherwise contained in the Merger
Agreement, the Purchaser shall have failed to commence the Offer within
five days following the date of the Merger Agreement, terminated the Offer
or permitted the Offer to expire without the purchase of Shares thereunder.
In the event of such termination, except as provided in the Merger
Agreement, the Merger Agreement will become void and have no effect, and there
will be no liability on the part of Parent, the Purchaser or the Company.
However, the Merger Agreement provides that the termination of the Merger
Agreement will not relieve any party from liability for any willful breach of
the Merger Agreement.
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<PAGE>
Amendments; Waivers. The Merger Agreement may not be amended except
pursuant to an instrument in writing signed by the Company following approval
of such action by the Special Committee and signed by Parent and the Purchaser;
provided, however, that after any approval of the Merger Agreement by the
stockholders of the Company, no amendment may be made without the further
approval of the stockholders of the Company which would decrease the Merger
Consideration or change any other terms and conditions of the Merger Agreement
if any of the changes would, individually or in the aggregate, materially
adversely affect the stockholders of the Company. At any time prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
stockholders of the Company, the Purchaser, Parent or the Company, by action
taken by the Special Committee on behalf of the Company or by the Boards of
Directors of Parent and the Purchaser, as the case may be, may (a) extend the
time for the performance of any of the obligations or other acts of any other
party to the Merger Agreement, (b) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document, certificate or writing delivered pursuant to the Merger Agreement, or
(c) waive compliance with any of the agreements of any other party or with any
conditions to its own obligations. Any agreement on the part of a party to the
Merger Agreement to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party by a duly
authorized officer.
Reasonable Best Efforts. The Company, Parent and the Purchaser have each
agreed in the Merger Agreement, subject to the terms and conditions thereof, to
use their reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by the Offer, the Merger and the Merger Agreement, and to
cooperate with each other in connection with the foregoing, including using
their reasonable best efforts to (i) obtain all necessary waivers, consents and
approvals from other parties to material agreements, leases and other
contracts, (ii) obtain all necessary consents, approvals and authorizations as
are required to be obtained under any federal, state or foreign law or
regulation, (iii) lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated by the Merger Agreement, (iv) effect any necessary
registrations and filings and submissions of information requested by
governmental authorities, and (v) fulfill all conditions to the Merger
Agreement. In addition, the Company will permit Parent to reasonably
participate in the defense and settlement of any claim, suit or cause relating
to any takeover proposal, the Offer, the Merger Agreement or the transactions
contemplated by the Merger Agreement, and the Company will not settle or
compromise any such claim, suit or cause of action without Parent's prior
written consent, which Parent will not unreasonably withhold.
DISSENTERS' RIGHTS
Under Section 262 of the DGCL, any holder of Shares at the Effective Time
(a "Remaining Stockholder") who does not wish to accept the Merger
Consideration pursuant to the Merger has the right to seek an appraisal and be
paid the "fair value" of its Shares at the Effective Time (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
judicially determined and paid to it in cash provided that such holder complies
with the provisions of such Section 262 of the DGCL.
The following is a brief summary of the statutory procedures to be
followed by a Remaining Stockholder in order to dissent from the Merger and
perfect appraisal rights under Delaware law. This summary is not intended to be
complete and is qualified in its entirety by reference to Section 262 of the
DGCL, the text of which is set forth in Annex C hereto. Any Remaining
Stockholder considering demanding appraisal is advised to consult legal
counsel. Dissenters' rights will not be available unless and until the Merger
(or a similar business combination) is consummated.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company (x)
before the taking of the vote on the approval and adoption of the Merger
Agreement if the Merger is not being effected as a Short-Form Merger but rather
is being consummated following approval thereof at a meeting of the Company's
stockholders (a "long-form merger") or (y) within 20 days after the date that
the Surviving Corporation mails to the Remaining Stockholders a notice (the
"Notice of Merger") to the effect that the Merger is effective and that
appraisal rights are available (and includes in such notice a copy of Section
262 of the DGCL and any other information required thereby) if the Merger is
being effected as a
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Short-Form Merger without a vote or meeting of the Company's stockholders. If
the Merger is effected as a long-form merger, this written demand for appraisal
of Shares must be in addition to and separate from any proxy or vote abstaining
from or against the approval and adoption of the Merger Agreement, and neither
voting against, abstaining from voting, nor failing to vote on the Merger
Agreement will constitute a demand for appraisal within the meaning of Section
262 of the DGCL. In the case of a long-form merger, any stockholder seeking
appraisal rights must hold the Shares for which appraisal is sought on the date
of the making of the demand, continuously hold such Shares through the
Effective Time, and otherwise comply with the provisions of Section 262 of the
DGCL.
In the case of both a Short-Form Merger and a long-form merger, a demand
for appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the stock certificates. If
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by the fiduciary. If Shares
are owned of record by more than one person, as in a joint tenancy or tenancy
in common, such demand must be executed by all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand, he
is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for
others, may exercise appraisal rights with respect to the Shares held for all
or less than all beneficial owners of Shares as to which the holder is the
record owner. In such case the written demand must set forth the number of
Shares covered by such demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Shares outstanding in the name
of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights before the date of any meeting of stockholders of the Company
called to approve the Merger in the case of a long-form merger and within 20
days following the mailing of the Notice of Merger in the case of a Short-Form
Merger.
Remaining Stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to: Secretary, Travelers Property Casualty Corp.,
One Tower Square, Hartford, Connecticut 06183. The written demand for appraisal
should specify the stockholder's name and mailing address, the number of Shares
covered by the demand and that the stockholder is thereby demanding appraisal
of such Shares. In the case of a long-form merger, the Company must, within ten
days after the Effective Time, provide notice of the Effective Time to all
stockholders who have complied with Section 262 of the DGCL and have not voted
for approval and adoption of the Merger Agreement.
In the case of a long-form merger, Remaining Stockholders electing to
exercise their appraisal rights under Section 262 must not vote for the
approval and adoption of the Merger Agreement or consent thereto in writing.
Voting in favor of the approval and adoption of the Merger Agreement, or
delivering a proxy in connection with the stockholders meeting called to
approve the Merger Agreement (unless the proxy votes against, or expressly
abstains from the vote on, the approval and adoption of the Merger Agreement),
will constitute a waiver of the stockholder's right of appraisal and will
nullify any written demand for appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a long-form merger or a
Short-Form Merger, within 120 days after the Effective Time, either the Company
or any stockholder who has complied with the required conditions of Section 262
and who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
Shares of the dissenting stockholders. If a petition for an appraisal is timely
filed, after a hearing on such petition, the Delaware Court of Chancery will
determine which stockholders are entitled to appraisal rights and thereafter
will appraise the Shares owned by such stockholders, determining the fair value
of such Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value.
In determining fair value, the Delaware Court of Chancery is to take into
account all relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware
Supreme Court discussed the factors that could be considered in determining
fair value in an appraisal proceeding, stating that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and
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<PAGE>
otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider "market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which were
known or which could be ascertained as of the date of merger which throw any
light on future prospects of the merged corporation . . ." The Delaware Supreme
Court has construed Section 262 of the DGCL to mean that "elements of future
value, including the nature of the enterprise, which are known or susceptible
of proof as of the date of the merger and not the product of speculation, may
be considered." However, the court noted that Section 262 provides that fair
value is to be determined "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
could be more than, the same as, or less than the Merger Consideration if they
do seek appraisal of their Shares, and that opinions of investment banking
firms as to fairness from a financial point of view are not necessarily
opinions as to fair value under Section 262 of the DGCL. Moreover, Parent
intends to cause the Surviving Corporation to argue in any appraisal proceeding
that, for purposes thereof, the "fair value" of the Shares is less than that
paid in the Offer. The cost of the appraisal proceeding may be determined by
the Delaware Court of Chancery and taxed upon the parties as the Delaware Court
of Chancery deems equitable in the circumstances. Upon application of a
dissenting stockholder, the Delaware Court of Chancery may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all Shares entitled to appraisal. In the absence of such a
determination or assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Shares subject to such demand or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the
Effective Time.
At any time within 60 days after the Effective Time, any former holder of
Shares shall have the right to withdraw his or her demand for appraisal and to
accept the Merger Consideration. After this period, such holder may withdraw
his or her demand for appraisal only with the consent of the Company as the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Court of Chancery within 120 days after the Effective Time, stockholders'
rights to appraisal shall cease and all stockholders shall be entitled to
receive the Merger Consideration. Inasmuch as the Company has no obligation to
file such a petition, and Parent has no present intention to cause or permit
the Surviving Corporation to do so, any stockholder who desires such a petition
to be filed is advised to file it on a timely basis. However, no petition
timely filed in the Delaware Court of Chancery demanding appraisal shall be
dismissed as to any stockholder without the approval of the Delaware Court of
Chancery, and such approval may be conditioned upon such terms as the Delaware
Court of Chancery deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL
BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information, based on reports filed by such
persons with the SEC, with respect to ownership of the Shares held by the
directors and executive officers of Parent, the Purchaser and the Company, and
with respect to ownership by persons believed by the Company to be the
beneficial owners of more than 5% of its outstanding common stock.
<TABLE>
<CAPTION>
PERCENT OF
VOTING
NUMBER OF SHARES PERCENTAGE OF PERCENTAGE OF POWER OF
BENEFICIALLY OWNED CLASS (2) OUTSTANDING OUTSTANDING
-------------------------- ------------------- COMMON COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER (1) CLASS A CLASS B CLASS A CLASS B STOCK STOCK
- ------------------------------------------ ------------ ------------- --------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Citigroup Inc. (3)
153 East 53rd Street
New York, New York 10043 ................ -- 328,020,170 -- 100% 85.2% 98.3%
Iridian Asset Management LLC
276 Post Road West
Westport, Connecticut 06880 ............. 3,774,700 -- 6.7% -- .98% *
Neuberger Berman, Inc.
605 Third Avenue
New York, New York 10158 ................ 3,671,300 -- 6.4% -- .95%
Kenneth J. Bialkin (4)
Director ................................ 10,445 -- -- -- * *
Charles J. Clarke (4)
Executive Officer ....................... 22,816 -- -- -- * *
Leslie B. Disharoon (4)
Director ................................ 2,820 -- -- -- * *
Douglas G. Elliot
Executive Officer ....................... 6,774 -- -- -- * *
Jay S. Fishman (4)
Director and Executive Officer .......... 46,340 -- -- -- * *
William Hannon (4)
Executive Officer ....................... 15,216 -- -- -- * *
Robert I. Lipp (4)
Director ................................ 134,859 -- -- -- * *
Dudley C. Mecum (4)
Director ................................ 7,820 -- -- -- * *
Frank J. Tasco (4)
Director ................................ 8,695 -- -- -- * *
Sanford I. Weill (4)
Director ................................ 4,100 -- -- -- * *
Arthur Zankel (4)
Director ................................ 7,405 -- -- -- * *
All Directors and Executive Officers --
as a group (16 persons) ................. 312,770 -- -- -- * *
</TABLE>
- ----------
* Less than 1%
(1) Based on Schedules 13G filed with the SEC and/or information available to
the Company.
(2) Calculated on the basis of the number of shares of each class of common
stock outstanding as of March 21, 2000.
(3) Each share of Class B Common Stock is convertible into a share of Company
Common Stock.
(4) This information includes Shares which are deemed "beneficially owned"
under SEC rules: (i) the following number of Shares granted in payment of
directors' fees to nonemployee directors, but receipt of which is
deferred: Mr. Bialkin, 6,070, Mr. Disharoon, 2,820, Mr. Mecum, 6,070 and
Mr. Tasco, 6,070; (ii) the following number of Shares held as
tenant-in-common with family members or trusts: Mr. Lipp, 22,431; (iii)
the following number of Shares owned by a family member: Mr. Hannon,
300; (iv) the following number of Shares as to which the holder has
direct or indirect voting power but not dispositive power: Mr. Clarke,
4,307, Mr. Elliot, 376 and Mr. Fishman, 3,484; (v) the following number
of Shares as to which the holder has direct or indirect voting power but
which remain subject to forfeiture and certain restrictions on
disposition: Mr. Clarke, 12,716, Mr. Elliot, 4,888, Mr. Fishman, 33,433,
Mr. Hannon, 7,876 and Mr. Lipp, 34,010.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
To the Company's, Parent's and the Purchaser's knowledge, no transactions
in the Shares, except as set forth on Schedule II and other than ordinary
course purchases or sales under the Travelers Group 401(k)
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Savings Plan and the Travelers Property Casualty Corp. Stock Purchase Plan, have
been effected during the past 60 days by the Company or its executive officers,
directors, affiliates and any associates or majority owned subsidiaries and any
executive officer or director of any subsidiary, or by Parent or its executive
officers, directors, affiliates and any associates or majority owned
subsidiaries and any executive officer or director of any subsidiary , or by the
Purchaser or its executive officers, directors, affiliates and any associates or
majority owned subsidiaries and any executive officer or director of any
subsidiary .
Since the commencement of the Company's second full fiscal year preceding
the date of this Offer to Purchase, no purchases of Shares were made by the
Company, Parent or the Purchaser, except purchases made by the Company pursuant
to its stock repurchase program as described on Schedule II.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the Company's knowledge, any of its affiliates, directors or executive officers
or any person controlling the Company is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to, or in connection with, the Offer with respect to any securities
of the Company (including, without limitation, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations). Except as described in this Offer to
Purchase, since the second full fiscal year preceding the date of this Offer to
Purchase, no contracts or negotiations concerning a merger, consolidation, or
acquisition, a tender offer for or other acquisition of any securities of the
Company, an election of directors of the Company, or a sale or other transfer
of a material amount of assets of the Company, has been entered into or has
occurred between any affiliates of the Company, Parent or the Purchaser or
between the Company or any of its affiliates and any unaffiliated person.
Except as described in this Offer to Purchase, since the third full fiscal year
preceding the date of this Offer to Purchase, the Company has not made any
underwritten public offering of the Shares that was (i) registered under the
Securities Act of 1933 or (ii) exempt from registration under the Securities
Act of 1933 pursuant to Regulation A thereunder.
To the best of the Company's knowledge, after reasonable inquiry, all of
the directors or executive officers of the Company, other than those
individuals, if any, for whom the tender of Shares could cause them to incur
liability under the provisions of Section 16(b) of the Exchange Act, or to the
extent their Shares are Restricted Shares (as defined in the Merger Agreement),
intend to tender Shares held by them pursuant to the Offer.
RELATED PARTY TRANSACTIONS
The Company has engaged in certain transactions and is a party to certain
arrangements with Parent and certain of its affiliates.
Intercompany Agreement
The Company and Parent entered into an Intercompany Agreement dated as of
April 2, 1996 (the "Intercompany Agreement"), certain provisions of which are
summarized below. As used herein, "Affiliated Group" means Parent collectively
with its subsidiaries other than the Company and its subsidiaries.
License to Use the Travelers Name and Certain Trademarks. Pursuant to the
Intercompany Agreement, certain members of the Affiliated Group have granted to
the Company and certain of its subsidiaries a non-exclusive revocable license
to use the "Travelers" name and certain trademarks (collectively, the
"Trademarks") solely in connection with the Company's property and casualty
insurance business and activities related to such property and casualty
insurance business.
Indemnification. The Intercompany Agreement provides that the Company
will indemnify each member of the Affiliated Group and each of their respective
officers, directors, employees and agents (collectively, the "Indemnities")
against losses based on, arising out of or resulting from certain actions by
the Company and its subsidiaries. Parent has also agreed to indemnify the
Company and its subsidiaries and each of their respective officers, directors,
employees and agents against losses based on, arising out of or resulting from
certain actions by Parent and its subsidiaries.
Parent Consent to Certain Events. The Intercompany Agreement provides that
until members of the Affiliated Group cease to control at least 20% of the
combined voting power of the outstanding Shares or no
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longer own at least 20% of the outstanding shares of common stock of the
Company, the prior written consent of Parent will be required for certain
fundamental corporate actions.
Registration Rights. The Company has granted to the Affiliated Group the
right to request up to two demand registrations in each calendar year. The
Affiliated Group also has unlimited "piggyback" registration rights. The
Company has agreed to pay all costs and expenses in connection with each such
registration, except underwriting discounts and commissions applicable to the
Shares sold by the Affiliated Group.
Certain Business Relationships. The Company has agreed that all
distribution arrangements in effect as of April 2, 1996 pursuant to which
members of the Affiliated Group distribute property and casualty insurance
products of the Company or its subsidiaries will continue until such time as
the members of the Affiliated Group cease to control at least 50% of the
combined voting power of the outstanding shares of common stock of the Company.
The Company has agreed to make its products available for distribution through
other members of the Affiliated Group and to refrain from using like
distribution channels, and Parent has agreed that the members of the Affiliated
Group will refrain from selling property and casualty insurance products of any
nonaffiliate, in each case, until such time as the members of the Affiliated
Group, in the aggregate, cease to control at least 50% of the combined voting
power of the outstanding shares of common stock of the Company and for a period
of two years from and after such date unless the parties agree to terminate
earlier or to extend such period. This arrangement may be modified by the
parties.
Real Property. The Intercompany Agreement provides that the Affiliated
Group will continue to lease to the Company certain premises currently occupied
by it and to sublease certain other properties currently occupied by it for
varying periods on terms consistent with prior cost allocation practices on a
fair market value basis.
Other Provisions. The Intercompany Agreement also provides for: (i) the
provision of insurance and allocation and/or reimbursement of costs and
premiums thereof; (ii) the provision of data processing services and allocation
and/or reimbursement of costs thereof; (iii) cross-licensing of computer
software; (iv) the provision of benefits and participation in benefit and
retirement plans and reimbursement for the costs thereof; and (v) provisions
governing certain other relationships among members of the Affiliated Group, on
the one hand, and the Company and its subsidiaries, on the other hand.
Tax Sharing Agreement.
The Company's items of income, loss, deductions and credits are included
in the consolidated and combined tax returns of Parent for federal income and
certain state tax purposes. Parent, the Purchaser and the Company have entered
into an agreement, effective January 1, 1996 (the "Tax Sharing Agreement"),
providing for the filing of consolidated and combined federal and certain state
income tax and franchise tax returns and for the allocation of income tax
liabilities related to such returns. As required by the terms of the Tax
Sharing Agreement, in general, the company will pay the Purchaser an amount
equal to the federal income or state income or franchise taxes that would have
been payable by the Company if it filed separate consolidated or combined
returns with its own subsidiaries.
Other Intercompany Agreements.
The Company participates with Parent and the Purchaser in certain limited
group purchasing arrangements, including telecommunications services. Parent
provides certain corporate staff services, including legal, internal audit and
other services, to the Company at cost pursuant to a Service Reimbursement
Agreement.
The Purchaser and various of its subsidiaries, including subsidiaries of
the Company, are parties to an Expense Allocation Agreement that provides for
the allocation among the parties of costs for services provided to or by the
parties. Such services include, but are not limited to, financial management,
operational management, legal, investment management, government relations,
record-keeping and data processing services and the acquisition of equipment,
software and office space. Charges are allocated at cost, and no party is
expected to realize a profit or incur a loss as a result of providing or
obtaining services under the agreement. The agreement may be terminated as to
any party upon 90 days prior notice to the other parties.
From time to time the Company engages in transactions with Parent and its
subsidiaries, including, among other things, reinsurance of long-standing
business and the promotion of affiliates' products. To the extent such
transactions are material to the Company, they are more fully described in the
Company's periodic reports filed with the SEC under the Exchange Act.
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During 1999, the Company paid to Parent and its subsidiaries approximately
$36 million, and Parent and its subsidiaries paid to the Company approximately
$28 million, in respect of services provided pursuant to the various
intercompany agreements and arrangements herein described.
The Company and Parent have made available to each other a line of credit
in the amount of $200 million. There is no obligation on the part of either
party to make a loan under this line of credit and no amounts are outstanding
thereunder.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
Treatment of Restricted Shares. The Merger Agreement provides that the
Merger Consideration payable with respect to "Restricted Shares" under the
Company's Capital Accumulation Plan (the "Plan") shall be deposited, as elected
by the holders of such shares, in either of two grantor trusts to be
established by the Company, one of which shall provide for a fixed and/or
variable rate of return and the other of which will invest in common stock of
Parent. The Merger Consideration will be invested and held in the trusts until
the end of the Restricted Period (as defined in the Plan) and will be subject
in other respects to the same terms and conditions as are applicable to
Restricted Shares awarded under the Plan. In the absence of an election by a
holder, the Merger Consideration attributable to such holder's Restricted
Shares will be deposited into the grantor trust providing a fixed and/or
variable rate of return.
Indemnification. Under the Merger Agreement, the directors and officers of
the Company are entitled to certain rights of indemnification and to be insured
by the Surviving Corporation or Parent with respect to certain matters from and
after the completion of the Merger. See "SPECIAL FACTORS--The Merger
Agreement--Indemnification and Insurance."
Interlocking Directors and Officers. In considering the recommendation of
the Company Board and the Special Committee with respect to the Offer and the
Merger, stockholders should be aware that certain officers and directors of
Parent and the Company have interests in the Offer and the Merger which are
described below and which may present them with certain potential conflicts of
interest. Currently, of the eight directors of the Company, four are also
directors of Parent and two are executive officers of Parent.
Certain Interests of Parent and the Purchaser. Stockholders also should be
aware that Parent and the Purchaser have certain interests that present actual
or potential conflicts of interest in connection with the Offer and the Merger.
As a result of the Purchaser's current ownership of approximately 85% of the
issued and outstanding shares of common stock of the Company and its nominees
constituting a majority of the Company's directors, the Purchaser may be deemed
to control the Company.
The Special Committee and the Company Board were aware of these actual and
potential conflicts of interest and considered them along with the other
matters described under "SPECIAL FACTORS--Recommendation of the Company Board;
Fairness of the Offer and the Merger."
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment, and will pay for, all Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn as permitted by "THE
TENDER OFFER--Section 4. Withdrawal Rights." The term "Expiration Date" means
12:00 midnight, New York City time, on Wednesday, April 19, 2000, unless and
until the Purchaser (but subject to the terms and conditions of the Merger
Agreement) shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire.
Subject to the provisions of the Merger Agreement, the Purchaser may waive
any or all of the conditions to its obligation to purchase Shares pursuant to
the Offer. If by the initial Expiration Date or any subsequent Expiration Date
any or all of the conditions to the Offer have not been satisfied or waived,
subject to the provisions of the Merger Agreement, the Purchaser may elect to
(i) terminate the Offer and return all tendered Shares to tendering
stockholders, (ii) waive all of the unsatisfied conditions and, subject to any
required extension, purchase all Shares validly tendered by the Expiration Date
and not properly withdrawn or (iii)
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extend the Offer and, subject to the right of stockholders to withdraw Shares
until the new Expiration Date, retain the Shares that have been tendered until
the expiration of the Offer as extended.
The Merger Agreement provides that, without the consent of the Company
(expressed in a resolution adopted by the Special Committee), the Purchaser
will not (i) decrease the Offer Price, (ii) change the form of consideration to
be paid in the Offer, (iii) impose any additional conditions to the Offer from
those set forth in "THE TENDER OFFER--Section 13. Certain Conditions to the
Offer" or (iv) make any other change in the terms or conditions of the Offer
which is materially adverse to the holders of Shares. The Purchaser
acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires the
Purchaser to pay the consideration offered or return the Shares tendered
promptly after the termination or withdrawal of the Offer and (ii) the
Purchaser may not delay acceptance for payment of, or payment for, any Shares
upon the occurrence of any of the conditions specified in "THE TENDER
OFFER--Section 13. Certain Conditions to the Offer" without extending the
period of time during which the Offer is open.
Notwithstanding the foregoing, the Purchaser may, without the consent of
the Company, extend the Offer beyond the initial Expiration Date in the
following events: (i) from time to time if, at the initial Expiration Date (or
any subsequent Expiration Date), any of the conditions of the Offer shall not
have been satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer or any period required by applicable law; (iii) if all
the conditions of the Offer are satisfied or waived, but the number of Shares
validly tendered and not withdrawn (together with such number of Shares as may
be issued upon conversion of the shares of Class B Common Stock owned by the
Purchaser) is less than 90% of the then outstanding number of Shares, for an
aggregate period not to exceed ten business days (for all such extensions); or
(iv) pursuant to an amendment to the Offer providing for a "subsequent offering
period" not to exceed twenty business days to the extent permitted under Rule
14d-11 under the Exchange Act.
Pursuant to Rule 14d-11 under the Exchange Act, the Purchaser may, subject
to certain conditions, provide a subsequent offering period following the
expiration of the Offer on the Expiration Date (a "Subsequent Offering
Period"). A Subsequent Offering Period is an additional period of time from
three business days to twenty business days in length, beginning after the
Purchaser purchases Shares tendered in the Offer, during which stockholders may
tender, but not withdraw, their Shares and receive the Offer Price.
The Merger Agreement requires the Purchaser to accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied or waived on the Expiration Date.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 13e-3(e), l4d-4(c),
14d-6(d) and 14e-l under the Exchange Act, which require that material changes
be promptly disseminated to stockholders in a manner reasonably designed to
inform them of such changes) and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.
If the Purchaser is delayed in its payment for the Shares or is unable to
pay for Shares pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer, the Depositary may retain tendered
Shares on behalf of the Purchaser, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to withdrawal rights as
described in "THE TENDER OFFER--Section 4. Withdrawal Rights." However, the
ability of the Purchaser to delay the payment for Shares which the Purchaser
has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act,
which requires that bidder pay the consideration offered or return the
securities deposited by, or on behalf of, holders of securities promptly after
the termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
13e-3(e), 14d-4(c), l4d-6(d) and 14e-1 under the Exchange Act. The minimum
period during which the
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Offer must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or change in
percentage of securities sought, will depend upon the facts and circumstances
then existing, including the relative materiality of the changed terms or
information. In a public release, the SEC has stated its views that an offer
must remain open for a minimum period of time following a material change in the
terms of the Offer and that waiver of a material condition is a material change
in the terms of the Offer. The release states that an offer should remain open
for a minimum of five business days from the date a material change is first
published or sent or given to security holders and that, if material changes are
made with respect to information not materially less significant than the offer
price and the number of shares being sought, a minimum of 10 business days may
be required to allow for adequate dissemination to stockholders and investor
response. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time. The
requirement to extend the Offer will not apply to the extent that the number of
business days remaining between the occurrence of the change and the
then-scheduled Expiration Date equals or exceeds the minimum extension period
that would be required because of such amendment. If, prior to the Expiration
Date, the Purchaser increases the consideration offered to holders of Shares
pursuant to the Offer, such increased consideration will be paid to all holders
whose Shares are purchased in the Offer whether or not such Shares were tendered
prior to such increase.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies, and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn, as soon as
practicable after the Expiration Date. Subject to applicable rules of the SEC,
the Purchaser expressly reserves the right to delay acceptance for payment of,
or payment for, Shares in order to comply in whole or in part with any other
applicable law. If the Purchaser desires to delay payment for Shares accepted
for payment pursuant to the Offer, and such delay would otherwise be in
contravention of Rule 14e-1(c) of the Exchange Act, the Purchaser will
otherwise extend the Offer.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing such Shares (the "Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in "THE TENDER OFFER--Section 3.
Procedures for Tendering Shares," (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined below) in lieu of the Letter of Transmittal and (iii) any
other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary, as agent for the tendering stockholders, of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to tendering stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the Offer Price for Shares be paid, regardless
of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Certificates are
submitted evidencing more Shares than are tendered, Certificates evidencing
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unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at DTC pursuant to the procedure set forth in "THE TENDER
OFFER--Section 3. Procedures for Tendering Shares," such Shares will be credited
to an account maintained at DTC), as promptly as practicable following the
expiration or termination of the Offer.
If, on or prior to the Expiration Date, the Purchaser shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration shall be paid to all holders of Shares that are
purchased pursuant to the Offer, whether or not such Shares were tendered,
accepted for payment or paid for prior to such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any such
transaction or assignment will not relieve the Purchaser of its obligations
under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES. Except as set forth below, in order
for Shares to be validly tendered pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal)
and any other documents required by the Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase and either (i) the Certificates evidencing tendered Shares
must be received by the Depositary at such address or such Shares must be
tendered pursuant to the procedure for book-entry transfer described below and
a Book-Entry Confirmation must be received by the Depositary (including an
Agent's Message if the tendering shareholder has not delivered a Letter of
Transmittal), in each case on or prior to the Expiration Date, or (ii) the
tendering shareholder must comply with the guaranteed delivery procedures
described below. No alternative, conditional or contingent tenders will be
accepted. The term "Agent's Message" means a message, transmitted by electronic
means to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation which states that DTC has received an express acknowledgment from
the participant in DTC tendering the Shares which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Purchaser may
enforce such agreement against such participant.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at DTC for purposes of the Offer within two business days after
the date of this Offer to Purchase. Any financial institution that is a
participant in DTC's system may make a book-entry delivery of Shares by causing
DTC to transfer such Shares into the Depositary's account in accordance with
DTC's procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer at DTC, either the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message in lieu of the Letter
of Transmittal, and any other required documents, must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the tendering
shareholder must comply with the guaranteed delivery procedure described below.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), except
in cases where Shares are tendered (i) by a registered holder of Shares who has
not completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. If a Certificate is registered in
the name of a person other than the signatory of the Letter of Transmittal (or
a facsimile thereof), or if payment is to be made, or a Certificate not
accepted for payment or not tendered is to be returned, to a person other than
the registered holder(s), then the Certificate must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear on the Certificate, with the signature(s) on
such Certificate or stock powers guaranteed by an Eligible Institution. If the
Letter of Transmittal or stock powers are signed or any certificate is endorsed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of
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corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Purchaser,
proper evidence satisfactory to the Purchaser of their authority to so act must
be submitted. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Certificates evidencing such stockholder's Shares are not
immediately available or such stockholder cannot deliver the Certificates and
all other required documents to the Depositary prior to the Expiration Date, or
such shareholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such Shares may nevertheless be tendered, provided
that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
prior to the Expiration Date by the Depositary as provided below; and
(iii) the Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in connection
with a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three NYSE trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the NYSE is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by the Purchaser.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation
of the delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Purchaser in its sole discretion,
which determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any and all tenders determined by it not
to be in proper form or the acceptance for payment of which may, in the opinion
of its counsel, be unlawful. The Purchaser also reserves the absolute right to
waive any condition of the Offer or any defect or irregularity in the tender of
any particular Shares or any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders, and the
Purchaser's interpretation of the terms and conditions of the Offer will be
final and binding on all persons. No tender of Shares will be deemed to have
been validly made until all defects and irregularities have been cured or
waived to the satisfaction of the Purchaser. None of the Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after
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the date of this Offer to Purchase). All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Shares
for payment. Upon such acceptance for payment, all prior proxies given by such
stockholder with respect to such Shares (and such other Shares and securities)
will be revoked without further action, and no subsequent proxies may be given
nor any subsequent written consent executed by such stockholder (and, if given
or executed, will not be deemed to be effective) with respect thereto. The
designees of the Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares.
The acceptance for payment by the Purchaser of Shares pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENTS
MADE TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT
TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT
SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED
TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 9 OF
THE LETTER OF TRANSMITTAL. NON-UNITED STATES HOLDERS MUST SUBMIT A COMPLETED
FORM W-8 OR FORM W-8BEN TO AVOID BACKUP WITHHOLDING. SEE INSTRUCTION 12 OF THE
LETTER OF TRANSMITTAL. THESE FORMS MAY BE OBTAINED FROM THE DEPOSITARY.
4. WITHDRAWAL RIGHTS. Tenders of the Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after May 21, 2000. If
the Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be accompanied by an extension of the Offer to
the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of such Shares, if different from that of the
person who tendered such Shares. If Certificates evidencing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such Certificates, the serial numbers shown on
such Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Shares have been tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in "THE TENDER OFFER--Section 3. Procedures for Tendering Shares,"
any notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawn Shares or must otherwise comply with DTC's
procedures.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described in "THE TENDER OFFER--Section 3. Procedures for Tendering
Shares," at any time prior to the Expiration Date or during a subsequent
offering period under Rule 14d-11 under the Exchange Act if the Offer is
amended to provide for one.
No withdrawal rights will apply to Shares tendered into a subsequent
offering period under Rule 14d-11 under the Exchange Act and no withdrawal
rights apply during a subsequent offering period under Rule 14d-11 under the
Exchange Act with respect to Shares tendered in the Offer and accepted for
payment.
31
<PAGE>
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for
Shares pursuant to the Offer or in the Merger will be a taxable transaction for
U.S. federal income tax purposes under the Code and may also be a taxable
transaction under applicable state, local or foreign tax laws. Generally, a
stockholder who receives cash in exchange for Shares pursuant to the Offer or
the Merger will recognize gain or loss for U.S. federal income tax purposes
equal to the difference between the amount of cash received and such
stockholder's adjusted tax basis in the Shares exchanged therefor. Provided
that such Shares constitute capital assets in the hands of the stockholder,
such gain or loss will be capital gain or loss, and will be long-term capital
gain or loss if the holder has held the Shares for more than one year at the
time of sale. Gain or loss will be calculated separately for each block of
Shares tendered pursuant to the Offer or converted pursuant to the Merger. The
maximum U.S. federal income tax rate applicable to individual taxpayers on
long-term capital gain is 20%, and the deductibility of capital losses is
subject to limitations. All stockholders should consult with their own tax
advisors as to the particular tax consequences of the Offer and the Merger to
them, including the applicability and effect of the alternative minimum tax and
any state, local or foreign income and other tax laws and of changes in such
tax laws.
The foregoing discussion may not be applicable to a stockholder who
acquired Shares pursuant to the exercise of employee stock options or otherwise
as compensation or to a stockholder who is otherwise subject to special tax
treatment under the Code (for example, brokers, dealers in securities, banks,
insurance companies, tax-exempt organizations and financial institutions and
taxpayers that are neither citizens nor residents of the United States or that
are foreign corporations or foreign estates or trusts as to the United States).
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS
SUBJECT TO CHANGE POSSIBLY WITH RETROACTIVE EFFECT. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR NON-UNITED STATES INCOME AND OTHER
TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE under the symbol "TAP." The following table sets forth, for
the quarters indicated, the high and low sales prices per Share on NYSE as
reported by published financial sources and the quarterly dividends paid per
Share:
<TABLE>
<CAPTION>
DIVIDEND
NYSE: HIGH LOW PAID
----- ---- --- ----
<S> <C> <C> <C>
1998:
First Quarter .................................. $46 1/16 $39 1/8 $ 0.10
Second Quarter ................................. 45 5/8 38 3/4 0.10
Third Quarter .................................. 45 3/4 29 5/8 0.10
Fourth Quarter ................................. 35 1/2 24 1/8 0.10
1999:
First Quarter .................................. $38 1/2 $28 3/16 $ 0.125
Second Quarter ................................. 41 3/8 33 3/8 0.125
Third Quarter .................................. 41 7/8 28 3/4 0.125
Fourth Quarter ................................. 38 7/8 27 11/16 0.125
2000:
First Quarter (through March 22, 2000) ......... $41 3/16 $29 3/8 $ 0.14
</TABLE>
On March 20, 2000, the last full trading day prior to the initial public
announcement with respect to the proposed Offer, the last sale price per Share
as reported on the NYSE was $33 11/16. On March 22, 2000, the last full trading
day prior to the commencement of the Offer, the last sale price per Share as
reported on the NYSE was $41.00.
32
<PAGE>
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the SEC and other public sources. Neither Parent nor the Purchaser
assumes any responsibility for the accuracy or completeness of the information
concerning the Company furnished by the Company or contained in such documents
and records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Parent or the Purchaser.
General. The Company is a leading provider of a broad range of insurance
products and services for commercial markets, including workers' compensation,
integrated disability, property, liability and specialty lines, and fidelity
and surety binds. The Company is also a leading provider of homeowners and auto
insurance for consumers. The Company is an indirect subsidiary of Parent.
Financial Information. Set forth below is certain selected financial
information relating to the Company which has been excerpted or derived from
the audited financial statements contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999 (the "Form 10-K"). More
comprehensive financial information is included in the Form 10-K and other
documents filed by the Company with the SEC. The financial information that
follows is qualified in its entirety by reference to such reports and other
documents may be examined and copies may be obtained from the offices of the
SEC in the manner set forth below.
33
<PAGE>
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
AT AND FOR THE YEAR ENDED DECEMBER 31,(1) ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues ................................................. $ 10,572 $ 10,451 $ 9,911 $ 8,197 $ 4,569
Total claims and expenses ...................................... $ 8,657 $ 8,614 $ 8,159 $ 7,710 $ 4,018
Income before cumulative effect of changes in
accounting principles ......................................... $ 1,409 $ 1,343 $ 1,236 $ 391 $ 419
Cumulative effect of changes in accounting principles .......... (133) -- -- -- --
-------- -------- -------- -------- --------
Net income ..................................................... $ 1,276 $ 1,343 $ 1,236 $ 391 $ 419
======== ======== ======== ======== ========
Total investments .............................................. $ 29,836 $ 31,886 $ 31,031 $ 29,364 $ 12,820
Total assets ................................................... $ 50,257 $ 51,274 $ 50,682 $ 49,779 $ 24,062
Claims and claim adjustment expense reserves ................... $ 29,003 $ 29,589 $ 30,324 $ 31,177 $ 15,460
Long-term debt ................................................. $ 850 $ 1,250 $ 1,249 $ 1,249 --
The Company-obligated mandatorily redeemable
securities of subsidiary trusts holding solely junior
subordinated debt securities of the Company ................... $ 900 $ 900 $ 900 $ 900 --
Stockholders' equity ........................................... $ 8,941 $ 9,125 $ 7,777 $ 6,480 $ 3,601
Stockholders' equity excluding accumulated other
changes in equity from nonowner sources ....................... $ 9,143 $ 8,204 $ 7,055 $ 6,195 $ 3,321
Year-end common shares outstanding(2) .......................... 387.3 391.9 393.1 399.6 N/A
Basic Earnings per Share(3)(5)
Income before cumulative effect of changes in
accounting principles ......................................... $ 3.62 $ 3.43 $ 3.13 $ 1.02 $ 1.28
Cumulative effect of changes in accounting principles .......... (0.34) -- -- -- --
-------- -------- -------- -------- --------
Net income ..................................................... $ 3.28 $ 3.43 $ 3.13 $ 1.02 $ 1.28
======== ======== ======== ======== ========
Diluted Earnings per Share(4)(5)
Income before cumulative effect of changes in
accounting principles ......................................... $ 3.61 $ 3.42 $ 3.12 $ 1.02 $ 1.28
Cumulative effect of changes in accounting principles .......... (0.34) -- -- -- --
-------- -------- -------- -------- --------
Net income ..................................................... $ 3.27 $ 3.42 $ 3.12 $ 1.02 $ 1.28
======== ======== ======== ======== ========
Per common share data:
Cash dividends ................................................. $ 0.50 $ 0.40 $ 0.30 $ 0.15 N/A
Book value ..................................................... $ 23.09 $ 23.28 $ 19.78 $ 16.22 N/A
Book value excluding accumulated other changes in
equity from nonowner sources .................................. $ 23.61 $ 20.93 $ 17.95 $ 15.50 N/A
-------- -------- -------- -------- --------
</TABLE>
- ----------
(1) On April 2, 1996, the Company purchased from Aetna Services, Inc. all of
the outstanding capital stock of Travelers Casualty and Surety Company
(formerly the Aetna Casualty & Surety Company) and the Standard Fire
Insurance Company (collectively, "Aetna P&C"). Includes amounts related
to Aetna P&C from April 2, 1996, the date of the acquisition.
(2) In April 1996, in conjunction with the acquisition of Aetna P&C, the
Company issued common stock through its initial public offering. As part
of this transaction, the Purchaser, the Company's parent, acquired
approximately 328 million shares of Class B Common Stock of the Company
in exchange for contributing the outstanding capital stock of The
Travelers Indemnity Company and a capital contribution of approximately
$1.1 billion.
(3) Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period.
(4) Diluted earnings per share reflects the effect of potentially dilutive
securities, principally stock-based incentive plans.
(5) For purposes of computing basic and diluted earnings per share for
periods prior to the initial public offering, the 328 million shares of
common stock issued to the Purchaser in April 1996 were assumed to be
outstanding for all reported periods.
34
<PAGE>
Travelers Property Casualty Corp. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions of dollars, except for ratio)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Income before federal income taxes and
cumulative effect of changes in
accounting principles ..................... $ 1,915 $ 1,837 $ 1,752 $ 487 $ 551
Interest ................................... 152 161 163 118 --
Portion of rentals deemed to be interest 47 49 55 45 33
-------- ------- ------- ------- --------
Income available for fixed charges ......... $ 2,114 $ 2,047 $ 1,970 $ 650 $ 584
======== ======= ======= ======= ========
Fixed charges:
Interest .................................. $ 152 $ 161 $ 163 $ 118 $ --
Portion of rentals deemed to be
interest ................................ 47 49 55 45 33
-------- ------- ------- ------- --------
Total fixed charges ........................ $ 199 $ 210 $ 218 $ 163 $ 33
======== ======= ======= ======= ========
Ratio of earnings to fixed charges ......... 10.62x 9.75x 9.04x 3.99x 17.53x
-------- ------- ------- ------- --------
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing income
before income taxes and cumulative effect of changes in accounting principles
and fixed charges by the fixed charges. For purposes of this ratio, fixed
charges consist of that portion of rentals deemed representative of the
appropriate interest factor.
The Shares are registered under the Exchange Act. The Company is subject
to the informational filing requirements of the Exchange Act and, in accordance
therewith, is required to file periodic reports, proxy statements and other
information with the SEC relating to its business, financial condition and
other matters. Information as of particular dates concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the SEC.
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from the
SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to
the public on the SEC Internet site (http:// www.sec.gov.). Copies of such
materials may also be obtained by mail from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the SEC's
customary fees. Certain reports and other information concerning the Company
may also be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
8. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent. Citigroup Inc., a Delaware corporation, is a diversified holding
company whose businesses provide some 100 million consumers, corporations,
governments and institutions in 100 countries with a broad range of financial
products and services, including consumer banking and credit, corporate and
investment banking, insurance, securities brokerage and asset management. The
1998 merger of Citicorp and Travelers Group brought together such brand names
as Citibank, Travelers, Salomon Smith Barney, Commercial Credit (now named
CitiFinancial), and Primerica under Citigroup's trademark red umbrella. The
name, citizenship, business address, principal occupation or employment and
five-year employment history for each of the directors and executive officers
of Parent and certain other information is set forth in Schedule I hereto.
The Purchaser. The Travelers Insurance Group Inc., a Connecticut
corporation, is a holding company with no business operations. The name,
citizenship, business address, principal occupation or employment and five-year
employment history for each of the directors and executive officers of the
Purchaser and certain other information is set forth in Schedule I hereto.
35
<PAGE>
The Purchaser owns 328,020,170 shares of the Company's Class B Common
Stock which are immediately convertible into 328,020,170 Shares, representing
approximately 85% of the outstanding common stock of the Company and
approximately 98% of the voting power thereof as of March 21, 2000.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to consummate the Offer and the Merger and to pay related fees and
expenses is estimated to be approximately $2.38 billion. The Purchaser will
obtain such funds from Parent who will obtain such funds from the existing
resources, including utilization of existing commercial paper facilities and
internally generated funds of Citigroup and its subsidiaries. The Offer is not
conditioned on any financing arrangements.
10. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the Merger Agreement, without
the prior approval of Parent or as otherwise contemplated in the Merger
Agreement, the Company has agreed to not (i) declare or pay any dividend or
make any distribution with respect to any shares of its capital stock, (ii)
purchase or otherwise acquire, or propose to purchase or otherwise acquire, any
outstanding share of its capital stock, and (iii) issue, sell, pledge, dispose
or encumber any capital stock of the Company or any of its subsidiaries except
as set forth in the Merger Agreement.
11. CERTAIN EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES.
Effect on the Market for the Shares. The purchase of Shares by the
Purchaser pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and will reduce the number of holders of Shares, which
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
Stock Quotations. The Shares are currently listed and traded on the NYSE,
which constitutes the principal trading market for the Shares. Depending upon
the number of Shares purchased pursuant to the Offer, the Shares may no longer
meet the standards for continued inclusion in the NYSE.
According to the NYSE's published guidelines, the Shares would not be
eligible to be included for listing if, among other things, the number of
Shares publicly held falls below 600,000, the number of holders of round lots
of Shares falls below 400 (or below 1,200 if the average monthly trading volume
is below 100,000 for the last twelve months) or the aggregate market value of
such publicly held Shares falls below $8,000,000. If, as a result of the
purchase of Shares pursuant to the Offer, the Merger or otherwise, the Shares
no longer meet the requirements of the NYSE for continued listing, the listing
of the Shares might be discontinued and, in such event, the market for the
Shares could be adversely affected. In the event the Shares were no longer
eligible for listing on the NYSE, quotations might still be available from
other sources. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of such Shares remaining at such time, the interest in maintaining a
market in such Shares on the part of securities firms, the possible termination
of registration of such Shares under the Exchange Act as described below and
other factors.
Margin Securities. The Shares are currently "margin securities" as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, following the Offer it is possible that the
Shares might no longer constitute "margin securities" for purposes of the
margin regulations of the Federal Reserve Board, in which event such Shares
could no longer be used as collateral for loans made by brokers.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the SEC if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders. The termination of the
registration of the Shares under the Exchange Act would reduce the information
required to be furnished by the Company to holders of Shares and to the SEC and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement of furnishing a
proxy statement in connection with stockholders' meetings and the requirements
of Rule 13e-3 under the Exchange Act with respect to the "going private"
transactions, no longer applicable to the Shares. In addition, "affiliates" of
the Company and persons holding "restricted securities" of the Company may be
deprived of the ability to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended. If
36
<PAGE>
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for NYSE reporting.
Parent and the Purchaser currently intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon as
practicable after consummation of the Offer if the requirements for termination
of registration are met.
12. FEES AND EXPENSES. Except as set forth below, the Purchaser will not
pay any fees or commissions to any broker, dealer or other person for
soliciting tenders of Shares pursuant to the Offer.
Salomon Smith Barney is acting as Dealer Manager in connection with the
Offer and has provided certain financial advisory services to Parent and the
Purchaser in connection with the Offer and the Merger. Salomon Smith Barney
will receive reasonable and customary compensation for its services, and Parent
and the Purchaser have agreed to reimburse Salomon Smith Barney for all
reasonable out-of-pocket expenses incurred by them, including the reasonable
fees and expenses of legal counsel, and to indemnify Salomon Smith Barney
against certain liabilities and expenses in connection with its engagement,
including certain liabilities under the federal securities laws.
Parent and the Purchaser have retained Innisfree M&A Incorporated, as the
Information Agent, and Citibank, N.A., as the Depositary, in connection with
the Offer. The Information Agent may contact holders of Shares by mail,
telephone, facsimile, telegraph and personal interview and may request banks,
brokers, dealers and other nominee shareholders to forward materials relating
to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Innisfree M&A Incorporated will receive reasonable and customary
compensation for its services and will also be reimbursed for certain
out-of-pocket expenses and may be indemnified against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws. Parent and the Purchaser will pay the Depositary
reasonable and customary compensation for their services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including certain liabilities under federal securities laws. Brokers, dealers,
commercial banks and trust companies will be reimbursed by Parent and the
Purchaser for customary handling and mailing expenses incurred by them in
forwarding material to their customers.
13. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole discretion in
accordance with the terms of the Merger Agreement, the Purchaser shall not be
required to accept for payment, purchase or pay for, subject to any applicable
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, and
may delay the acceptance for payment of or, subject to the restriction referred
to above, the payment for, any tendered Shares (whether or not any Shares
theretofore have been accepted for payment or paid for pursuant to the Offer),
and may amend and terminate the Offer, if, (i) Parent and the Purchaser shall
not have obtained all insurance regulatory approvals necessary in order to
consummate the Offer, the Merger and the other transactions contemplated
hereby, or (ii) at any time on or after March 22, 2000 and prior to the time of
payment for any such Shares, any of the following events shall occur:
(a) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or
rendered applicable to the Offer or the Merger by any domestic or foreign
federal or state governmental regulatory or administrative agency or
authority or court or legislative body or commission which (i) prohibits,
or imposes any material limitations on, Parent's or the Purchaser's
ownership or operation of all or a material portion of the Company's
businesses or assets, (ii) prohibits or makes illegal the acceptance for
payment, payment for or purchase of Shares or the consummation of the Offer
or the Merger, (iii) results in a material delay in or restricts the
ability of the Purchaser, or renders the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares, or (iv) imposes
material limitations on the ability of the Purchaser or Parent effectively
to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders, provided that Parent
shall have used all reasonable efforts to cause any such judgment, order or
injunction to be vacated or lifted;
(b) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct in any respect as of the
date of consummation of the Offer as though made on or as
37
<PAGE>
of such date, except for such failures to be true and correct as have
not had or would not reasonably be expected to have a material adverse
effect on the Company, or the Company shall have breached or failed in any
material respect to perform or comply with any material obligation,
agreement or covenant required by the Merger Agreement to be performed or
complied with by it;
(c) the Board of Directors of the Company, based on the recommendation
of the Special Committee, shall have (including by amendment to the
Schedule 14D-9) withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement or shall have resolved to do any of the foregoing;
(d) the Company, acting through the Special Committee, Parent and the
Purchaser shall have agreed that the Purchaser shall terminate the Offer or
postpone the acceptance for payment of or payment for shares thereunder; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Parent, the Purchaser
and their respective affiliates and may be asserted by Parent or the Purchaser,
in whole or in part, at any time and from time to time in the sole discretion
of Parent or the Purchaser. The failure by Parent or the Purchaser at any time
to exercise its rights under any of the foregoing conditions shall not be
deemed a waiver of any such rights and each such right shall be deemed an
ongoing right which may be asserted at any time or from time to time. If the
Offer is terminated under any of the foregoing provisions, all tendered Shares
that have not previously been accepted for payment will be returned to the
tendering stockholder.
14. CERTAIN LEGAL MATTERS.
General. Except as described in this Section 14, based on a review of
publicly available filings by the Company with the SEC and a review of certain
information furnished by the Company to Parent and the Purchaser and
discussions of representatives of Parent and the Purchaser with representatives
of the Company, Parent and the Purchaser are not aware of any license or
regulatory permit that appears to be material to the business of the Company
and that might be adversely affected by the Purchaser's acquisition of Shares
pursuant to the Offer, or of any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Purchaser
pursuant to the Offer. Should any such approval or other action be required, it
is presently contemplated that such approval or action would be sought, except
as described below under "--State Takeover Laws." While the Purchaser does not
currently intend to delay acceptance for payment of Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if required, would be obtained without
substantial conditions or that adverse consequences would not result to the
Company's business or that certain parts of the Company's business would not
have to be disposed of in the event that such approval were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, the Purchaser may decline to accept for payment or pay
for any Shares tendered.
State Insurance Approvals. This Offer is conditioned on the receipt of
required regulatory approvals, if any, in the eight states in which the
Company's insurer subsidiaries are domiciled.
State Takeover Laws. The Company and certain of its subsidiaries conduct
business in a number of states throughout the United States, some of which have
adopted laws and regulations applicable to offers to acquire shares of
corporations that are incorporated or have substantial assets, stockholders
and/or a principal place of business in such states. In Edgar v. Mite Corp.,
the Supreme Court of the United States held that the Illinois Business Takeover
Statute, which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate
commerce and was therefore unconstitutional. In CTS Corp. v. Dynamics Corp. of
America, however, the Supreme Court of the United States held that a state may,
as a matter of corporate law and, in particular, those laws concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without prior approval of the
remaining stockholders, provided that such laws were applicable only under
certain conditions, in particular, that the corporation has a substantial
number of stockholders in and is incorporated under the laws
38
<PAGE>
of such state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal
district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they applied to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit.
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL ("Section 203") prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the corporation's outstanding voting stock) from engaging in a
"business combination" (defined to include mergers and certain other actions)
with a Delaware corporation for a period of three years following the date such
person became an interested stockholder. The Company expressly elected in its
Certificate of Incorporation not to be governed by Section 203.
The Company conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. Neither Parent nor the
Purchaser has determined whether any of these state takeover laws and
regulations will by their terms apply to the Offer or the Merger, and, except
as set forth above, neither Parent nor the Purchaser has presently sought to
comply with any state takeover statute or regulation. Parent and the Purchaser
reserve the right to challenge the applicability or validity of any state law
or regulation purporting to apply to the Offer or the Merger, and neither
anything in this Offer to Purchase nor any action taken in connection herewith
is intended as a waiver of such right. In the event it is asserted that one or
more state takeover statutes is applicable to the Offer or the Merger and an
appropriate court does not determine that such statute is inapplicable or
invalid as applied to the Offer or the Merger, Parent or the Purchaser might be
required to file certain information with, or to receive approval from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer. In addition, if enjoined, the Purchaser might be unable
to accept for payment any Shares tendered pursuant to the Offer, or be delayed
in continuing or consummating the Offer and the Merger. In such case, the
Purchaser may not be obligated to accept for payment any Shares tendered. See
"THE TENDER OFFER--Section 13. Certain Conditions to the Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules that have been promulgated thereunder by the Federal Trade
Commission ("FTC"), certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The purchase of Shares
pursuant to the Offer is not subject to such requirements because Parent
currently owns in excess of 50% of the Company's issued and outstanding common
stock.
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could take such
action under the antitrust laws of the United States as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of the Shares so acquired
or divestiture of substantial assets of Parent or the Company. Private parties
(including individual States) may also bring legal actions under the antitrust
laws of the United States. The Purchaser does not believe that the consummation
of the Offer will result in a violation of any applicable antitrust laws.
However, there can be no assurance that a challenge to the Offer on antitrust
grounds will not be made, or if such a challenge is made, what the result will
be.
Litigation. On March 21, 2000, at least nine lawsuits seeking class action
status were filed in the Delaware Court of Chancery by purported stockholders
of the Company against Parent and the Company's directors. The lawsuits allege,
among other things, that Parent's offer is inadequate and grossly unfair, that
Parent has tried to take advantage of the fact that the market price of the
Company Common Stock does not fully reflect the true value of the Company, that
Parent timed the announcement of its proposal to place an artificial lid on the
market price of the Company Common Stock, that Parent is violating its duties
as a majority stockholder of the Company, that Parent is engaging in coercive
conduct, and that the individual defendants have breached their fiduciary
duties to the members of the proposed class. The complaints seek, among other
things, an order
39
<PAGE>
preliminarily and permanently enjoining the defendants from proceeding with the
proposed transaction, an order rescinding the transaction and setting it aside
or awarding rescissory damages in the event the proposed transaction is
consummated, damages, and attorneys' fees and expenses.
15. MISCELLANEOUS.
The Offer is being made to all holders of Shares. The Purchaser is not
aware of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make
a good faith effort to comply with any such state statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
the Purchaser cannot comply with any such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Parent and the Purchaser have filed with the SEC a Tender Offer Statement
on Schedule TO, together with all exhibits thereto, pursuant to Regulation M-A
under the Exchange Act (the "Exchange Act Rules"), furnishing certain
additional information with respect to the Offer which includes the information
required by Schedule 13E-3. In addition, the Company has filed a
Solicitation/Recommendation Statement on Schedule 14D-9, together with all
exhibits thereto, pursuant to Rule 14d-9 of the Exchange Act Rules setting
forth its recommendation with respect to the Offer and the reasons for such
recommendations and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the SEC in the manner set forth in
"THE TENDER OFFER--Section 7. Certain Information Concerning the Company"
(except that they will not be available at the regional offices of the SEC).
The Travelers Insurance Group Inc.
March 23, 2000
40
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth in the table
below are the name and the present principal occupations or employment and the
name, principal business and address of any corporation or other organization
in which such occupation or employment is conducted, and the five-year
employment history of each of the directors and executive officers of Parent.
Unless otherwise stated, each executive officer of Parent has been employed in
such position or in other executive or management positions with Parent for at
least five years. Unless otherwise noted, each person identified below is a
United States citizen. The principal place of business address of Parent and,
unless otherwise indicated, the business address of each person identified
below is c/o Citigroup Inc., 153 East 53rd Street, New York, New York 10043.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ --------------------------------------------------------
<S> <C>
C. Michael Armstrong ......... Director since 1993. Chairman and Chief Executive
Officer of AT&T Corp. since 1997. He was Chairman
and Chief Executive Officer of Hughes Electronic
Corporation from 1992 to 1997. Prior to 1992 he was an
Officer of International Business Machines Corporation,
a Member of the IBM Management Committee and
Chairman of the IBM World Trade Corporation. He is
also on the Supervisory Board of Thyssen-Bornemisza Group.
Alain J.P. Belda ............. Director since 1997. Chief Executive Officer of Alcoa Inc.
since 1999 and President since 1997. He has been President
of Alcoa Inc. since 1997 and a director of Alcoa Inc.
since 1999. From 1997 to 1999, he served as Chief
Operating Officer of Alcoa Inc. and Vice Chairman
from 1995 to 1997. He is also a director of Cooper
Industries, Inc. and E.I. du Pont de Nemours &
Company. Mr. Belda is a citizen of Brazil.
Kenneth J. Bialkin ........... Director since 1986. Partner at Skadden, Arps, Slate,
Meagher & Flom LLP since 1988. He is also a director
of the Company, The Municipal Assistance Corporation
for the City of New York, Tecnomatix Technologies
Ltd. and Sapiens International Corporation N.V.
Kenneth T. Derr .............. Director since 1987. Chairman of the Board, Retired of
Chevron Corporation. He served as Chairman and
Chief Executive Officer of Chevron Corporation from
1989 to 1999. He is also a director of AT&T Corp. and
Potlatch Corporation.
John M. Deutch ............... Director since 1996 (and 1987 to 1993). Institute
Professor, Massachusetts Institute of Technology since
1990. He served as Director of the Central Intelligence
Agency from 1995 to 1996, and Deputy Secretary,
U.S. Department of Defense in 1994 and Under
Secretary, U.S. Department of Defense in 1993. He is
also a director of Ariad Pharmaceuticals, Inc., CMS
Energy, Cummins Engine Company, Inc., Raytheon
Company and Schlumberger, Ltd.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------------------- ---------------------------------------------------------
<S> <C>
Ann Dibble Jordan .......... Director since 1989. Consultant since 1987. Prior to
1987 she served as Director of the Department of Social
Services for the University of Chicago Medical Center
from 1986 to 1987, Field Work Associate Professor at
the School of Social Service Administration of the
University of Chicago from 1970 to 1987 and Director
of Social Services of Chicago Lying-in Hospital from
1970 to 1985. She is also a director of Johnson & Johnson
Corporation and Automatic Data Processing, Inc.
Reuben Mark ................ Director since 1996. Chairman and Chief Executive
Officer of Colgate-Palmolive Company since 1986. He
served as Chief Executive Officer of Colgate-Palmolive
Company from 1984 to 1986. He is also a director of
Pearson plc and Time Warner Inc.
Michael T. Masin ........... Director since 1997. Vice Chairman and Director, GTE
Corporation and Designated President and Vice Chairman
of the company to be formed by the merger of GTE
Corporation and Bell Atlantic. He has been President--
International, GTE Corporation since 1995 and Vice
Chairman since 1993. Prior to 1993, he was a Partner
at O'Melveny & Myers. He is also a director of Compania
Nacional Telefonos de Venezuela, BCT Telus Communications,
Inc. and Puerto Rican Telephone Company.
Dudley C. Mecum ............ Director since 1986. He is a Managing Director of
Capricorn Holdings, LLC since 1997. He was also a
Partner at G.L. Ohrstrom & Co. from 1989 to 1996 and
was the Managing Partner of KPMG LLP (New York
office) from 1979 to 1985. He is also a director of the
Company, Dyncorp, Lyondell Companies, Inc.,
Suburban Propane Partners, MLP and CCC Information
Services, Inc.
Richard D. Parsons ......... Director since 1996. He has been the President of Time
Warner Inc. since 1995 and a Director of Time Warner
Inc. since 1991. From 1988 to 1995 he held several
positions with Dime Savings Bank of New York
including Chairman and Chief Executive Officer from
1991 to 1995 and President and Chief Operating Officer
from 1988 to 1990. He is also a director of Estee Lauder
Companies Inc. and Philip Morris Companies Inc.
Andrall E. Pearson ......... Director since 1986. Chairman and Chief Executive
Officer of Tricon Global Restaurants, Inc. since 1997.
He served as Operating Partner of Clayton, Dubilier &
Rice, Inc. from 1993 to 1997. He has been a Professor at
Harvard Business School since 1985. From 1971 to 1984
he served as President and Chief Operating Officer of
PepsiCo, Inc. He is also a director of DBT-OnLine, Inc.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------------------- ----------------------------------------------------------
<S> <C>
John S. Reed ............... Director since 1982. Chairman and Co-Chief Executive
Officer since 1998. Mr. Reed has announced his
retirement, effective at the upcoming annual meeting,
from all his officer and director positions at Parent. He
has held various positions with the Parent since joining
Citibank N.A. in 1965, including Chairman and Chief Executive
Officer of Citicorp and Citibank from 1984 to the present
and Vice Chairman of Citicorp and Citibank N.A. from 1982 to
1998. He is also a director of Monsanto Company and
Philip Morris Companies, Inc.
Robert E. Rubin ............ Director since 1999. Member of the Office of the
Chairman and Chairman of the Executive Committee.
He served as Secretary of the Treasury of the United
States from 1995 to 1999 and as Assistant to the
President for Economic Policy from 1993 to 1994. Prior
to 1993 he held various titles at Goldman, Sachs & Co.,
including Co-Senior Partner and Co-Chairman,
Goldman, Sachs & Co. from 1990 to 1992 and Vice-
Chairman and Co-Chief Operating Officer from 1987 to
1990. He is also a director of Ford Motor Company.
Franklin A. Thomas ......... Director since 1970. He served as President of The
Ford Foundation from 1979 to 1996. He is also a director
of Alcoa, Inc., Cummins Engine Company, Inc., Lucent
Technologies, Inc., Pepsico, Inc. and CONOCO Inc.
Sanford I. Weill ........... Director since 1986. Chairman and Co-Chief Executive
Officer and Member of the Office of the Chairman. He
has been Chairman and Co-Chief Executive Officer
since 1998. From 1986 to 1998 he served as Chairman of
the Board and Chief Executive Officer of Travelers
Group Inc. and he served as President from 1986 to 1991.
He is also a director of the Company, AT&T Corp., E.I.
du Pont de Nemours & Company and United
Technologies Corp.
Edgar S. Woolard ........... Director since 1987. Former Chairman and Chief
Executive Officer of E.I. du Pont de Nemours &
Company. He was Chairman of E.I. du Pont de Nemours
& Company from 1995 to 1997, Chairman and Chief
Executive Officer from 1989 to 1995, President and Chief
Operating Officer from 1987 to 1989 and Vice Chairman from
1985 to 1987. He is also a director of Apple Computer, Inc.
Arthur Zankel .............. Director since 1986. General Partner of Zankel Capital
Advisors, LLC since 2000. He served as General Partner
of First Manhattan Co. from 1965 to 1999 and was
Co-Managing Partner of First Manhattan Co. from
1980 to 1997. He is also a director of the Company,
Vicorp Restaurants, Inc. and White Mountains
Insurance Group Ltd.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ---------------------------------------------------------
<S> <C>
Gerald R. Ford ............... Honorary Director. He has been a Director or Honorary
Director since 1986. President of the United States
from August 1974 through January 1977. He was
Vice President of the United States from
December 1973 through August 1974. He is also a
director of the National Association of Securities Dealers,
Inc., an Advisory Director of Chase Bank of Texas and
an Advisor to the Board of American Express Company.
Michael A. Carpenter ......... Co-Chief Executive--Global Corporate and Investment
Bank since November 1998. He is also Chairman of the
Board and Chief Executive Officer and a Director of
each of Salomon Smith Barney Inc. and Salomon Smith
Barney Holdings Inc., wholly owned subsidiaries of the
Parent. Previously, from January 1989 to June 1994 he
was Chairman of the Board, President and Chief
Executive Officer of Kidder, Peabody Group, Inc., and
from 1986 to 1989, he was Executive Vice President of
GE Capital Corporation.
Paul J. Collins .............. Vice Chairman of Parent. He joined Citicorp in
1961. Mr. Collins is also a Director of each of Citicorp
and Citibank, N.A. since 1985. He is also a Director of
Kimberly-Clark Corporation and Nokia Corporation; a
Trustee of Carnegie Hall, the Central Park Conservancy
and the Glyndebourne Arts Trust.
Michael D'Ambrose ............ Senior Human Resources Officer. Mr. D'Ambrose
joined Citibank in 1997, and was in charge of Executive
Resources of Citibank until May 1999. Prior to that
time, he served as Chief Operating Officer of Westwood
One, Inc. and President and Chief Executive Officer of
Shadow Broadcast Services.
Jay S. Fishman ............... He has been Chairman of the Board of the Company since
March 2000 and Chief Executive Officer and President
of the Company since 1998. He was Chief Executive
Officer and President, Commercial Lines in 1998 and its
Chief Operating Officer, Consumer Lines from 1996 to 1998.
Since joining Travelers Group in 1989, he has held various
positions including, Vice Chairman and Chief
Administrative Officer of the Company from 1996 to
1998.
Edward D. Horowitz ........... Chief Executive for e-Citi. Mr. Horowitz joined Citibank
in January 1997 and, prior to that time, was a Senior
Vice President--Technology of Viacom, Inc. and Chief
Executive Officer of Viacom Interactive Media.
Thomas W. Jones .............. Chairman and Chief Executive of the Global Investment
Management and Private Banking Group. Mr. Jones
joined the Parent in August 1997 and, prior to that time,
he was Vice Chairman and a director of the
Teachers Insurance and Annuity Association--
College Retirement Equities Fund.
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------- --------------------------------------------------------
<S> <C>
Robert I. Lipp ................. Chairman and Chief Executive Officer--Global
Consumer Business. From 1976 to 2000 he was Chairman of
the Board of the Company and from 1996 to 1998 he was
Chief Executive Officer of the Company. From October 1998
to April 1999, he was Co-Chairman--Global Consumer Business
of the Parent. He is a Director of Citicorp and Citibank,
N.A. Prior to joining the Parent, Mr. Lipp spent
23 years with Chemical New York Corporation. He is
President of the New York City Ballet; a director of the
Wadsworth Atheneum a Trustee of Williams College; and
Chairman of Dance-On Inc.
Deryck C. Maughan .............. Vice Chairman. He is a Director of Salomon Smith
Barney Holdings Inc. and Salomon Smith Barney Inc.;
a Managing Director of Salomon Smith Barney Inc. He
has been employed in such position or other executive
or management positions with Parent since
November 1997. He was, until, the consummation of
the merger with Salomon Inc in November 1997,
Chairman and Chief Executive Officer of Salomon
Brothers Inc and an Executive Vice President of
Salomon Inc. He is a member of the Group of Thirty
and the Trilateral Commission, serves on the
International Advisory Board of the British American
Business Council and is a Trustee of the Japan Society.
Mr. Maughan is a citizen of the United Kingdom.
Victor J. Menezes .............. Co-Chief Executive--Global Corporate and Investment
Bank. He has been President of Citibank, N.A. since June
1998. Mr. Menezes is a Director of Citicorp and
Citibank, N.A. He is a Trustee of the Asia Society and
a member of the U.S. Advisory Board of INSEAD.
Charles O. Prince, III ......... General Counsel and Corporate Secretary. He joined
Commercial Credit Company (a predecessor company
to Parent) in 1979, was promoted to Senior Vice
President and General Counsel in 1983 and was named
Executive Vice President in 1996.
William R. Rhodes .............. Vice Chairman. He is also a Vice Chairman of Citicorp
and Citibank, N.A. Mr. Rhodes joined Citibank, N.A.
in 1957. He is a Governor and Trustee of The New York
and Presbyterian Hospital and a Director of the New York
City Partnership and Chamber of Commerce.
Petros Sabatacakis ............. Senior Risk Officer. Senior Risk Manager for the Global
Corporate and Investment Bank. Mr. Sabatacakis joined
Parent in August 1999 and prior to that time, was
Senior Vice President--Financial Services for American
International Group. Previously, he was senior risk
manager and head of Global Treasury and Capital
Markets at Chemical Bank.
</TABLE>
I-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ----------------------------------------------------------
<S> <C>
Todd S. Thomson .............. Chief Financial Officer of Parent. Prior to that Mr.
Thomson was Chief Executive Officer, Citibank Global Private
Bank. Mr. Thomson joined Parent in July 1998 and,
prior to that time, was Senior Vice President, Strategic
Planning and Business Development for GE Capital
Services. Previously, he held management positions at
Barents Group LLC and Bain and Company.
Marc P. Weill ................ Chief Executive of Citigroup Investments, Inc. He is
Chief Investment Officer of The Travelers Insurance
Company. He also serves as Chairman of the Board of
Travelers Asset Management International Corporation,
a registered investment advisor, and serves as an officer
and/or director of various other subsidiaries of
Parent. Mr. Weill has held various other positions with
Parent and its subsidiaries since January 1991.
He is a board member and sponsor of The Fresh Air
Fund as well as the Connecticut Special Olympics.
Robert B. Willumstad ......... Head of Global Consumer Lending. He is also
Chairman of CitiFinancial Credit Company. Mr. Willumstad
has been employed in executive or management positions
with the Parent for more than the past five years. Prior to
joining Parent, Mr. Willumstad spent 20 years with
Chemical Bank in various positions including the post
of President of Chemical Technologies Corporation.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. Set forth in the
table below are the name and the present principal occupations or employment
and the name, principal business and address of any corporation or other
organization in which such occupation or employment is conducted, and the
five-year employment history of each of the directors and executive officers of
the Purchaser. Each person identified below is a United States citizen. The
principal business address of the Purchaser and, unless otherwise indicated,
the business address of each person identified below is One Tower Square,
Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------- --------------------------------------------------------
<S> <C>
J. Eric Daniels ......... Director since 2000. Chairman, President and Chief
Executive Officer of Travelers Life & Annuity Company
since 1998. Mr. Daniels previously served as Chief
Operating Officer for Citibank's Consumer Bank. He
joined Citibank in 1975.
Irwin Ettinger .......... Director since 1994. Chief Accounting Officer and
Chief Tax Officer of the Parent. Mr. Ettinger joined
Commercial Credit Company (a predecessor company
to the Parent) in 1987, was named Senior Vice President
in 1991 and Executive Vice President in 1996.
Jay S. Fishman .......... Director since 1993. See description in item 1 above.
Robert I. Lipp .......... Director since 1993. See description in item 1 above.
Marc P. Weill ........... Director since 1993. See description in item 1 above.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. Set forth in the table
below are the name and the present principal occupations or employment and the
name, principal business and address of any corporation or other organization
in which such occupation or employment is conducted, and the five-year
employment history of each of the directors and executive officers of the
Purchaser. Each person identified below is a United
I-6
<PAGE>
States citizen. The principal business address of the Purchaser and, unless
otherwise indicated, the business address of each person identified below is
c/o Travelers Property Casualty Corp., One Tower Square, Hartford, Connecticut
06183.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ----------------------------- --------------------------------------------------------
<S> <C>
Kenneth J. Bialkin .......... Director since 1996. See description in item 1 above.
Leslie B. Disharoon ......... Director since 1998. Former Chairman of the Board,
President and Chief Executive Officer of Monumental
Corporation from 1978 to 1988. He is also a director of
Aegon USA, Inc., GRC International Inc. M.S.D. & T.
Funds, Inc. and Caves Valley Club Inc. (Chairman).
Jay S. Fishman .............. Director since 1998. See description in item 1 above.
Robert I. Lipp .............. Director since 1996. See description in item 1 above.
Dudley C. Mecum ............. Director since 1996. See description in item 1 above.
Frank J. Tasco .............. Director since 1996. Retired Chairman of the Board
and Chief Executive Officer of Marsh & McLennan
Companies, Inc. He was a director of Travelers Group Inc.
from 1992 to 1998. He is Chairman of the Board of Angram Inc.
Sanford I. Weill ............ Director since 1996. See description in item 1 above.
Arthur Zankel ............... Director since 1996. See description in item 1 above.
Charles J. Clarke ........... Vice Chairman since 1998; Chairman--Commercial Lines of
the Company since 1990. He has been employed in such
positions or other executive or management positions with
the Company or its affiliates for more than the past five
years.
J. David Gibbs .............. President and Chief Executive Officer--Claim Services
of the Company since 1998. Mr. Gibbs was Executive
Vice President responsible for the Field Services
Division of the Company from 1996 through 1998. Prior
to joining the Company, Mr. Gibbs served as Senior
Vice President, Product Services and Regulation of
American International Group's Domestic Brokerage
Group. Mr. Gibbs had served in several positions at
American International Group since 1990.
Joseph P. Kiernan ........... Chairman and Chief Executive Officer--Bond Specialty
of the Company since March 1996. From 1989 to
March 1996, Mr. Kiernan was Vice President of Aetna's
bond business and has worked in the bond business
lines at Aetna since 1963. From June 1995 to
March 1996, Mr. Kiernan was Vice President of Standard
Commercial Accounts of Aetna.
</TABLE>
I-7
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------------------- ---------------------------------------------------------
<S> <C>
Douglas G. Elliot .......... Chief Operating Officer--Commercial Lines of the
Company since 1999. He has been employed in such
position or other executive or management positions
with the Company or its predecessors for more than the
past five years.
Ronald E. Foley ............ Chairman and Chief Executive Officer--Risk
Management of the Company since January 1996. He
has been employed in such positions or other executive
or management positions with the Company or its
affiliates for more than the past five years.
William P. Hannon .......... Chief Financial Officer of the Company since
January 1996. Prior to joining the Company, Mr. Hannon
served as Deputy Managing Partner of the Financial
Services practice of KPMG LLP, which he joined in
1969, and also served as a member of the firm's
Securities and Exchange Commission reviewing
partner's committee.
James M. Michener .......... Senior Vice President, General Counsel and Secretary
of the Company since July 1996. Prior to joining the
Company, Mr. Michener was General Counsel of The
MetraHealth Companies, Inc. from January 1995 to
October 1995 and Deputy General Counsel of United
HealthCare Corporation from October 1995 to
May 1996. From August 1977 to December 1994, Mr.
Michener served in several positions at the Purchaser.
Douglas K. Russell ......... Vice President, Controller and Chief Accounting Officer
of the Company since July 1999. Mr. Russell has served
in several positions at the Company since January 1997.
Prior to joining the Company, Mr. Russell was a Director
of MetraHealth Companies, Inc. from May 1995 to
October 1995 and of United HealthCare Corporation
from October 1995 to December 1996. From 1979 to
May 1995, Mr. Russell served as Staff-Senior Manager
of Ernst & Young LLP.
</TABLE>
I-8
<PAGE>
SCHEDULE II
The following table sets forth information concerning transactions in the
Company's Common Stock during the past 60 days by (i) Parent, its subsidiaries,
and their respective directors and executive officers, and (ii) the Company,
its subsidiaries, their respective directors and executive officers and any
pension, profit-sharing or similar plan of the Company. All transactions listed
below involved open-market purchases or sales of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF THE COMPANY's
NAME OF PARTY TRANSACTION DATE COMMON STOCK PRICE PER SHARE
- ------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Douglas G. Elliot ......... 1/22/00 571 $ 36.7344
Jay S. Fishman ............ 1/22/00 3,867 $ 36.7344
Ronald E. Foley ........... 1/22/00 1,612 $ 36.7344
William P. Hannon ......... 1/22/00 1,506 $ 36.7344
Robert I. Lipp ............ 1/22/00 13,267 $ 36.7344
James M. Michener ......... 1/22/00 636 $ 36.7344
------
Total ..................... 21,459
</TABLE>
The following sets forth information with respect to purchases of the
Company Common Stock by the Company, Parent and the Purchaser during the past
two years.
<TABLE>
<CAPTION>
AVG. PURCHASE
NUMBER OF RANGE OF PRICES PRICE(1) PER
SHARES PURCHASED PAID PER SHARE SHARE DURING
QUARTER/YEAR PURCHASER DURING QUARTER DURING QUARTER ($) QUARTER ($)
- ------------ --------- -------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
3rd Quarter 1998 the Company 386,500 $ 33.76-30.50 $ 31.66
4th Quarter 1998 the Company 1,642,500 $ 33.94-25.11 $ 30.22
1st Quarter 1999 the Company 946,500 $ 35.34-28.53 $ 30.50
2nd Quarter 1999 the Company 542,500 $ 40.76-33.66 $ 37.58
3rd Quarter 1999 the Company 453,500 $ 39.73-29.24 $ 35.46
4th Quarter 1999 the Company 3,194,500 $ 37.81-28.01 $ 32.45
1st Quarter 2000 the Company 2,301,000 $ 38.06-30.34 $ 33.56
</TABLE>
- ----------
(1) Purchase prices exclude commissions.
II-1
<PAGE>
ANNEX-A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CITIGROUP INC.,
THE TRAVELERS INSURANCE GROUP INC.
AND
TRAVELERS PROPERTY CASUALTY CORP.
DATED AS OF MARCH 22, 2000
<PAGE>
ARTICLE I
THE TENDER OFFER
SECTION 1.01 The Tender Offer .........................................A-1
SECTION 1.02 Company Action ...........................................A-2
ARTICLE II
THE MERGER
SECTION 2.01 The Merger ...............................................A-3
SECTION 2.02 Effective Time ...........................................A-3
SECTION 2.03 Effects of the Merger ....................................A-3
SECTION 2.04 Certificate of Incorporation and Bylaws ..................A-4
SECTION 2.05 Directors ................................................A-4
SECTION 2.06 Officers .................................................A-4
SECTION 2.07 Conversion of Shares .....................................A-4
SECTION 2.08 Merger Without Stockholders' Meeting .....................A-4
SECTION 2.09 Stockholders' Meeting ....................................A-4
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01 Dissenting Shares ........................................A-5
SECTION 3.02 Exchange of Certificates and Cash ........................A-5
SECTION 3.03 Stock Transfer Books .....................................A-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Corporate Organization ..................................A-7
SECTION 4.02 Capitalization ..........................................A-7
SECTION 4.03 Authority Relative to this Agreement ....................A-7
SECTION 4.04 No Conflict; Required Filings and Consents ..............A-8
SECTION 4.05 SEC Filings and Financial Statements ....................A-8
SECTION 4.06 Absence of Certain Changes of Events ....................A-9
SECTION 4.07 No Undisclosed Liabilities ..............................A-9
SECTION 4.08 Company Benefit Plans ...................................A-9
SECTION 4.09 Proxy Statement .........................................A-9
SECTION 4.10 Opinion of Financial Advisor ............................A-9
SECTION 4.11 Board Approval ..........................................A-9
SECTION 4.12 Brokers .................................................A-10
A-i
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
SECTION 5.01 Corporate Organization ...................................A-10
SECTION 5.02 Authority Relative to this Agreement .....................A-10
SECTION 5.03 No Conflict; Required Filings and Consents ...............A-10
SECTION 5.04 Brokers ..................................................A-11
SECTION 5.05 Financing ................................................A-11
SECTION 5.06 Proxy Statement ..........................................A-11
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company .......................A-11
SECTION 6.02 Notification of Certain Matters ..........................A-12
SECTION 6.03 Indemnification; Directors' and Officers' Insurance ......A-12
SECTION 6.04 Access and Information ...................................A-13
SECTION 6.05 Publicity ................................................A-13
SECTION 6.06 Reasonable Best Efforts ..................................A-13
SECTION 6.07 Company Benefit Plans ....................................A-13
SECTION 6.08 Contribution of Company Common Stock .....................A-13
SECTION 6.09 Purchaser Compliance .....................................A-13
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Obligation of Each Party to Effect
the Merger ...............................................A-14
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination ..............................................A-14
SECTION 8.02 Effect of Termination ....................................A-14
SECTION 8.03 Amendment ................................................A-15
SECTION 8.04 Extension Waiver .........................................A-15
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations, Warranties
and Agreements ...........................................A-15
SECTION 9.02 Fees and Expenses ........................................A-15
SECTION 9.03 Notices ..................................................A-15
SECTION 9.04 Governing Law ............................................A-16
A-ii
<PAGE>
SECTION 9.05 Interpretation .........................................A-16
SECTION 9.06 Entire Agreement; Assignment ...........................A-16
SECTION 9.07 Severability ...........................................A-16
SECTION 9.08 Parties In Interest ....................................A-16
SECTION 9.09 Counterparts ...........................................A-16
ANNEX A ........................................................Annex A-1
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 22,
2000, by and among Citigroup Inc., a Delaware corporation ("Parent"), The
Travelers Insurance Group Inc., a Connecticut corporation and an indirect
wholly owned subsidiary of Parent (the "Purchaser"), and Travelers Property
Casualty Corp., a Delaware corporation (the "Company").
WHEREAS, the Purchaser beneficially owns 100% of the Class B common stock,
par value $.01 per share, of the Company (the "Class B Common Stock"), which
represents approximately 85% of the outstanding shares of common stock of the
Company;
WHEREAS, it is proposed that the Purchaser shall commence a tender offer
(the "Tender Offer") to acquire all of the outstanding shares of Class A common
stock, par value $.01 per share, of the Company (the "Shares" or the "Company
Common Stock"), for an amount equal to $41.50 per Share (such amount, or any
greater amount per Share paid pursuant to the Tender Offer, being hereinafter
referred to as the "Offer Price"), net to the seller in cash, upon the terms
and subject to the conditions provided herein; and
WHEREAS, the Board of Directors of the Company, based on the
recommendation of the special committee of independent directors of the Board
of Directors of the Company (the "Special Committee"), has (i) determined that
each of the Tender Offer and the merger of the Merger Sub (as hereinafter
defined) with and into the Company, with the Company as the surviving
corporation (the "Merger"), is fair to and in the best interests of the
stockholders of the Company (other than Parent or the Purchaser), (ii) resolved
to approve and adopt this Agreement and the transactions contemplated hereby
and (iii) recommended acceptance of the Tender Offer and approval and adoption
of this Agreement and the Merger by such stockholders of the Company, subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, Parent, the Purchaser and the Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
SECTION 1.01 The Tender Offer. (a) Provided that none of the events set
forth in Annex A hereto shall have occurred or be existing, as soon as
practicable (but in no event later than five business days from the public
announcement of the terms of this Agreement) Parent shall cause the Purchaser
to commence the Tender Offer. The initial expiration date of the Tender Offer
shall be the twentieth business day from and after the date the Tender Offer is
commenced (the "Initial Expiration Date"). The obligation of the Purchaser to
commence the Tender Offer and to accept for payment and pay for Shares tendered
pursuant to the Tender Offer shall be subject only to the conditions set forth
in Annex A hereto, any of which conditions may be waived by the Purchaser in
its sole discretion. The Purchaser expressly reserves the right to amend or
make changes to the terms and conditions of the Tender Offer; provided,
however, that, without the prior written consent of the Company (expressed in a
resolution adopted by both the Special Committee and the Company's Board of
Directors), the Purchaser shall not (i) decrease the Offer Price or change the
form of consideration to be paid in the Tender Offer, (ii) impose any
additional conditions to the Tender Offer from those set forth in Annex A
hereto, or (iii) otherwise amend the Tender Offer in a manner that would
adversely affect the holders of Shares. The Company agrees that no Shares held
by the Company or any subsidiary of the Company will be tendered pursuant to
the Tender Offer. Notwithstanding anything in this Agreement to the contrary,
without the consent of the Company, the Purchaser shall have the right to
extend the Tender Offer beyond the Initial Expiration Date in the following
events: (i) from time to time if, at the Initial Expiration Date (or extended
expiration date of the Tender Offer, if applicable), any of the conditions to
the Tender Offer shall not have been satisfied or waived; (ii) for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Tender Offer or any period required by
applicable law; (iii) for an aggregate period not to exceed ten business days
(for all such extensions), if all of the conditions to the Tender Offer are
satisfied or waived but the number of Shares validly tendered and not withdrawn
A-1
<PAGE>
(together with such number of Shares as may be issued upon conversion of the
shares of Class B Common Stock owned by the Purchaser) is less than ninety
percent of the then outstanding number of Shares; or (iv) pursuant to an
amendment to the Tender Offer providing for a "subsequent offering period" not
to exceed twenty business days to the extent permitted under, and in compliance
with, Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Following the satisfaction or waiver of the conditions to the
Tender Offer, Parent shall cause the Purchaser to accept for payment, in
accordance with the terms of the Tender Offer, all Shares validly tendered
pursuant to the Tender Offer and not withdrawn as soon as it is permitted to do
so pursuant to applicable law.
(b) The Purchaser shall file with the Securities and Exchange Commission
(the "SEC") on the date that the Tender Offer is commenced (i) a Tender Offer
Statement on Schedule TO (together with any supplements or amendments thereto,
the "Schedule TO") which will contain, among other things, the offer to
purchase, form of the related letter of transmittal and summary advertisement
(together with any supplements or amendments thereto, the "Tender Offer
Documents"), and (ii) together with Parent and the Company, a Rule 13e-3
Transaction Statement on Schedule 13E-3 with respect to the Tender Offer which
shall be filed as a part of the Schedule TO. The Tender Offer Documents shall
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not 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 were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information supplied by the Company in writing for inclusion in the Tender
Offer Documents. Each of Parent and the Purchaser further agrees to take all
steps necessary to cause the Tender Offer Documents to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, agrees promptly
to correct any information provided by it for use in the Tender Offer Documents
if and to the extent that it shall have become false and misleading in any
material respect and the Purchaser further agrees to take all steps necessary
to cause the Tender Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Company and its counsel
shall be given the opportunity to review the initial Schedule TO before it is
filed with the SEC. In addition, Parent and the Purchaser agree to provide the
Company and its counsel with any comments or other communications that Parent,
the Purchaser or their counsel may receive from time to time from the SEC or
its staff with respect to the Tender Offer Documents and the promptly after the
receipt of such comments or other communications.
SECTION 1.02 Company Action. The Company hereby approves of and consents
to the Tender Offer. Concurrently with the filing of the Schedule TO, the
Company shall file with the SEC and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
supplements or amendments thereto, the "Schedule 14D-9"). The Schedule 14D-9
will set forth, and the Company hereby represents to Parent and the Purchaser,
that (a) each of the Special Committee and the Board of Directors of the
Company, at meetings duly called and held, has unanimously (i) determined that
each of the Tender Offer and the Merger is fair to and in the best interests of
the Company's stockholders (other than Parent or the Purchaser); (ii) approved
this Agreement and the transactions contemplated hereby, including, without
limitation the Tender Offer and the Merger; and (iii) resolved to recommend
that the Company's stockholders accept the Tender Offer, tender their Shares
pursuant thereto and approve and adopt this Agreement and the Merger; provided,
however, that such recommendation may be withdrawn or modified to the extent
that the Board of Directors of the Company, based on the recommendation of the
Special Committee, determines in good faith, based on the advice of outside
counsel, that such recommendation would be inconsistent with its fiduciary
duties to the Company's stockholders under applicable law; and (b) Morgan
Stanley & Co., Incorporated, the financial advisor to the Special Committee
("Morgan Stanley"), has delivered to the Special Committee and the Company's
Board of Directors its written opinion that the consideration to be received by
the stockholders of the Company (other than Parent or the Purchaser) pursuant
to each of the Tender Offer and the Merger is fair to such stockholders from a
financial point of view. The Schedule 14D-9 will comply in all material
A-2
<PAGE>
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not 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 were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. The
Company further agrees to take all steps necessary to cause the Schedule 14D-9
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws. Each
of the Company, on the one hand, and Parent and the Purchaser, on the other
hand, agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false and
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. Parent and its
counsel shall be given the opportunity to review the initial Schedule 14D-9
before it is filed with the SEC. In addition, the Company agrees to provide
Parent, the Purchaser and their counsel with any comments or other
communications that the Company or its counsel may receive from time to time
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments or other communications.
SECTION 1.03 Stockholder Lists. In connection with the Tender Offer, the
Company shall promptly furnish the Purchaser with mailing labels, security
position listings of Shares held in stock depositories and any available
listing or computer file containing the names and addresses of the record
holders of Shares, each as of the most recent practicable date, and shall
promptly furnish the Purchaser with such additional information, including
updated lists of stockholders, mailing labels and lists of securities positions
and such other information and assistance as the Purchaser or its agents may
reasonably request in connection with communicating to the record and
beneficial holders of Shares with respect to the Tender Offer and the Merger.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.02 hereof), the
Company and the Purchaser shall consummate the Merger pursuant to which (a) TAP
Merger Corp., a wholly owned Delaware subsidiary of the Purchaser ("Merger
Sub"), shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall thereupon cease, (b) the Company shall be the
successor or surviving corporation in the Merger (the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and (c)
the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
SECTION 2.02 Effective Time. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger") with the Secretary of State of the
State of Delaware and by making any related filings required under the Delaware
General Corporation Law ("DGCL") in connection with 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 later time as
is agreed to by the parties hereto and as is specified in the Certificate of
Merger (the "Effective Time" or the "Closing"). Prior to such filing, a closing
shall be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four
Times Square, New York, New York 10036, or such other place as the parties
shall agree, for the purposes of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VII.
SECTION 2.03 Effects of the Merger. From and after the Effective Time, the
Merger shall have the effects set forth in the DGCL (including, without
limitation, Sections 259, 260 and 261 thereof).
A-3
<PAGE>
SECTION 2.04 Certificate of Incorporation and Bylaws. Subject to Section
6.03 hereof, the Certificate of Incorporation and the Bylaws of the Company in
effect upon consummation of the Merger shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
SECTION 2.05 Directors. The directors of the Company immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
until their respective successors are duly elected or appointed and qualified
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or otherwise as provided by law.
SECTION 2.06 Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
until their respective successors are duly elected or appointed and qualified
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or otherwise as provided by law.
SECTION 2.07 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, the Purchaser, the Company
or any holder of Shares:
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such share (other than Shares to be
canceled pursuant to clause (b) below and any Dissenting Shares (as hereinafter
defined)) shall thereafter represent only the right to receive, upon the
surrender of such certificate in accordance with the provisions of Section
3.02, an amount in cash per Share equal to the Offer Price (the "Merger
Consideration"), without interest. The holders of such certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares
of Company Common Stock except as otherwise provided herein or by law.
(b) Each share of Company Common Stock and Class B Common Stock (i) held
in the treasury of the Company or by any wholly owned subsidiary of the Company
or (ii) owned by Parent or the Purchaser (except for Company Common Stock held
by Parent or any of its affiliates in a fiduciary or similar capacity on behalf
of third parties or held on account of a debt previously contracted) shall
automatically be canceled, retired and cease to exist without any conversion
thereof and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $.01 per share, of the Merger
Sub (the "Merger Sub Common Stock") outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
SECTION 2.08 Merger Without Stockholders' Meeting. If, as a result of the
purchase of Shares pursuant to the Tender Offer and compliance with the terms
of this Section 2.08, the Purchaser owns in the aggregate at least 90% of the
Shares outstanding upon completion of the Tender Offer and continues to hold at
least 90% of the outstanding Class B Common Stock, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the satisfaction or waiver of the
conditions to the Merger set forth in Article VII without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL (a
"Short-Form Merger"). In connection therewith, if following the purchase of
Shares pursuant to the Tender Offer, the Purchaser owns in the aggregate less
than 90% of the Shares outstanding, the Purchaser agrees to convert such number
of shares of Class B Common Stock into Company Common Stock to the extent that,
after giving effect to such conversion, Parent and the Purchaser would own in
the aggregate the number of Shares necessary to effect a Short-Form Merger.
SECTION 2.09 Stockholders' Meeting. (a) If required by applicable law in
order to consummate the Merger, the Company acting through its Board of
Directors shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following
the acceptance for payment and purchase of Shares by the Purchaser pursuant
to the Tender Offer to consider and vote upon the approval and adoption of
this Agreement and the Merger;
A-4
<PAGE>
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to this Agreement and the Merger and use its best
efforts (A) after consultation with Parent and the Purchaser, to respond
promptly to any comments made by the staff of the SEC with respect to such
preliminary proxy or information statement and cause a definitive proxy or
information statement (together with any amendments or supplements thereto,
the "Proxy Statement") to be mailed to its stockholders at the earliest
practicable time, and (B) to obtain the necessary approvals of this
Agreement and the Merger by its stockholders; and
(iii) include in the Proxy Statement the recommendations of the
Special Committee and the Company's Board of Directors that the
stockholders of the Company vote in favor of the approval and adoption of
this Agreement and the Merger, except to the extent that the Board of
Directors of the Company, based on the recommendation of the Special
Committee, shall have determined in good faith, based on the advice of its
outside counsel, that such recommendation would violate its fiduciary
duties under applicable law.
(b) Parent and the Purchaser will provide the Company with the information
concerning Parent, the Purchaser and their subsidiaries and affiliates required
under the Exchange Act to be included in the Proxy Statement. If a vote of the
stockholders of the Company is necessary to effect the Merger, each of Parent
and the Purchaser will vote or cause to be voted all Shares and shares of Class
B Common Stock owned by it and its subsidiaries in favor of the approval and
adoption of this Agreement and the Merger.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time
that are held by stockholders (i) who shall have neither voted for approval and
adoption of this Agreement and the Merger nor consented thereto in writing and
(ii) who shall be entitled to and shall have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of the DGCL
("Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration at or after the Effective Time unless and until the holder
of such Shares fails to perfect, withdraws or otherwise loses such holder's
right to appraisal. If a holder of Dissenting Shares shall withdraw (in
accordance with Section 262(k) of the DGCL) his or her demand for such
appraisal or shall become ineligible for such appraisal, then, as of the
Effective Time or the occurrence of such event, whichever last occurs, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive the Merger Consideration,
without interest thereon. The Company shall give Parent (a) prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to Section 262 of the DGCL and received by
the Company and (b) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for payment of fair value or offer to settle or settle any such demands.
SECTION 3.02 Exchange of Certificates and Cash. (a) Exchange Agent. On or
before the Closing Date, Parent shall enter into an agreement providing for the
matters set forth in this Section 3.02 (the "Exchange Agent Agreement") with a
bank or trust company selected by Parent (the "Exchange Agent"), authorizing
such Exchange Agent to act as Exchange Agent in connection with the Tender
Offer and the Merger. Immediately prior to the Effective Time, Parent shall
deposit or shall cause to be deposited with or for the account of the Exchange
Agent, for the benefit of the holders of shares of Company Common Stock (other
than Dissenting Shares and shares to be canceled pursuant to Section 2.07(b)),
an amount in cash equal to the aggregate Merger Consideration payable pursuant
to Section 2.07(a) (such cash funds are hereafter referred to as the "Exchange
Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates that immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other than
Dissenting Shares and shares to be canceled pursuant to Section 2.07(b) (the
"Certificates"), (i) a
A-5
<PAGE>
form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with a letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions (collectively, the "Transmittal Documents"), the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly represented by
such Certificate, without any interest thereon, less any required withholding
of taxes, and the Certificate so surrendered shall thereupon be canceled. In
the event of a transfer of ownership of shares of Company Common Stock that is
not registered in the transfer records of the Company, the Merger Consideration
may be issued and paid in accordance with this Article III to the transferee of
such shares if the Certificate evidencing such shares of Company Common Stock
is presented to the Exchange Agent and is properly endorsed or otherwise in
proper form for transfer. In such event, the signature on the Certificate or
any related stock power must be properly guaranteed and the person requesting
payment of the Merger Consideration must either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate so surrendered or establish to the Surviving Corporation
that such tax has been paid or is not applicable. The Merger Consideration will
be delivered by the Exchange Agent as promptly as practicable following
surrender of a Certificate and the related Transmittal Documents. Cash payments
may be made by check unless otherwise required by a depositary institution in
connection with the book-entry delivery of securities. No interest will be
payable on such Merger Consideration. Until surrendered in accordance with this
Section 3.02, each Certificate shall be deemed at any time after the Effective
Time to evidence only the right to receive, upon such surrender, the Merger
Consideration for each share of Company Common Stock formerly represented by
such Certificate. The Exchange Fund shall not be used for any purpose other
than as set forth in this Article III. Any interest, dividends or other income
earned on the investment of cash held in the Exchange Fund shall be for the
account of the Surviving Corporation.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof) which remains undistributed
to the holders of Company Common Stock for six months following the Effective
Time shall be delivered by the Exchange Agent to the Surviving Corporation,
upon demand. Any holders of Company Common Stock who have not theretofore
complied with this Article III shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration.
(d) No Liability. None of the Surviving Corporation, Parent, the
Purchaser, the Company or the Exchange Agent shall be liable to any holder of
shares of Company Common Stock for any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation and the Exchange Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as the Surviving Corporation or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment
under the United States Internal Revenue Code of 1986, as amended (the "Code"),
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Corporation or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
the Exchange Agent.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, the holder of such lost, stolen or destroyed Certificate(s) shall
execute an affidavit of that fact upon request. The holder of any such lost,
stolen or destroyed Certificate(s) shall also deliver a reasonable indemnity
against any claim that may be made against Parent, the Surviving Corporation or
the Exchange Agent with respect to the Certificate(s)
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alleged to have been lost, stolen or destroyed. The affidavit and any indemnity
which may be required hereunder shall be delivered to the Exchange Agent, who
shall be responsible for making payment for such lost, stolen or destroyed
Certificates(s) pursuant to the terms hereof.
SECTION 3.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. Any Certificates presented to the Exchange Agent or the
Surviving Corporation for any reason at or after the Effective Time shall be
canceled and exchanged for the Merger Consideration pursuant to the terms in
this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
THE COMPANY HEREBY REPRESENTS AND WARRANTS TO PARENT AND THE
PURCHASER AS FOLLOWS:
SECTION 4.01 Corporate Organization. The Company and each of its
subsidiaries (a "Subsidiary") is a corporation, partnership or other legal
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing would not, individually or in the aggregate, have a material
adverse effect on the business, assets, results of operations or financial
condition of the Company and the Subsidiaries, taken as a whole (a "Company
Material Adverse Effect"). The Company and each Subsidiary is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have Company Material Adverse Effect.
SECTION 4.02 Capitalization. (a) The authorized capital stock of the
Company consists of 700,000,000 shares of Company Common Stock, 700,000,000
shares of Class B Common Stock, and 25,000,000 shares of preferred stock, par
value $.01 per share. As of March 21, 2000, (i) 57,128,767 shares of Company
Common Stock and 328,020,170 shares of the Class B Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(ii) 15,264,640 Shares were held in the Company's treasury, and (iii) no shares
of preferred stock were issued or outstanding. Since March 21, 2000, the
Company has not issued any shares of its capital stock. Except as set forth in
this Section 4.02 and except for this Agreement and the transactions
contemplated hereby (including any conversion of Class B Common Stock pursuant
to Section 2.08 hereof), there are not now, and at the Effective Time there
will not be, any shares of capital stock of the Company issued or outstanding
or any subscriptions, options, warrants, calls, rights, convertible or
exchangeable securities or other agreements, commitments or rights of any
character relating to issued or unissued capital stock or other securities of
the Company, or otherwise obligating the Company to issue, transfer or sell, or
cause to be issued, transferred or sold, or to make any payments in respect of,
shares of capital stock or other securities of the Company.
(b) Except for this Agreement and the transactions contemplated hereby,
there are not now, and at the Effective Time there will be not be, any voting
trusts or other agreements or understanding to which the Company or any
Subsidiary is a party or is bound with respect to the voting of capital stock
of the Company or any Subsidiary.
SECTION 4.03 Authority Relative to this Agreement. The Company has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby (other
than,
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with respect to the Merger, the approval of this Agreement and the Merger by
the stockholders of the Company, to the extent required by applicable law, and
the filing and recordation of the Certificate of Merger as required by the
DGCL). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by each of
Parent and the Purchaser, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
SECTION 4.04 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement and the consummation of the transactions contemplated hereby
will not, (i) conflict with or violate the Company's Restated Certificate of
Incorporation, as amended to the date hereof (the "Company Charter"), or its
restated Bylaws (the "Bylaws"), or the certificate of incorporation, bylaws or
other equivalent organizational documents of any Company Subsidiary or (ii)
conflict with or violate any federal, state or local statute, law, rule,
regulation, ordinance, code, order, or any other requirement or rule of law
applicable to the Company or any Subsidiary or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of those properties or assets is bound or affected, except in
the case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a Company Material Adverse Effect or prevent or materially
delay the performance by the Company of any of its obligations under this
Agreement or the consummation of any of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement and the consummation of the Tender Offer,
the Merger and the other transactions contemplated hereby by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign (each a "Governmental Entity"), except (i) for (A) any applicable
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities Act"), (B) the filing and recordation of appropriate merger and
similar documents as required by the DGCL, and (C) any insurance regulatory
approvals necessary to consummate the Offer, the Merger and the transactions
contemplated hereby, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, have a Company Material Adverse
Effect or prevent or materially delay the performance by the Company of any of
its obligations under this Agreement or the consummation of any of the
transactions contemplated hereby.
SECTION 4.05 SEC Filings and Financial Statements. The Company has
heretofore filed (or, with respect to forms, reports, statements, schedules and
other materials required to be filed after the date hereof, will file) all
forms, reports, statements, schedules and other materials with the SEC required
to be filed pursuant to the Exchange Act or other federal securities laws since
January 1, 1997 (the "SEC Reports"). As of their respective dates, the SEC
Reports (including, without limitation, all financial statements included
therein, exhibits and schedules thereto and documents incorporated by reference
therein) complied in all material respects with all applicable requirements of
the Exchange Act and other federal securities laws and to the best knowledge of
the Company, did not 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 made therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company (the
"1999 Financial Statements") included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999 (including the related notes
thereto) (the "1999 Form 10-K") have been prepared from, and are in accordance
with, the books and records of the Company and its subsidiaries, comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP")
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or insurance statutory accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
and subject, in the case of unaudited interim financial statements, to normal
year-end adjustments) and fairly present the consolidated financial position
and the consolidated results of operations and cash flows of the Company and
its consolidated subsidiaries as at the dates thereof or for the periods
presented therein.
SECTION 4.06 Absence of Certain Changes of Events. Except as disclosed in
the SEC Reports, since December 31, 1999, neither the Company nor any of its
Subsidiaries has (a) conducted its business other than in the ordinary and
usual course of business consistent with post practice or (b) suffered any
change in its business, financial condition, results of operations, assets or
liabilities which, in the aggregate, has had or is reasonably likely to have
Company Material Adverse Effect.
SECTION 4.07 No Undisclosed Liabilities. Except (a) as disclosed in the
SEC Reports filed prior to the date hereof, (b) for liabilities incurred by the
Company or its Subsidiaries in the ordinary course of business consistent with
past practice and (c) for liabilities incurred in connection with the
transactions contemplated by this Agreement, to the best knowledge of the
Company, neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
which, individually or in the aggregate, would be reasonably likely to have a
Company Material Adverse Effect.
SECTION 4.08 Company Benefit Plans. Each of the Nomination, Compensation
and Governance Committee of the Board of Directors of the Company and the
Incentive Compensation Sub-Committee of the Board of Directors of the Company
has adopted a valid and binding rule to provide that the restricted shares of
Company Common Stock ("Restricted Shares") granted under the Company's Capital
Accumulation Plan (the "CAP Plan") shall be converted into cash in the Merger
and such consideration shall be deposited, as elected by the holders of such
shares, in either of two grantor trusts to be established by the Company, one
of which shall provide for a fixed and/or variable rate of return and the other
of which shall invest in common stock of Parent (each, a "Trust" and,
collectively, the "Trusts"), such consideration to be invested and held in such
Trusts until the end of the Restricted Period (as defined in the CAP Plan) and
otherwise to be subject to the same terms and conditions as are applicable to
Restricted Shares under the Plan. The Company will amend the Company's Stock
Purchase Plan (the "Purchase Plan") to provide that (i) the Purchase Plan shall
terminate as of the Effective Time, (ii) all elections made by participants of
the Purchase Plan for the month of March shall be honored by the Company
pursuant to the terms of the Purchase Plan, and (iii) no new elections by any
person to participate in the Purchase Plan for any month after March will be
honored.
SECTION 4.09 Proxy Statement. In addition to the Company's representations
and warranties contained in Section 1.02, none of the information supplied by
the Company for inclusion in the Proxy Statement or related materials, at the
time such Proxy Statement or any amendments or supplements thereto are filed
with the SEC, and at the time of the first mailing and at the time of the
Special Meeting, shall 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 made therein, in light of the circumstances under which
they were made, not misleading.
SECTION 4.10 Opinion of Financial Advisor. Morgan Stanley has delivered to
the Special Committee its opinion to the effect that, as of the date hereof,
the consideration to be received by the stockholders of the Company (other than
Parent and its subsidiaries) pursuant to the Tender Offer and the Merger is
fair to such stockholders from a financial point of view.
SECTION 4.11 Board Approval. The Board of Directors of the Company, based
on the unanimous recommendation of the Special Committee, at a meeting duly
called and held and at which a quorum was present and voting, unanimously (a)
determined that this Agreement, the Tender Offer and the Merger are fair to and
in the best interests of the Company's stockholders (other than Parent or the
Purchaser), (b) approved this Agreement, the Tender Offer, the Merger and the
other transactions contemplated hereby, and (c) resolved to recommend
acceptance of the Tender Offer and approval and adoption of this Agreement by
the Company's stockholders.
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SECTION 4.12 Brokers. No broker, finder or investment banker (other than
Morgan Stanley) is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement, the Tender Offer, the Merger and
the other transactions contemplated hereby based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Morgan
Stanley pursuant to which such firm would be entitled to any payment relating
to the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
PARENT AND THE PURCHASER HEREBY JOINTLY AND SEVERALLY REPRESENT
AND WARRANT TO THE COMPANY AS FOLLOWS:
SECTION 5.01 Corporate Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
SECTION 5.02 Authority Relative to this Agreement. Each of Parent and the
Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and the Purchaser and the consummation by each of them of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of Parent and the Purchaser, and by Parent as the sole
stockholder of the Purchaser, and no other corporate proceedings on the part of
Parent or the Purchaser are necessary to authorize the execution, delivery and
performance of this Agreement by Parent and the Purchaser or the consummation
by Parent and the Purchaser of the transactions contemplated hereby (other
than, with respect to the Merger, the filing and recordation of the Certificate
of Merger as required by the DGCL). This Agreement has been duly and validly
executed and delivered by each of Parent and the Purchaser and, assuming the
due authorization, execution and delivery by the Company, constitutes a valid
and binding obligation of each of Parent and the Purchaser, enforceable against
each of Parent and the Purchaser in accordance with its terms.
SECTION 5.03 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and the Purchaser do not, and the
consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the certificate of incorporation or bylaws of either Parent or
the Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to either Parent or the Purchaser or by which any
of their properties or assets are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which, with notice, lapse of
time or both, would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any properties or assets of either Parent or
the Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or any other instrument or
obligation to which either Parent or the Purchaser is a party or by which
either Parent or the Purchaser or any of their properties or assets is bound or
affected, except in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, prevent or materially delay the performance
by each of Parent of the Purchaser of any of its obligations under this
Agreement or the consummation of any of the transactions contemplated hereby (a
"Parent Material Adverse Effect").
(b) The execution and delivery of this Agreement by Parent and the
Purchaser do not, and the performance of this Agreement and the consummation of
the Tender Offer, the Merger and the other transactions contemplated hereby by
Parent and the Purchaser will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity,
except (i) for (A) any applicable requirements, if any, of the Exchange Act,
the Securities Act and state takeover laws, and (B) filing and recordation of
appropriate merger and similar documents as required by the DGCL and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings
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or notifications, would not prevent or delay consummation of the transactions
contemplated hereby in any material respect or otherwise prevent Parent or the
Purchaser from performing its obligations under this Agreement in any material
respect, or would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
SECTION 5.04 Brokers. No broker, finder or investment banker (other than
Salomon Smith Barney Inc.) is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement, the Tender Offer, the Merger
and the other transactions contemplated hereby based upon arrangements made by
or on behalf of Parent or the Purchaser.
SECTION 5.05 Financing. Either Parent or the Purchaser has or will have
available, prior to the expiration of the Tender Offer, sufficient funds to
enable Parent and the Purchaser to consummate the Tender Offer, the Merger and
other transactions contemplated hereby and to pay all fees and expenses related
to the transactions contemplated by this Agreement.
SECTION 5.06 Proxy Statement. In addition to Parent's and the Purchaser's
representations and warranties contained in Section 1.01(b), none of the
information supplied by Parent or the Purchaser for inclusion in the Proxy
Statement or related materials at the time such Proxy Statement or any
amendments or supplements thereto are filed with the SEC and at the time of the
first mailing and at the time of the Special Meeting, shall 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 made therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. The Company covenants and
agrees that, prior to the Effective Time, unless Parent shall otherwise agree
in writing or unless such action shall have been approved by a majority of the
entire Board of Directors of the Company or except as otherwise expressly
contemplated by this Agreement:
(a) The business of the Company and its Subsidiaries shall be conducted
only in, and the Company and its Subsidiaries shall not take any action except
in, the ordinary and usual course of business consistent with past practice;
(b) The Company and its Subsidiaries shall use their commercially
reasonable best efforts to keep available the services of its and their present
officers and key employees and to preserve the good will of those having
business relationships with any of them; and
(c) None of the Company or any of its Subsidiaries shall directly or
indirectly: (i) declare or pay any dividend or make any distribution with
respect to any shares of its capital stock; (ii) purchase or otherwise acquire,
or propose to purchase or otherwise acquire, any outstanding share of its
capital stock; (iii) propose or adopt any amendments to its charter documents
or bylaws; (iv) issue, sell, pledge, dispose or encumber any capital stock of
the Company or of any of its Subsidiaries except as required pursuant to the
CAP Plan, the Purchase Plan, the Company's Agency Capital Accumulation Plan,
the Elite Share Program, the Company's Compensation Plan for Non-Employee
Directors or the Travelers Group 401(k) Savings Plan or pursuant to the
conversion of Class B Common Stock pursuant to Section 2.08 hereof; (v) except
in the ordinary and usual course of business consistent with past practice,
sell, pledge, dispose of or encumber any of its material assets; (vi) incur any
long-term indebtedness for borrowed money, issue any debt securities or assume,
guarantee or endorse any material obligations of any other person except for
obligations of any wholly owned subsidiary; (vii) approve, adopt or amend any
agreement, plan, program or arrangement which provides any benefits to any
employee of the Company (other than as contemplated by this Agreement); (viii)
except in the ordinary and usual course of business consistent with past
practice, increase, directly or indirectly, the compensation of any employee of
the Company; (ix) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any person; or (x) authorize or propose any of
the foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
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SECTION 6.02 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
the occurrence, or failure to occur, of any event which occurrence of failure
to occur would be likely to cause (a) any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect, or (b)
any material failure of the Company, on the one hand, or Parent or the
Purchaser, on the other hand, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations or warranties of the parties of the conditions to the parties
hereunder.
SECTION 6.03 Indemnification; Directors' and Officers' Insurance. (a)
Parent and the Company agree that all rights to indemnification now existing in
favor of the present or former directors or officers of the Company or any of
its Subsidiaries as provided in the Company Charter and Bylaws, or in the
certificate or articles of incorporation, by-laws or similar documents of any
of such Subsidiaries, in effect as of the date hereof shall, with respect
matters occurring prior to the Effective Time, survive the Merger and continue
in full force and effect after the Effective Time. To the maximum extent
permitted by law, such indemnification shall be mandatory rather than
permissive, and the Company or the Surviving Corporation, as the case may be,
shall advance expenses in connection with such indemnification. Parent and the
Company further agree that all rights to indemnification now existing in favor
of the present or former directors or officers of the Company or any of its
Subsidiaries in any indemnification agreement between such person and the
Company or any such Subsidiary, as the case may be, shall survive the Merger
and continue and full force and effect in accordance with the terms of such
agreement.
(b) From and after the Effective Time, Parent and the Surviving
Corporation shall jointly and severally, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now or
who becomes prior to the Effective Time a director of the Company against all
losses, expenses (including reasonable attorney's fees and expenses), claims,
damages, liabilities and, subject to the proviso of the next sentence, amounts
paid in settlement, to the extent they are based on or arise out of or pertain
to the transactions contemplated by this Agreement. In the event of any such
loss, expense, claim, damage, liability or settlement (whether or not arising
before the Effective Time), (i) Parent and the Surviving Corporation shall pay
the reasonable fees and expenses of counsel selected by the director seeking
indemnification pursuant to this Section 6.03(b), which counsel shall be
reasonable satisfactory to Parent and the Surviving Corporation, promptly after
statements therefor are received and otherwise advance to such directors upon
reimbursement of documented expenses reasonably incurred, (ii) any
determination required to be made with respect to whether such directors'
conduct complies with the standards set forth in the DGCL and any applicable
provisions of the Company's Certificate of Incorporation or By-Laws shall be
made by independent counsel mutually acceptable to Parent, the Surviving
Corporation and such directors; provided, however, that neither Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld). The
directors seeking indemnification pursuant to this Section 6.03(b) as a group
may retain one law firm with respect to each related matter except to the
extent there is, in the opinion of counsel to a director under applicable
standards of professional conduct, a conflict on any significant issue between
positions of such director and any other director seeking indemnification
pursuant to this Section 6.03(b).
(c) Parent shall or the Surviving Corporation shall maintain in effect for
six years from the Effective Time, to the extent available, the current
directors' and officers' liability insurance policies maintained by Parent or
the Surviving Corporation covering those directors and officers of the Company
who are currently covered by such policies (provided that Parent or the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not less favorable to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time.
(d) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such
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consolidation or merger or (ii) transfers or conveys all or any substantial
portion of its properties and assets to any person, then, and in each such
case, proper provision shall be made so that the successors and assigns of such
party assume the obligations of such party as contemplated by this Section
6.03.
SECTION 6.04 Access and Information. The Company shall afford to Parent,
the Purchaser and their representatives such access during normal business
hours throughout the period prior to the Effective Time to the Company's books,
records (including, without limitation, tax return and work papers of the
Company's independent auditors), facilities, personnel and to such other
information as Parent shall reasonably request.
SECTION 6.05 Publicity. None of the Company, Parent or the Purchaser shall
issue or cause the publication of any press release or other public
announcement with respect to this Agreement, the Tender Offer, the Merger or
the other transactions contemplated hereby without prior consultation with the
other parties, except as may be required by law or any listing agreement with a
national securities exchange to which Parent or the Company is a party. Upon
execution of this Agreement, Parent and the Company shall agree upon the text
of a press release to be issued with respect to this Agreement and the
transactions contemplated hereby.
SECTION 6.06 Reasonable Best Efforts. Subject to the terms and conditions
hereof, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by the Tender Offer, the
Merger and this Agreement, and to cooperate with the each other in connection
with the foregoing, including using its reasonable best efforts (a) obtain all
necessary waivers, consents and approvals from other parties to material
agreements, leases and other contracts, (b) obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign law or regulation, (c) lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, (d) effect any necessary
registrations and filings and submissions of information requested by
governmental authorities, and (e) fulfill all conditions to this Agreement. In
furtherance of and not in limitation of the foregoing, the Company shall permit
Parent to reasonably participate in the defense and settlement of any claim,
suit or cause of action relating to any takeover proposal, the Tender Offer,
the Merger, this Agreement or the other transactions contemplated hereby, and
the Company shall not settle or compromise any such claim, suit or cause of
action without Parent's prior written consent, which shall not be unreasonably
withheld.
SECTION 6.07 Company Benefit Plans. (a) Parent or the Company shall
provide adequate written notice to each holder of Restricted Shares under the
CAP plan prior to the consummation of the Tender Offer that such holder shall
prior to the consummation of the Tender Offer elect to cause an amount equal to
the Merger Consideration to be paid with respect to such holder's Restricted
Shares to be deposited in either or both of the Trusts in such proportions as
such holder shall elect. In the event a holder does not make such an election,
the Merger Consideration attributable to such holder's Restricted Shares shall
be deposited into the Trust providing a fixed and/or variable rate of return.
(b) The Company shall promptly mail a notice to each of the "Plan Agent,"
the "Plan Administrator" (as each such term is defined in the Purchase Plan),
and each employee who is either a participant in the Purchase Plan or who is a
former participant for whom the Plan Agent continues to hold shares of Company
Common Stock under the Purchase Plan or who is eligible to participate in the
Purchase Plan, notifying each such person of the amendments to the Purchase
Plan described in Section 4.08.
SECTION 6.08 Contribution of Company Common Stock. Promptly following
consummation of the Offer, the Purchaser shall contribute all shares of Company
Common Stock and all shares of Class B Common Stock to Merger Sub in order to
effect the Merger.
SECTION 6.09 Purchaser Compliance. Parent shall cause the Purchaser to
comply with all of its obligations under this Agreement.
A-13
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ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of Parent, the Purchaser and the Company to
consummate the Merger are subject to the satisfaction or waiver at or prior to
the Effective Time of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company,
if required by applicable law; and
(b) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect
and which materially restricts, prevents or prohibits consummation of the
Merger or the other transactions contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted.
(c) Tender Offer. The Purchaser shall have purchased the Shares pursuant
to the Tender Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether prior to or after approval by the stockholders of the Company:
(a) by mutual written consent of the Board of Directors of the Company on
behalf of the Company (as agreed to by the Special Committee) and Parent and
the Purchaser;
(b) by either Parent or the Board of Directors of the Company on behalf of
the Company (as agreed to by the Special Committee) if (i) the Purchaser shall
not have purchased the Shares pursuant to the Tender Offer on or before June
30, 2000; provided, however, that the right to terminate this Agreement under
this Section 8.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date or (ii)
any court of competent jurisdiction or other Governmental Entity shall have
issued an order, decree, ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; or
(c) by Parent and the Purchaser if prior to the purchase of Shares
pursuant to the Tender Offer, the Special Committee or the Board of Directors
of the Company shall have (including by amendment to the Schedule 14D-9)
withdrawn or modified in a manner adverse to the Purchaser its approval or
recommendation of the Tender Offer, the Merger or this Agreement or shall have
resolved to do any of the foregoing; or
(d) by the Board of Directors of the Company on behalf of the Company (as
agreed to by the Special Committee) if due to an occurrence or circumstance,
not involving a breach by the Company of its obligations hereunder, which would
result in a failure to satisfy any of the conditions set forth in Annex A
hereto or otherwise, the Purchaser shall have failed to commence the Tender
Offer within 5 business days following the date of this Agreement, terminated
the Tender Offer or permitted the Tender Offer to expire without the purchase
of Shares thereunder.
SECTION 8.02 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 8.01 hereof, except as provided in
Section 9.01 hereof, this Agreement shall forthwith become void and have no
effect, and there shall be no liability on the part of Parent, the Purchaser or
the Company. Nothing contained in this Section 8.02 shall relieve any party
from liability for any willful breach of this Agreement.
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SECTION 8.03 Amendment. This Agreement may not be amended except pursuant
to an instrument in writing signed by the Company following approval of such
action by the Special Committee and signed by Parent and the
Purchaser; provided, however, that after any approval of this Agreement by the
stockholders of the Company, no amendment may be made without the further
approval of the stockholders of the Company which would: (i) decrease the
Merger Consideration; or (ii) change any other terms and conditions and this
Agreement if any of the changes would, individually or in the aggregate,
materially adversely affect the stockholders of the Company.
SECTION 8.04 Extension Waiver. At any time prior to the Effective Time,
whether before or after approval of this Agreement by the stockholders of the
Company, any party hereto, by action taken by the Special Committee on behalf
of the Company or by Parent and the Purchaser, as the case may be, may (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing
delivered pursuant hereto, or (c) waive compliance with any of the agreements
or any other party or with any conditions to its own obligations. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party by
a duly authorized officer.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.01 hereof, as the case may be, except that the agreement
set forth in Section 9.02 hereof shall survive termination and this Section
9.01 shall not limit any covenant or agreement of the parties hereto which by
its terms contemplates performance after the Effective Time.
SECTION 9.02 Fees and Expenses. All costs and expenses incurred in
connection with the Tender Offer, the Merger, this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses, regardless of whether the Tender Offer or the Merger
shall be consummated.
SECTION 9.03 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have duly given if delivered personally or
sent by cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested), to the respective parties at the
following addresses or at such addresses as shall be specified by the parties
by like notice:
(a) If to Parent or the Purchaser:
Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Attention: Katherine McG. Sullivan, Esq.
Telecopy No: 212-793-1925
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attention: Eric J. Friedman, Esq.
Telecopy No: 212-735-2000
A-15
<PAGE>
(b) If to the Company:
Travelers Property Casualty Corp.
One Tower Square
Hartford, Connecticut
Attention: James M. Michener, Esq.
Telecopy No.: 860-277-8967
with a copy to:
Wachtell, Lipton, Rosen & Katz, LLP
51 West 52nd Street
New York, New York 10019
Attention: Martin Lipton, Esq.
Telecopy No.: 212-403-2000
SECTION 9.04 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 conflicts
of laws thereof, except to the extent that mandatory provisions of federal law
apply.
SECTION 9.05 Interpretation. For purposes of this Agreement, the term
"subsidiary" shall mean with respect to a specified party, any other entity (i)
of which fifty percent or more of either the equity interests in, or the voting
control of, such entity is, directly or indirectly, beneficially owned by the
specified party, (ii) of which the specified party has the ability to (A) elect
fifty percent or more of the directors or members of the governing board of
such entity or (B) appoint either the general partner of a general partnership
or limited partnership or the managing member of a limited liability company or
(iii) that the specified party otherwise controls.
SECTION 9.06 Entire Agreement; Assignment. The Agreement (together with
the annex hereto) (a) contains the entire agreement among Parent, the Purchaser
and the Company with respect to the Tender Offer, the Merger and the
transactions contemplated hereby and supersedes all prior agreements and
undertakings, both written and oral, among the parities, or any of them, with
respect to these matters; and (b) shall not be assigned, except that the
Purchaser may assign any of its rights and obligations hereunder, including,
without limitation, the right to purchase any or all of the Shares tendered
pursuant to the Tender Offer, to Parent or one or more direct or indirectly
wholly owned subsidiaries of Parent; provided, however, that no such assignment
shall relieve the Purchaser of its obligations hereunder.
SECTION 9.07 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
SECTION 9.08 Parties In Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective
successors, legal representatives and permitted assigns, and, except for the
provisions of Section 6.03, which shall be enforceable by the beneficiaries
contemplated thereby, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
A-16
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CITIGROUP INC.
By: /s/ Charles O. Prince, III
------------------------------------
Name: Charles O. Prince, III
Title: Secretary and General Counsel
THE TRAVELERS INSURANCE GROUP INC.
By: /s/ Irwin Ettinger
------------------------------------
Name: Irwin Ettinger
Title: Senior Vice President
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ Jay S. Fishman
------------------------------------
Name: Jay S. Fishman
Title: Chairman, President and Chief
Executive Officer
A-17
<PAGE>
ANNEX A-I
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provision of the Tender Offer, and in addition
to (and not in limitation of) the Purchaser's rights to extend and amend the
Tender Offer at any time in its sole discretion in accordance with the terms of
this Agreement, the Purchaser shall not be required to accept for payment,
purchase or pay for, subject to any applicable and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares (whether or not any Shares theretofore have been
accepted for payment or paid for pursuant to the Tender Offer), and may
terminate the Tender Offer as to any Shares not then paid for, if (i) Parent
and the Purchaser shall not have obtained all insurance regulatory approvals
necessary in order to consummate the Offer, the Merger and the other
transactions contemplated hereby, or (ii) at any time on or after March 22,
2000 and prior to the time of payment for any such Shares, any of the following
events shall occur:
(a) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or
rendered applicable to the Tender Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative agency
or authority or court or legislative body or commission which (i) prohibits
or imposes any material limitations on, Parent's or the Purchaser's
ownership or operation of all or a material portion of the Company's
businesses or assets, (ii) prohibits or makes illegal the acceptance for
payment, payment for or purchase of Shares or the consummation of the
Tender Offer or the Merger, (iii) results in a material delay in or
restricts the ability of the Purchaser, or renders the Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares, or (iv)
imposes material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders, provided that
Parent shall have used all reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(b) the representations and warranties of the Company set forth in the
Agreement shall not be true and correct as of the date of consummation of
the Tender Offer as though made on or as of such date, except for such
failures to be true or correct that as has not had or would not be
reasonably expected to have a Company Material Adverse Effect or the
Company shall have breached or failed in any material respect to perform or
comply with any material obligation, agreement or covenant required by the
Agreement to be performed or complied with by it;
(c) the Board of Directors of the Company, based on the recommendation
of the Special Committee, shall have (including by amendment to the
Schedule 14D-9) withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Tender Offer, the Merger or
the Agreement or shall have resolved to do any of the foregoing;
(d) the Company, acting through its Board of Directors (as agreed to
by the Special Committee), Parent and the Purchaser shall have agreed that
the Purchaser shall terminate the Tender Offer or postpone the acceptance
for payment of or payment for shares thereunder; or
(e) the Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent, the Purchaser
and their respective affiliates and may be asserted by Parent or the Purchaser,
in whole or in part, at any time and from time to time in the sole discretion
of Parent or the Purchaser. The failure by Parent or the Purchaser at any time
to exercise its rights under any of the foregoing conditions shall not be
deemed a waiver of any such rights and each such right shall be deemed an
ongoing right which may be asserted at any time or from time to time.
Should the Offer be terminated pursuant to any of the foregoing
provisions, all tendered Shares not theretofore accepted for payment shall
forthwith be returned to the tendering stockholders.
<PAGE>
ANNEX B
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, New York
10036
(212) 761-4000
March 21, 2000
Special Committee of the Board of Directors
on behalf of the Board of Directors
Travelers Property Casualty Corp.
One Tower Square - 8GS
Hartford, CT 06183
Members of the Special Committee on behalf of:
We understand that Travelers Property Casualty Corp. (the "Company"), Citigroup
Inc. ("Parent") and an indirect subsidiary of Parent (the "Buyer") propose to
enter into a Transaction which will provide, among other things, for (i) the
commencement by the Buyer of a tender offer (the "Tender Offer") for all issued
outstanding shares of Class A common stock, par value $0.01 per share (the
"Class A Common Stock"), of the Company not already owned by or held by the
Buyer for $41.50 per share in cash, and (ii) the subsequent merger (the
"Merger") of a newly formed acquisition sub of the Buyer with and into the
Company. You have indicated that pursuant to the Merger, the Company will become
a wholly-owned subsidiary of the Buyer and each outstanding share of Class A
Common Stock of the Company, other than shares held in treasury or held by the
Buyer or any affiliate of the Buyer (except for shares held in a fiduciary or
similar capacity on behalf of third parties or held on account of a debt
previously contracted) or as to which dissenters' rights have been perfected,
will be converted into the right to receive $41.50 per share in cash (the
"Consideration"). We further understand that the Buyer beneficially owns,
directly or indirectly, 100% of the Class B common stock, par value $0.01 per
share (together with the Class A Common Stock, the "Common Stock"), constituting
approximately 85% of the outstanding shares of the Common Stock.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Class A Common Stock of the Company (other than Parent,
its subsidiaries and affiliates) pursuant to the Tender Offer and the Merger is
fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) reviewed certain financial projections prepared by the management of
the Company;
(iv) reviewed the reported prices and trading activity for the Common
Stock;
(v) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly traded companies and their securities;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable purchase transactions;
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(vii) participated in discussions and negotiations among representatives
of the Company and Parent and their financial and legal advisors;
and
(viii) performed such other analyses and reviewed such other documentation
as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such appraisals.
We have reviewed actuarial reports prepared by the Company with respect to
reserve adequacy of the Company and have relied without independent verification
upon such reports for purposes of this opinion. Our opinion is necessarily based
on economic, market and other conditions as in effect on, and the information
made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets.
We have acted as financial advisor to the Special Committee on behalf of the
Board of Directors of the Company in connection with this transaction and will
receive a fee for our services.
It is understood that this letter is for the information of the Special
Committee of the Board of Directors and the Board of Directors of the Company
only and may not be used for any other purpose without our prior written
consent; provided however, that the Company may include the opinion in its
entirety as an exhibit to any report, statement, or schedule filed by the
Company with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 in connection with the Tender Offer or the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of shares of Class A Common Stock
(other than Parent and its subsidiaries) pursuant to the Tender Offer and the
Merger is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Phillip S. Barnett
-------------------------
Phillip S. Barnett
Managing Director
B-2
<PAGE>
ANNEX C
EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE RELATING TO THE RIGHTS
OF DISSENTING STOCKHOLDERS
262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g)), Section 252, Section 254, Section 257, Section 258,
Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholder entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
C-3
<PAGE>
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of its addresses
set forth below:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier Delivery: BY HAND:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Actions Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2544 525 Washington Boulevard Reporting Services Inc.
Jersey City, New Jersey Jersey City, New Jersey 07303-2544 Attention:
07303-2544 Corporate Actions
100 William Street
New York, NY 10038
</TABLE>
Facsimile for Eligible Institutions:
(201) 324-3284
Any questions or requests for assistance may be directed to the
Information Agent at its address and telephone numbers set forth below.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or the Depositary.
Stockholders may also contact their brokers, dealers, commercial banks, trust
companies or other nominees for assistance concerning the Offer.
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone: (212) 750-5833 (call collect)
or
Call Toll Free (888) 750-5835
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
388 Greenwich Street
New York, New York 10013
Call Toll-Free 1-800-996-7920
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
TRAVELERS PROPERTY CASUALTY CORP.
(Name of Subject Company)
----------------
TRAVELERS PROPERTY CASUALTY CORP.
(Name of Person(s) Filing Statement)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
893939 10 8
(CUSIP Number of Class of Securities)
JAMES M. MICHENER, ESQ.
TRAVELERS PROPERTY CASUALTY CORP.
ONE TOWER SQUARE -- 8GS
HARTFORD, CONNECTICUT 06183
(860) 277-0111
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
WITH COPIES TO:
MARTIN LIPTON, ESQ. ERIC J. FRIEDMAN, ESQ.
Wachtell, Lipton, Rosen & Katz Skadden, Arps, Slate, Meagher & Flom LLP
51 West 52nd Street Four Times Square
New York, New York 10019 New York, New York 10036
(212) 403-1000 (212) 735-3000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
================================================================================
<PAGE>
ITEM 1. SUBJECT COMPANY INFORMATION.
NAME AND ADDRESS.
The name of the subject company is Travelers Property Casualty Corp., a
Delaware corporation ("Travelers"). The address of the principal executive
offices of Travelers is One Tower Square, Hartford, Connecticut 06183, and its
telephone number is (860) 277-0111.
SECURITIES.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement (this "Statement") relates is the Class A
common stock, par value $.01 per share (the "Shares"), of Travelers. As of
March 21, 2000, there were 57,128,767 Shares issued and outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
NAME AND ADDRESS.
The name, business address and business telephone number of Travelers,
which is the subject company and the person filing this Statement, are set
forth in Item 1 above.
TENDER OFFER.
This Statement relates to the tender offer by The Travelers Insurance
Group Inc., a Connecticut corporation ("Purchaser") and an indirect wholly
owned subsidiary of Citigroup Inc., a Delaware corporation ("Citigroup"), to
purchase all outstanding Shares at a purchase price of $41.50 per Share, net to
the seller in cash (less any required withholding taxes), without interest
thereon, on the terms and subject to the conditions set forth in the Offer to
Purchase, dated March 23, 2000 (the "Offer to Purchase"), and in the related
Letter of Transmittal (the "Letter of Transmittal," which, together with the
Offer to Purchase, as they may be amended or supplemented from time to time,
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and
(a)(2) herewith, respectively, and are incorporated herein by reference in
their entirety. Citigroup and its subsidiaries already own 100% of the Class B
Common Stock, par value $.01 per share, of Travelers, which constitutes
approximately 85% of the outstanding Travelers common stock. The Offer is
described in a Tender Offer Statement on Schedule TO (which includes the
information required to be reported under Rule 13e-3), dated March 23, 2000
(the "Schedule TO"), which was filed with the Securities and Exchange
Commission on March 23, 2000.
The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of March 22, 2000 (the "Merger Agreement"), by and among Citigroup,
Purchaser and Travelers. Following the consummation of the Offer and the
satisfaction or waiver of certain conditions, Travelers will merge with a newly
formed wholly owned subsidiary of Purchaser (the "Merger"). Travelers will
continue as the surviving corporation. In the Merger, each outstanding Share
(other than Shares held in the treasury of Travelers or by any of its wholly
owned subsidiaries, or owned by Citigroup or Purchaser (except for Shares held
by Citigroup or any of its affiliates in a fiduciary or similar capacity on
behalf of third parties or held on account of debt previously contracted) or
held by stockholders who perfect and do not withdraw or otherwise lose their
dissenters' rights under Delaware law) will be converted into the right to
receive the merger consideration, which will be $41.50 per Share, net to the
seller in cash (less any required withholding taxes), or any higher price paid
per Share in the Offer. A copy of the Merger Agreement is filed as Exhibit
(e)(1) hereto and is incorporated herein by reference in its entirety.
The Schedule TO states that the principal executive offices of Citigroup
are located at 153 East 53rd Street, New York, New York 10043 and
that the principal executive offices of Purchaser are located at One Tower
Square, Hartford, Connecticut 06183.
1
<PAGE>
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
CONFLICTS OF INTEREST.
Except as described or referred to in this Item 3, there exists on the
date hereof no material agreement, arrangement or understanding and no actual
or potential conflict of interest between Travelers or its affiliates and
either (i) Travelers, its executive officers, directors or affiliates or (ii)
Purchaser, Citigroup or any of their respective executive officers, directors
or affiliates.
1. CERTAIN ARRANGEMENTS BETWEEN TRAVELERS AND ITS EXECUTIVE OFFICERS,
DIRECTORS AND AFFILIATES.
Proxy Statement Disclosures. Certain contracts, agreements, arrangements
and understandings between Travelers and its executive officers, directors and
affiliates are described on pages 1-22 of Travelers' "Proxy Statement Relating
to the Annual Meeting of the Company's Shareholders to be Held on April 18,
2000" (the "2000 Proxy Statement") in the sections: "About the Annual Meeting,"
"Beneficial Ownership," "Election of Directors," "Directors' Compensation,"
"Executive Compensation," "Compensation Tables," "Retirement Plans," "Other
Transactions" and "Relationships with Citigroup and Affiliates," and in Items
10 through 13, inclusive, of Travelers' Form 10-K for the year ended December
31, 1999 (the "Form 10-K"). The 2000 Proxy Statement is filed herewith as
Exhibit (e)(2) and is incorporated herein by reference. Items 10 through 13,
inclusive, of the Form 10-K are filed herewith as Exhibit (e)(3) and are
incorporated herein by reference. The information incorporated by reference is
considered to be a part of this Statement, except for any information that is
superseded by information included directly in this Statement.
Company Benefit Plans. Prior to the execution of the Merger Agreement, the
Nomination, Compensation and Governance Committees of the Board of Directors of
Travelers (the "Travelers Board") took action to provide that the Shares
granted under Travelers' Capital Accumulation Plan (the "CAP Plan") will be
converted into cash in the Merger and deposited in either of two grantor trusts
to be established by Travelers, one of which will hold and invest the funds in
securities that provide for a fixed and/or variable rate of return and the
other of which will invest the funds in common stock of Citigroup (each, a
"Trust" and, collectively, the "Trusts"). The funds will be invested and held
in the Trusts until the end of the Restricted Period (as defined in the CAP
Plan). Travelers has amended its Stock Purchase Plan (the "Purchase Plan") to
provide that the Purchase Plan will terminate as of the closing of the Merger,
all elections made by participants of the Purchase Plan for the month of March
will be honored by Travelers and no new elections by any person to participate
in the Purchase Plan for any month after March will be honored.
2. CERTAIN ARRANGEMENTS BETWEEN TRAVELERS AND CITIGROUP.
The information set forth under "INTRODUCTION," "SPECIAL FACTORS --
Background of this Offer," "SPECIAL FACTORS -- Recommendation of the Special
Committee and the Company Board; Fairness of the Offer and the Merger,"
"SPECIAL FACTORS -- Opinion of Financial Advisor," "SPECIAL FACTORS -- The
Merger Agreement," "SPECIAL FACTORS -- Beneficial Ownership of Common Stock,"
"SPECIAL FACTORS --Transactions and Arrangements Concerning the Shares,"
"SPECIAL FACTORS -- Related Party Transactions," "THE TENDER OFFER -- Certain
Information Concerning the Company" and "THE TENDER OFFER -- Certain
Information Concerning Parent and the Purchaser" in the Offer to Purchase is
incorporated herein by reference.
3. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
In considering the recommendations of the Travelers Board and the Special
Committee with respect to the Offer, the Merger and the Merger Agreement and
the fairness of the consideration to be received in the Offer and the Merger,
stockholders should be aware that certain officers and directors of Citigroup,
Purchaser and Travelers have interests in the Offer and the Merger which are
described in the sections of the Offer to Purchase listed below and which may
present them with certain potential conflicts of interest.
2
<PAGE>
The information contained under "SPECIAL FACTORS -- Beneficial Ownership
of Common Stock," "SPECIAL FACTORS -- Transactions and Arrangements Concerning
the Shares," "SPECIAL FACTORS -- Related Party Transactions" and "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger" in the
Offer to Purchase is incorporated herein by reference.
The Special Committee and the Travelers Board were aware of these actual
and potential conflicts of interest and considered them along with the other
matters described below in Item 4, "The Solicitation or Recommendation --
Reasons for the Recommendation."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION.
Recommendation of the Special Committee. At a meeting held on March 21,
2000, the Special Committee (i) unanimously determined that each of the Offer
and the Merger, both as contemplated by the Merger Agreement, is fair to and in
the best interests of Travelers and its stockholders; (ii) unanimously
approved, and recommended that the Travelers Board approve, the Offer and the
Merger; and (iii) recommended that the Travelers Board recommend acceptance of
the Offer and, if necessary, approval of the Merger Agreement by the
stockholders of Travelers.
Recommendation of the Travelers Board. At a meeting held on March 21,
2000, after hearing the Special Committee's recommendation, the Travelers
Board, by unanimous vote of all directors and based on, among other things, the
recommendation of the Special Committee, (i) determined that the Offer and the
Merger are fair to, advisable and in the best interests of Travelers and its
stockholders (other than Parent and Purchaser); (ii) approved the Offer, the
Merger and the Merger Agreement and the transactions contemplated by the Merger
Agreement; and (iii) recommended that Travelers' stockholders accept the Offer
and approve the Merger Agreement and the Merger. ACCORDINGLY, THE TRAVELERS
BOARD RECOMMENDS THAT THE STOCKHOLDERS OF TRAVELERS ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER AND, IF NECESSARY, APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE MERGER.
A letter to the stockholders of Travelers, a letter to brokers, dealers,
commercial banks, trust companies and other nominees, a letter to clients for
use by brokers, dealers, commercial banks, trust companies and other nominees
communicating the Travelers Board's recommendation and press releases
announcing the Offer and the Merger are filed herewith as Exhibits (a)(3),
(a)(4), (a)(5), (a)(6) and (a)(7) respectively, and are incorporated herein by
reference.
The Travelers Board's recommendation is based in part on the oral opinion
(which was subsequently confirmed in writing) delivered by Morgan Stanley & Co.
Incorporated ("Morgan Stanley") to the Special Committee on behalf of the
Travelers Board on March 21, 2000, to the effect that, as of such date and
based on and subject to the matters described in the opinion, the price per
share of $41.50 to be received pursuant to the Offer and the Merger by
Travelers stockholders other than Citigroup and its subsidiaries, was fair,
from a financial point of view, to such stockholders. The full text of the
written opinion, which sets forth the assumptions made, the procedures
followed, the matters considered and the limitations on the review undertaken
by Morgan Stanley, is attached hereto as Annex A and filed herewith as Exhibit
(a)(8) and is incorporated herein by reference.
REASONS FOR THE RECOMMENDATION.
The reasons for the recommendation stated in this Item 4 are set forth
under "INTRODUCTION," "SPECIAL FACTORS -- Background of this Offer," "SPECIAL
FACTORS -- Recommendation of the Special Committee and the Board; Fairness of
the Offer and the Merger" and "SPECIAL FACTORS -- Opinion of Financial Advisor"
in the Offer to Purchase, and are incorporated herein by reference.
INTENT TO TENDER.
To the best knowledge of Travelers, after making reasonable inquiry, each
of Travelers' executive officers, directors, affiliates and subsidiaries, other
than those individuals, if any, for whom the tender of
3
<PAGE>
Shares could cause them to incur liability under the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended, or to the extent
their Shares are Restricted Shares (as defined in the Merger Agreement),
currently intends to tender pursuant to the Offer all Shares held of record or
beneficially owned by them as of the date hereof.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The information contained under "SPECIAL FACTORS -- Background of this
Offer," "SPECIAL FACTORS -- Recommendation of the Special Committee and the
Board; Fairness of the Offer and the Merger" and "SPECIAL FACTORS -- Opinion of
Financial Advisor" in the Offer to Purchase is incorporated herein by
reference.
Neither Travelers nor any person acting on its behalf has employed,
retained or compensated, or currently intends to employ, retain or compensate,
any person to make solicitations or recommendations to the stockholders of
Travelers on its behalf with respect to the Offer or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The information set forth under "SPECIAL FACTORS -- Transactions and
Arrangements Concerning the Shares" in the Offer to Purchase is incorporated
herein by reference.
Except as set forth in this Item 6, no transactions in the Shares during
the past 60 days have been effected by Travelers or, to the best of Travelers'
knowledge, by any executive officer, director, affiliate or subsidiary of
Travelers.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as described or referred to in this Statement, no negotiation is
being undertaken or engaged in by Travelers which relates to or would result in
(i) a tender offer or other acquisition of the Shares by Travelers, any of its
subsidiaries or any other person, (ii) an extraordinary transaction, such as a
merger, reorganization, or liquidation, involving Travelers or any of its
subsidiaries, (iii) a purchase, sale, or transfer of a material amount of
assets by Travelers or any of its subsidiaries or (iv) any material change in
the present dividend rate or policy, or indebtedness or capitalization of
Travelers.
Except as described or referred to in this Statement, there are no
transactions, Travelers Board resolutions, agreements in principle, or signed
contracts entered into in response to the Offer that would relate to one or
more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION.
The information contained in the Offer to Purchase filed as Exhibit (a)(1)
herewith is incorporated herein by reference.
4
<PAGE>
ITEM 9. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase dated March 23, 2000.*+
(a)(2) Letter of Transmittal.*+
(a)(3) Letter from the Chairman and Chief Executive Officer of Travelers to Travelers'
Stockholders, dated March 23, 2000.+
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust
Companies, and Nominees.*
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies, and Nominees.*
(a)(6) Text of press release issued by Citigroup, dated March 21, 2000.*
(a)(7) Text of press release issued by Travelers, dated March 21, 2000.*
(a)(8) Opinion of Morgan Stanley & Co. Incorporated, dated March 21, 2000 (attached
as Annex A hereto).+
(e)(1) Agreement and Plan of Merger, dated as of March 22, 2000, among Citigroup,
Purchaser and Travelers.*
(e)(2) Travelers' Proxy Statement Relating to the Annual Meeting of Shareholders to
be Held on April 18, 2000 (incorporated by reference to the Schedule 14A of
Travelers filed on March 17, 2000 (File No. 001-14328)).
(e)(3) Items 10 through 13 of the Form 10-K of Travelers for the year ended
December 31, 1999 (incorporated by reference to the Form 10-K of Travelers,
filed on March 13, 2000 (File No. 001-14328)).
(e)(4) Restated Certificate of Incorporation of Travelers, as amended (incorporated by
reference to Exhibit 3.01 of the Form 10-Q of Travelers for the period ended
March 31, 1997 (File No. 001-14328)).
</TABLE>
- ----------
* Incorporated by reference to the Schedule TO filed by Citigroup and
Purchaser on March 23, 2000.
+ Included in copies mailed to Travelers' stockholders.
5
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete, and
correct.
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ James M. Michener
--------------------------------------------
Name: James M. Michener
Title: General Counsel and Secretary
Dated: March 23, 2000
6
<PAGE>
EXHIBIT (a)(1)(C)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 23, 2000
OF
THE TRAVELERS INSURANCE GROUP INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Actions Corporate Actions, Suite 4660 c/o Securities Transfer
P.O. Box 2544 525 Washington Boulevard and Reporting Services Inc.
Jersey City, New Jersey 07303-2544 Jersey City, New Jersey 07303-2544 Attention: Corporate Actions
100 William Street Galleria
New York, New York
10038
</TABLE>
Facsimile for Eligible Institutions:
(201) 324-3284
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THERE FOR
PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------
Total Number of Number of
Share Certificate Shares Evidenced by Shares
Number(s)* Share Certificate(s)* Tendered**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each share certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
[ ] CHECK HERE IF CERTIFICATES HAVE BEEN LOST, DESTROYED OR STOLEN.
NUMBER OF SHARES LOST . SEE INSTRUCTION 11.
This Letter of Transmittal is to be completed by stockholders of
Travelers Property Casualty Corp. either if certificates evidencing Shares (as
defined below) are to be forwarded herewith or if delivery of Shares is to be
made by book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company ("DTC") pursuant to the procedures described under "THE
TENDER OFFER--Section 3. Procedures for Tendering Shares" in the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Certificates") are
not immediately available or who cannot deliver their Certificates and all other
documents required hereby to the Depositary prior to the Expiration Date (as
defined under "INTRODUCTION" in the Offer to Purchase) or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis and who wish
to tender their Shares must do so pursuant to the guaranteed delivery procedure
described under "THE TENDER OFFER--Section 3. Procedures for Tendering Shares"
in the Offer to Purchase. See Instruction 2.
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED SHARES ARE BEING DELIVERED
BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY
TRANSFER FACILITY:
Name of Tendering Institution
--------------------------------------------
Account Number
-----------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED SHARES ARE BEING TENDERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY:
Name(s) of Registered Holder(s)
-----------------------------------------
Window Ticket Number (if any)
------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------
Name of Institution that Guaranteed Delivery
-----------------------------
If delivery is by book-entry transfer, check box: [ ]
Account Number
-----------------------------------------------------------
Transaction Code Number
--------------------------------------------------
2
<PAGE>
SIGNATURES MUST BE PROVIDED AT THE END OF THIS LETTER OF TRANSMITTAL.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to The Travelers Insurance Group Inc., a
Connecticut corporation and an indirect wholly owned subsidiary of Citigroup
Inc., a Delaware corporation (the "Purchaser"), all of the outstanding shares of
Class A common stock, par value $.01 per share (the "Shares"), of Travelers
Property Casualty Corp., a Delaware corporation (the "Company"), at a purchase
price of $41.50 per Share, net to the seller in cash (such amount, or any
greater amount per Share paid pursuant to the Offer, being referred to herein as
the "Offer Price"), without interest thereon, upon the terms and subject to the
conditions set forth in this Letter of Transmittal (as amended or supplemented
from time to time) and in the Offer to Purchase dated March 23, 2000 (the "Offer
to Purchase"), receipt of which is hereby acknowledged (which together
constitute the "Offer"). The undersigned understands that the Purchaser reserves
the right to transfer or assign, in whole, or from time to time in part, to one
or more of its affiliates or subsidiaries, all or any portion of the issued and
outstanding Shares tendered pursuant to the Offer or the right to purchase all
or any portion of the issued and outstanding Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in, to and under all of the Shares that are being
tendered hereby (and any and all non-cash dividends, distributions, rights,
other Shares or other securities issued or issuable in respect thereof on or
after March 22, 2000 (collectively, "Distributions")) and irrevocably appoints
the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any and all Distributions), with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver Certificates
evidencing such Shares (and any and all Distributions), or transfer ownership
of such Shares (and any and all Distributions) on the account books maintained
by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Purchaser upon receipt by the Depositary, as the undersigned's agent, of
the Offer Price, (ii) present such Shares (and any and all Distributions) for
registration transfer on the books of the Company, and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any and all Distributions), all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints Charles O. Prince, III,
Katherine McG. Sullivan and any other designee of the Purchaser, and each of
them, as the attorneys-in-fact and proxies of the undersigned, each with full
power of substitution and re-substitution, to vote in such manner as each such
attorney-in-fact and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all of the Shares (and any and all Distributions) tendered hereby which have
been accepted for payment by the Purchaser prior to the time of such vote or
other action and all Shares and other securities issued in Distributions in
respect of such Shares, which the undersigned is entitled to vote at any
meeting of stockholders of the Company (whether annual or special and whether
or not an adjourned or postponed meeting) or consent in lieu of any such
meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable, is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with other terms of the Offer. Such
acceptance for payment shall, without further action, revoke all other powers
of attorney and proxies granted by the undersigned at any time with respect to
such Shares (and any and all Distributions), and no subsequent power of
attorney or proxy shall be given or written consent executed (and if given or
executed shall not be effective) by the undersigned with respect thereto. The
undersigned understands and acknowledges that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance of such Shares
for payment, the Purchaser or the Purchaser's designees must be able to
exercise full voting and other rights with respect to such Shares (and any and
all Distributions), including, without limitation, voting at any meeting of the
Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned owns the
3
<PAGE>
Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act,
and that when the same are accepted for payment by the Purchaser, the Purchaser
will acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restriction, charges and
encumbrances and the same will not be subject to any adverse claims. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby and
all Distributions. In addition, the undersigned shall remit and transfer
promptly to the Depositary for the account of the Purchaser all Distributions
in respect of the Shares tendered hereby, accompanied by appropriate
documentation of transfer, and pending such remittance and transfer or
appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by the Purchaser
in its sole discretion.
No authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned. All obligations of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "THE TENDER
OFFER--Section 3. Procedures for Tendering Shares" and in the instructions
hereto will constitute the undersigned's acceptance of the terms and subject to
the conditions of the Offer (and if the Offer is extended or amended, the terms
or conditions of any such extension or amendment). The Purchaser's acceptance
of such Shares for payment will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that, under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept for
payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and/or return any Certificates evidencing Shares not tendered or
accepted for payment in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered." Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions," please mail the check for
the purchase price of all Shares purchased and all Certificates evidencing
Shares not tendered or not accepted for payment (and any accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing above under "Description of Shares Tendered." In the event that the
boxes entitled "Special Payment Instructions" and "Special Delivery
Instructions" are both completed, please issue the check for the purchase price
of all Shares purchased and/or return all Certificates evidencing Shares not
tendered or not accepted for payment (and any accompanying documents, as
appropriate) in the name(s) of, and mail such check and return Certificates
(and any accompanying documents, as appropriate) to, the person(s) so
indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered hereby and delivered
by book-entry transfer that are not accepted for payment by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the "Special
Payment Instructions," to transfer any Shares from the name of the registered
holder(s) thereof if the Purchaser does not purchase any of the Shares tendered
hereby.
4
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the the purchase price of Shares
(less the amount of any federal income and backup withholding tax required to
be withheld) accepted for payment is to be issued in the name of someone other
than the undersigned, if Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the undersigned or
if Shares tendered hereby and delivered by book-entry transfer that are not
purchased are to be returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account indicated above.
Issue: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------
(PLEASE PRINT)
Address:
-------------------------------------------
(INCLUDE ZIP CODE)
- ---------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
[ ] Credit Shares delivered by book-entry transfer and not purchased to the
Book-Entry Transfer Facility account.
Account Number:
------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for purchase price of Shares purchased
(less the amount of any federal income and backup withholding tax required to be
withheld) or Certificates evidencing Shares not tendered or not purchased are to
be mailed to someone other than the undersigned or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------
(PLEASE PRINT)
Address:
-------------------------------------------
(INCLUDE ZIP CODE)
- ---------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
X
- -----------------------------------------------------------------------------
X
- -----------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated , 2000.
---------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
the certificate(s) or on a security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5.)
Name(s)
--------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
---------------------------------------------------------------
Capacity (full title)
-------------------------------------------------------
(SEE INSTRUCTION 5)
Address
-------------------------------------------------------------------
---------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------
Taxpayer Identification or Social Security Number
-------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW.
Authorized Signature(s)
-----------------------------------------------------
Name
-----------------------------------------------------------------------
Name of Firm
---------------------------------------------------------------
Address
---------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
----------------------------------------------
Dated , 2000
--------------------
- --------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a firm that is a member of the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), unless
(i) this Letter of Transmittal is signed by the registered holder(s) of Shares
(which term, for the purposes of this document, shall include any participant
in a Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) tendered hereby and such holder(s) has (have)
not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on this Letter of Transmittal or
(ii) such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be used either if
certificates representing Shares are to be forwarded herewith to the Depositary
or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth under "THE TENDER OFFER--Section 3. Procedures for
Tendering Shares" in the Offer to Purchase. Certificates evidencing all
physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares delivered by book-entry as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) must be received by
the Depositary at one of its addresses set forth herein prior to the Expiration
Date (as defined under "THE TENDER OFFER--Section 1. Terms of the Offer;
Expiration Date" in the Offer to Purchase). If certificates representing Shares
are forwarded to the Depositary in multiple deliveries, a properly completed
and duly executed Letter of Transmittal must accompany each such delivery.
Stockholders whose certificates representing Shares are not immediately
available, who cannot deliver their Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot comply
with the book-entry transfer procedure on a timely basis may tender their
Shares pursuant to the guaranteed delivery procedures described under "THE
TENDER OFFER--Section 3. Procedures for Tendering Shares" in the Offer to
Purchase. Pursuant to such procedure, (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary (as provided in (iii) below)
prior to the Expiration Date and (iii) the certificates evidencing all
physically delivered Shares in proper form for transfer by delivery (or
Book-Entry Confirmation with respect to such Shares), as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three New York
Stock Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as described under "THE TENDER OFFER--Section 3.
Procedures for Tendering Shares" in the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES
(REPRESENTING SHARES) AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE
TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE DEPOSITARY. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers, the number of Shares
evidenced by such certificates and the number of Shares tendered should be
listed on a separate signed schedule and attached hereto.
4. Partial Tenders (Not Applicable to Stockholders Who Tender by
Book-Entry Transfer.) If fewer than all the Shares evidenced by any certificate
submitted to the Depositary herewith are to be tendered hereby, fill in the
number of Shares that are to be tendered in the box entitled "Number of Shares
Tendered." In such case, new Certificate(s) evidencing the remainder of the
Shares that were evidenced by the old certificate(s) delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless
7
<PAGE>
otherwise provided in the box entitled "Special Delivery Instructions" on the
reverse side hereof, as soon as practicable after the Expiration Date. All
Shares evidenced by the Certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signatures(s) must correspond with the names(s) as written
on the face of the Certificate(s) evidencing such Shares without alternation,
enlargement or any change whatsoever.
If any Share tendered hereby is owned of record by two or more persons,
all such persons must sign this Letter of Transmittal.
If any Shares tendered hereby are registered in names of different
holders, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Certificates or separate stock
powers are required, unless payment is to be made to, or Certificates
evidencing Shares not tendered or purchased are to be issued in the name of, a
person other than the registered holder(s), in which case, the Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Certificates(s). Signatures on such
Certificates and stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Certificate(s). Signatures on such
Certificate(s) or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, the Purchaser will pay or cause to be paid all stock transfer taxes with
respect to the transfer and sale of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price of any Shares purchased
is to be made to, or if Certificate(s) evidencing Shares not tendered or not
purchased are to be issued in the name of, a person other than the registered
holder(s), or if Certificate(s) evidencing tendered shares are registered in
the name of the person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s), or such other person or otherwise) payable on account of
the transfer to such other person will be deducted from the purchase price of
such Shares purchased, unless evidence satisfactory to the Purchaser of the
payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED
IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE
AFFIXED TO THE CERTIFICATE(S) EVIDENCING THE SHARES TENDERED HEREBY.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Certificate is to be sent and/or any Certificates are to
be returned to someone other than the signer above, or to the signer above but
at an address other than that shown in the box entitled "Description of Shares
Tendered" on the reverse hereof, the appropriate boxes on the reverse of this
Letter of Transmittal must be completed. Stockholders delivering Shares
tendered hereby by book-entry transfer may request that Shares not purchased be
credited to such account maintained at a Book-Entry Transfer Facility as such
stockholder may designate in the box entitled "Special Delivery Instructions"
on the reverse hereof. If no such instructions are given, all such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility designated on the reverse hereof as the account from which such Shares
were delivered.
8
<PAGE>
8. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective telephone numbers and addresses set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal,
the Notice of Guaranteed Delivery and the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or Dealer Manager or from brokers, dealers, commercial banks
or trust companies.
9. Waiver of Conditions. Except as otherwise provided in the Offer to
Purchase and subject to the terms of the Merger Agreement, the Purchaser
reserves the right in its sole discretion to waive in whole or in part at any
time or from time to time any of the specified conditions of the Offer or any
defect or irregularity in tender with regard to any Shares tendered.
10. Substitute Form W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
a Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify, under penalty of perjury, that such number is correct
and that such stockholder is not subject to backup withholding of federal
income tax. If a tendering stockholder is subject to backup withholding, he or
she must cross out item (2) of the "Certification" box on Substitute Form W-9,
unless such stockholder has since been notified that such stockholder is no
longer subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the tendering stockholder to a $50 penalty
imposed by the Internal Revenue Service ("IRS") and a 31% federal income tax
withholding on the payment of the purchase price of all Shares purchased from
such stockholder. If the tendering stockholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
such stockholder should write "Applied For" in the space provided for the TIN
in Part 1, sign and date the Substitute Form W-9 and sign and date the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I, the Depositary will be required to withhold 31% of all
payments made for surrendered shares except that if the Depositary is provided
with a TIN within 60 days, the amount of such withholding will be refunded to
the tendering stockholder.
11. Lost, Destroyed or Stolen Share Certificates. If any Certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box in the box entitled
"Description of Shares Tendered" and indicating the number of Shares lost. The
stockholder will then be instructed as to the steps that must be taken in order
to replace the Share Certificate(s). This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost,
destroyed or stolen Share Certificates have been followed.
12. Non-United States Holders. Non-United States holders must submit a
completed IRS Form W-8 or Form W-8BEN to avoid backup withholding. IRS Form W-8
or Form W-8BEN may be obtained by contacting the Depositary at one of the
addresses on the face of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
AND CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS), OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE).
9
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a stockholder surrendering
Certificates must, unless an exemption applies, provide the Depositary (as
payer) with such stockholder's correct TIN on Substitute Form W-9 included in
this Letter of Transmittal. If the stockholder is an individual, the
stockholder's TIN is the stockholder's social security number. If the correct
TIN is not provided, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service and payments of cash to the stockholder (or other
payee) may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must complete an IRS Form W-8 or Form W-8BEN,
signed under penalties of perjury, attesting to such individual's exempt
status. Such forms can be obtained from the Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions. A stockholder should consult his or her
advisor as to such stockholder's qualification for exemption from backup
withholding and, the procedure for obtaining such exemption.
If federal backup withholding applies, the Depositary is required to
withhold 31% of any payment made to the stockholder. Backup withholding is not
an additional tax. Rather, the federal income tax liability of persons subject
to backup withholding will be reduced by the amount of tax withheld. If backup
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent federal backup withholding on payments that are made to a
stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of his or her correct TIN (or
the TIN of any other payee) by completing the Substitute Form W-9 included in
this Letter of Transmittal certifying (i) that the TIN provided on the
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN),
and that (ii) the stockholder is not subject to backup withholding because (a)
the stockholder has not been notified by the IRS that the stockholder is
subject to backup withholding as a result of a failure to report all interest
and dividends or (b) the IRS has notified the stockholder that the stockholder
is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record holder
of the Shares tendered hereby. If the Shares are held in more than one name or
are not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report. If the tendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number, which
appears in a separate box below the Substitute Form W-9. If "Applied For" is
written in Part I, the Depositary will be required to withhold 31% of all
payments made for surrendered Shares except that if the Depositary is provided
with a TIN within 60 days, the amount of such withholding will be refunded to
the tendering stockholder.
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PART I--PLEASE PROVIDE YOUR TIN IN ----------------
THE BOX AT RIGHT AND CERTIFY Social Security
BY SIGNING AND DATING BELOW Number
SUBSTITUTE
FORM
W-9 OR
Department -------------------------------
of the Employer Identification No.
Treasury (If awaiting TIN write "Applied For")
Internal ---------------------------------------------------------------------------------------
Revenue PART II--For payees NOT subject to backup withholding, see the enclosed
Service Guidelines for Department Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as of the instructed therein.
PAYER'S
REQUEST FOR PART III--Awaiting TIN [ ]
TAXPAYER
IDENTIFICATION CERTIFICATION--Under penalties of perjury, I certify that:
NUMBER
("TIN")
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding because either (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding; and
(3) Any information provided on this form is true, correct and complete.
---------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup ("TIN") withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
---------------------------------------------------------------------------------------
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATES REQUIRED TO AVOID BACKUP WITHHOLDING.
- ----------------------------------------------------------------------------------------------------------------------
Signature: Date: , 2000
---------------------------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF
31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number to the
Depositary by the time of payment, 31% of all reportable payments made to me
thereafter will be withheld, but that such amounts will be refunded to me if I
provide a certified Taxpayer Identification Number to the Depositary within
sixty (60) days.
Signature: Date: , 2000
------------------------ --------------------------
- -------------------------------------------------------------------------------
11
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other Offer materials may be directed
to the Information Agent or the Dealer Manager at their respective addresses
and telephone numbers as set forth below:
--------------------
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone: (212) 750-5833 (call collect) or
Call Toll Free: (888) 750-5835
--------------------
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
388 Greenwich Street
New York, New York 10013
Call Toll-Free 1-800-996-7920
12
<PAGE>
EXHIBIT (a)(1)(D)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) (i) if certificates
("Certificates") evidencing shares of Class A common stock, par value $.01 per
share (the "Shares"), of Travelers Property Casualty Corp., a Delaware
corporation (the "Company"), are not immediately available, (ii) if the
procedure for delivery by book-entry transfer cannot be completed prior to the
Expiration Date (as defined in the Offer to Purchase), or (iii) if time will
not permit all required documents to reach the Depositary prior to the
Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand,
transmitted by facsimile transmission or mailed to the Depositary. See "THE
TENDER OFFER--Section 3. Procedures for Tendering Shares" of the Offer to
Purchase.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Actions Corporate Action, Suite 4660 c/o Securities Transfer
P.O. Box 2544 525 Washington Boulevard and Reporting Services Inc.
Jersey City, New Jersey 07303-2544 Jersey City, New Jersey 07303-2544 Attention: Corporate Actions
100 William Street
New York, New York 10038
Facsimile for Eligible Institutions:
(201) 324-3284
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in "THE TENDER OFFER--Section 3. Procedures for
Tendering Shares") and certificates representing the Shares to the Depositary
within the time period specified herein. Failure to do so could result in
financial loss to the Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to The Travelers Insurance Group Inc., a
Connecticut corporation and an indirect wholly owned subsidiary of Citigroup
Inc., upon the terms and subject to the conditions set forth in the Offer to
Purchase dated March 23, 2000 (the "Offer to Purchase"), and the related Letter
of Transmittal (which, together with the Offer to Purchaser, constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure described under
"THE TENDER OFFER--Section 3. Procedures for Tendering Shares" in the Offer to
Purchase.
- --------------------------------------------------------------------------------
Number of Shares:
---------------------------------------------------------------
Share Certificate Number(s) (if available):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please check box if Shares will be tendered by book-entry transfer: [ ]
Account Number:
-----------------------------------------------------------------
Date:
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) of Record Holder(s):
- --------------------------------------------------------------------------------
Please Type or Print
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address(es)
- --------------------------------------------------------------------------------
Zip Code
- --------------------------------------------------------------------------------
Area Code and Telephone Number(s)
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 2000
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"), guarantees to
deliver to the Depositary, at one of its addresses set forth above, either
Certificates evidencing the Shares tendered hereby in proper form for transfer,
or confirmation of book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in the case of a book-entry transfer, and any
other required documents, all within three New York Stock Exchange, Inc.
trading days (as defined in the Offer to Purchase) of the date hereof.
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------
Name of Firm
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Zip Code
--------------------------------------------------------------------------
Area Code and Telephone Number
--------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------
Title
Name:
---------------------------------------------------------------------
Please Type or Print
Dated: , 2000
--------------------------------------------------------------
- --------------------------------------------------------------------------------
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY.
CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(1)(E)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
AT
$41.50 NET PER SHARE
BY
THE TRAVELERS INSURANCE GROUP INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
March 23, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by The Travelers Insurance Group Inc., a
Connecticut corporation (the "Purchaser") and an indirect wholly owned
subsidiary of Citigroup Inc., a Delaware corporation, to act as Dealer Manager
in connection with the Purchaser's offer to purchase all of the issued and
outstanding shares of Class A common stock, par value $.01 per share (the
"Shares"), of Travelers Property Casualty Corp., a Delaware corporation (the
"Company"), at a purchase price of $41.50 per Share, net to the seller in cash
(such amount, or any greater amount per Share paid pursuant to the Offer, being
referred to herein as the "Offer Price"), without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
March 23, 2000 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer") enclosed herewith. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of March 22, 2000,
among Parent, the Purchaser and the Company.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed for your information and use are copies of the following
documents:
1. The Offer to Purchase dated March 23, 2000;
2. The Letter of Transmittal, including a Certification of Taxpayer
Identification Number on Substitute Form W-9, to be used by holders of
Shares in accepting the Offer and tendering Shares;
3. A Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available
or cannot be delivered to Citibank, N.A. (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase) or if the
procedure for book-entry transfer cannot be completed by the
Expiration Date;
4. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer;
5. A letter to stockholders of the Company from Jay S. Fishman, Chairman
and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9, dated March
23, 2000, which has been filed by the Company with the Securities and
Exchange Commission, which includes the recommendation of the Board of
Directors of the Company that stockholders accept the Offer and tender
their shares to the Purchaser pursuant to the Offer;
<PAGE>
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates evidencing such Shares (or a confirmation of a book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer
Facility (as defined in the Offer to Purchase)), (ii) a properly completed and
duly executed Letter of Transmittal (or a properly completed and manually
signed facsimile thereof) or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer and (iii) any other required
documents.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedure
described under "THE TENDER OFFER-- Section 3. Procedures for Tendering Shares"
in the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer
or other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. However, the Purchaser
will, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Tender Offer should be
addressed to Salomon Smith Barney or Innisfree M&A Incorporated (the
"Information Agent") at the addresses and telephone numbers set forth on the
back cover of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the addresses and telephone numbers set forth on the back
cover page of the Offer to Purchase.
VERY TRULY YOURS,
SALOMON SMITH BARNEY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU, OR
ANY OTHER PERSON, THE AGENT OF THE PURCHASER, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT (a)(1)(F)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
AT
$41.50 NET PER SHARE
BY
THE TRAVELERS INSURANCE GROUP INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
March 23, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated March 23,
2000 (the "Offer to Purchase") and the related Letter of Transmittal in
connection with the offer by The Travelers Insurance Group Inc., a Connecticut
corporation (the "Purchaser") and an indirect wholly owned subsidiary of
Citigroup Inc. ("Parent"), to purchase all of the outstanding shares of Class A
common stock, par value $.01 per share (the "Shares"), of Travelers Property
Casualty Corp., a Delaware corporation (the "Company"), at a purchase price of
$41.50 per Share, net to the seller in cash (such amount, or any greater amount
per Share paid pursuant to the Offer, being referred to herein as the "Offer
Price"), without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the enclosed Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer").
WE ARE THE HOLDER OF RECORD (DIRECTLY OR INDIRECTLY) OF SHARES HELD FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD OR OUR NOMINEES AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE ENCLOSED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The Offer Price is $41.50 per Share, net to you in cash without
interest upon the terms and conditions set forth in the Offer to
Purchase.
2. The Offer is being made for all issued and outstanding Shares.
3. The Board of Directors of the Company (the "Company Board"), based
upon the unanimous recommendation of a special committee of
independent directors of the Company Board, (a) unanimously determined
that each of the Offer and Merger (as defined in the Offer to
Purchase) is fair to and in the best interests of the Company's
stockholders (other than Parent and the Purchaser), (b) unanimously
approved the Offer, the Merger and the Merger Agreement and the
transactions contemplated by the Merger Agreement and (c) unanimously
recommends that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer and approve and adopt the Merger
Agreement and the Merger.
4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS
EXTENDED.
<PAGE>
5. Stockholders who tender Shares will not be obligated to pay brokerage
fees or commissions to the Dealer Manager, the Information Agent or
the Depositary or, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, stock transfer taxes with respect to the
purchase of Shares by the Purchaser pursuant to the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter
of Transmittal and any supplements and amendments thereto and is being made to
all holders of Shares. The Purchaser is not aware of any state where the making
of the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with
such state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares in such state. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Purchaser by Salomon Smith Barney Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing and returning to us the instruction form
set forth on the opposite side of this letter. An envelope in which to return
your instructions to us is enclosed. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified in your
instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE
SO THAT WE WILL HAVE AMPLE TIME TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated March 23, 2000 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), in connection with the Offer by The
Travelers Insurance Group Inc., a Connecticut corporation (the "Purchaser") and
an indirect wholly owned subsidiary of Citigroup Inc., a Delaware corporation,
to purchase all of the outstanding shares of Class A common stock, par value
$.01 per share (the "Shares"), of Travelers Property Casualty Corp., a Delaware
corporation (the "Company"), at a purchase price of $41.50 per Share, net to the
seller in cash (such amount, or any greater amount per Share paid pursuant to
the Offer, being referred to herein as the "Offer Price"), without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 2000
- -------------------------------------
Number of Shares to be Tendered:
Shares*
- -------------------------
- -------------------------------------
- -------------------------------------
Account Number:
----------------------
Dated: , 2000
-------------------------
- -------------------------------------
SIGN HERE
-----------------------------------------------
-----------------------------------------------
Signature(s)
-----------------------------------------------
Please Type or Print Name(s)
-----------------------------------------------
-----------------------------------------------
Please Type or Print Address(es)
-----------------------------------------------
Area Code and Telephone Number(s)
-----------------------------------------------
Tax Identification or Social Security Number(s)
- ----------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
EXHIBIT (a)(1)(G)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GIVE THE
SOCIAL
SECURITY
FOR THIS TYPE ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals1
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, either person1
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and Minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is also
trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under State law
8. Sole proprietorship account The Owner(4)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
9. A valid trust, estate, or Legal entity (Do not furnish
pension fund the identifying number of
the personal representative
or trustee unless the legal
entity itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- --------------------------------------------------------------------------------
</TABLE>
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of Social Security Administration or the Internal Revenue Service
("IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Exempt payees described above nevertheless should file Form W-9 to avoid
possible erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TIN, WRITE "EXEMPT" ON THE FACE OF
THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS,
OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the Treasury regulations under sections 6041,
6041A(a), 6045, 6050A. (All "section" references herein are
to the Internal Revenue Code of 1986)
PRIVACY ACT NOTICE--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a TIN to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TIN--If you fail to furnish your TIN to a
payer, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell any Shares. The Offer is made solely by the Offer to Purchase dated
March 23, 2000 and the related Letter of Transmittal and any amendments or
supplements thereto, and is being made to all holders of Shares. The Purchaser
is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of the Shares pursuant thereto, the Purchaser shall make
a good faith effort to comply with such statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, the
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) holders of Shares in such
state.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
AT
$41.50 NET PER SHARE
BY
THE TRAVELERS INSURANCE GROUP, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
The Travelers Insurance Group, Inc., a Connecticut corporation (the "Purchaser")
and an indirect wholly owned subsidiary of Citigroup Inc., a Delaware
corporation ("Parent"), is offering to purchase all of the outstanding shares of
Class A Common Stock, par value $.01 per share (the "Shares") of Travelers
Property Casualty Corp. (the "Company"), at a price of $41.50 per Share, net to
the seller in cash, without interest (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated March 23,
2000 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer").
The Offer is a third party tender offer by the Purchaser to purchase at the
Offer Price all Shares tendered pursuant to the Offer. Following the
consummation of the Offer, the Purchaser and Parent intend to effect the Merger
(as defined below) as described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
The Offer is not conditioned upon any minimum number of shares being tendered.
The Offer is subject to other terms and conditions set forth in the Offer to
Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
March 22, 2000 (the "Merger Agreement"), by and among the Company, the Purchaser
and Parent. Pursuant to the Merger Agreement, as soon as practicable after the
completion of the Offer and the satisfaction or waiver of the conditions set
forth in the Merger Agreement, the Purchaser intends to transfer all of the
Shares purchased by it in the Offer and all of the shares of Class B Common
Stock, par value $.01 per share, of the Company, held by the Purchaser to a
newly-formed, wholly-owned subsidiary ("Merger Sub"). Merger Sub will then be
merged with and into the Company (the "Merger") in accordance with the
applicable provisions of the Delaware General Corporation Law. Following the
Merger, the Company shall be the surviving corporation and the separate
existence of Merger Sub shall cease. At the effective time of the Merger each
issued and outstanding Share (other than (i) Shares held in the Company's
treasury, (ii) Shares held by Parent and the Purchaser (except for Shares held
in a fiduciary or similar capacity on behalf of third parties or held on account
of a debt previously contracted), (iii) Dissenting Shares (as defined in the
Merger Agreement), will be converted into the right to receive the Offer Price,
without interest thereon (the "Merger Consideration").
The Board of Directors of the Company, based upon the unanimous recommendation
of a Special Committee of independent directors of the board, (a) unanimously
determined that each of the Offer and the Merger is fair to and in the best
interests of the Company's stockholders (other than Parent and the Purchaser),
(b) unanimously approved the Offer, the Merger and the Merger Agreement and the
transactions contemplated by the Merger Agreement, and (c) unanimously
recommends that the Company's stockholders accept the Offer and tender their
Shares pursuant to the Offer and approve and adopt the Merger Agreement and the
Merger. Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by the Purchaser pursuant to the Offer. Stockholders who hold their
Shares through a bank or a broker should check with such institution as to
whether it charges any service fees. The Purchaser will pay the expenses of
Citibank, N.A., which is acting as depositary (in such capacity, the
"Depositary"), Innisfree M&A Incorporated, which is acting as the Information
Agent (in such capacity, the "Information Agent"), and Salomon Smith Barney
Inc., who is acting as dealer manager (in such capacity, the "Dealer Manager")
in connection with the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn if, as
and when the Purchaser gives oral or written notice to the Depositary of its
acceptance for payment of such Shares. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted pursuant to the Offer will
be made by deposit of the purchase price thereof with the Depositary, which will
act as agent for tendering stockholders whose Shares have been accepted for
payment. Under no circumstances will interest on the purchase price for Shares
be paid by the Purchaser, regardless of any delay in making such payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares or a
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in the
Offer to Purchase) pursuant to the procedures set forth in the Offer to
Purchase, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase) and (iii) any other documents required by the Letter of Transmittal.
The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on
Wednesday, April 19, 2000, unless and until the Purchaser (in accordance with
the terms of the Merger Agreement) shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date on which the Offer, as so extended by the Purchaser,
shall expire. Notwithstanding the foregoing, the Purchaser may, without the
consent of the Company, extend the Offer beyond the initial Expiration Date in
the following events: (i) from time to time if, at the initial Expiration Date
(or any subsequent Expiration Date), any of the conditions of the Offer
specified in the section "THE TENDER OFFER--Section 13. Certain Conditions to
the Offer" shall not have been satisfied or waived; (ii) for any period required
by any rule, regulation, interpretation or position of the SEC or the staff
thereof applicable to the Offer or any period required by applicable law; (iii)
if all the conditions of the Offer are satisfied or waived, but the number of
Shares validly tendered and not withdrawn (together with such number of Shares
as may be issued upon conversion of the Shares of Class B Common Stock owned by
the Purchaser) is less than ninety percent of the then outstanding number of
Shares, for an aggregate period not to exceed ten business days (for all such
extensions); or (iv) pursuant to an amendment to the Offer providing for a
"subsequent offering period" not to exceed twenty business days to the extent
permitted under Rule 14d-11 under the Exchange Act. Any such extension will be
followed by public announcement thereof no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the rights of a tendering stockholder to
withdraw such stockholder's Shares except for an extension pursuant to Rule
14d-11 under the Exchange Act. Without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser will have no
obligation to publish, advertise or otherwise communicate any such announcement
other than by issuing a press release to the Dow Jones News Service or otherwise
as may be required by applicable law.
Tenders of Shares made pursuant to the Offer are irrevocable except that such
Shares may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment pursuant to the Offer, may also be withdrawn at
any time after May 21, 2000 or at such later time as may apply if the Offer is
extended except for an extension pursuant to Rule 14d-11 under the Exchange Act.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth in the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of such Shares, if different from that of the person who tendered such
Shares. If certificates evidencing such Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry transfer as set forth in the section "THE TENDER OFFER--Section 3.
Procedures for Tendering Shares" of the Offer to Purchase, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures. However,
withdrawn Shares may be re-tendered by again following one of the procedures
described in the section "THE TENDER OFFER--Section 3. Procedures for Tendering
Shares" of the Offer to Purchase at any time prior to the Expiration Date. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding on all parties.
The information required to be disclosed by Rule 13e-3(e)(1) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended, is
contained in the Offer to Purchase and is incorporated herein by reference.
The receipt of cash in exchange for Shares pursuant to the Offer or in the
Merger will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local or foreign tax
laws. Generally, a stockholder who receives cash in exchange for Shares pursuant
to the Offer (or the Merger) will recognize gain or loss for U.S. federal income
tax purposes equal to the difference between the amount of cash received and
such stockholder's adjusted tax basis in the Shares exchanged therefor. Provided
that such Shares constitute capital assets in the hands of the stockholder, such
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the holder has held the Shares for more than one year at the time of
sale. Gain or loss will be calculated separately for each block of Shares
tendered pursuant to the Offer or converted pursuant to the Merger. The maximum
U.S. federal income tax rate applicable to individual taxpayers on long-term
capital gain is 20%, and the deductibility of capital losses is subject to
certain limitations. All stockholders should consult with their tax advisors as
to the particular tax consequences of the Offer and the Merger to them,
including the applicability and effect of the alternative minimum tax and any
state, local or foreign income and other tax laws and of changes in such tax
laws. For a more complete description of certain U.S. federal income tax
consequences of the Offer and the Merger, see Section 5 of the Offer to
Purchase. The information required to be disclosed by Paragraph (d)(1) of Rule
14d-6 of the General Rules and Regulations under the Exchange Act is contained
in the Offer to Purchase and is incorporated herein by reference.
The Offer to Purchase, the related Letter of Transmittal and other relevant
documents will be mailed to record holders of Shares whose names appear on the
Company's stockholder lists and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance or copies of the Offer to Purchase, the
Letter of Transmittal and other tender offer documents may be directed to the
Information Agent or the Dealer Manager at their respective telephone numbers
and addresses set forth below. No fees or commissions will be paid to brokers,
dealers or other persons (other than the Information Agent) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone: (212) 750-5833 (call collect)
or
Call Toll Free (888) 750-5835
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
Call Toll-Free 1-800-996-7920
March 23, 2000
<PAGE>
TRAVELERS PROPERTY CASUALTY CORP. [LOGO]
Travelers Property Casualty Board
Approves Citigroup Tender Offer
HARTFORD, Conn. (March 21, 2000) - The Board of Directors of Travelers
Property Casualty (NYSE:TAP) approved a cash tender offer by Citigroup
(NYSE:C), announced earlier today, for all the publicly-held shares of the
Company's Class A common stock at a price of $41.50 per share. Citigroup
currently owns approximately 85% of Travelers Property Casualty outstanding
common stock.
Any shares of Travelers Property Casualty Class A common stock not
purchased in the tender offer will be acquired by Citigroup in a subsequent
merger transaction at the same $41.50 per share cash price.
A Special Committee comprised of independent directors of the Travelers
Property Casualty Board of Directors reviewed and recommended approval of the
offer by the full Board of Directors. The Committee's recommendation, and the
Board's approval, is based on a number of factors, including the opinion of
Morgan Stanley & Co. Incorporated, the financial advisor to the Special
Committee that the $41.50 per share consideration to be received by the public
stockholders of Travelers Property Casualty in the transaction is fair from a
financial point of view to such holders.
The tender offer will commence shortly and will be made only by an offer to
purchase and other offering documents, copies of which will be filed with the
Securities and Exchange Commission and mailed to Travelers Property Casualty
stockholders.
The Board of Directors also approved postponement of the annual
stockholders' meeting previously scheduled for April 18, 2000.
Travelers Property Casualty (NYSE:TAP) is a leading provider of a broad
range of insurance products and services for commercial markets, including
workers' compensation, integrated disability, property, liability and specialty
lines, and fidelity and surety binds. The company is also a leading provider of
homeowners and auto insurance for consumers. Travelers Property Casualty is a
member of Citigroup (NYSE: C). For more information on Travelers Property
Casualty and its products, please visit the company's website at
www.travelers.com.
Investors and security holders are strongly advised to read both the
tender offer statement and the solicitation/recommendation statement regarding
the tender offer referred to in this press release when they become available,
because they will contain important information. The tender offer statement will
be filed by Citigroup with the Securities and EXchange Commission (SEC), and the
solicitation/recommendation statement will be filed by Travelers Property
Casualty with the SEC. Investors and security holders may obtain a free copy of
these statements (when available) and other documents filed by Citigroup and
Travelers Property Casualty at the SEC's web site at http://www.sec.gov. The
tender offer statement and related materials may be obtained for free by
directing such requests to Citigroup Investor Relations. The
solicitation/recommendation statement and such other documents may be obtained
for free by directing such requests to Travelers Investor Relations.
Media contacts:
Keith Anderson (860) 954-6390
Leah Johnson (212) 559-9446
Investors:
Bill Pike (212) 793-8874
Sheri Ptashek (212) 559-4658
<PAGE>
CITIGROUP (LOGO)
For immediate release
Citigroup Inc. (NYSE symbol: C)
March 21, 2000
Citigroup Announces Intent to Acquire Outstanding Shares of
Travelers Property Casualty Class A Common Stock
New York, NY - Citigroup (NYSE: C) announced today that it intends to make a
cash tender offer for all the publicly-held shares of Travelers Property
Casualty Class A common stock at a price of $1.50 per share. Citigroup currently
owns approximately 85% of Travelers Property Casualty outstanding common stock.
Any shares of Travelers Property Casualty Class A common stock not purchased in
the tender offer will be acquired by Citigroup in a subsequent merger
transaction at the same $41.50 per share cash price.
The transaction was approved by a Special Committee comprised of independent
directors of the Travelers Property Casualty Board of Directors based on a
number of factors, including the opinion of Morgan Stanley & Co. Incorporated,
the financial advisor to the Special Committee that the $41.50 per share
consideration to be received by the public stockholders of Travelers Property
Casualty in the transaction is fair from a financial point of view to such
holders.
The tender offer will commence shortly after the approval by the Board of
Directors of Travelers Property Casualty which is expected later today and will
be made only by an offer to purchase and other offering documents, copies of
which will be filed with the Securities and Exchange Commission and mailed to
Travelers Property Casualty stockholders.
Salomon Smith Barney is acting as Citigroup's financial advisor in connection
with the transaction and will act as dealer manager for the tender offer.
Travelers Property Casualty (NYSE:TAP) is a leading provider of a broad range of
insurance products and services for commercial markets, including workers'
compensation, integrated disability, property, liability, and specialty lines,
and fidelity and surety binds. The company is also a leading provider of
homeowners and auto insurance for consumers. Travelers Property Casualty is a
member of Citigroup (NYSE: C). For more information on Travelers Property
Casualty and its products, please visit the company's website at
www.travelers.com.
Citigroup (NYSE:C), the most global financial services company, provides some
100 million consumers, corporations, governments and institutions in 100
countries with a broad range of financial products and services, including
consumer banking and credit, corporate and investment banking, insurance,
securities brokerage and asset management. The 1998 merger of Citicorp and
Travelers Group brought together such brand names as Citibank, Travelers,
Salomon Smith Barney, Commercial Credit (now named CitiFinancial), and Primerica
under Citigroup's trademark red umbrella. Additional information may be found at
www.citigroup.com.
###
Media contacts:
Keith Anderson (860) 954-6390
Leah Johnson (212) 559-9446
Investors:
Bill Pike (212) 793-8874
Sheri Ptashek (212) 559-4658
<PAGE>
Investors and security holders are strongly advised to read both the tender
offer statement and the solicitation/recommendation statement regarding the
tender offer referred to in this press release when they become available,
because they will contain important information. The tender offer statement will
be filed by Citigroup with the Securities and Exchange Commission (SEC), and the
solicitation/recommendation statement will be filed by Travelers Property
Casualty with the SEC. Investors and security holders may be obtain a free copy
of these statements (when available) and other documents filed by Citigroup and
Travelers Property Casualty at the SEC's web site at http://www.sec.gov. The
tender offer statement and related materials may be obtained for free by
directing such requests to Citigroup Investor Relations. The
solicitation/recommendation statement and such other documents may be obtained
for free by directing such requests to Travelers Investor Relations.
<PAGE>
EXHIBIT (a)(1)(K)
[TRAVELERS PROPERTY CASUALTY CORP. LETTERHEAD]
Travelers Property Casualty Corp.
One Tower Square-8GS
Hartford, CT 06138
March 23, 2000
Dear Stockholder:
On March 22, 2000, Travelers Property Casualty Corp. ("Travelers"),
Citigroup Inc., a Delaware corporation ("Citigroup"), and The Travelers
Insurance Group Inc., a Connecticut corporation and an indirect wholly owned
subsidiary of Citigroup ("Purchaser"), entered into a merger agreement
providing for the acquisition of all of the outstanding Class A common stock of
Travelers at $41.50 per share, net to the seller in cash (less any required
withholding taxes), without interest thereon.
Purchaser has today commenced a cash tender offer for all outstanding
shares of Travelers Class A common stock, at a price of $41.50 per share, net
to the seller in cash (less any required withholding taxes), without interest
thereon. The merger agreement provides that, following the tender offer, a
newly formed wholly owned subsidiary of Purchaser will merge with and into
Travelers and any remaining shares of common stock of Travelers other than
those owned by Citigroup, Travelers or Purchaser will be converted into the
right to receive $41.50 per share in cash, without interest.
At a meeting on March 21, 2000, your Board of Directors (the "Board"), by
unanimous vote based on, among other things, the recommendation of a Special
Committee comprised of Travelers' independent directors, (i) determined that
each of the tender offer and the merger is fair to, advisable and in the best
interests of Travelers and its stockholders; (ii) approved the tender offer and
the merger agreement and the transactions contemplated thereby; and (iii)
recommended acceptance of the tender offer and approval of the merger agreement
by Travelers' stockholders.
In arriving at its recommendation, the Board gave careful consideration to
the factors described in the enclosed tender offer materials and Travelers'
Solicitation/Recommendation Statement on Schedule 14D-9. Included as Annex A to
the Schedule 14D-9 is the written opinion, dated March 21, 2000, of Morgan
Stanley & Co. Incorporated, the Special Committee's financial advisor, to the
effect that, as of that date and based on and subject to the matters described
in the opinion, the price per share of $41.50 to be received by the holders of
shares of Travelers Class A common stock in the tender offer and the merger,
was fair, from a financial point of view, to those holders.
Enclosed for your consideration are copies of the tender offer materials
and Travelers' Solicitation/ Recommendation Statement on Schedule 14D-9, which
are being filed today with the Securities and Exchange Commission. These
documents should be read carefully.
Sincerely,
/s/ Jay S. Fishman
Jay S. Fishman
Chairman and Chief Executive Officer
<PAGE>
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------X
HOWARD VOGEL, on behalf of himself and :
all others similarly situated, :
: C.A. No. 17902NC
Plaintiff, :
:
-against- :
:
TRAVELERS PROPERTY CASUALTY CORP., :
ROBERT I. LIPP, JAY S. FISHMAN, FRANK J. :
TASCO, DUDLEY C. MECUM II, ARTHUR ZANKEL, :
KENNETH J. BIALKIN, SANFORD I. WEILL, :
LESLIE B. DISHAROON and CITIGROUP INC., :
:
Defendants. :
- ------------------------------------------------X
COMPLAINT
Plaintiff alleges upon personal knowledge with respect to himself, and
upon information and belief as to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a class action on behalf of the public stockholders of
Travelers Property Casualty Corp. ("Travelers" or the "Company"), in connection
with the proposed acquisition of the publicly owned shares of Travelers common
stock by its major controlling shareholder, defendant Citigroup, Inc.
("Citigroup").
2. The consideration that Citigroup stated it would offer to members of
the Class (as defined below) in the proposed acquisition is unfair and
inadequate because, among other things, the intrinsic value of Travelers' common
stock is materially in excess of the amount offered, giving due consideration to
the
<PAGE>
Company's growth and anticipated operating results, net asset value and
profitability.
THE PARTIES
3. Plaintiff Howard Vogel is the owner of shares of Travelers common
stock.
4. Travelers is a Delaware corporation with its principal executive
offices at One Tower Square, Hartford, Connecticut.
5. Defendant Citigroup is a diversified financial services holding
company that provides a broad range of financial services. Citigroup and its
affiliates control approximately 85% of the outstanding common stock of
Travelers. As such, Citigroup and its representatives on the Travelers board
effectively control and dominate Travelers' affairs. Citigroup, therefore, is a
controlling shareholder and owes fiduciary obligations of good faith, candor,
loyalty and fair dealing to the public shareholders of Travelers.
6. (a) Defendants Robert I. Lipp, Jay S. Fishman, Frank J. Tasco,
Dudley C. Mecum II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, Leslie
B. Disharoon serve as directors of Travelers (collectively, the "Individual
Defendants").
(b) In addition, defendant Lipp is Chairman of the Company and
defendant Fishman is President and Chief Executive Officer.
(c) Defendants Lipp, Mecum, Zankel, Bialkin and Weill are
Citigroup's appointees to the Travelers' Board of Directors.
<PAGE>
7. Each individual defendant owed and owes Travelers', public
stockholders fiduciary obligations and were and are required to: use their
ability to control and manage Travelers in a fair, just and equitable manner;
act in furtherance of the best interests of Travelers' public stockholders;
govern Travelers in such a manner as to head the expressed views of its public
shareholders; and refrain from abusing their positions of control.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action, pursuant to Rule 23 of the Rules of
this Court, on behalf of himself and all other shareholders of the Company
(except the defendants herein and any persons, firm, trust, corporation, or
other entity related to or affiliated with them) and their successors in
interest, who are or will be threatened with injury arising from defendants'
actions, as more fully described herein (the "Class").
9. This action is properly maintainable as a class action for the
following reasons:
a. The Class is so numerous that joinder of all members is
impracticable. There are millions of shares of Travelers common stock which are
outstanding, held by hundreds if not thousands of stockholders who are members
of the Class.
b. There are questions of law and fact that are common to the Class
and that predominate over questions affecting any individual class member. The
common questions include, inter alia, the following:
3
<PAGE>
(i) whether defendants have engaged in and are continuing to
engage in conduct which unfairly benefits Citigroup at the expense of the
members of the Class;
(ii) whether the Individual Defendants, as officers and/or
directors of the Company, and Citigroup, the controlling stockholder of
Travelers are violating their fiduciary duties to plaintiff and the other
members of the Class;
(iii) whether plaintiff and the other members of the Class would
be irreparably damaged were defendants not enjoined from the conduct described
herein; and
(iv) whether defendants have initiated and timed their buy-out of
Travelers shares to unfairly benefit Citigroup at the expense of Travelers'
public shareholders.
c. The claims of plaintiff are typical of the claims of the other
members of the Class in that all members of the Class will be damaged alike by
defendants' actions.
d. Plaintiff is committed to prosecuting this action and has
retained competent counsel experience in litigation of this nature. Accordingly,
plaintiff is an adequate representative of the Class.
SUBSTANTIVE ALLEGATIONS
A. THE COMPANY
10. Travelers provides a broad range of insurance products and services
for the commercial and consumer markets.
B. THE OFFER
11. On March 21, 2000, Citigroup issued a press release stating that it
intends to make a cash tender offer for
4
<PAGE>
all the publicly-held shares of Travelers that it does not presently own for
$41.50 per share. According to the press release, the transaction was
purportedly approved by a special committee of the Board of Directors of
Travelers.
12. Given Citigroup's stranglehold on the Travelers Board, any
purported independent committee is a sham.
13. Citigroup is the primary financial backer of Travelers and is,
therefore, well aware of the true financial condition of Travelers. In making
its inadequate offer to acquire the remaining stock of Travelers, Citigroup has
tried to take advantage of the fact that the market price of Travelers stock
does not fully reflect the true value of the Company.
14. Any transaction to acquire the Company at the price being
considered does not represent the true value of the Company and is unfair and
inadequate and constitutes unfair dealing.
15. The price that Citigroup has offered has been dictated by Citigroup
to serve its own interests, and is being crammed down by Citigroup and its
representatives on Travelers' Board to force Travelers' minority shareholders to
relinquish their Travelers shares at a grossly unfair price.
16. Because Citigroup is in possession of proprietary corporate
information concerning Travelers' future financial prospects, the degree of
knowledge and economic power between Citigroup and the class members is unequal,
making it grossly and inherently unfair for Citigroup to obtain the remaining
15% of
5
<PAGE>
Travelers' shares at the unfair and inadequate price that it has proposed.
17. By offering an inadequate price for Travelers' shares and planning
to use its control to force the consummation of the transaction. Citigroup is
violating its duties as majority shareholder.
18. Any buy-out of Travelers' public shareholders by Citigroup on the
terms recently offered on lesser terms, will deny class members their right to
share proportionately and equitably in the true value of Travelers' valuable and
profitable business, and future growth in profits and earnings, at a time when
the Company is poised to increase its profitability.
19. Because Citigroup controls 85% of Travelers and dominates its
Board, no auction or market check can be effected to establish Travelers' worth
through arm's-length bargaining. Thus, Citigroup has the power and is exercising
its power to acquire Travelers' minority shares and dictate terms which are in
Citigroup's best interest, without competing bids and regardless of the wishes
or best interests of the class members or the intrinsic value of Travelers'
stock.
20. By reason of the foregoing, defendants have breached and will
continue to breach their duties to the minority public shareholders of Travelers
and are engaging in improper, unfair dealing and wrongful and coercive conduct.
21. Plaintiff and the Class will suffer irreparable harm unless
defendants are enjoined from breaching their
6
<PAGE>
fiduciary duties and from carrying out the aforesaid plan and scheme.
22. Plaintiff and the other class members are immediately threatened by
the acts and transactions complained of herein and lack an adequate remedy at
law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring that this action is properly maintainable as a class
action, and certifying plaintiff as class representative;
B. Enjoining the proposed transaction and, if the transaction is
consummated, rescinding the transaction;
C. Awarding plaintiff and the Class compensatory damages and/or
rescissory damages;
D. Awarding plaintiff the costs and disbursements of this action,
including reasonable allowance for plaintiff's attorneys' and experts' fees; and
E. Granting such other, and further relief as this Court may deem
to be just and proper.
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.,
By: /s/ illegible
-------------------------------
Suite 1401, Mellon Bank Center
919 North Market Street
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Steven G. Schulman
Samuel H. Rudman
MILBERG WEISS BERSHAD HYNES
& LERACH LLP
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
7
<PAGE>
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------X
Joseph Leone, :
: Civil Action No. 17905NC
Plaintiff, :
:
-against- :
:
Travelers Property Casualty Corp. :
Citigroup, Inc., Jay S. Fishman, :
Sanford I. Weill, Robert I. Lipp, :
Kenneth Bialkin, Leslie B. Disharoon, :
Dudley C. Mecum, Frank J. Tasco, and :
Arthur Zankel, :
:
Defendants. :
:
- ------------------------------------------------X
SHAREHOLDER'S CLASS ACTION COMPLAINT
Plaintiff alleges upon personal knowledge with respect to paragraph 2,
and upon information and belief as to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a stockholders' class action on behalf of the public
stockholders of Travelers Property Casualty Corp. ("Travelers Property" or the
"Company") to enjoin the proposed acquisition of the publicly owned shares of
Travelers Property's common stock by its controlling shareholder, defendant
Citigroup, Inc. ("Citigroup").
THE PARTIES
2. Plaintiff has been the owner of common stock of the Company since
prior to the transaction complained of herein and continuously to date.
<PAGE>
3.Travelers Property is a corporation duly organized and existing
under the laws of the State of Delaware.
4. Defendant Citigroup is a corporation duly organized and existing
under the laws of Delaware. Citigroup, controls approximately 83.8% of the
Company's outstanding common stock.
5. Defendant Jay S. Fishman ("Fishman") is Chief Executive Officer,
President and a director of the Company.
6. Defendant Sanford I. Weill ("Weill") is a director of the Company.
He is currently co-chief executive officer of Citigroup.
7. Defendant Robert I. Lipp is Chairman of the Board of the Company.
8. Defendants Kenneth Bialkin, Leslie B. Disharoon, Dudley C. Mecum,
Frank J. Tasco, and Arthur Zankel are directors of Travelers Property.
9. The individual defendants named in paragraphs 5 through 8 (the
"Individual Defendants") are in a fiduciary relationship with plaintiff and the
other public stockholders of Travelers Property and owe them the highest
obligations of good faith and fair dealing.
10. Defendant Citigroup, through its approximately 83.8% ownership of
Travelers Property and having persons affiliated with it comprise a majority of
Travelers Property's board, has effective and working control of Travelers
Property. As such, defendant Citigroup is in a fiduciary relationship with
plaintiff and the other public stockholders of Travelers Property and owes them
the
-2-
<PAGE>
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this action on his own behalf and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all Travelers Property stockholders (except defendants herein and any person,
firm, trust, corporation or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
12. This action is properly maintainable as a class action:
a. The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. There
are in excess of 50 million shares of Travelers Property common stock held by
shareholders other than Citigroup, who are geographically dispersed throughout
the United States.
b. There are questions of law and fact which are common to the
Class including, inter alia, the following:
(i) whether the Individual Defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the members
of the Class;
(ii) whether plaintiff and the other members of the Class will
be damaged irreparably by defendants' failure to
-3-
<PAGE>
take action designed to obtain the best value for the public shareholders'
interest in Travelers Property.
c. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interests as the other members of the Class. Accordingly,
plaintiff will fairly and adequately represent the Class.
d. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class and establish incompatible standards of
conduct for the party opposing the Class.
13. Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive relief with
respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
14. On March 21, 2000, it was announced that Citigroup offered to
acquire all of the outstanding shares of Travelers Property it does not already
own for $41.50 per share.
15. The consideration to be paid to Class members in the transaction is
unfair and grossly inadequate because, among other things, the intrinsic value
of Travelers Property's common stock is materially in excess of the amount
offered for those securities in the proposed acquisition given the stock's
current trading price
-4-
<PAGE>
and the Company's net asset value and prospects for future growth and earnings.
The proposed transaction constitutes unfair dealing.
16. Citigroup timed its offer to take advantage of the decline in the
market price of Travelers Property's stock. The offer has the effect of capping
the market for Travelers Property's stock to facilitate Citigroup's plan to
obtain the public interest in Travelers Property as cheaply as possible.
17. Under the circumstances, the Individual Defendants are obligated to
explore all alternatives to maximize shareholder value.
18. The defendants have breached their duty of loyalty to Travelers
Property stockholders by using their control of Travelers Property to force
plaintiff and the Class to sell their equity interest in Travelers Property at
an unfair price, and deprive Travelers Property's public shareholders of maximum
value to which they are entitled. The Individual Defendants have also breached
the duties of loyalty and due care by not taking adequate measures to ensure
that the interests of Travelers Property's public shareholders are properly
protected from overreaching. Citigroup has breached its fiduciary duties, which
arise from its effective control of Travelers Property, by using such effective
control for its own benefit.
19. The unfairness of the transaction is compounded by the gross
disparity between the knowledge and information possessed by defendants by
virtue of their positions of control of the Company and that possessed by
Travelers Property's public
-5-
<PAGE>
shareholders. Defendants' scheme and intent is to take advantage of this
disparity and to induce the Class to relinquish their shares at an unfair price
on the basis of incomplete or inadequate information.
20. Because Citigroup controls nearly 84% of Travelers and dominates
its Board, no auction or market check can be effected to establish Travelers'
worth through arm's-length bargaining. Thus, Citigroup has the power and is
exercising its power to acquire Travelers' minority shares and dictate terms
which are in Citigroup's best interest, without competing bids and regardless of
the wishes or best interests of Class members or the intrinsic value of
Travelers' stock.
21. By reason of the foregoing, defendants have breached and will
continue to breach their duties to the minority public shareholders of Travelers
and are engaging in improper, unfair dealing and wrongful and coercive conduct.
22. Plaintiff and the Class will suffer irreparable harm unless
defendants are enjoined from breaching their fiduciary duties and from carrying
out the aforesaid plan and scheme.
23. Plaintiff and the other Class members are immediately threatened by
the acts and transactions complained of herein and lack an adequate remedy at
law.
WHEREFORE, plaintiff demands judgment as follows:
A. declaring this to be a proper class action and designating
plaintiff Class representative;
B. enjoining, preliminarily and permanently, the
-6-
<PAGE>
acquisition under the terms presently proposed;
C. to the extent, if any, that the transaction complained of is
consummated prior to the entry of this Court's final judgment, rescinding the
same or awarding rescissory damages to the Class;
D. directing that defendants account to plaintiff and the Class
for all damages caused to them and account for all profits and any special
benefits obtained by defendants as a result of their unlawful conduct;
E. awarding to plaintiff the costs and disbursements of this
action, including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and experts; and
F. granting such other and further relief as the Court deems
appropriate.
Dated: March 21, 2000
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Carmella P. Keener
------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074
-7-
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------X
LESLIE SUSSER, :
: C.A. No. 17903NC
Plaintiff, :
:
-against- :
:
TRAVELERS PROPERTY CASUALTY :
CORP., SANFORD I. WEILL, JAY S. :
FISHMAN, ROBERT I. LIPP, FRANK :
J. TASCO, DUDLEY C. MESCUM II, :
ARTHUR ZANKEL, KENNETH J. :
BIALKIN, LESLIE D. DISHAROON :
and CITIGROUP INC., :
:
Defendants. :
:
- ------------------------------------------------X
CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, alleges upon information and belief,
except as to paragraph 1 which plaintiff alleges upon knowledge, as follows;
1. Plaintiff is a stockholder of defendant Travelers Property Casualty
Corp. ("TPC" or the "Company").
2. TPC is a corporation duly organized and existing under the laws of
the State of Delaware, with its principal offices located at One Tower Square,
Hartford, Connecticut 06183. TPC provides a range of insurance products and
services for the commercial and consumer markets, including workers'
compensations, property, liability, fidelity and surety bonds, as well as
homeowners and auto insurance.
3. Defendant Citigroup Inc. ("Citigroup") is a corporation duly
organized and existing under the laws of the State Of Delaware with its
principal offices located at 153 East 53rd
<PAGE>
Street, New York, New York 10043. Citigroup is a diversified financial services
holding company that provides a range a financial services to consumer and
corporate customers, including investment banking, retail brokerage, corporate
banking, and cash management products and services. Citigroup and its affiliates
own approximately 85 percent of TPC's total shares outstanding.
4. Defendant Sanford I Weill is a Director of TPC and the Co-Chairman
and Co-Chief Executive Officer of Citigroup.
5. Defendant Jay S. Fishman is the President and Chief Executive
Officer of TPC and Chairman of its Board of Directors.
6. Defendant Robert I. Lipp is a Director of TPC and the Chief
Executive Officer of Citigroup's Global Insurance Business.
7. Defendant Frank J. Tasco is a Director of TPC.
8. Defendant Dudley C. Mecum, II is a Director of TPC and a Director of
Citigroup.
9. Defendant Arthur Zankel is a Director of TPC and a Director of
Citigroup.
10. Defendant Kenneth J. Bialkin is a Director of TPC and a Director of
Citigroup.
11. Defendant Leslie B. Disharoon is a Director of TPC.
12. The individual defendants, as officers and/or directors of TPC, and
Citigroup, as controlling shareholder, have a fiduciary relationship and
responsibility to plaintiff and the other public stockholders of TPC and owe to
them the highest
2
<PAGE>
obligations of good faith, loyalty, fair dealing, due care and candor.
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action on his own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of TPC, or their successors in interest, who are being
and will be harmed by defendants' actions described below (the "Class").
Excluded from the Class are defendants herein and any person, firm, trust,
corporation, or other entity related to or affiliated with any of defendants.
14. This action is properly maintainable as a class action because:
a. The Class is so numerous that joinder of all members is
impracticable, There are hundreds of TPC stockholders of record and many more
beneficial owners who are located throughout the United States;
b. There are questions of law and fact which are common to the
Class, including: whether Citigroup has acted in a manner calculated to benefit
itself at the expense of TPC public stockholders; and whether plaintiff and the
other members of the Class would be irreparably damaged if Citigroup is not
enjoined from committing the wrongs complained of herein;
c. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making
3
<PAGE>
appropriate final injunctive relief with respect to the Class as a whole; and
d. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interests as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
CLAIM FOR RELIEF
15. Approximately 85% of TPC's total shares outstanding are owned by
Citigroup and its affiliates.
16. On March 21, 2000, Citigroup announced that it intends to make a
cash tender offer to acquire each share of TPC that it does not already own for
$41.50 cash per share. The transaction was already approved by a "Special
Committee" allegedly comprised of "independent" TPC directors.
17. Citigroup has timed the proposal to freeze out TPC's public
shareholders in order to capture for itself TPC's future potential without
paying an adequate or fair price to the Company's public shareholders.
18. Citigroup timed the announcement of the proposed buyout to place an
artificial lid on the market price of TPC's stock so that the market would not
reflect TPC's improving potential, thereby purporting to justify an unreasonably
low price.
4
<PAGE>
19. Citigroup has access to internal financial information about TPC,
its true value, expected increase in true value and the benefits of 100%
ownership of TPC to which plaintiff and the Class members are not privy.
Citigroup is using such inside information to benefit itself in this
transaction, to the detriment of the TPC's public stockholders.
20. Citigroup has clear and material conflicts of interest and is
acting to better its own interests at the expense of TPC's public shareholders.
Citigroup has voting control of the Company and controls it proxy machinery. It
has selected and elected all of TPC's directors who are beholden to Citigroup
for their offices and the valuable perquisites which they enjoy therefrom.
21. Citigroup, with the acquiescence of the directors of TPC, is
engaging in self-dealing and not acting in good faith toward plaintiff and the
other members of the Class. By reason of the foregoing, Citigroup and the
individual defendants have breached and are breaching their fiduciary duties to
the members of the Class.
22. Unless the proposed buyout is enjoined by the Court, defendants
will continue to breach their fiduciary duties owed to plaintiff and the members
of the Class to the irreparable harm of the members of the Class.
23. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
5
<PAGE>
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Preliminarily and permanently enjoining defendants and all persons
acting in concert with them, from proceeding with, consummating or closing the
proposed transaction;
C. In the event the proposed buyout is consummated, rescinding it and
setting it aside or awarding rescissory damages to the Class;
D. Directing defendants to account to Class members for their damages
sustained as a result of the wrongs complained of herein;
E. Awarding plaintiff the costs of this action, including a reasonable
allowance for plaintiff's attorneys' and experts' fees; and
F. Granting such other and further relief as to the Court may seem just
and proper.
Dated: March 21, 2000
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ illegible
--------------------------------
919 North Market Street
Suite 1401, Mellon Bank Center
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY GARDY & SQUITIERI LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
6
<PAGE>
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------X
George Schore, :
: Civil Action No. 17906NC
Plaintiff, :
:
-against- :
:
Travelers Property Casualty Corp. :
Citigroup, Inc., Jay S. Fishman, :
Sanford I. Weill, Robert I. Lipp, :
Kenneth Bialkin, Leslie B. Disharoon, :
Dudley C. Mecum, Frank J. Tasco, and :
Arthur Zankel, :
:
Defendants. :
:
- ------------------------------------------------X
SHAREHOLDER'S CLASS ACTION COMPLAINT
Plaintiff alleges upon personal knowledge with respect to paragraph 2,
and upon information and belief as to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a stockholders' class action on behalf of the public
stockholders of Travelers Property Casualty Corp. ("Travelers Property" or the
"Company") to enjoin the proposed acquisition of the publicly owned shares of
Travelers Property's common stock by its controlling shareholder, defendant
Citigroup, Inc. ("Citigroup").
THE PARTIES
2. Plaintiff has been the owner of common stock of the Company since
prior to the transaction complained of herein and continuously to date.
<PAGE>
3. Travelers Property is a corporation duly organized and existing
under the laws of the State of Delaware.
4. Defendant Citigroup is a corporation duly organized and existing
under the laws of Delaware. Citigroup, controls approximately 83.8% of the
Company's outstanding common stock.
5. Defendant Jay S. Fishman ("Fishman") is Chief Executive Officer,
President and a director of the Company.
6. Defendant Sanford I. Weill ("Weill") is a director of the Company.
He is currently co-chief executive officer of Citigroup.
7. Defendant Robert I. Lipp is Chairman of the Board of the Company.
8. Defendants Kenneth Bialkin, Leslie B. Disharoon, Dudley C. Mecum,
Frank J. Tasco, and Arthur Zankel are directors of Travelers Property.
9. The individual defendants named in paragraphs 5 through 8 (the
"Individual Defendants") are in a fiduciary relationship with plaintiff and the
other public stockholders of Travelers Property and owe them the highest
obligations of good faith and fair dealing.
10. Defendant Citigroup, through its approximately 83.8% ownership of
Travelers Property and having persons affiliated with it comprise a majority of
Travelers Property's board, has effective and working control of Travelers
Property. As such, defendant Citigroup is in a fiduciary relationship with
plaintiff and the other public stockholders of Travelers Property and owes them
the
-2-
<PAGE>
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this action on his own behalf and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all Travelers Property stockholders (except defendants herein and any person,
firm, trust, corporation or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
12. This action is properly maintainable as a class action:
a. The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. There
are in excess of 50 million shares of Travelers Property common stock held by
shareholders other than Citigroup, who are geographically dispersed throughout
the United States.
b. There are questions of law and fact which are common to the
Class including, inter alia, the following;
(i) whether the Individual Defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the members
of the Class;
(ii) whether plaintiff and the other members of the Class will
be damaged irreparably by defendants' failure to
-3-
<PAGE>
take action designed to obtain the best value for the public shareholders'
interest in Travelers Property.
c. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interests as the other members of the Class. Accordingly,
plaintiff will fairly and adequately represent the Class.
d. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class and establish incompatible standards of
conduct for the party opposing the Class.
13. Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive relief with
respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
14. On March 21, 2000, it was announced that Citigroup offered to
acquire all Of the outstanding shares of Travelers Property it does not already
own for $41.50 per share.
15. The consideration to be paid to Class members in the transaction is
unfair and grossly inadequate because, among other things, the intrinsic value
of Travelers Property's common stock is materially in excess of the amount
offered for those securities in the proposed acquisition given the stock's
current trading price
-4-
<PAGE>
and the Company's net asset value and prospects for future growth and earnings.
The proposed transaction constitutes unfair dealing.
16. Citigroup timed its offer to take advantage of the decline in the
market price of Travelers Property's stock. The offer has the effect of capping
the market for Travelers Property's stock to facilitate Citigroup's plan to
obtain the public interest in Travelers Property as cheaply as possible.
17. Under the circumstances, the Individual Defendants are obligated to
explore all alternatives to maximize shareholder value.
18. The defendants have breached their duty of loyalty to Travelers
Property stockholders by using their control of Travelers Property to force
plaintiff and the Class to sell their equity interest in Travelers Property at
an unfair price, and deprive Travelers Property's public shareholders of maximum
value to which they are entitled. The Individual Defendants have also breached
the duties of loyalty and due care by not taking adequate measures, to ensure
that the interests of Travelers Property's public shareholders are properly
protected from overreaching. Citigroup has breached its fiduciary duties, which
arise from its effective control of Travelers Property, by using such effective
control for its own benefit.
19. The unfairness of the transaction is compounded by the gross
disparity between the knowledge and information possessed by defendants by
virtue of their positions of control of the Company and that possessed by
Travelers Property's public
-5-
<PAGE>
shareholders. Defendants' scheme and intent is to take advantage of this
disparity and to induce the Class to relinquish their shares at an unfair price
on the basis of incomplete or inadequate information.
20. Because Citigroup controls nearly 84% of Travelers and dominates
its Board, no auction or market check can be effected to establish Travelers,
worth through arm's-length bargaining. Thus, Citigroup has the power and is
exercising its power to acquire Travelers' minority shares and dictate terms
which are in Citigroup's best interest, without competing bids and regardless of
the wishes or best interests of Class members or the intrinsic value of
Travelers' stock.
21. By reason of the foregoing, defendants have breached and will
continue to breach their duties to the minority public shareholders of Travelers
and are engaging in improper, unfair dealing and wrongful and coercive conduct.
22. Plaintiff and the Class will suffer irreparable harm unless
defendants are enjoined from breaching their fiduciary duties and from carrying
out the aforesaid plan and scheme.
23. Plaintiff and the other Class members are immediately threatened by
the acts and transactions complained of herein and lack an adequate remedy at
law.
WHEREFORE, plaintiff demands judgment as follows:
A. declaring this to be a proper class action and designating plaintiff
Class representative;
B. enjoining, preliminarily and permanently, the
-6-
<PAGE>
acquisition under the terms presently proposed;
C. to the extent, if any, that the transaction complained of is
consummated prior to the entry of this Court's final judgment, rescinding the
same or awarding rescissory damages to the Class;
D. directing that defendants account to plaintiff and the Class for all
damages caused to them and account for all profits and any special benefits
obtained by defendants as a result of their unlawful conduct;
E. awarding to plaintiff the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of plaintiff's
attorneys and experts; and
F. granting such other and further relief as the Court deems
appropriate.
Dated: March 21, 2000
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Carmella P. Keener
------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF &
SUCHAROW LLP
100 Park Avenue
New York, NY 10017
(212) 907-0700
-7-
<PAGE>
PROJECT JUICE
- --------------------------------------------------------------------------------
PRESENTATION TO THE SPECIAL COMMITTEE
MARCH 20, 2000
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Section 1 Executive Summary
Section 2 Corporate Overview
Section 3 Valuation
Appendix A Financial Model
Appendix B Analysis of Selected Acquisitions of Minority Interests
Appendix C Selected U.S. Property and Casualty Precedent Transactions
Appendix D Orange Performance Relative to Tangerine
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
SECTION 1
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
o Tangerine is a premier player within the property and casualty sector given
its:
- Highly regarded management team
- Top-tier market position in key products (e.g., #2 in personal lines
through independent agents, #3 in commercial lines, #1 in fidelity and
surety)
- Proven consolidation and expense management capabilities
o Tangerine has also demonstrated stronger growth and returns relative to its
P&C peer group:
- 3-year average GAAP ROE of 15.1% vs. 10.9% for peer median
- 3-year average GAAP operating income growth of 9.0% vs. 5.7% for peer
median
o Despite these strong fundamentals, Tangerine's current depressed equity
market valuation reflects difficulties of the last few years in the overall
P&C sector including:
- Deterioration of pricing and top-line growth
- Turn in the reserve cycle
- Build up of excess capital
- Lack of investor interest in the sector
o These industry difficulties have resulted in a P&C industry P/E which is
now 39.7% of the S&P 500 P/E vs. 59.4% of the S&P 500 P/E at the time of
Tangerine's IPO in 1996.
o At the same time, Orange's share price has significantly outperformed
market indices and may provide Tangerine with a more advantageous currency
in making acquisitions in today's consolidating environment
MORGAN STANLEY DEAN WITTER
2
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
SECTION 2
CORPORATE OVERVIEW
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
TANGERINE STRENGTHS
- --------------------------------------------------------------------------------
o Universally high-regarded management team
- Analytical approach to the business and focus on profitability and
recurring earnings
- Underwriting discipline
- Expense management
o Market leader in the U.S. P&C industry
- 2nd largest writer of personal lines through independent agents and
3rd largest writer of commercial lines based on DPW
- 3rd largest publicly traded U.S. P&C company by market capitalization
- Strong position in an industry where other market leaders have come
under significant operating pressures (e.g., Allstate, CNA, SAFECO,
and St. Paul)
o Proven consolidation ability
- Track record of having successfully completed one of the largest
consolidating mergers in the U.S. P&C industry, especially relative to
SAFECO's integration of American States and CNA's integration of
Continental
- Achievement of headcount reduction targets has helped to create
infrastructure leverage
o High retention rates and selective underwriting have driven commercial
lines performance
- Over 80% customer retention rates across major business lines
- Rigorous account-by-account analysis
- Dedicated claims and underwriting functions for construction and
workers' compensations policies
- As prices firm, mid to high single digit premium increases expected
across small, middle-market and construction market segments for the
next 5 years
o Consistently strong personal lines business
- Focus on growing agency business where margins have been strong (e.g.,
affinity group markets)
- Disciplined underwriting policies and processes on the field and
corporate levels
- Lower loss ratios than the industry and favorable loss reserve
development
MORGAN STANLEY DEAN WITTER 4
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
TANGERINE STRENGTHS (CONT'D)
- --------------------------------------------------------------------------------
o Diversified distribution in personal lines
- Leader in independent agency distribution of personal lines
- Growing personal lines affinity market business with over 35% compound
annual increase in affinity policies in force since 1997
- Orange credit card cross-sell opportunities with roll-out of call
leveraging initiative in 40 states this year
o High quality balance sheet
- High quality investment portfolio (average rating of "Aa3/AA" on fixed
income portfolio) with matched duration risk (5.8 years)
- Conservative financial leverage with 16.4% debt and preferred/capital
and conservative operating leverage of 1.07x 1999 NPW/statutory
capital and surplus
o Reserve quality
- Consistently ranked among the best in the industry in reserving
practices by equity analysts
- $827 million of total reserve margin estimated by Management
- Conservative loss picks, especially in commercial casualty lines
- Aggressive catastrophe management and resolution of A&E claims (84% of
environmental property damage claims have been resolved)
MORGAN STANLEY DEAN WITTER 5
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
TANGERINE ISSUES
- --------------------------------------------------------------------------------
OPERATING ISSUES
o Modestly declining profitability
- ROE has fallen from 15.8% in 1997 to 14.8% in 1999
- Management expects only 1.6% growth in operating income for 2001 over
2000 while I/B/E/S estimates call for 8.2% growth over the same period
o Industry fundamentals have been poor for the past several years given soft
pricing and adverse reserve characteristics
- Potential margin erosion as a result of continued severe competition
in commercial lines and personal auto
- Industry-wide deterioration of personal auto reserve redundancy and
continued high accident year combined ratios in workers' compensation
- Tangerine's personal lines combined ratio has increased to 96.7% in
1999 from 92.2% in 1997
- Tangerine's commercial lines combined ratio has fallen to only
108.6% in 1999 from 109.0% in 1997
- Tangerine's overall combined ratio has increased to 103.2% in 1999
from 102.3% in 1997
o Unclear whether recent commercial lines price firming will be long-lived
- Management expects 7% - 9% near-term commercial lines annual premium
rate growth
o Sustainability of reserve releases
- Reserve releases have improved the combined ratio by 4.2% on average
over the past 3 years
o Potential difficulty of achieving cross-selling targets
- Few precedents for successful cross-selling in the insurance sector
- Tangerine's need to cancel SECURE program due to limited success in
selling profitable policies through PFS life agents
o Tangerine's Internet strategy may be less developed than that of
competitors
MORGAN STANLEY DEAN WITTER 6
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
TANGERINE ISSUES (CONT'D)
- --------------------------------------------------------------------------------
STOCK MARKET/CAPITALIZATION ISSUES
o Inability to make acquisitions has negatively impacted equity market
valuation over the past several years
- Until passage of the financial services deregulation bill, Tangerine
was unable to make acquisitions due to the formation of Orange
- Expectation by equity analysts that Tangerine will need to make
acquisitions to grow
- Market reaction to Reliance Surety acquisition (1.7% decline in share
price on day of announcement) and only marginal earnings accretion
expected
- Weak currency for making acquisitions relative to Orange currency
o Potential liquidity discount in Tangerine's share price
- Inferior voting rights for Class A shares
- Lower level of liquidity relative to peers given Orange ownership
o Overcapitalization consistent with overall P&C industry
- 1.07x NPW/surplus leverage despite 45% personal lines book
- 16.4% debt and preferred/total capital is below peer group median
financial leverage
- Limited ability to effect share repurchases on a larger scale to
deploy excess capital
MORGAN STANLEY DEAN WITTER 7
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
OPERATING ENVIRONMENT
- --------------------------------------------------------------------------------
o THE P&C MARKET SUFFERS FROM OVERCAPACITY AND COMPETITIVE PRICING CAUSING
TANGERINE TO:
- MORE SELECTIVELY UNDERWRITE CERTAIN BUSINESSES
- ENTER HIGHER MARGIN BUSINESS SEGMENTS
- DEVELOP ALTERNATIVE DISTRIBUTION CHANNELS
- CUT COSTS AGGRESSIVELY
o Commoditization of traditional products has caused Tangerine to pursue:
- A selective underwriting strategy
- Higher margin businesses (e.g., surety in commercial lines and
affinity group business in personal lines)
- Rate increases and improvement of retention through service
initiatives
o Tangerine is likely to benefit from near-term firming of pricing in
commercial lines:
- --------------------------------------------------------------------------------
SELECTED COMMERCIAL LINES RATE TRENDS
1998 1999 2000E
- --------------------------------------------------------------------------------
Commercial Accounts (3.7) 3.7 9.6
- --------------------------------------------------------------------------------
Select Accounts (3.0) (0.4) 1.3
- --------------------------------------------------------------------------------
Construction (4.5) 1.7 9.2
- --------------------------------------------------------------------------------
SOURCE Company Reports
o Alternative distribution is an important source of growth for Tangerine:
- Roll-out of call leveraging effort with Orange's credit card division
is a major part of the personal lines growth strategy
- Joint venture with Winterthur allows for better sourcing of global
programs in the large commercial market
o High industrywide infrastructure leverage has driven Tangerine management
to cut its expense base:
- Aggressive expense management has reduced controllable expense ratio
to 21.7% in 1999 from 24.3% in 1996 because of ongoing cost controls
(e.g., reduction of headcount by 12% over the period)
- Management believes Tangerine's controllable expenses will rise only
as a result of salary increases
MORGAN STANLEY DEAN WITTER 8
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
ANALYST COMMENTARY
CURRENT STREET OPINIONS AND ESTIMATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SUMMARY OF ANALYST FORECASTS AND OPINIONS
EPS ESTIMATES
---------------
PRICE AT REPORT 2000E 2001E 5-YEAR PROJ. CAGR TARGET PRICE
DATE FIRM RECOMMENDATION $ $ $ % $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/02/2000 ING Barings Strong Buy 33.12 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
02/28/2000 Merrill Lynch Market Perform 31.12 3.60 3.90 N/A 40.00
- ---------------------------------------------------------------------------------------------------------------------
02/07/2000 J.P. Morgan Market Perform 33.31 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
01/20/2000 Keefe, Bruyette & Woods Buy 36.69 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
01/19/2000 Warburg Dillon Read Strong Buy 37.25 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
01/19/2000 Credit Suisse First Boston Buy 37.25 3.55 3.70 12.0-15.0 44.00
- ---------------------------------------------------------------------------------------------------------------------
01/18/2000 Bear Stearns & Co. Inc. Neutral 37.63 3.55 3.70 N/A 40-42.00
- ---------------------------------------------------------------------------------------------------------------------
01/18/2000 Deutsche Bank Buy 38.00 3.65 3.90 11.0 40.00
- ---------------------------------------------------------------------------------------------------------------------
01/18/2000 Morgan Stanley Dean Witter Outperform 37.00 3.60 N/A 12.0 49.00
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
03/09/2000 I/B/E/S/ Median N/A 30.43 3.65 3.95 11.5 N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE Bloomberg, equity research reports
"WITH ITS SIGNIFICANT BOOK OF COMMERCIAL LINES BUSINESS, STRONG BALANCE SHEET,
DISCIPLINED UNDERWRITING AND CROSS-SELLING OPPORTUNITIES WITH ORANGE, WE BELIEVE
TANGERINE IS WELL-POSITIONED TO CAPITALIZE ON THE CURRENT CYCLE TURN."
- -Harry Fong, Deutsche Bank, 1/18/2000
"TANGERINE IS LED BY HIGHLY CAPABLE MANAGERS WHO HAVE A SENSE OF URGENCY ABSENT
IN MOST PROPERTY-CASUALTY INSURERS."
- -Charles Gates, Credit Suisse First Boston, 1/19/2000
"WE BELIEVE THAT TANGERINE WILL BE ABLE TO CROSS-SELL PRODUCTS TO A BROADER
CUSTOMER BASE THROUGH ORANGE'S CREDIT CARD AND BRANCH NETWORKS AND EVENTUALLY
OVER THE INTERNET. IF THIS WORKS, WE BELIEVE THAT THERE COULD BE A SUBSTANTIAL
INCREASE IN PREMIUM VOLUME."
- -Alan Zimmerman, Morgan Stanley Dean Witter, 1/18/2000
"DESPITE IMPROVED RATES IN SOME SECTORS, WE BELIEVE A POTENTIAL SLOWDOWN IN THE
RATE OF RESERVE REDUNDANCY COULD HAVE A PARTIAL OFFSETTING EFFECT ON FUTURE
EARNINGS GROWTH."
- -Michael Smith, Bear Stearns, 1/18/2000
MORGAN STANLEY DEAN WITTER 9
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
HISTORICAL QUARTERLY EPS PERFORMANCE
- --------------------------------------------------------------------------------
O TANGERINE HAS CONSISTENTLY DELIVERED BETTER-THAN-EXPECTED EARNINGS TO
INVESTORS
[GRAPHIC OMITTED]
Bar chart of actual operating EPS versus I/B/E/S median estimates for
the period beginning in 1997 and ending in 1999
MORGAN STANLEY DEAN WITTER 10
<PAGE>
PROJECT JUICE
CORPORATE OVERVIEW
SELECTED HISTORICAL AND BUDGETED RESULTS
$ IN MILLIONS, EXCEPT RATIOS UNLESS NOTED
- --------------------------------------------------------------------------------
o TANGERINE HAS ENJOYED A RECORD OF CONSISTENT OPERATING INCOME GROWTH DRIVEN
BY IMPROVED COMMERCIAL LINES UNDERWRITING, FAVORABLE LOSS RESERVE DEVELOPMENT
AND CONSISTENT EXPENSE MANAGEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ACTUAL BUDGET
----------------------- -------
1997 1998 1999 2000B
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERICAL LINES STATUTORY RATIOS:
- --------------------------------------------------------------------------------
Loss and LAE Ratio 78.4% 78.5% 77.9% 72.7%
- --------------------------------------------------------------------------------
Underwriting Expense Ratio 30.6 29.7 30.7 29.8
- --------------------------------------------------------------------------------
Combined Ratio 109.0 108.2 108.6 102.5
- --------------------------------------------------------------------------------
PERSONAL LINES STATUTORY RATIOS:
- --------------------------------------------------------------------------------
Loss and LAE Ratio 63.5 66.7 70.0 68.2
- --------------------------------------------------------------------------------
Underwriting Expense Ratio 28.7 27.2 26.7 26.5
- --------------------------------------------------------------------------------
Combined Ratio 92.2 93.9 96.7 94.7
- --------------------------------------------------------------------------------
TOTAL COMPANY STATUTORY RATIOS:
- --------------------------------------------------------------------------------
Loss and LAE Ratio 72.4 73.6 74.3 70.7
- --------------------------------------------------------------------------------
Underwriting Expense Ratio 29.9 28.6 28.8 28.2
- --------------------------------------------------------------------------------
Combined Ratio 102.3 102.3 103.2 98.9
- --------------------------------------------------------------------------------
TOTAL COMPANY STATUTORY RATIO DEVELOPMENT:
- --------------------------------------------------------------------------------
Accident Year Loss and LAE Ratio 76.5 77.3 79.1 NA
- --------------------------------------------------------------------------------
Reserve Development (4.1) (3.7) (4.8) NA
- --------------------------------------------------------------------------------
Calendar Year Loss and LAE Ratio 72.4 73.6 74.3 NA
- --------------------------------------------------------------------------------
OTHER OPERATING RATIOS:
- --------------------------------------------------------------------------------
Net Written Premiums / Capital + Surplus 1.27x 1.14x 1.07x 1.00x
- --------------------------------------------------------------------------------
Return on Average GAAP Equity 15.8% 14.8% 14.8% 15.4%
- --------------------------------------------------------------------------------
SOURCE Company reports
</TABLE>
Note
1. Combined ratios before policyholder dividends
MORGAN STANLEY DEAN WITTER 11
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
REVENUE AND EARNINGS GROWTH
- --------------------------------------------------------------------------------
NET PREMIUM WRITTEN GROWTH
$MM
[GRAPHIC OMITTED]
Bar chart showing personal lines and commercial lines net premiums
written from 1996 to 2000 (estimated)
GAAP OPERATING EARNINGS GROWTH
$MM
[GRAPHIC OMITTED]
Bar chart showing GAAP operating earnings from 1996 to 2000 (estimated)
MORGAN STANLEY DEAN WITTER 12
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
EXPENSE MANAGEMENT
- --------------------------------------------------------------------------------
O TANGERINE HAS SIGNIFICANT OPERATING LEVERAGE BUILT INTO ITS EXPENSE
MANAGEMENT
CONTROLLABLE OPERATING EXPENSES TO NET PREMIUMS WRITTEN (GAAP)
%
[GRAPHIC OMITTED]
Bar chart showing the percentage of controllable operating expenses to
GAAP net premiums written for 1995 to 1999
HEADCOUNT
[GRAPHIC OMITTED]
Bar chart showing total employee headcount from April 1996 to December
1999
MORGAN STANLEY DEAN WITTER 13
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
RESERVE POSITION
TANGERINE INTERNAL ACTUARIAL RESERVE ESTIMATES
- --------------------------------------------------------------------------------
O TANGERINE IS REGULARLY NAMED AMONG THE BEST RESERVED COMPANIES IN THE P&C
SECTOR AND MANAGEMENT BELIEVES IT HAS AT LEAST $827 MILLION OF OVERALL
RESERVE MARGIN
O CONSERVATIVE LOSS PICKS AND REGULAR MONITORING OF RESERVE POSITION
O AGGRESSIVE RESOLUTION OF CONSTRUCTION DEFECT CLAIMS AND INNOVATIVE WORKERS'
COMPENSATION LOSS CONTROL SYSTEMS
O 84% OF ALL ENVIRONMENTAL PROPERTY DAMAGE CLAIMS RESOLVED
RESERVE POSITION RANGES AND RESERVE POSITION AS % OF CARRIED RESERVES
$MM
[GRAPHIC OMITTED]
Bar chart showing the reserve position ranges and reserve position as
a percentage of carried reserves
MORGAN STANLEY DEAN WITTER 14
<PAGE>
PROJECT JUICE CORPORATE OVERVIEW
RELATIVE OPERATING PERFORMANCE
<TABLE>
<CAPTION>
TANGERINE VS. P&C PEER GROUP
3-YEAR AVERAGE
--------------------------------------------------------------------------
NPE OP. INCOME LOSS+LAE EXPENSE COMBINED DEBT+PREFERRED/
GROWTH GROWTH GAAP ROE RATIO RATIO RATIO TOTAL CAPITAL
(2) (3) (4) (4) (4)(5) (6)
% % % % % % %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tangerine 10.2 9.0(7) 15.1 73.4 29.1 102.5 16.4
COMMERCIAL LINES COMPANIES
AIG (P&C Business) 9.5 14.3 14.8(8) 75.5 20.8 96.3 14.7(8)
Chubb 6.8 13.0 10.9 65.4 33.0 98.4 11.1
CNA (P&C Business) 0.0 NM NM 82.0 32.4 114.4 26.6
Hartford (P&C Business) 2.4 3.4(9) 13.8(8) 71.0 31.7 102.6 35.8
St. Paul 10.4 5.7 10.2 76.6 33.4 110.0 23.4
PERSONAL LINES COMPANIES
Allstate 3.1 13.7 15.0 73.8 25.3 99.1 15.6
Ohio Casualty 8.7 (24.2) 4.5 74.2 34.3 108.4 22.7
SAFECO 7.1(10) (15.5) 6.1 70.5 29.2 99.8 33.6
Peer Group Median 7.0 5.7 10.9 74.0 32.1 101.2 23.1
</TABLE>
SOURCE SEC filings
NOTES
1. 1997-1999 data if available, otherwise 1996 - LTM as of 9/30/99 for GAAP
items and 1996 - 1998 data for statutory items
2. GAAP operating income excluding realized capital gains after-tax and
extraordinary items
3. Operating ROE (average equity)
4. Statutory basis. Calendar year results
5. Before policyholder dividends
6. As of 12/3/99 if available, otherwise result as of 9/30/99
7. 1997 vs. 1996 growth not meaningful and is excluded
8. Total company
9. Adjusted 1996 P&C segment results due to unusual items
10. Adjusted for American States acquisition
MORGAN STANLEY DEAN WITTER 15
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
MAJOR EVENTS AFFECTING TANGERINE SHARE PRICE
- --------------------------------------------------------------------------------
SELECTED EVENTS SINCE TANGERINE IPO
PRICES
[GRAPHIC OMITTED]
Annotated line graph of TAP share price from April 22, 1996 to March
17, 2000
4/23/1996 3/25/97 11/13/97
Tangerine IPO at Fed raises rates Tangerine completes
$27.50/share secondary offering of
14.2 MM shares of
$35.50
4/6/98 12/15/98 1/25/99
Announcement of Announcement of 4Q98 EPS=0.88
Orange merger International JV with IBES=0.81
Winterthur
4/19/99 7/19/99 10/6/99
1Q99 EPS=0.83 2Q99 EPS=0.86 Announcement of
IBES=0.81 IBES=0.83 $200MM share
repurchase
10/18/99 10/22/99 1/18/00
Announcement of Tentative agreement to 4Q99 EPS=0.90
3Q99 EPS=0.85 enact HR-10 IBES=0.85
IBES=0.84
2/29/00
Announcement of
Reliance Surety
Acquisition
MORGAN STANLEY DEAN WITTER 16
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
TANGERINE PRICE-VOLUME TRADING ANALYSIS
- --------------------------------------------------------------------------------
O TANGERINE HAD TRADED IN LINE WITH THE S&P 500 AFTER ITS IPO, BUT HAS NOW
UNDERPERFORMED THE BROADER MARKET ALONG WITH THE REST OF THE P&C SECTOR
TANGERINE PRICE-VOLUME VS. S&P 500 SINCE APRIL 1996
INDEXED PRICE VS. S&P 500 MM
[GRAPHIC OMITTED]
Line chart of TAP's share price (indexed to 100) and volume versus the
S&P 500 (indexed to 100)from April 23, 1996 to March 17, 2000
TANGERINE PRICE-VOLUME ANALYSIS VS. S&P 500 OVER LAST 52 WEEKS
INDEXED PRICE VS. S&P 500 MM
[GRAPHIC OMITTED]
Line chart of TAP's share price and volume versus the S&P 500 from
March 17, 1999 to March 16, 2000
MORGAN STANLEY DEAN WITTER 17
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
CORPORATE OVERVIEW
SECTOR PERFORMANCE RELATIVE TO GENERAL MARKET
- --------------------------------------------------------------------------------
O THE P&C INDEX HAS UNDERPERFORMED THE S&P 500 SINCE JANUARY 1999
O SINCE BEGINNING OF 1998, P&C INDEX HAS SIGNIFICANTLY UNDERPERFORMED THE S&P
500 AND CURRENTLY REMAINS EXTREMELY OUT OF FAVOR DUE TO POOR FUNDAMENTALS,
RISING INTEREST RATES AND SECTOR ROTATION AWAY FROM INSURANCE AND FINANCIAL
SERVICES STOCKS
GENERAL MARKET PERFORMANCE SINCE APRIL 1996(1)
INDEXED PRICES
[GRAPHIC OMITTED]
Line chart of the share prices (indexed to 100) of the S&P 500, P&C
Index, S&P Financial Index and TAP from April 23, 1996 to March 17,
2000
P&C INDEX RELATIVE TO S&P 500 INDEX SINCE APRIL 1996(1)
INDEXED PRICES
[GRAPHIC OMITTED]
Line chart of the P&C Index relative to the S&P 500 Index from April
23, 1996 to March 17, 2000
MORGAN STANLEY DEAN WITTER 18
<PAGE>
PROJECT JUICE CORPORATE OVERVIEW
ANALYSIS OF MAJOR TANGERINE CLASS A SHAREHOLDERS
GROWTH AT A REASONABLE
PRICE ("GARP") INVESTORS
DOMINATE TANGERINE'S CLASS
A INSTITUTIONAL INVESTOR BASE
<TABLE>
<CAPTION>
TOTAL ASSETS UNDER CURRENT HOLDINGS CUMULATIVE
INSTITUTION EQUITY ORIENTATION MANAGEMENT ($BN) (OF SHARES) % TSO % TSO
--------------------------------- ------------------ ---------------- ----------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Fidelity Management & Research Co. Growth, Value, Income 433.8 6,276,870 10.3 10.3
Iridian Asset Management LLC N/A N/A 3,744,700 6.1 16.4
Neuberger & Berman Pension Mgmt. Value, Growth N/A 3,696,650 6.0 22.4
Goldman Sachs Asset Management (US) Growth, Value 77.8 2,983,501 4.9 27.3
Alliance Capital Management L.P Growth, Value 173.7 1,970,265 3.2 30.5
Independence Investment Associates Growth,Value 25.4 1,800,400 2.9 33.4
Thompson, Siegel & Walmsley Inc. Value, Growth 4.6 1,573,420 2.6 36.0
Putnam Investment Management Growth, Value 160.1 1,377,285 2.2 38.3
Centurion Investment Group L.P. N/A N/A 1,268,000 2.1 40.3
Perry Partners L.P. Growth, Value 0.8 1,094,000 1.8 42.1
John Hancock Advisers, Inc. Growth, Value 21.8 959,905 1.6 43.7
Barclays Global Investors, N.A. Growth, Value, Index, Quant. N/A 920,934 1.5 45.2
Mitchell Hutchins Asset Mgmt., Inc. Growth 43.8 867,198 1.4 46.6
INVESCO Funds Group Growth, Value 13.3 792,300 1.3 47.9
Columbia Management Company Growth, Value 18.5 706,200 1.2 49.1
David L. Babson & Company, Inc. Index, Growth, Value 6.9 699,360 1.1 50.2
Dimensional Fund Advisors, Inc. Index, Value 13.2 694,400 1.1 51.3
T. Rowe Price Associates, Inc. Growth, Value 94.0 637,700 1.0 52.4
TIAA-CREF Investment Management Inc. Growth, Index 63.3 617,882 1.0 53.4
NWQ Investment Management Company Value 6.3 572,899 0.9 54.3
Dewey Square Investors Corporation Value 3.4 557,288 0.9 55.2
Prudential Investments Value, Growth 66.7 538,800 0.9 56.1
Jennison Associates LLC Growth 31.3 535,300 0.9 57.0
OppenheimerFunds Inc. Value 42.7 504,700 0.8 57.8
Scudder Kemper Investments, Inc, Growth, Income,Value 112.3 504,330 0.8 58.6
American Express Financial Advisors Growth, Value, Index 128.0 498,098 0.8 59.4
Philo Smith & Company, Inc. N/A N/A 493,700 0.8 60.3
Jurika & Voyles, L.P. Growth, Value 5.3 468,918 0.8 61.0
Wilmington Trust Company Growth, Value 6.1 454,660 0.7 61.8
The Vanguard Group Growth, Value, Index 223.7 434,700 0.7 62.5
Perpetual Investment Mgmt Svces Ltd. N/A N/A 432,300 0.7 63.2
C. S. McKee & Company, Inc. N/A N/A 422,250 0.7 63.9
Colonial Management Associates, Inc. Income N/A 414,400 0.7 64.5
J. P. Morgan Investment Mgmt. (US) Growth, Value 153.8 413,806 0.7 65.2
Glickenhaus & Company Value 4.3 411,600 0.7 65.9
BlackRock, Inc. Value 4.1 306,900 0.5 66.4
Evergreen Investment Management Co. Growth, Value 11.8 285,850 0.5 66.9
Sanford C. Bernstein (Asset Mgmt.) Value 46.8 283,786 0.5 67.3
AIM Management Group, Inc. Growth, Value 57.1 283,300 0.5 67.8
Sloate, Weisman, Murray & Co., Inc. Value 1.2 275,920 0.5 68.2
</TABLE>
SOURCE MSQT, SEC Filings
MORGAN STANLEY DEAN WITTER 19
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
SECTION 3
VALUATION
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
PROJECT JUICE VALUATION
SUMMARY VALUATION
========================================
INDICATIVE VALUATION OF TANGERINE
($ IN MILLIONS)
I. INDICATIVE PUBLIC MARKET TRADING VALUATION
<TABLE>
<CAPTION>
BASIS COMPARABLES TRADING RANGE RELEVANT MULTIPLE RANGE IMPLIED VALUE RANGE
----- ------------------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
2000E I/B/E/S Median EPS $3.65 7.0x - 11.0x 9.5 x - 10.5 x $34.68 - $38.33
2001E I/B/E/S Median EPS 3.95 6.0 - 10.0 8.5 - 9.5 33.58 - 37.53
2000E Management EPS $3.79 7.0 x - 11.0 x 9.5 x - 10.5 x $36.00 - $39.79
2001E Management EPS 3.85 6.0 - 10.0 8.5 - 9.5 32.75 - 36.60
12/31/99 Book Value Per Share $23.21 1.00x - 1.50x 1.40 x - 1.50 x $32.49 - $34.81
INDICATIVE REFERENCE RANGE $33.00 - $38.00
II. INDICATIVE MINORITY SQUEEZE-OUT PREMIUM VALUATION
PUBLIC MARKET TRADING RANGE: $33.00 - $38.00
PREMIUM: 10.0% 36.30 - 41.80
20.0% 39.60 - 45.60
30.0% 42.90 - 49.40
INDICATIVE REFERENCE RANGE $40.00 - $48.00
III. INDICATIVE LONG-TERM/"NORMALIZED" TRADING RANGE
BASIS RELEVANT MULTIPLE RANGE IMPLIED VALUE RANGE
----- ----------------------- -------------------
2000E IIB/E/S Median EPS $3.65 11.0 x - 13.0 x $40.15 - $47.45
2001E I/B/E/S Median EPS 3.95 10.0 - 12.0 39.50 - 47.40
2000E Management EPS $3.79 11.0 x - 13.0 x $41.68 - $49.26
2001E Management EPS 3.85 10.0 - 12.0 38.53 - 46.23
12/31/99 Book Value Per Share $23.21 1.75 - 2.25 x $40.61 - $52.21
INDICATIVE REFERENCE RANGE $40.00 $48.00
</TABLE>
MORGAN STANLEY DEAN WITTER 21
<PAGE>
PROJECT JUICE VALUATION
SUMMARY VALUATION (CONT'D)
=============================================
INDICATIVE VALUATION OF TANGERINE (CONT'D)
($ IN MILLIONS)
<TABLE>
<CAPTION>
IV. INDICATIVE PREMIUMS PAID IN SQUEEZE-OUT TRANSACTIONS
BASIS ACQUISITION PREMIUM RANGE RELEVANT PREMIUM RANGE IMPLIED VALUE RANGE
<S> <C> <C> <C> <C>
Tangerine Unaffected
Share Price (1) $33.75 15.0 % - 30.0 % 20.0 % - 30.0 % $40.50 - $44.00
V. INDICATIVE PREMIUMS PAID IN PRECEDENT MERGERS & ACQUISITIONS
BASIS ACQUISITION MULTIPLES RANGE RELEVANT MULTIPLE RANGE IMPLIED VALUE RANGE
1999 Actual EPS $3.50 12.0 x - 20.0 x 14.0 x - 17.0 x $49.00 - $60.00
2000E I/B/E/S Median EPS 3.65 10.0 - 18.0 13.0 - 16.0 47.45 - 58.40
2000E Management EPS 3.79 10.0 - 18.0 13.0 - 16.0 49.26 - 60.63
12/31/99 Book Value Per Share $23.21 1.90 x - 3.40 x 2.25 x - 3.00 x $52.21 - $69.62
INDICATIVE REFERENCE RANGE $50.00 - $60.00
VI. DISCOUNTED CASH FLOW INDICATIVE RANGE
INDICATIVE REFERENCE RANGE $40.00 - $47.00
VII. INDICATIVE REFERENCE RANGE
SUMMARY INDICATIVE REFERENCE RANGE $40.00 - $48.00
</TABLE>
NOTES
1. As of 3/17/00
MORGAN STANLEY DEAN WITTER 22
<PAGE>
<TABLE>
<CAPTION>
PROJECT JUICE VALUATION
DCF INDICATIVE VALUATION RANGE
================================================
KEY ASSUMPTIONS - MANAGMENT CASE I
HISTORICAL PROJECTED
------------------ ----------------------------------
1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Premium Growth (%) 3.5 1.4 2.0 9.2 7.4 7.4 7.0
Loss Ratio (%) 73.6 74.3 70.7 70.8 69.5 68.6 68.2
Expense Ratio (%) 28.7 28.9 28.7 28.0 27.7 27.4 27.2
Combined Ratio (%) 102.3 103.2 99.4 98.8 97.2 96.1 95.4
NPW/Surplus (x) 1.3 1.1 1.0 1.0 1.0 1.0 1.0
Return on Avg. Equity (%)(1) 14.8 14.8 16.4 15.2 15.3 15.4 15.4
GAAP Earnings Growth (%)(1) 8.6 (5.0) 19.7 0.4 8.6 7.7 6.8
</TABLE>
SENSITIVITY ANALYSIS
CURRENT OPERATING LEVERAGE (1.0X NPW/SURPIUS)
EQUITY VALUE PER Share (TERMINAL VALUE OF 12.0X DISCOUNT RATE OF 10.5%)
<TABLE>
<CAPTION>
Annual Incremental (Increase) in Premium Growth Rate
Incremental (Increase) -------------------------------------------------------
Combined Ratio (2.0%) (1.0%) 0.0% 1.0% 2.0%
<S> <C> <C> <C> <C> <C>
(2.0%) $45.77 $47.12 $48.60 $50.20 $51.95
(1.0%) 43.97 45.19 46.50 47.93 49.49
0.0% 42.18 43.25 44.41 45.67 47.04
1.0% 40.39 41.31 42.31 43.40 44.58
2.0% 38.60 39.38 40.22 41.13 42.12
3.0% 36.81 37.44 38.12 38.87 39.67
4.0% 35.02 35.51 36.03 36.60 37.21
</TABLE>
DISCOUNTED CASH FLOW - MANAGEMENT CASE I
INDICATIVE VALUE RANGE
<TABLE>
<S> <C> <C> <C>
TERMINAL FORWARD GAAP P/E MULTIPLE 11.0x
Discount Rate 10.0% 10.5% 11.0%
Equity Value per Share $43.87 $42.21 $40.62
TERMINAL FORWARD GAAP P/E MULTIPLE 12.0x
Discount Rate 10.0% 10.5% 11.0%
Equity Value per Share $46.17 $44.41 $42.73
TERMINAL FORWARD GAAP P/E MULTIPLE 13.0X
Discount Rate 10.0% 10.5% 11.0%
Equity Value per Share $48.47 $46.61 $44.84
</TABLE>
SENSITIVITY ANALYSIS
GRADUAL INCREASE IN LEVERAGE TO 1.5X NPW/SURPLUS
EQUITY VALUE PER SHARE (TERMINAL VALUE OF 12.0x DISCOUNT RATE OF 10.5%)
<TABLE>
<CAPTION>
Annual Incremental (Increase) in Premium Growth Rate
Incremental (Increase) -------------------------------------------------------
Combined Ratio (2.0%) (1.0%) 0.0% 1.0% 2.0%
<S> <C> <C> <C> <C> <C> <C>
(2.0%) $47.77 $49.77 $51.67 $53.62 $55.70
(1.0%) 46.05 47.94 49.62 51.39 53.25
0.0% 44.32 46.10 47.56 49.13 50.80
1.0% 42.60 44.19 45.48 46.86 48.34
2.0% 40.88 42.26 43.39 44.60 45.89
3.0% 39.10 40.32 41.29 42.34 43.44
4.0% 37.32 38.39 39.20 40.07 40.99
</TABLE>
NOTES
1. Historical ROE and earnings growth calculated on a levered basis; projected
ROE and earnings growth calculated on an unlevered basis
MORGAN STANLEY DEAN WITTER 23
<PAGE>
PROJECT JUICE VALUATION
VALUATION MATRIX
==========================================================
VALUATION MATRIX
$ IN MILLIONS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
PREMIUM/DISCOUNT TO
------------------------------------------------
EQUITY VALUE EQUITY CURRENT 52-WEEK 52-WEEK ALL-TIME
PER SHARE VALUE MARKET HIGH LOW HIGH
--------- ------- ------ ---- --- ----
<S> <C> <C> <C> <C> <C>
$33.75 $41.88 $27.69 $45.81
$35.00 $13,486 3.7 % (16.4)% 26.4 % (23.6)%
36.00 13,871 6.7 (14.0) 30.0 (21.4)
37.00 14,256 9.6 (11.6) 33.6 (19.2)
38.00 14,641 12.6 (9.3) 37.2 (17.1)
39.00 15,027 15.6 (6.9) 40.9 (14.9)
40.00 15,412 18.5 (4.5) 44.5 (12.7)
41.00 15,797 21.5 (2.1) 48.1 (10.5)
42.00 16,183 24.4 0.3 51.7 (8.3)
43.00 16,568 27.4 2.7 55.3 (6.1)
44.00 16,953 30.4 5.1 58.9 (4.0)
45.00 17,339 33.3 7.5 62.5 (1.8)
46.00 17,724 36.3 9.9 66.1 0.4
47.00 18,109 39.3 12.2 69.8 2.6
48.00 18,494 42.2 14.6 73.4 4.8
49.00 18,880 45.2 17.0 77.0 7.0
50.00 19,265 48.1 19.4 80.6 9.1
51.00 19,650 51.1 21.8 84.2 11.3
52.00 20,036 54.1 24.2 87.8 13.5
53.00 20,421 57.0 26.6 91.4 15.7
54.00 20,806 60.0 29.0 95.0 17.9
55.00 21,192 63.0 31.3 98.6 20.1
<CAPTION>
PRICE AS A MULTIPLE OF
----------------------------------------------------------------------------
I/B/E/S MEDIAN EARNINGS MANAGEMENT EARNINGS 12/31/99
----------------------- ----------------------
2000E 2001 E 2000E 2001 E BOOK VALUE
----- ------ ----- ------ ----------
<S> <C> <C> <C> <C>
$1,406.3 $1,521.9 $1,460.0 $1,484.5 $8,941.4
9.6 x 8.9 x 9.2 x 9.1x 1.51x
9.9 9.1 9.5 9.3 1.55
10.1 9.4 9.8 9.6 1.59
10.4 9.6 10.0 9.9 1.64
10.7 9.9 10.3 10.1 1.68
11.0 10.1 10.6 10.4 1.72
11.2 10.4 10.8 10.6 1.77
11.5 10.6 11.1 10.9 1.81
11.8 10.9 11.3 11.2 1.85
12.1 11.1 11.6 11.4 1.90
12.3 11.4 11.9 11.7 1.94
12.6 11.6 12.1 11.9 1.98
12.9 11.9 12.4 12.2 2.03
13.2 12.2 12.7 12.5 2.07
13.4 12.4 12.9 12.7 2.11
13.7 12.7 13.2 13.0 2.15
14.0 12.9 13.5 13.2 2.20
14.2 13.2 13.7 13.5 2.24
14.5 13.4 14.0 13.8 2.28
14.8 13.7 14.3 14.0 2.33
15.1 13.9 14.5 14.3 2.37
</TABLE>
MORGAN STANLEY DEAN WITTER 24
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
VALUATION
P&C INDUSTRY HISTORICAL MULTIPLE ANALYSIS
- --------------------------------------------------------------------------------
O OVER THE PAST 10-YEAR PERIOD, P&C STOCKS HAVE TRADED CONSISTENTLY BETWEEN:
- 8.0X TO 15.0X FORWARD EARNINGS WITH A MEAN FORWARD EARNINGS MULTIPLE
OF 11.2X
- 1.25X TO 2.25X GAAP BOOK VALUE WITH A MEAN GAAP BOOK VALUE MULTIPLE OF
1.43X
O SINCE TANGERINE'S IPO, THERE HAVE BEEN TWO DISTINCT TRADING PATTERNS
O BETWEEN 6/96 AND 8/98:
- 11.0X TO 14.0X FORWARD EARNINGS
- 1.75X TO 2.50X GAAP BOOK VALUE
O BETWEEN 9/98 AND PRESENT:
- 8.0X TO 11.0X FORWARD EARNINGS
- 1.25X TO 1.75X GAAP BOOK VALUE
P&C INDEX HISTORICAL NTM PRICE TO EARNINGS RATIO FROM 1990 TO PRESENT (1)
[GRAPHIC OMITTED]
Line chart of P&C Index next twelve months price to earnings ratio
from March 16, 1990 to present
TANGERINE HISTORICAL NTM PRICE TO EARNINGS RATIO FROM 1996 TO PRESENT
[GRAPHIC OMITTED]
Line chart of TAP's historical next twelve months price to earnings
ratio from June 7, 1996 to March 17, 2000
MORGAN STANLEY DEAN WITTER 25
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
VALUATION
P&C INDUSTRY HISTORICAL MULTIPLE ANALYSIS
- --------------------------------------------------------------------------------
O OVER THE PAST 10-YEAR PERIOD, P&C STOCKS HAVE TRADED CONSISTENTLY BETWEEN:
- 8.0X TO 15.0X FORWARD EARNINGS WITH A MEAN FORWARD EARNINGS MULTIPLE
OF 11.2X
- 1.25X TO 2.25X GAAP BOOK VALUE WITH A MEAN GAAP BOOK VALUE MULTIPLE OF
1.43X
O SINCE TANGERINE'S IPO, THERE HAVE BEEN TWO DISTINCT TRADING PATTERNS
O BETWEEN 6/96 AND 8/98:
- 11.0X TO 14.0X FORWARD EARNINGS
- 1.75X TO 2.50X GAAP BOOK VALUE
O BETWEEN 9/98 AND PRESENT:
- 8.0X TO 11.0X FORWARD EARNINGS
- 1.25X TO 1.75X GAAP BOOK VALUE
P&C INDEX(1) HISTORICAL PRICE TO BOOK RATIO FROM 1990 TO PRESENT (2)
[GRAPHIC OMITTED]
Line chart of P&C Index Price to book ratio from January 2, 1996 to
March 17, 2000
TANGERINE HISTORICAL PRICE TO BOOK RATIO FROM 1996 TO PRESENT (2)
[GRAPHIC OMITTED]
Line chart of the Company's price to book ratio from June 3, 1996 to
March 17, 2000
MORGAN STANLEY DEAN WITTER 26
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
VALUATION
PROPERTY & CASUALTY VALUATION COMPARISON
TRADING STATISTICS(1)
- --------------------------------------------------------------------------------
2000E PRICE TO EARNINGS RATIOS (X)
[GRAPHIC OMITTED]
Bar chart of the current 2000 price to earnings ratio of comparable
companies
PRICE TO BOOK RATIOS (X)
[GRAPHIC OMITTED]
Bar chart of the current 2001 price to earnings ratio of comparable
companies
2001E PRICE TO EARNINGS RATIOS (X)
[GRAPHIC OMITTED]
Bar chart of the current price to book ratios of comparable companies
2000E RETURN ON EQUITY
[GRAPHIC OMITTED]
Bar chart of 2000 (estimated) return on equity of comparable companies
MORGAN STANLEY DEAN WITTER 27
<PAGE>
PROJECT JUICE VALUATION
SELECTED P&C COMPANY TRADING COMPARABLES
===================================================
<TABLE>
<CAPTION>
CURRENT PRICE(1) AS A % OF
-----------------------------------------------------
ADJ.
MARKET CURRENT 52-WK. 52-WK. 2000E 2001E BOOK BOOK
VALUE PRICE High Low EPS EPS VALUE VALUE
Company $ $ % % X X X X
------- --------- --------- ------- ------ -------- ------- ------ -------
(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL/INDUSTRIAL LINES
AIG 150,760 97.38 85.0 123.9 26.7 23.5 4.73 4.47
Chubb 9,345 53.25 69.7 123.1 12.8 11.5 1.47 1.48
CNA Financial 5,255 28.50 62.9 116.0 15.6 11.4 0.60 0.65
Hartford Financial Services 8,007 35.81 53.9 121.9 8.7 7.8 1.39 1.37
St. Paul Companies 6,039 26.63 71.8 124.9 9.7 8.7 0.99 1.08
Tangerine 13,070 33.75 80.6 121.9 9.2 8.5 1.48 1.48
Mean (6) 65.1 123.3 10.4 9.3 1.28 1.31
Median (6) 69.7 123.1 9.7 8.7 1.39 1.37
PERSONAL LINES
Allstate 16,095 20.86 51.2 121.5 7.5 6.7 1.06 1.15
Ohio Casualty 721 12.00 57.1 111.6 15.0 12.2 0.64 0.89
SAFECO 2,698 20.75 44.4 115.3 12.2 9.9 0.59 0.69
Mean 51.3 116.1 11.6 9.6 0.76 0.91
Median 51.2 115.3 12.2 9.9 0.63 0.88
<CAPTION>
5-YEAR DEBT/ DEBT+
DIV. GROWTH 2000E TOTAL PREFERRED/
YIELD RATE ROAE CAPITAL TOTAL CAP
% % % % %
------ ------ ---- ----- ----------
(3) (4) (4)
<C> <C> <C> <C> <C>
0.2 14.2 15.0 14.7(5) 14.7(5)
2.4 11.2 10.5 11.1 11.1
0.0 8.7 4.0 24.6 26.6
2.7 11.1 14.4 17.3 35.8
3.9 9.8 10.6 16.8 23.4
1.5 11.7 14.6 7.2 16.4
3.0 10.7 11.8 15.1 23.4
2.7 11.1 10.6 16.8 23.4
2.9 9.5 14.0 11.3 15.6
7.7 10.0 6.0 22.7 22.7
7.1 9.6 5.6 19.4 33.6
5.9 9.7 8.5 17.8 24.0
7.1 9.6 6.0 19.4 22.7
</TABLE>
NOTES
1. Prices and I/B/E/S median EPS estimates as of 3/16/00. Balance sheet data
as of 9/30/1999 except for Tangerine and Ohio Casualty (as of 12/31/99)
2. Excludes effect of FAS 115
3. 2000E ROAE: 2000 I/B/E/S median earnings estimate divided by the average
estimated 12/31/99 book value and estimated 12/31/00 book value
4. Includes redeemable preferred and tax-deductible preferred stock
5. Excludes matched borrowings and leasing company funding
6. Excludes AIG, CNA, and Tangerine
MORGAN STANLEY DEAN WITTER 28
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
VALUATION
P&C INSURANCE VALUE MAP (1)
- --------------------------------------------------------------------------------
O THE VALUE MAP REFLECTS THAT THE MARKET CURRENTLY ATTACHES A VALUATION TO
TANGERINE CONSISTENT WITH ITS PROJECTED ROE
2000E P/B to 2000E Return on Equity (1)
[GRAPHIC OMITTED]
Line chart (value map) showing least squares regression trend of 2000
estimated return on equity on 2000 estimated price to book for
comparable companies
MORGAN STANLEY DEAN WITTER 29
<PAGE>
- --------------------
PROJECT JUICE
----------------------------------------------------------------
APPENDIX A
FINANCIAL MODEL
----------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT (MANAGEMENT CASE 1)
========================================================
CONSOLIDATED INCOME STATEMENT
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
-------------------- --------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $8,104 $8,213 $8,376 $9,148 $9,826 $10,553 $11,296 $11,926 $12,503
% change 3.5% 1.4% 2.0% 9.2% 7.4% 7.4% 7.0% 5.6% 4.8%
Unearned Premiums (315) (204) (224) (387) (340) (364) (372) (316) (289)
Net Earned Premiums $7,788 $8,009 $8,152 $8,761 $9,486 $10,189 $10,924 $11,611 $12,214
Total Losses and LAE 5,729 5,950 5,760 6,204 6,592 6,993 7,451 7,952 8,351
Total Expenses 2,326 2,378 2,408 2,557 2,724 2,897 3,076 3,260 3,465
Dividends to Policyholders 41 47 34 37 39 42 45 47 49
UNDERWRITING INCOME $(308) $(366) $(49) $(37) $131 $257 $353 $351 $348
P/T Investmt. Income $2,100 $2,092 $2,044 $2,060 $2,113 $2,179 $2,259 $2,343 $2,424
Realized Gains 144 112 - - - - - - -
P/T Statutory Income $1,936 $1,838 $1,994 $2,023 $2,244 $2,436 $2,611 $2,694 $2,772
Current Taxes 545 394 488 546 627 699 760 782 803
STATUTORY NET INCOME $1,390 $1,444 $1,506 $1.477 $1,618 $1,737 $1,851 $1,911 $1,970
Annual growth rate 22.5% 3.9% 4.3% -2.0% 9.5% 7.4% 6.6% 3.3% 3.0%
STATUTORY OPERATING INCOME $1,297 $1,371 $1,506 $1,477 $1,618 $1,737 $1,851 $1,911 $1,970
GAAP NET INCOME (1) $1,343 $1,276 $1,527 $1,533 $1,665 $1,794 $1,916 $1,970 $2,025
Annual growth rate 8.6% -5.0% 19.7% 0.4% 8.6% 7.7% 6.8% 2.8% 2.8%
GAAP OPERATING INCOME (1) $1,250 $1,337 $1,527 $1,533 $1,665 $1,794 $1,916 $1,970 $2,025
EARNINGS PER SHARE $3.18 $3.44 $3.96 $3.98 $4.32 $4.66 $4.97 $5.11 $5.26
Annual growth rate 8.2% 15.2% 0.4% 8.6% 7.7% 6.8% 2.8% 2.8%
FINANCIAL RATIOS
Statutory Loss and LAE Ratio 73.6% 74.3% 70.7% 70.8% 69.5% 68.6% 68.2% 68.5% 68.4%
Statutory Expense Ratio 28.7% 28.9% 28.7% 28.0% 27.7% 27.4% 27.2% 27.3% 27.7%
Statutory Combined Ratio 102.3% 103.2% 99.4% 98.8% 97.2% 96.1% 95.4% 95.8% 96.1%
<CAPTION>
- ---------------------------------------
2007 2008 2009 2010
---- ---- ---- -----
<C> <C> <C> <C>
$13,076 $13,655 $14,261 $14,894
4.6% 4.4% 4.4% 4.4%
(287) (290) (303) (317)
$12,789 $13,365 $13,957 $14,577
8,749 9,138 9,539 9,953
3,622 3,780 3,945 4,114
51 54 56 58
$367 $394 $418 $452
$2,507 $2,591 $2,676 $2,764
- - - -
$2,873 $2,985 $3,093 $3,216
833 864 895 933
$2,041 $2,121 $2,198 $2,283
3.6% 4.0% 3.6% 3.9%
$2,041 $2,121 $2,198 $2,283
$2,098 $2,178 $2,258 $2,347
3.6% 3.8% 3.7% 3.9%
$2,098 $2,178 $2,258 $2,347
$5.44 $5.65 $5.86 $6.09
3.6% 3.8% 3.7% 3.9%
68.4% 68.4% 68.3% 68.3%
27.7% 27.7% 27.7% 27.6%
96.1% 96.0% 96.0% 95.9%
</TABLE>
Notes
1. Historical GAAP earnings calculated on a levered basis; projected GAAP
earnings calculated on an unlevered basis
MORGAN STANLEY DEAN WITTER 31
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION (CONT'D)
COMMERCIAL LINES - NATIONAL AND COMMERCIAL (MANAGEMENT CASE 1)
==============================================================
COMMERCIAL LINES - NATIONAL
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
---------------------- --------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $626 $489 $427 $427 $427 $427 $427 $427 $427
% change -4.8% -21.9% -12.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
STATUTORY UNDERWRITING INCOME $(111) $(75) $(109) $(114) $(118) $(128) $(126) $(126) $(126)
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 92.5% 86.2% 98.6% 98.8% 99.0% 99.2% 99.3% 99.3% 99.3%
Expense Ratio 23.8% 27.9% 27.0% 27.9% 28.7% 30.9% 30.3% 30.3% 30.3%
Combined Ratio 116.3% 114.0% 125.6% 126.6% 127.7% 130.0% 129.6% 129.6% 129.6%
<CAPTION>
- --------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$427 $427 $427 $427
0.0% 0.0% 0.0% 0.0%
$(126) $(126) $(126) $(126)
99.3% 99.3% 99.3% 99.3%
30.3% 30.3% 30.3% 30.3%
129.6% 129.6% 129.6% 129.6%
</TABLE>
COMMERCIAL LINES - COMMERCIAL
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ---------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $1,377 $1,397 $1,421 $1,561 $1,717 $1,837 $1,929 $2,025 $2,127
% change -11.6% 1.4% 1.7% 9.8% 10.0% 7.0% 5.0% 5.0% 5.0%
STATUTORY UNDERWRITING INCOME $(145) $(83) $(18) $(36) $38 $84 $100 $69 $72
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 80.2% 72.4% 69.8% 71.0% 67.1% 65.5% 65.5% 67.0% 67.0%
Expense Ratio 30.9% 31.3% 30.2% 29.0% 28.2% 27.8% 27.5% 27.8% 27.8%
Combined Ratio 111.0% 103.7% 100.0% 100.0% 95.3% 93.3% 93.0% 94.8% 94.8%
<CAPTION>
- -------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$2,212 $2,300 $2,392 $2,488
4.0% 4.0% 4.0% 4.0%
$79 $82 $85 $88
67.0% 67.0% 67.0% 67.0%
27.8% 27.8% 27.8% 27.8%
94.8% 94.8% 94.8% 94.8%
</TABLE>
MORGAN STANLEY DEAN WITTER 32
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION (CONT'D)
COMMERCIAL LINES - SELECT AND SPECIALTY (MANAGEMENT CASE 1)
============================================================
COMMERCIAL LINES - SELECT
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $1,494 $1,494 $1,587 $1,764 $1,941 $2,135 $2,348 $2,513 $2,638
% change 4.3% 0.0% 6.2% 11.2% 10.0% 10.0% 10.0% 7.0% 5.0%
STATUTORY UNDERWRITING INCOME $(69) $(92) $50 $2 $24 $47 $72 $83 $95
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 74.4% 74.3% 64.9% 68.0% 67.4% 66.8% 66.2% 66.2% 66.2%
Expense Ratio 30.4% 31.2% 30.6% 29.9% 29.5% 29.1% 28.8% 29.0% 29.0%
Combined Ratio 104.8% 105.5% 95.5% 97.9% 96.9% 95.9% 95.0% 95.2% 95.2%
<CAPTION>
- ------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$2,770 $2,909 $3,054 $3,207
5.0% 5.0% 5.0% 5.0%
$100 $105 $110 $116
66.2% 66.2% 66.2% 66.2%
29.0% 29.0% 29.0% 29.0%
95.2% 95.2% 95.2% 95.2%
</TABLE>
COMMERCIAL LINES - SPECIALTY
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $455 $403 $428 $476 $523 $575 $633 $677 $718
% change 6.3% -11.5% 6.2% 11.2% 10.0% 10.0% 10.0% 7.0% 6.0%
STATUTORY UNDERWRITING INCOME $4 $27 $22 $31 $38 $46 $56 $60 $64
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 71.9% 67.0% 66.0% 66.0% 66.0% 66.0% 66.0% 66.0% 66.0%
Expense Ratio 26.6% 27.0% 27.7% 25.7% 25.1% 24.3% 23.5% 24.0% 24.0%
Combined Ratio 98.4% 94.0% 93.7% 91.7% 91.1% 90.3% 89.5% 90.0% 90.0%
<CAPTION>
- ------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$754 $791 $831 $873
5.0% 5.0% 5.0% 5.0%
$69 $72 $76 $79
66.0% 66.0% 66.0% 66.0%
24.0% 24.0% 24.0% 24.0%
90.0% 90.0% 90.0% 90.0%
</TABLE>
MORGAN STANLEY DEAN WITTER 33
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION (CONT'D)
COMMERCIAL LINES - SELECT AND SPECIALTY (MANAGEMENT CASE 1)
============================================================
COMMERCIAL LINES - CONSTRUCTION
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ---------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $423 $420 $397 $473 $472 $500 $525 $546 $568
% change -1.1% -0.9% -5.3% 19.2% -0.3% 6.0% 5.0% 4.0% 4.0%
STATUTORY UNDERWRITING INCOME $(60) $(96) $(80) $(60) $(39) $(34) $(37) $(50) $(55)
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 88.1% 92.0% 88.8% 83.2% 79.3% 77.7% 77.7% 80.0% 80.0%
Expense Ratio 26.0% 27.8% 28.6% 25.4% 26.3% 25.8% 26.0% 26.0% 26.5%
Combined Ratio 114.1% 119.8% 117.4% 108.6% 105.5% 103.5% 103.7% 106.0% 106.5%
<CAPTION>
- -------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$591 $614 $639 $665
4.0% 4.0% 4.0% 4.0%
$(74) $(71) $(81) $(84)
83.0% 82.0% 83.0% 83.0%
26.5% 26.5% 26.5% 26.5%
109.5% 108.5% 109.5% 109.5%
</TABLE>
COMMERCIAL LINES - BOND
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ---------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $240 $207 $243 $245 $262 $281 $300 $315 $331
% change -5.7% -13.8% 17.3% 0.8% 7.2% 7.0% 7.0% 5.0% 5.0%
STATUTORY UNDERWRITING INCOME $93 $97 $79 $69 $72 $80 $89 $92 $97
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 15.6% 16.1% 19.2% 28.2% 28.2% 28.2% 28.2% 28.2% 28.2%
Expense Ratio 43.2% 43.1% 41.9% 43.0% 41.5% 40.4% 39.3% 40.4% 40.4%
Combined Ratio 58.8% 59.3% 61.1% 71.2% 69.8% 68.6% 67.5% 68.6% 68.6%
<CAPTION>
- -------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$344 $358 $372 $387
4.0% 4.0% 4.0% 4.0%
$102 $106 $110 $114
28.2% 28.2% 28.2% 28.2%
40.4% 40.4% 40.4% 40.4%
68.6% 68.6% 68.6% 68.6%
</TABLE>
MORGAN STANLEY DEAN WITTER 34
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION (CONT'D)
PERSONAL LINES - AUTO
AND HOMEOWNERS (MANAGEMENT CASE 1)
=============================================================
PERSONAL LINES - AUTO
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $2,328 $2,369 $2,390 $2,637 $2,809 $3,006 $3,216 $3,409 $3,579
% change 19.4% 1.7% 0.9% 10.3% 6.5% 7.0% 7.0% 6.0% 5.0%
STATUTORY UNDERWRITING INCOME $96 $8 $31 $27 $41 $51 $53 $70 $32
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 68.2% 73.6% 73.0% 73.0% 73.0% 73.0% 73.0% 73.0% 73.0%
Expense Ratio 25.5% 25.3% 25.6% 24.7% 24.7% 24.5% 24.5% 24.2% 25.5%
Combined Ratio 93.6% 99.0% 98.6% 97.7% 97.7% 97.4% 97.5% 97.2% 98.5%
<CAPTION>
- ------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$3,758 $3,946 $4,143 4,350
5.0% 5.0% 5.0% 5.0%
$33 $35 $37 $38
73.0% 73.0% 73.0% 73.0%
25.5% 25.5% 25.5% 25.5%
98.5% 98.5% 98.5% 98.5%
</TABLE>
PERSONAL LINES - HOMEOWNERS
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
--------------------- ----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Written Premiums $1,162 $1,436 $1,484 $1,566 $1,676 $1,793 $1,919 $2,015 $2,116
% change 3.4% 23.6% 3.3% 5.6% 7.0% 7.0% 7.0% 5.0% 5.0%
STATUTORY UNDERWRITING INCOME $44 $67 $155 $154 $166 $181 $196 $193 $202
STATUTORY FINANCIAL RATIOS
Loss and LAE Ratio 63.7% 63.7% 60.4% 60.4% 60.4% 60.4% 60.4% 61.0% 61.0%
Expense Ratio 30.8% 28.9% 28.5% 28.7% 28.4% 28.2% 28.1% 28.5% 28.5%
Combined Ratio 94.5% 92.6% 88.9% 89.1% 88.8% 88.6% 88.5% 89.5% 89.5%
<CAPTION>
- ------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$2,221 $2,310 $2,403 $2,499
5.0% 4.0% 4.0% 4.0%
$213 $214 $222 $231
61.0% 61.5% 61.5% 61.5%
28.5% 28.5% 28.5% 28.5%
89.5% 90.0% 90.0% 90.0%
</TABLE>
MORGAN STANLEY DEAN WITTER 35
<PAGE>
PROJECT JUICE FINANCIAL MODEL
SUMMARY FINANCIAL INFORMATION (CONT'D)
CONSOLIDATED BALANCE SHEET (MANAGEMENT CASE 1)
============================================================
STATUTARY BALANCE SHEET AND GAAP HOLDING COMPANY EQUITY
$ IN MILLIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
-------------------- ------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Invested Assets $30,346 $29,808 $29,557 $30,268 $31,107 $32,190 $33,424 $34,623 $35,795
Premiums Receivable 2,838 2,697 2,932 3,202 3,439 3,694 3,954 4,174 4,376
Other Assets 1,490 2,081 2,133 2,186 2,241 2,297 2,354 2,413 2,474
TOTAL ASSETS $34,674 $34,586 $34,622 $35,656 $36,787 $38,181 $39,732 $41,210 $42,645
LIABILITIES:
Loss and LAE Reserves $21,394 $19,945 $19,002 $18,843 $18,904 $19,153 $19,535 $20,012 $20,526
UPR 3,292 3,549 3,773 4,160 4,500 4,864 5,236 5,552 5,840
Other Liabilities 3,658 3,436 3,470 3,505 3,557 3,611 3,665 3,720 3,776
TOTAL LIABILITIES $28,345 $26,930 $26,246 $26,508 $26,961 $27,628 $28,436 $29,284 $30,142
Surplus 7,656 8,376 9,148 9,826 10,553 11,296 11,926 12,503
TOTAL LIABILITIES AND SURPLUS $34,586 $34,622 $35,656 $36,787 $38,181 $39,732 $41,210 $42,645
GAAP Holding Co. Equity (1) $9,125 $8,941 $9,682 $10,511 $11,236 $12,020 $12,829 $13,518 $14,149
<CAPTION>
- ------------------------------------------
2007 2008 2009 2010
---- ---- ---- ----
<C> <C> <C> <C>
$37,021 $38,235 $39,485 $40,795
4,577 4,779 4,991 5,213
2,535 2,599 2,664 2,730
$44,133 $45,613 $47,140 $48,738
$21,078 $21,612 $22,152 $22,718
6,128 6,418 6,721 7,039
3,851 3,928 4,007 4,087
$31,057 $31,958 $32,880 $33,844
13,076 13,655 14,261 14,894
$44,133 $45,613 $47,140 $48,738
$14,779 $15,415 $16,080 $16,777
</TABLE>
NOTES
1. Unlevered
MORGAN STANLEY DEAN WITTER 36
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
APPENDIX B
ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS
1992 TO PRESENT
========================================================
<TABLE>
<CAPTION>
INITIAL OWNERSHIP FINAL
DATE OF POSITION CONSIDERATION
PUB. ANC. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $
(1) (2)
- ------------------------------------------- -------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
05/07/99 J Ray McDermott SA/ Offshore Oil & Gas Construction 63.0 35.62
McDermott International Inc.
04/29/99 Killearn Properties Inc./ Real Estate Development 62.0 5.50
Killearn Inc.
03/19/99 Spelling Entertainment Group/ Motion Picture 81.9 9.75
Viacom Inc. (Nat'l Amusements)
03/08/99 LabOne Inc. (Lab Holdings Inc.)/ Laboratory Testing Services 80.5 12.75
Lab Holdings Inc.
01/22/99 Treadco Inc./ Auto supply 51.0 9.00
Arkansas Best Corp.
12/03/98 Banner Aerospace Inc./ Aerospace Equipment 85.0 11.0
Fairchild Corp.
11/12/98 Aquila Gas Pipeline Corp./ Gas Utility 81.6 8.00
UtiliCorp, United Inc.
10/27/98 CITIZENS CORP./ INSURANCE 81.8 33.25
ALLMERICA FINANCIAL
10/16/98 BRC Holdings Inc./ Software 51.0 19.00
Affiliated Computer Services
09/29/98 Newmont Gold Company/ Gold Mining 93.7 25.37
Newmont Mining Corp.
09/23/98 J&L Specialty Steel Inc./ Steel 53.5 6.38
Usinor SA
<CAPTION>
PREMIUM OFFERED OVER MARKET
---------------------------------------------
PURCHASE VALUE UNAFFECTED DAY PRIOR TO ALL-TIME
OFFERED PRICE Pub. Anc. HIGH
$MM % % %
(3)
-------------- ----------- ----------- ---------
<C> <C> <C> <C>
514.5 12.7 16.8 (31.8)
1.9 20.1 20.5 (76.0)
191.6 39.7 44.4 (80.5)
34.3 9.2 17.2 (67.1)
22.7 32.8 38.5 (60.0)
82.4 42.1 25.7 (22.1)
43.2 20.9 23.1 (57.3)
212.4 25.7 20.6 (4.0)
131.9 17.3 17.1 (25.1)
264.8 18.0 (5.2) (59.2)
115.0 75.6 100.0 (76.5)
</TABLE>
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 38
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS (CONT'D)
1992 TO PRESENT
=============================================================
<TABLE>
<CAPTION>
INITIAL OWNERSHIP FINAL
DATE OF POSITION CONSIDERATION
PUB. ANC. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $
(1) (2)
- ---------------------------------------- -------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
09/08/98 PEC Israel Economic Corp./ Investments 81.3 30.00
Investor Group
08/24/98 Tele-Communications Int'l/ Cable Television 81.1 21.00
Liberty Media
07/07/98 Life Technologies/ Medical Products 47.5 37.00
Dexter Corp.
04/30/98 Mycogen Corp./ Chemicals 61.1 28.00
Dow AgroSciences
03/17/98 BET Holdings/ Televison/ 57.9 63.00
Investor Group Magazines
03/10/98 IB Timberlands Ltd./ Lumber Products 84.4 13.63
IP Forest Resources
03/05/98 XLConnect Solutions/ Computer Services 69.3 20.00
Xerox Corp.
03/02/98 Coleman Company Inc./ Outdoor Products 83.0 30.14
Sunbeam Corp.
01/22/98 BT Office Products/ Office Supplies 70.0 13.75
Burhmann
01/20/98 NACT Telecommunications/ Communications 82.1 8.61
World Access
01/08/98 Raynoier Timberlands/ Forestry Services 74.7 13.00
Rayonier Inc.
<CAPTION>
PREMIUM OFFERED OVER MARKET
---------------------------------------------
PURCHASE VALUE UNAFFECTED DAY PRIOR TO ALL-TIME
OFFERED PRICE PUB. ANC. HIGH
$MM % % %
(3)
-------------- ----------- ----------- ---------
<C> <C> <C> <C>
102.7 21.5 31.5 (12.7)
379.1 4.9 0.0 (19.2)
436.7 16.5 18.4 (3.9)
388.5 49.1 41.8 (3.9)
462.3 15.2 4.0 3.7
99.5 32.2 33.0 (55.5)
93.0 18.9 (11.1) (35.0)
333.0 85.0 44.4 (2.6)
138.1 75.0 32.5 (41.5)
107.6 2.4 5.1 46.2
65.8 24.8 11.2 (69.6)
</TABLE>
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 39
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS (CONT'D)
1992 TO PRESENT
============================================================
<TABLE>
<CAPTION>
INITIAL OWNERSHIP FINAL
DATE OF POSITION CONSIDERATION
PUB. Anc. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $
(1) (2)
- ------------------------------------------- -------------------------------- ----------------- ------------
<S> <C> <C> <C> <C>
12/18/97 Ariel Communications/ Communications 82.1 8.61
Telephone and Data Systems
12/18/97 United States Cellular/ Communications 80.7 33.00
Telephone and Data Systems
09/18/97 GUARANTY NATIONAL CORP./ INSURANCE 80.7 36.00
ORION CAPITAL CORP.
09/11/97 BET Holdings, Inc./ Own and operate television stations; 61.2 48.00
Investor Group publish magazines
09/12/97 WESTERN NATIONAL/AMERICAN GENERAL INSURANCE 45.0 29.75
06/25/97 Rhone-Poulenc Rorer Inc./ Pharmaceuticals 70.7 97.00
Rhone-Poulenc SA
06/20/97 Wheelabrator Technologies Inc. Manufacturer of laboratory and 67.0 15.00
Waste Management, Inc. medical equipment
05/22/97 Chaparral Steel Co./ Manufactures primary steel products 85.0 15.50
Texas Industries Inc.
05/14/97 Enron Global Power & Pipelines LLC/ Provides natural gas transmission 52.0 35.00
Enron Group services
03/03/97 American Financial Enterprises Inc./ Provides short-term investment 83.0 37.00
American Financial Group Inc. services
02/25/97 Fina Inc./Petrofina SA Oil and gas exploration, production 85.4 60.00
and refining; wholesale petroleum;
manufacture plastic materials
<CAPTION>
PREMIUM OFFERED OVER MARKET
---------------------------------------------
PURCHASE VALUE UNAFFECTED DAY PRIOR TO ALL-TIME
OFFERED PRICE PUB. ANC. HIGH
$MM % % %
(3)
-------------- ----------- ----------- ---------
<C> <C> <C> <C>
107.6 2.4 5.1 (46.2)
539.2 (0.9) 0.0 (19.0)
117.2 26.0 10.0 10.0
288.0 22.0 15.0 15.0
1,200.0 12.3 5.8 (4.8)
4,415.8 28.0 22.0 20.0
777.2 18.0 15.0 (51.0)
72.8 27.0 19.0 (8.0)
437.5 24.0 16.0 16.0
1,947.2 38.0 35.0 35.0
257.0 18.0 19.0 8.0
</TABLE>
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 40
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS (CONT'D)
1992 TO PRESENT
============================================================
<TABLE>
<CAPTION>
INITIAL
OWNERSHIP FINAL
DATE OF POSITION CONSIDERATION
PUB. ANC. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $
(1) (2)
- ------------------------------------------------ ------------------------------------- ----------------- ----- -----------
<S> <C> <C> <C> <C>
02/06/97 ACORDIA/ANTHEM INSURANCE 66.8 40.00
01/21/97 Mafco Consolidated Group/Mafco Holdings Manufactures cigars 85.0 33.50
01/13/97 Systemix Inc./ Biotechnology 73.2 19.50
Novartis AG
01/13/97 ZURICH REINSURANCE/ZURICH INSURANCE CO. INSURANCE 66.0 39.50
12/17/96 ALLMERICA PROPERTY & CASUALTY/ALLMERICA INSURANCE 59.5 33.00
FINANCIAL CORP.
08/26/96 CCP/CONSECO INSURANCE 49.5 23.25
08/08/96 Roto Rooter/Chemed Corp. Plumbing services; manufactures 58.2 41.00
related equipment
10/18/95 Applied Immune Sciences/ Biotechnology 46.0 11.75
Rhone-Poulenc Rorer
08/26/96 BANKERS LIFE HOLDING/CONSECO INSURANCE 90.4 25.00
08/25/96 GEICO/BERKSHIRE HATHAWAY INSURANCE 51.0 70.00
09126/95 SCOR U.S./SCOR SA INSURANCE 80.0 15.25
05/19/95 Bic Corp./ Consumer and stationery products 77.0 40.50
Bic SA
04/05/95 Club Med, Inc./Club Mediterranee S.A. Resort management 70.8 32.00
03/07/95 Lin Broadcasting Corp./ Communication 52.0 129.50
AT&T Co.
12/29/94 Fleet Mortgage Group Inc./ Mortgage banking 81.0 20.00
(Mortgage Assoc.)
Fleet Financial Group Inc.
11/02/94 Pacific Telecom/Pacificorp Cellular phone services 86.6 30.00
09127/94 Ogden Projects Inc./Ogden Corp. Heavy construction, waste 84.2 18.38
management
<CAPTION>
PREMIUM OFFERED OVER MARKET
---------------------------------------------
PURCHASE VALUE UNAFFECTED DAY PRIOR TO ALL-TIME
OFFERED PRICE PUB. ANC. HIGH
$MM % % %
(3)
-------------- ----------- ----------- ---------
<C> <C> <C> <C>
193.0 43.5 43.5 0.0
116.8 30.0 24.0 (8.0)
75.8 29.0 27.0 (68.0)
352.0 23.0 28.0 9.0
798.6 15.0 16.0 8.0
265.1 19.9 19.9 (26.2)
88.3 11.0 12.0 (2.0)
84.4 47.0 68.0 (65.0)
117.5 14.9 14.9 (11.1)
2,300.0 25.6 25.6 0.0
60.0 37.1 37.1 (26.5)
218.8 30.0 13.0 (1.0)
150.4 44.0 33.0 (2.0)
3,323.3 (7.0) (3.0) (11.0)
190.0 21.0 15.0 (22.0)
159.0 21.0 24.0 (5.0)
110.3 6.0 6.0 (42.0)
</TABLE>
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 41
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS (CONT'D)
1992 TO PRESENT
==============================================================
<TABLE>
<CAPTION>
INITIAL OWNERSHIP FINAL
DATE OF POSITION CONSIDERATION
PUB. ANC. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $
(1) (2)
- --------- --------------------------------- -------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
09/08/94 Contel Cellular Inc./ Cellular services, telecommunications 90.0 25.50
GTE Corp.
08/24/94 Castle & Cooke Inc./ Real estate development 83.0 15.75
Dole Foods
07/28/94 Chemical Waste Management/ Waste management 78.0 8.85
WMX Technologies
04/28/94 Enquirer/Star Group Inc./MacFadden Printing, publishing, and allied 77.0 17.50
Holdings Inc. & Boston Ventures L.P. industries
03/01/94 Foxmeyer Corp. Wholesale drug distributor 80.5 14.75
(Foxmeyer Health Corp.)/
National Intergroup Inc.
11/23/93 Southeastern Public Service Co./ Conglomerate-utilities, gas and 71.0 22.20
Triarc Co. (DWG) insurance
10/13/93 Medical Marketing Group Inc./ Marketing for pharmaceuticals 54.2 27.25
Medco Containment Services Inc.
02/22/93 United Investors Management Asset management 83.0 31.25
Company/Torchmark Corp.
08/17/92 PHLCorp, Inc./ Motivation service, trading stamps 63.0 25.78
Leucadia National Corp.
03/02/92 Grace Energy Corp./ Divested energy company 83.4 19.00
W.R. Grace & Co.
02/24/92 Unocal Exploration Corp./ Oil and gas 96.0 11.68
Unocal Corp.
<CAPTION>
PREMIUM OFFERED OVER MARKET
---------------------------------------------
PURCHASE VALUE UNAFFECTED DAY PRIOR TO ALL-TIME
OFFERED PRICE PUB. ANC. HIGH
$MM % % %
(3)
-------------- ----------- ----------- ---------
<C> <C> <C> <C>
254.2 39.0 43.0 (9.0)
81.5 52.0 35.0 0.0
397.1 4.0 11.0 (32.0)
636.0 2.0 20.0 (11.0)
82.4 (3.0) (6.0) (3.0)
69.0 (5.0) 3.0 (18.0)
157.6 (8.0) (18.0) (20.0)
216.0 13.0 16.0 0.0
140.0 28.0 12.0 24.0
80.1 60.0 31.0 0.0
116.7 18.0 21.0 (51.0)
</TABLE>
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 42
<PAGE>
PROJECT JUICE ANALYSIS OF SELECTED ACQUISITIONS OF MINORITY INTERESTS
ANALYSIS OF SELECTED MINORITY INTEREST ACQUISITIONS (CONT'D)
1992 TO PRESENT
==============================================================
<TABLE>
<CAPTION>
INITIAL OWNERSHIP FINAL PURCHASE VALUE
DATE OF POSITION CONSIDERATION OFFERED
PUB. ANC. ACQUIREE/ACQUIROR ACQUIREE'S INDUSTRY % $ $MM
(1) (2)
- -------------------------------------- -------------------------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
08/17/92 PHLCorp Inc./ Motivation service, trading stamps 63.0 25.78 140.0
Leucadia National Corp.
03/02/92 Grace Energy Corp./ Divested energy company 83.4 19.00 80.1
W.R. Grace & Co.
02/24/92 Unocal Exploration Corp./ Oil and gas 96.0 11.68 116.7
Unocal Corp.
Mean (All Transactions)
Median (All Transactions)
Mean (Insurance Transactions)
Median (Insurance Transactions)
<CAPTION>
PREMIUM OFFERED OVER MARKET
- ---------------------------------------------
UNAFFECTED INDAY PRIOR TO ALL-TIME
PRICE PUB. ANC. HIGH
% % %
(3)
----------- ----------- ---------
<C> <C> <C>
28.0 12.0 24.0
60.0 31.0 0.0
18.0 21.0 (51.0)
24.7 21.1 (19.9)
21.3 19.0 (11. 1)
24.3 22.1 (4.6)
24.3 20.3 (2.0)
</TABLE>
SOURCE MSDW research, Securities Data Company
NOTES
1. Based on level of ownership prior to back-end acquisition
2. Based on final offer price per share
3. Share price of acquiree prior to implicit or explicit market expectation of
acquisition by parent
MORGAN STANLEY DEAN WITTER 43
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
APPENDIX C
SELECTED U.S. PROPERTY AND CASUALTY PRECEDENT TRANSACTIONS
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
SELECTED U.S. PROPERTY AND CASUALTY PRECEDENT TRANSACTIONS
- --------------------------------------------------------------------------------
SELECTED U.S. PROPERTY AND CASUALTY PRECEDENT TRANSACTIONS
$ IN MM
- --------------------------------------------------------------------------------
O TRADITIONAL TRANSACTION PRECEDENT MULTIPLES ARE LESS RELEVANT IN A MINORITY
INTEREST ACQUISITION CONTEXT GIVEN THE IMPLIED CONTROL PREMIUM IN MOST M&A
TRANSACTIONS
O LIMITED SET OF RELIABLE PUBLICLY AVAILABLE INFORMATION
O A REVIEW OF PRICING TRENDS IN MAJOR RECENT PERSONAL AND COMMERCIAL LINES
TRANSACTIONS REVEALS THREE TRENDS:
- MANY "ONE-OFF" TRANSACTIONS
- HIGHER MULTIPLES PAID FOR PERSONAL LINES COMPANIES
- LOWER MULTIPLES PAID IN COMMERCIAL LINES TRANSACTIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
EQUITY VALUE AS A MULTIPLE OF SHARE PRICE
----------------------------------------- -------------
GAAP OPERATING INCOME
----------------------
AGGREGATE EQUITY 1 YR 2 YRS BOOK BOOK VAL 1 DAY 1 MONTH
ANNOUNC. VALUE VALUE LTM FWD FWD VALUE (EXFAS115) PRIOR PRIOR
DATE ACQUIROR TARGET $ $ x x x x x % %
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
2/29/00 Tangerine Reliance Surety 580.0 580.0 NA NA NA 3.58 NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
Zurich/Farmers
10/19/99 Insurance Foremost 897.0 812.0 16.6 15.0 13.9 3.02 3.06 22.2 21.9
- ---------------------------------------------------------------------------------------------------------------------------------
8/23/99 American Re United National 505.0 505.0 20.5 NA NA 1.81 NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
St. Paul Personal
7/12/99 MetLife Lines 600.0 600.0 NA NA NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
7/12/99 Royal & Sun Alliance Orion Capital Corp 1,849.9 1,390.5 NA 18.2 15.6 2.17 2.23 22.7 68.7
- ---------------------------------------------------------------------------------------------------------------------------------
6/9/99 Allstate Corp. CNA Personal Lines 1,200.0 1,200.0 20.0 NA NA 1.25 1.25 NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
2/8/99 Chubb Corporation Executive Risk 1,050.0 850.0 19.8 17.3 15.9 2.65 3.08 63.0 28.6
- ---------------------------------------------------------------------------------------------------------------------------------
Cigna's P&C
1/12/99 ACE Limited Operations 3,450.0 3,450.0 20.4 NA NA 1.41 NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
2/1/99 Liberty Mutual GRE U.S. Business 1,465.0 1,465.0 NA NA NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
Associates First
8/31/98 Capital Corp. Northland Co. 500.0 500.0 NA NA NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
6/3/98 Nationwide Mutual Allied Group 1,639.7 1,800.0 23.5 21.3 20.0 3.66 3.91 4.5 15.8
- ---------------------------------------------------------------------------------------------------------------------------------
Guardian Royal Netherlands
6/1/98 Exchange Insurance 1,150.0 1,150.0 23.7 NA NA 1.96 2.09 NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
1/19/98 St. Paul Cos. USF&G 3,500.0 2,800.0 11.0 14.2 11.9 1.49 1.60 2.6 -2.0
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/97 GE Capital Colonial Penn 1,020.0 950.0 NA NA NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------------
6/9/97 SAFECO American States 2,800.0 2,800.0 15.9 16.5 14.8 2.11 2.31 31.2 12.9
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Life &
11/29/95 Travelers Group Casualty 4,035.0 4,000.0 10.0 NA NA 1.03 1.12 17.9 7.3
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Mean (All Companies) 1,640.1 1,553.3 18.1 17.1 15.3 2.18 2.29 23.4 21.9
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Median (All Companies) 1,175.0 1,175.0 19.9 16.9 15.2 2.04 2.23 22.2 15.8
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- ---------------------------------------------------------------------------------------------------------------------------------
Mean (Personal Lines) 1,071.3 1,072.4 20.0 18.1 17.0 2.64 2.74 13.3 18.8
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Median (Personal Lines) 1,022.3 950.0 20.0 18.1 17.0 3.02 3.06 13.3 18.8
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- ---------------------------------------------------------------------------------------------------------------------------------
Mean (Commercial Lines) 1,898.6 1,771.9 17.3 16.5 14.5 2.02 2.07 27.5 23.1
- ---------------------------------------------------------------------------------------------------------------------------------
Median (Commercial Lines) 1,468.0 1,390.5 19.8 16.9 15.2 1.96 2.16 22.7 12.9
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- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE Securities Data Company, MSDW research
NOTES
1. Personal lines transactions include: Farmers/Foremost, MetLife/St. Paul
Personal Lines, Allstate/CNA Personal Lines, Nationwide/Allied, GE
Capital/Colonial Penn
2. Commercial lines transactions include: Tangerine/Reliance Surety, American
Re/United National, Royal & Sun Alliance/Orion Capital, Chubb/Executive
Risk, ACE/CIGNA P&C, Liberty Mutual/GRE, Associates/Northland,
GRE/Netherlands Insurance, SAFECO/American States, Tangerine/Aetna
MORGAN STANLEY DEAN WITTER 45
<PAGE>
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PROJECT JUICE
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APPENDIX D
ORANGE PERFORMANCE RELATIVE TO TANGERINE
- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
- --------------------------------------------------------------------------------
PROJECT JUICE
- --------------------------------------------------------------------------------
ORANGE PERFORMANCE RELATIVE TO TANGERINE
- --------------------------------------------------------------------------------
ORANGE PERFORMANCE RELATIVE TO TANGERINE
- --------------------------------------------------------------------------------
O ORANGE'S STOCK HAS CONSISTENTLY OUTPERFORMED THAT OF TANGERINE
TANGERINE VERSUS ORANGE
INDEXED PRICES
[GRAPHIC OMITTED]
47 The Value Map reflects that the market currently attaches a valuation to
Tangerine consistent with its projected ROE
Line chart of the Company's share price (index to 100) versus Citigroup's
share price (index to 100) from April 23, 1996 to March 17, 2000
RATIO OF TANGERINE SHARE PRICE TO ORANGE SHARE PRICE
[GRAPHIC OMITTED]
Line chart showing the ratio of the Company's share price to Citigroup's
share price from April 23, 1996 to March 17, 2000
MORGAN STANLEY DEAN WITTER 47
