Filed Pursuant to Rule 424(b)(2)
relating to Reg. Statement No. 33-51859
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 4, 1994)
USF&G CORPORATION [LOGO]
$150,000,000
7.0% Senior Notes Due 1998
Interest payable May 15 and November 15
ISSUE PRICE 99.863%
Interest on the 7.0% Senior Notes due 1998 (the "Notes") of USF&G Corporation
(the "Corporation") will be payable semiannually on May 15 and November 15 of
each year, commencing November 15, 1995. The Notes will mature on May 15, 1998
and are not redeemable prior to maturity. The Notes will constitute unsecured
and unsubordinated indebtedness of the Corporation and will rank on a parity
with its other unsecured and unsubordinated indebtedness. See "Description of
the Notes."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) CORPORATION(1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.863% 0.450% 99.413%
- --------------------------------------------------------------------------------
Total $149,794,500 $675,000 $149,119,500
- --------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from May 18, 1995.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $50,000 payable by the Corporation.
The Notes are offered by the several Underwriters as specified herein, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
approval of certain legal matters by counsel for the Underwriters. It is
expected that the Notes will be delivered in book-entry form only on or about
May 18, 1995 through the facilities of The Depository Trust Company against
payment therefor in immediately available funds.
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
May 11, 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
-------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to those documents identified in the accompanying Prospectus,
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1994 (File No. 1-8233) and the Corporation's Current Reports on Form 8-K, dated
January 12, 1995, January 20, 1995 and January 25, 1995 (File No. 1-8233) are
incorporated herein by reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE OFFERING......................................................................... S-3
USE OF PROCEEDS...................................................................... S-4
RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES AND RATIO OF CONSOLIDATED EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS................................. S-4
RECENT DEVELOPMENTS.................................................................. S-4
DESCRIPTION OF THE NOTES............................................................. S-5
UNDERWRITING......................................................................... S-10
EXPERTS.............................................................................. S-10
<CAPTION>
<S> <C>
PROSPECTUS
AVAILABLE INFORMATION................................................................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 2
THE CORPORATION...................................................................... 3
RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES AND RATIO OF CONSOLIDATED EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS................................. 3
USE OF PROCEEDS...................................................................... 3
DESCRIPTION OF DEBT SECURITIES....................................................... 4
DESCRIPTION OF CAPITAL STOCK......................................................... 12
DESCRIPTION OF WARRANTS.............................................................. 21
PLAN OF DISTRIBUTION................................................................. 22
VALIDITY OF SECURITIES............................................................... 23
EXPERTS.............................................................................. 23
</TABLE>
S-2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
NOTES............................... $150,000,000 aggregate principal amount of 7.0%
Senior Notes due 1998.
MATURITY............................ May 15, 1998.
INTEREST PAYMENT DATES.............. May 15 and November 15 of each year, commencing
November 15, 1995.
OPTIONAL REDEMPTION................. The Notes are not redeemable prior to maturity.
RANKING............................. The Notes will be unsecured obligations and will rank
pari passu with all other unsecured and
unsubordinated indebtedness of the Corporation. See
"Description of the Notes--General" and "--Ranking."
COVENANTS........................... The Notes contain certain covenants which limit,
among other things, the issuance, sale or other
disposition of capital stock of the principal
insurance subsidiaries of the Corporation and the
incurrence of certain liens on the common stock of
the principal insurance subsidiaries of the
Corporation. See "Description of the Notes." The
Notes do not contain any other provision which will
restrict the Corporation from incurring, assuming or
becoming liable with respect to any indebtedness or
other obligations, whether secured or unsecured, or
from paying dividends or making other distributions
on its capital stock or purchasing or redeeming its
capital stock. The Notes do not contain any financial
ratios, or specified levels of net worth or liquidity
to which the Corporation must adhere. In addition,
the Notes do not contain any provision which would
require that the Corporation repurchase or redeem or
otherwise modify the terms of any of the Notes upon a
change in control or other events involving the
Corporation which may adversely affect the
creditworthiness of the Notes.
USE OF PROCEEDS..................... The net proceeds of the Offering will be used by the
Corporation to repay or repurchase outstanding
indebtedness, including indebtedness outstanding
under the Corporation's revolving credit facility.
See "Use of Proceeds."
</TABLE>
S-3
<PAGE>
USE OF PROCEEDS
The net proceeds to the Corporation from this offering are expected to be
approximately $149 million. The net proceeds will be used by the Corporation
from time to time to repay or repurchase outstanding indebtedness, which may
include a portion of the $215 million indebtedness outstanding under the
Corporation's revolving credit facility. Indebtedness under the revolving credit
facility bears interest at variable rates (7.11% as of May 11, 1995), and the
revolving credit facility expires on September 30, 1997. Morgan Guaranty Trust
Company of New York, an affiliate of J.P. Morgan Securities Inc., is a lender
under the revolving credit facility and is expected to receive up to
approximately $15 million of the net proceeds from this offering as a result of
the repayment of a portion of the revolving credit facility. See "Underwriting."
RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES AND
RATIO OF CONSOLIDATED EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
On a consolidated basis, the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends include the
earnings and fixed charges of the Corporation and its subsidiaries.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
<S> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges.......................... (A) (B) 1.4 2.5 0.7 (C)
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends..................... (A) (B) 0.8 1.4 0.6 (C)
</TABLE>
- ------------
(A) The Corporation had a net loss for the year ended December 31, 1990, and
earnings were inadequate to cover fixed charges and combined fixed charges
and preferred stock dividends by $435 million and $452 million,
respectively, for the year ended December 31, 1990.
(B) The Corporation had a net loss for the year ended December 31, 1991, and
earnings were inadequate to cover fixed charges and combined fixed charges
and preferred stock dividends by $149 million and $186 million,
respectively, for the year ended December 31, 1991.
(C) The Corporation's earnings were inadequate to cover fixed charges and
combined fixed charges and preferred stock dividends by $49 million and $95
million, respectively, for the year ended December 31, 1994. The ratio of
consolidated earnings before facilities exit costs to fixed charges was 3.0
in 1994, and the ratio of consolidated earnings before facilities exit costs
to combined fixed charges and preferred stock dividends was 1.8 in 1994.
The ratios were determined by dividing consolidated earnings by total fixed
charges and total fixed charges and preferred stock dividends, respectively.
Earnings consist of income from continuing operations before considering income
taxes, the cumulative effect of accounting changes, and fixed charges. Fixed
charges consist of interest and that portion of rentals which is deemed to be an
appropriate interest factor.
RECENT DEVELOPMENTS
Beginning in the third quarter of 1994 and ending in the first quarter of
1995, the Corporation called for redemption all of the 3.8 million outstanding
shares of its $5 Series C Cumulative Convertible Preferred Stock (the "Series C
Preferred Stock"). As a result of the calls, over 93% of the Series C Preferred
Stock converted into 14.7 million shares of USF&G Common Stock in accordance
with the terms of the Series C Preferred Stock. Pursuant to arrangements the
Corporation had previously entered into with an unaffiliated financial
institution, the Corporation sold 716,600 shares of the Corporation's Common
Stock to such institution to fund a portion of the cash redemptions resulting
from those calls. In addition to the foregoing,
S-4
<PAGE>
the Corporation also recently filed Articles Supplementary with the Maryland
State Department of Assessments and Taxation increasing the number of the
Corporation's shares classified as Junior Participating Preferred Stock from
120,000,000 shares to 240,000,000 shares.
In December 1994, the Corporation entered into a definitive agreement to
acquire all of the outstanding stock of Victoria Financial Corporation
("Victoria") for approximately 4.1 million shares or approximately $55.3
million, of the Corporation's common stock, depending on the average market
price of the Corporation's common stock over a specified period preceding the
closing of the transaction. Victoria is an insurance holding company which
specializes in nonstandard auto coverage. The Victoria transaction is expected
to close in the second quarter of 1995.
In April 1995, the Corporation acquired all of the outstanding equity of
Discover Re Managers, Inc. ("Discover Re") for approximately 5.4 million shares,
or approximately $78.5 million, of the Corporation's common stock. Discover Re
provides insurance, reinsurance and related services to the alternative risk
transfer market.
DESCRIPTION OF THE NOTES
The Notes are to be issued under an Indenture dated as of January 28, 1994
(the "Indenture") entered into by the Corporation and Signet Trust Company, as
trustee (the "Trustee"). The following summaries of certain provisions of the
Notes and the Indenture, a copy of which is filed as an exhibit to the
Registration Statement of which the Prospectus is a part, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Notes and the Indenture, including the
definitions therein of certain terms. Capitalized terms used herein have the
meanings attributed to them in the Notes or the Indenture (unless otherwise
defined herein).
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Debt Securities and the
Indenture set forth in the Prospectus, to which reference is hereby made.
GENERAL
The Notes will be limited to $150,000,000 aggregate principal amount and
will mature on May 15, 1998. The Notes will bear interest at the rate set forth
on the front cover of this Prospectus Supplement from May 18, 1995, payable
semi-annually on May 15 and November 15 of each year, commencing November 15,
1995, to the registered holders at the close of business on the May 1 or
November 1 preceding such May 15 or November 1, whether or not such day is a
business day. Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
Principal of and interest on the Notes is payable at the office or agency of
the Corporation maintained for such purposes (which initially is the Trustee);
provided, however, that payment of interest may also be made at the option of
the Corporation by check mailed to the Person entitled thereto as shown on the
security register. The Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and any integral multiple thereof.
No service charge will be made for any registration of transfer or exchange of
Notes, except in certain circumstances for any tax or other governmental charge
that may be imposed in connection therewith.
RANKING
The Notes will be general unsecured obligations and will rank pari passu
with all other unsecured and unsubordinated senior indebtedness of the
Corporation.
S-5
<PAGE>
The Corporation is a holding company whose principal asset is the stock of
United States Fidelity and Guaranty Company ("USF&G Company"), a
property/casualty insurer. USF&G Company, in turn, owns the stock of Fidelity
and Guaranty Life Insurance Company ("F&G Life"), a life insurer, and the
Corporation's other principal subsidiaries. Since the Corporation is a holding
company, its rights and the rights of its creditors, including the holders of
the Notes, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization generally will be subject to the prior claims of
the subsidiary's creditors (including, in the case of an insurance subsidiary,
its policyholders). In addition, there are certain regulatory limitations on the
payment of dividends and on loans and other transfers of funds to the
Corporation by its subsidiaries.
Because the operations of the Corporation are conducted through its
subsidiaries, the Corporation is dependent on dividends from its subsidiaries to
meet its obligations for payment of interest and principal on outstanding debt
obligations, dividends to shareholders and corporate expenses. Under the
Maryland Insurance Code, a Maryland insurance subsidiary such as USF&G Company
must provide the Maryland Insurance Commissioner (the "Insurance Commissioner")
with not less than thirty days' prior written notice before payment of an
"extraordinary dividend" to its holding company. "Extraordinary dividends" are
dividends which, together with any dividends paid during the immediately
preceding twelve month period, would be in excess of 10% of the subsidiary's
statutory policyholders' surplus as of the prior calendar year end.
Extraordinary dividends may not be paid until such thirty day period has expired
and the Insurance Commissioner has not disapproved the payment, or the Insurance
Commissioner has approved the payment within such period. In addition, ten days'
prior notice of any dividend must be given to the Insurance Commissioner prior
to payment, and the Insurance Commissioner has the right to prevent payment of
such dividend if it is determined that such payment could impair the insurer's
surplus or financial condition. During 1995, approximately $157 million in
dividends are available for payment to the Corporation from its insurance
subsidiaries without providing the notice required for extraordinary dividends.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to maturity.
SINKING FUND
There will be no sinking fund payments for the Notes.
COVENANTS
The Notes contain, among others, the following covenants:
Limitation on Issuance or Disposition of Stock of Principal Insurance
Subsidiaries. The Corporation will not, nor will it permit any Principal
Insurance Subsidiary to, issue, sell or otherwise dispose of any shares of
Capital Stock (other than non-voting Preferred Stock) of any Principal Insurance
Subsidiary, except for (i) directors qualifying shares; (ii) sales or other
dispositions to the Corporation or to one or more Principal Insurance
Subsidiaries; (iii) the disposition of all or any part of the Capital Stock of
any Principal Insurance Subsidiary for consideration which is at least equal to
the fair value of such Capital Stock as determined by the Corporation's board of
directors (acting in good faith); or (iv) any issuance, sale, assignment,
transfer or other disposition made in compliance with an order of a court or
regulatory authority of competent jurisdiction, other than an order issued at
the request of the Corporation or any Principal Insurance Subsidiary.
Limitation on Liens. As long as any of the Notes remain outstanding, the
Corporation will not, and will not permit any Principal Insurance Subsidiary to,
issue, assume, incur or guarantee any indebtedness for borrowed money secured by
a mortgage, pledge, lien or other encumbrance, directly or indirectly, on any of
the Common Stock of a Principal Insurance Subsidiary, which Common Stock is
owned by the Corporation
S-6
<PAGE>
or by any Principal Insurance Subsidiary, unless the Notes and, if the
Corporation so elects, any other indebtedness of the Corporation ranking on a
parity with the Notes, shall be secured equally and ratably with, or prior to,
such secured indebtedness for borrowed money so long as it is outstanding.
"Principal Insurance Subsidiary" means each of USF&G Company and F&G Life,
so long as it remains a Subsidiary, or any other Subsidiary of the Corporation
which shall hereafter succeed by merger or otherwise to a major part of the
business of one or more of the Principal Insurance Subsidiaries. The decision as
to whether a Subsidiary shall have succeeded to a major part of the business of
one or more of the Principal Insurance Subsidiaries shall be made in good faith
by the Board of Directors of the Corporation or a committee thereof by the
adoption of a resolution so stating, and the Corporation shall within 30 days of
the date of the adoption of such resolution deliver to the Trustee a copy
thereof, certified by the Corporate Secretary or an Assistant Corporate
Secretary of the Corporation.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock.
"Common Stock" means, with respect to any Principal Insurance Subsidiary,
stock of any class, however designated, except stock which is non-participating
beyond fixed dividend and liquidation preferences and the holders of which have
either no voting rights or limited voting rights entitling them, only in the
case of certain contingencies, to elect less than a majority of the directors
(or persons performing similar functions) of such Principal Insurance
Subsidiary, and shall include securities of any class, however designated, which
are convertible into such Common Stock.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
Neither the Notes nor the Indenture contain any provisions other than the
foregoing which will restrict the Corporation from incurring, assuming or
becoming liable with respect to any indebtedness or other obligations, whether
secured or unsecured, or from paying dividends or making other distributions on
its capital stock or purchasing or redeeming its capital stock. Neither the
Notes nor the Indenture contain any financial ratios, or specified levels of net
worth or liquidity to which the Corporation must adhere. In addition, neither
the Notes nor the Indenture contain any provision which would require that the
Corporation repurchase or redeem or otherwise modify the terms of any of the
Notes upon a change in control or other events involving the Corporation which
may adversely affect the creditworthiness of the Notes.
EVENTS OF DEFAULT
The Notes shall be subject to the Events of Default set forth in the
Prospectus, except that it shall be an Event of Default with respect to the
Notes in the event of the due acceleration (which acceleration shall not have
been rescinded within 30 days after written notice to the Corporation) of any
indebtedness for borrowed money in a principal amount in excess of $10,000,000
($25,000,000 in the case of Non-Recourse Indebtedness) for which the Corporation
or any Principal Insurance Subsidiary is liable, or a default by the Corporation
or any Principal Insurance Subsidiary in the payment at final maturity of
outstanding indebtedness for borrowed money in a principal amount in excess of
$10,000,000 ($25,000,000 in the case of Non-Recourse Indebtedness), unless such
acceleration or default at maturity shall be remedied or cured by the
Corporation or any Principal Insurance Subsidiary or rescinded, annulled or
waived by the holders of such indebtedness, in which case such acceleration or
default at maturity shall not constitute an Event of Default under this
provision and any acceleration relating thereto shall be rescinded.
"Non-Recourse Indebtedness" means any indebtedness for borrowed money for which
the liability and obligation of the Corporation and any Principal Insurance
Subsidiary is limited solely to property or assets pledged to secure such
indebtedness for borrowed money, without any liability or obligation, direct or
indirect, on the part of
S-7
<PAGE>
the Corporation or any Principal Insurance Subsidiary for any deficiency in the
amount realized from such property or assets.
BOOK-ENTRY, DELIVERY AND FORM
The Notes initially will be represented by one or more global securities
(the "Global Securities") deposited with The Depository Trust Company ("DTC")
and registered in the name of a nominee of DTC. Except as set forth below, the
Notes will be available for purchase in denominations of $1,000 principal amount
at maturity, and integral multiples thereof, in book-entry form only.
Upon the issuance of the Global Securities, the depository for such Global
Securities (the "Depository") or its nominee will credit on its book-entry
registration and transfer system the respective principal amounts of the Notes
represented by such Global Securities to the accounts of the persons that have
accounts with such Depository (the "Participants"). Such accounts shall be
designated by the Underwriters of the Notes. Ownership of beneficial interests
in such Global Securities will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the Depository or its
nominee (with respect to interests of Participants) and records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to own, pledge or transfer beneficial interests in a Global Security.
Unless and until certificated Notes are issued under the limited
circumstances described below, no beneficial owner of a Note shall be entitled
to receive a definitive certificate representing a Note. So long as the
Depository or its nominee is the registered owner of all the Global Securities,
the Depository or such nominee, as the case may be, will be considered to be the
sole owner or holder of the Notes for all purposes of the Indenture. Unless and
until exchanged in whole or in part for the Notes represented thereby, the
Global Securities may not be transferred except in their entirety by the
Depository to a nominee of the Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository or by the Depository or
any nominee to a successor depository or any nominee of such successor.
So long as the Notes are represented by the Global Securities, any payments
in respect of the Notes will be made to the Depository or its nominee, as the
registered owner of the Global Securities. None of the Corporation, the Trustee,
any Paying Agent or the Registrar will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Securities for the Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
If the Depository is at any time unwilling, unable or ineligible to continue
as Depository and a successor Depository is not appointed by the Corporation
within 90 days, the Corporation will issue individual Notes in definitive form
in exchange for the Global Securities representing the Notes. In addition, the
Corporation may at any time and in its sole discretion determine not to have the
Notes represented by Global Securities and, in such event, will issue individual
Notes in definitive form in exchange for the Global Securities. In either
instance, the Corporation will issue Notes in definitive form equal in aggregate
principal amount to the Global Securities, in such names and in such principal
amounts as the Depository shall request. Notes so issued in definitive form will
be issued in denominations of $1,000 principal amount at maturity and integral
multiples thereof and will be issued in registered form only, without coupons.
DTC has advised the Corporation and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities of its Participants
and to facilitate the clearance and settlement of securities transactions among
its Participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates.
S-8
<PAGE>
DTC's Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of which (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
CONCERNING THE TRUSTEE
Signet Trust Company is the Trustee under the Indenture and has been
appointed by the Corporation as Registrar and Paying Agent with respect to the
Notes.
S-9
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Corporation has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has severally
agreed to purchase, the principal amount of the Notes set forth opposite its
name below.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------- ----------------
<S> <C>
J. P. Morgan Securities Inc................................................. $ 50,000,000
Goldman, Sachs & Co. ....................................................... 50,000,000
Lehman Brothers Inc. ....................................................... 50,000,000
----------------
Total............................................................... $150,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all of the Notes if any are purchased.
The Underwriters have advised the Corporation that they propose initially to
offer the Notes to the public at the offering price set forth on the cover page
of this Prospectus Supplement, and to certain dealers at such price less a
concession not in excess of .30% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of .20% of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Underwriters receive customary fees for ordinary brokerage transactions
with the Corporation and its affiliates. The Underwriters and their affiliates
have performed investment and commercial banking services in the ordinary course
of their respective businesses for the Corporation and its affiliates in the
past, for which they have received customary compensation, and may continue to
do so in the future. Morgan Guaranty Trust Company of New York, an affiliate of
J. P. Morgan Securities Inc., is a lender under the Corporation's revolving
credit facility and is expected to receive up to approximately $15 million of
the net proceeds from this offering as a result of the repayment of a portion of
the revolving credit facility.
The Corporation does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Notes. The Underwriters are not obligated,
however, to make a market in the Notes and may discontinue market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Corporation has agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
EXPERTS
The consolidated financial statements and schedules of the Corporation
incorporated herein by reference to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1994, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedules are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
S-10
<PAGE>
$600,000,000
[USF&G LOGO] USF&G CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
-------------------
USF&G Corporation (the "Corporation") may from time to time offer, together
or separately, its (i) debt securities (the "Debt Securities") which may be
either senior debt securities (the "Senior Debt Securities") or subordinated
debt securities (the "Subordinated Debt Securities"), (ii) shares of its
preferred stock, $50.00 par value per share (the "Preferred Stock"), which may
be issued in the form of Depositary Shares evidenced by Depositary Receipts,
(iii) shares of its common stock, $2.50 par value per share (the "Common
Stock"), and (iv) warrants to purchase securities of the Corporation as shall be
designated by the Corporation at the time of the offering (the "Warrants"), in
amounts, at prices and on terms to be determined at the time of the offering.
The Debt Securities, Preferred Stock, Common Stock and Warrants are collectively
called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $600,000,000 aggregate public
offering price (or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Corporation). Certain specific terms of
the particular Securities in respect of which this Prospectus is being delivered
are set forth in the accompanying Prospectus Supplement (the "Prospectus
Supplement"), including, where applicable, in the case of Debt Securities, the
specific title, aggregate principal amount, the denomination, whether such Debt
Securities are secured or unsecured obligations, maturity, premium, if any, the
interest rate (which may be fixed, floating or adjustable), the time and method
of calculating payment of interest, if any, the place or places where principal
of (and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities will be payable, any terms of redemption at the
option of the Corporation or the holder, any sinking fund provisions, terms for
any conversion or exchange into other Securities or property, the initial public
offering price and other special terms, in the case of Preferred Stock, the
specific title, the aggregate number of shares offered, any dividend (including
the method of calculating payment of dividends), liquidation, redemption, voting
and other rights, any terms for any conversion or exchange into other
Securities, the initial public offering price and other terms, and, in the case
of Warrants, the duration, purchase price, exercise price and detachability of
such Warrants and a description of the Securities for which each Warrant is
exercisable. If so specified in the applicable Prospectus Supplement, Debt
Securities of a series may be issued in whole or in part in the form of one or
more temporary or permanent global securities (the "Global Securities").
The Corporation's Common Stock is listed on the New York Stock Exchange
under the trading symbol "FG." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance. The Corporation's Common Stock is also listed on the Pacific Stock
Exchange, the London Stock Exchange and the Swiss Exchanges in Basle, Geneva and
Zurich, Switzerland.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Corporation. The Subordinated
Debt Securities, when issued, will be subordinated in right of payment to all
Senior Debt (as defined herein) of the Corporation.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable to the Securities
offered.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Corporation or any dealers or underwriters are
involved in the sale of the Securities in respect of which this Prospectus is
being delivered, the names of such agents, dealers or underwriters and any
applicable commissions or discounts are set forth in or may be calculated from
the Prospectus Supplement with respect to such Securities.
-------------------
The date of this Prospectus is February 4, 1994.
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy or information statements and other information
with the Securities and Exchange Commission (the "Commission"). This Prospectus
contains information concerning the Corporation but does not contain all of the
information set forth in the Registration Statement and exhibits thereto which
the Corporation has filed with the Commission under the Securities Act of 1933
(the "Securities Act"). Such reports, proxy or information statements,
Registration Statement and exhibits and other information filed by the
Corporation with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth St.,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at 7
World Trade Center, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
reports, proxy or information statements, Registration Statement and exhibits
and other information concerning the Corporation can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, and the Pacific Stock Exchange, Inc., 301 Pine Street, San
Francisco, California 94104 and 233 South Beaudry Avenue, Los Angeles,
California 90012.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Corporation hereby incorporates by reference in this Prospectus its (i)
Annual Report on Form 10-K for the year ended December 31, 1992, as amended on
July 13, 1993, under File No. 1-8233, (ii) Quarterly Report on Form 10-Q for the
three months ended March 31, 1993, under File No. 1-8233, (iii) Quarterly Report
on Form 10-Q for the six months ended June 30, 1993, under File No. 1-8233, (iv)
Quarterly Report on Form 10-Q for the nine months ended September 30, 1993,
under File No. 1-8233, and (v) the description of the Corporation's Common Stock
and Shareholder Rights Plan contained in its Registration Statements filed
pursuant to Section 12 of the Exchange Act and any amendment or report filed for
the purpose of updating those descriptions.
All documents filed by the Corporation pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and made a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other document subsequently filed with the
Commission which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: USF&G Corporation, 100 Light Street, Baltimore, Maryland 21202,
Attention: John F. Hoffen, Jr., Secretary, telephone (410) 547-3000.
2
<PAGE>
THE CORPORATION
USF&G Corporation (the "Corporation") is a holding company whose principal
subsidiaries are engaged in writing property/casualty insurance and life
insurance/annuities. Property/casualty insurance is written primarily by United
States Fidelity and Guaranty Company, founded in 1896, and is sold through
independent agents supported by the company's underwriting, marketing,
administrative and claim services offices located throughout the United States.
Life insurance and annuities are written primarily by Fidelity and Guaranty Life
Insurance Company, founded in 1959, and are sold throughout the United States
through independent agents. The Corporation is incorporated in Maryland, and its
principal executive office is located at 100 Light Street, Baltimore, Maryland
21202, telephone (410) 547-3000.
RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES AND RATIO
OF CONSOLIDATED EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
On a consolidated basis, the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends include the
earnings and fixed charges of the Corporation and its subsidiaries.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------
1993 1992 1992 1991 1990 1989 1988
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.... 2.3 1.3 1.4 (A) (B) 2.9 5.1
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends............................. 1.3 .8 .8 (A) (B) 2.4 4.0
</TABLE>
- ------------
<TABLE>
<S> <C>
(A) The Corporation had a net loss for the year ended December 31, 1991, and earnings were
inadequate to cover fixed charges and combined fixed charges and preferred stock
dividends by $149 million and $186 million, respectively, for the year ended December
31, 1991.
(B) The Corporation had a net loss for the year ended December 31, 1990, and earnings were
inadequate to cover fixed charges and combined fixed charges and preferred stock
dividends by $435 million and $452 million, respectively, for the year ended December
31, 1990.
</TABLE>
The ratios were determined by dividing consolidated earnings by total fixed
charges and total fixed charges and preferred stock dividends, respectively.
Earnings consist of income from continuing operations before considering income
taxes, the cumulative effect of accounting changes, and fixed charges. Fixed
charges consist of interest, that portion of rentals which is deemed to be an
appropriate interest factor and preferred stock dividend requirements.
USE OF PROCEEDS
Except as otherwise stated in a Prospectus Supplement, the net proceeds from
the sale of the Securities will be added to the general funds of the Corporation
and will be available for general corporate purposes, including the repayment of
indebtedness.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture dated as of
January 28, 1994 (the "Senior Indenture"), between the Corporation and Signet
Trust Company, as trustee. The Subordinated Debt Securities are to be issued
under a separate Indenture dated as of January 28, 1994 (the "Subordinated
Indenture"), between the Corporation and Chemical Bank, as trustee. The Senior
Indenture and the Subordinated Indenture are sometimes referred to collectively
as the "Indentures." Copies of the Senior Indenture and the Subordinated
Indenture have been filed as exhibits to the Registration Statement. Each of
Signet Trust Company and Chemical Bank is hereinafter referred to as a "Trustee"
and collectively, as the "Trustees." The following summaries of certain
provisions of the Senior Debt Securities, the Subordinated Debt Securities and
the Indentures do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indentures applicable to a particular series of Debt Securities, including the
definitions therein of certain terms. Wherever particular Sections, Articles or
defined terms of the Indentures are referred to, it is intended that such
Sections, Articles or defined terms shall be incorporated herein by reference.
Article and Section references used herein are references to the applicable
Indenture. Capitalized terms not otherwise defined herein shall have the meaning
given in the Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more series and
may be denominated and payable in foreign currencies or units based on or
relating to foreign currencies. Unless otherwise specified in the Prospectus
Supplement, the Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Corporation and will rank equally and ratably
with all other unsecured and unsubordinated indebtedness of the Corporation. The
Subordinated Debt Securities when issued will be subordinated in right of
payment to the prior payment in full of all Senior Debt (as defined below) of
the Corporation, as described under "Subordination of Subordinated Debt
Securities" and in the Prospectus Supplement applicable to an offering of
Subordinated Debt Securities.
Reference is made to the Prospectus Supplement relating to the particular
Debt Securities offered thereby (the "Offered Debt Securities") which shall set
forth whether the Offered Debt Securities shall be Senior Debt Securities or
Subordinated Debt Securities, and shall further set forth the following terms of
the Offered Debt Securities: (i) the title of the Offered Debt Securities; (ii)
any limit on the aggregate principal amount of the Offered Debt Securities;
(iii) the Person to whom any interest on the Offered Debt Securities will be
payable, if other than the Person in whose name such Offered Debt Securities are
registered on any Regular Record Date; (iv) the date or dates on which the
principal of the Offered Debt Securities will be payable; (v) the rate or rates
per annum (which may be fixed, floating or adjustable) at which the Offered Debt
Securities will bear interest, if any, or the formula pursuant to which such
rate or rates shall be determined, the date or dates from which such interest
will accrue and the dates on which such interest, if any, will be payable and
the Regular Record Dates for such interest payment dates; (vi) whether the
Offered Debt Securities will be secured; (vii) the place or places where
principal of (and premium, if any) and interest, if any, on Offered Debt
Securities will be payable; (viii) if applicable, the price at which, the
periods within which and the terms and conditions upon which the Offered Debt
4
<PAGE>
Securities may he redeemed at the option of the Corporation pursuant to a
sinking fund or otherwise; (ix) if applicable, any obligation of the Corporation
to redeem or purchase Offered Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the terms and conditions
upon which the Offered Debt Securities will be redeemed or purchased, in whole
or in part; (x) if applicable, the terms of any right to convert or exchange the
Offered Debt Securities into other securities or property of the Corporation;
(xi) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which the Offered Debt Securities will be issuable; (xii)
the currency or currencies, including composite currencies or currency units, in
which payment of the principal of (or premium, if any) or interest, if any, on
any of the Offered Debt Securities will be payable if other than the currency of
the United States of America; (xiii) if the amount of payments of principal of
(or premium, if any) or interest, if any, on the Offered Debt Securities may be
determined with reference to one or more indices, the manner in which such
amounts will be determined; (xiv) if the principal of (or premium, if any) or
interest, if any, on any of the Offered Debt Securities of the series is to be
payable, at the election of the Corporation or a Holder thereof, in one or more
currencies, including composite currencies, or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies, including composite currencies, or currency units in which payment
of the principal of (or premium, if any) or interest, if any, on Securities of
such series as to which such election is made will be payable, and the periods
within which and the terms and conditions upon which such election is to be
made; (xv) the portion of the principal amount of the Offered Debt Securities,
if other than the principal amount thereof, payable upon acceleration of
maturity thereof; (xvi) whether all or any part of the Offered Debt Securities
will be issued in the form of a Global Security or Securities and, if so, the
depositary for, and other terms relating to, such Global Security or Securities;
(xvii) any event or events of default applicable with respect to the Offered
Debt Securities in addition to those provided in the Indentures; (xviii) any
other covenant or warranty included for the benefit of the Offered Debt
Securities in addition to (and not inconsistent with) those included in the
Indentures for the benefit of Debt Securities of all series, or any other
covenant or warranty included for the benefit of the Offered Debt Securities in
lieu of any covenant or warranty included in the Indentures for the benefit of
Debt Securities of all series, or any provision that any covenant or warranty
included in the Indentures for the benefit of Debt Securities of all series
shall not be for the benefit of the Offered Debt Securities, or any combination
of such covenants, warranties or provisions; (xix) any restriction or condition
on the transferability of the Offered Debt Securities; (xx) any authenticating
or paying agents, registrars, conversion agents or any other agents with respect
to the Offered Debt Securities; and (xxi) any other terms of the Offered Debt
Securities. (Indentures, Section 301) Debt Securities may also be issued under
the Indentures upon the exercise of Warrants. See "Description of Warrants."
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities are to be issued as registered securities without
coupons in denominations of $1,000 or any integral multiple of $1,000.
(Indentures, Section 302) No service charge will be made for any transfer or
exchange of such Offered Debt Securities, but the Corporation or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Indentures, Section 305)
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other considerations
applicable thereto will be described in the Prospectus Supplement relating
hereto.
Since the Corporation is a holding company, the rights of the Corporation,
and hence the right of creditors of the Corporation (including the Holders of
Debt Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
5
<PAGE>
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Corporation itself as a creditor of the
subsidiary may be recognized.
The Indentures do not contain any provisions that limit the ability of the
Corporation or any Subsidiary to incur indebtedness or that afford Holders of
the Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Corporation or any Subsidiary.
EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise specified in the Prospectus Supplement, the following
events are defined in the Indentures as "Events of Default" with respect to Debt
Securities of any series: (i) failure to pay principal (including any sinking
fund payment) of, or premium (if any) on, any Debt Security of that series when
due (in the case of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions); (ii) failure to pay interest, if
any, on any Debt Security of that series when due and such failure continues for
a period of 30 days; (iii) failure by the Corporation to perform in any material
respect any other covenant in the Indentures (other than a covenant included in
the Indentures solely for the benefit of a series of Debt Securities other than
that series) which continues for a period of 90 days after written notice to the
Corporation; (iv) due acceleration (which acceleration shall not have been
rescinded within 30 days after written notice to the Corporation) of any
indebtedness for borrowed money in a principal amount in excess of $50,000,000
for which the Corporation or any Principal Insurance Subsidiary is liable,
including Debt Securities of another series, or a default by the Corporation or
any Principal Insurance Subsidiary in the payment at final maturity of
outstanding indebtedness for borrowed money in a principal amount in excess of
$50,000,000 unless such acceleration or default at maturity shall be remedied or
cured by the Corporation or any Principal Insurance Subsidiary or rescinded,
annulled or waived by the holders of such indebtedness, in which case such
acceleration or default at maturity shall not constitute an Event of Default
under this provision and any acceleration relating thereto shall be rescinded;
and (v) certain events of insolvency, reorganization, receivership or
liquidation of the Corporation or any Principal Insurance Subsidiary.
(Indentures, Section 501)
No Event of Default with respect to Debt Securities of a particular series
shall necessarily constitute an Event of Default with respect to Debt Securities
of any other series. If an Event of Default with respect to Debt Securities of
any series at the time Outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
Debt Securities of that series to be due and payable immediately; provided,
however, that under certain circumstances the Holders of a majority in aggregate
principal amount of Outstanding Debt Securities of that series may rescind or
annul such declaration and its consequences. (Indentures, Section 502)
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to the principal amount of such Original Issue
Discount Securities due on acceleration upon the occurrence of an Event of
Default and the continuation thereof.
The Indentures provide that the applicable Trustee may withhold notice to
the Holders of the Debt Securities of any default (except in payment of
principal (or premium, if any) or interest, if any) if it considers it in the
interest of the Holders of the Debt Securities to do so. (Indentures, Section
502)
The Corporation will be required to furnish to the Trustees annually a
statement by certain officers of the Corporation as to the compliance with all
conditions and covenants of the Indentures. (Indentures, Section 1004)
6
<PAGE>
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series affected will have the right, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee or exercising any trust or
power conferred on such applicable Trustee with respect to the Debt Securities
of such series, and to waive certain defaults. (Indentures, Sections 512 and
513)
The Indentures provide that, in case an Event of Default shall occur and be
continuing, the applicable Trustee shall exercise such of its rights and powers
under the Indentures, and use the same degree of care and skill in its exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs. (Indentures, Section 601) Subject to such provisions, the
applicable Trustee will be under no obligation to exercise any of its rights or
powers under the Indentures at the request of any of the Holders of Debt
Securities unless they shall have offered to such Trustee security or indemnity
in form and substance reasonably satisfactory to such Trustee against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request. (Indentures, Section 603)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures or for any remedy thereunder,
unless such Holder shall have previously given to the applicable Trustee written
notice of a continuing Event of Default and unless also the Holders of at least
25% in aggregate principal amount of the Outstanding Debt Securities of the same
series shall have made written request, and offered security or indemnity to
such Trustee in form and substance reasonably satisfactory to such Trustee, to
institute such proceeding as trustee, and such Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of the same series a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days. (Indentures,
Section 507) However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the principal of (or
premium, if any) or interest, if any, on such Debt Security on or after the
respective due dates expressed in such Debt Security, or of the right to convert
such Debt Security in accordance with the Indentures (if applicable).
(Indentures, Section 508)
MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the
Corporation and the applicable Trustee, with the consent of the Holders of not
less than a majority of aggregate principal amount of each series of the
Outstanding Debt Securities issued under the Indentures which is affected by the
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of each Holder of such Debt Security affected
thereby: (i) change the Stated Maturity of the principal of (or premium, if any)
or any installment of principal or interest, if any, on any such Debt Security;
(ii) reduce the principal amount of (or premium, if any) or the interest rate,
if any, on any such Debt Security or the principal amount due upon acceleration
of an Original Issue Discount Security; (iii) change the place or currency of
payment of principal of (or premium, if any) or the interest, if any, on any
such Debt Security; (iv) impair the right to institute suit for the enforcement
of any such payment on or with respect to any such Debt Security; (v) adversely
change the right to convert or exchange, including decreasing the conversion
rate or increasing the conversion price of, such Debt Security (if applicable);
(vi) reduce the percentage of Holders of Debt Securities necessary to modify or
amend the Indentures; (vii) in the case of the Subordinated Indenture, modify
the subordination provisions in a manner adverse to the holders of the
Subordinated Debt Securities; or (viii) modify the foregoing requirements or
reduce the percentage of Outstanding Debt Securities necessary to waive
compliance with certain provisions of the Indentures or for waiver of certain
defaults. (Indentures, Section 902)
The holders of at least a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Corporation with certain restrictive provisions
of the Indentures and waive any past default under the Indentures, except a
default in the payment of principal, premium or interest or in the performance
of certain covenants. (Indentures, Sections 907 and 513)
7
<PAGE>
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that the Corporation may elect either (A) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (including, in the case of Subordinated Debt Securities, the
provisions described under "Subordination of Subordinated Debt Securities"
herein and except for the obligations to exchange or register the transfer of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities, and to hold monies for payments in trust) ("defeasance"), or (B) to
be released from its obligations with respect to such Debt Securities concerning
the restrictions described under "Consolidation, Merger and Sale of Assets" and
any other covenants applicable to such Debt Securities (including, in the case
of Subordinated Debt Securities, the provisions described under "Subordination
of Subordinated Debt Securities" herein), which are subject to covenant
defeasance ("covenant defeasance"), and the occurrence of an event described and
notice thereof in clauses (iii) and (iv) under "Events of Default and Notice
Thereof" (with respect to covenants subject to covenant defeasance) shall no
longer be an Event of Default, in each case, upon the irrevocable deposit with
the applicable Trustee (or other qualifying trustee), in trust for such purpose,
of money, and/or U.S. Government Obligations (or Foreign Government Obligations
in the case of Debt Securities denominated in foreign currencies) which through
the payment of principal and interest in accordance with their terms will
provide money in an amount sufficient to pay the principal of (and premium, if
any) and interest, if any, on such Debt Securities, and any mandatory sinking
fund or analogous payments thereon, on the scheduled due dates therefor. Such a
trust may only be established if, among other things, (i) the Corporation has
delivered to the applicable Trustee an opinion of counsel (as specified in the
Indentures) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, (ii) no
Event of Default or event which with the giving of notice or lapse of time, or
both, would become an Event of Default under the Indenture shall have occurred
and be continuing on the date of such deposit, and (iii) in the case of
Subordinated Debt Securities, (x) no default in the payment of principal of (or
premium, if any) or interest, if any, on any Senior Debt beyond any applicable
grace period shall have occurred and be continuing, and (y) no other default
with respect to any Senior Debt shall have occurred and be continuing and shall
have resulted in the acceleration of such Senior Debt. (Indentures, Article
Thirteen)
The Corporation may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Corporation exercises its defeasance option, payment of such Debt
Securities may not be accelerated because of an Event of Default. If the
Corporation exercises its covenant defeasance option, payment of such Debt
Securities may not be accelerated by reference to the covenants noted under
clause (B) above. In the event the Corporation omits to comply with its
remaining obligations with respect to such Debt Securities under the Indentures
after exercising its covenant defeasance option and such Debt Securities are
declared due and payable because of the occurrence of any Event of Default, the
amount of money and U.S. Government Obligations (or Foreign Government
Obligations in the case of Debt Securities denominated in foreign currencies) on
deposit with the applicable Trustee may be insufficient to pay amounts due on
the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default. However, the Corporation will remain liable in
respect of such payments. (Indentures, Article Thirteen)
LIMITATION ON LIENS
As long as any of the Debt Securities remains outstanding, the Corporation
will not, and will not permit any Principal Insurance Subsidiary to, issue,
assume, incur or guarantee any indebtedness
8
<PAGE>
for borrowed money secured by a mortgage, pledge, lien or other encumbrance,
directly or indirectly, on any of the Common Stock of a Principal Insurance
Subsidiary, which Common Stock is owned by the Corporation or by any Principal
Insurance Subsidiary, unless the Debt Securities and, if the Corporation so
elects, any other indebtedness of the Corporation ranking on a parity with the
Debt Securities, shall be secured equally and ratably with, or prior to, such
secured indebtedness for borrowed money so long as it is outstanding.
(Indentures, Section 1005)
"Principal Insurance Subsidiary" means each of United States Fidelity and
Guaranty Company and Fidelity and Guaranty Life Insurance Company, so long as it
remains a Subsidiary, or any other Subsidiary of the Corporation which shall
hereafter succeed by merger or otherwise to a major part of the business of one
or more of the Principal Insurance Subsidiaries. The decision as to whether a
Subsidiary shall have succeeded to a major part of the business of one or more
of the Principal Insurance Subsidiaries shall be made in good faith by the Board
of Directors of the Corporation or a committee thereof by the adoption of a
resolution so stating, and the Corporation shall within 30 days of the date of
the adoption of such resolution deliver to the applicable Trustee a copy
thereof, certified by the Corporate Secretary or an Assistant Corporate
Secretary of the Corporation. (Indentures, Section 101)
"Common Stock" means, with respect to any Principal Insurance Subsidiary,
stock of any class, however designated, except stock which is non-participating
beyond fixed dividend and liquidation preferences and the holders of which have
either no voting rights or limited voting rights entitling them, only in the
case of certain contingencies, to elect less than a majority of the directors
(or persons performing similar functions) of such Principal Insurance
Subsidiary, and shall include securities of any class, however designated, which
are convertible into such Common Stock. (Indentures, Section 101)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Corporation may not consolidate with or merge into any other Person or
sell its property and assets as, or substantially as, an entirety to any Person
and may not permit any Person to merge into or consolidate with the Corporation
unless (i) either the Corporation will be the resulting or surviving entity or
any successor or purchaser is a corporation, partnership or trust organized
under the laws of the United States of America, any State or the District of
Columbia, and any such successor or purchaser expressly assumes the
Corporation's obligations on the Debt Securities under a supplemental Indenture,
(ii) immediately after giving effect to the transaction no Event of Default
shall have occurred and be continuing, and (iii) certain other conditions are
met. (Indentures, Section 801)
CONVERSION RIGHTS
The terms on which Debt Securities of any series may be convertible or
exchangeable into Common Stock or other securities of the Corporation or
exchangeable into securities of another corporation will be set forth in the
Prospectus Supplement relating thereto. Such terms shall include provisions as
to whether conversion or exchange is mandatory, at the option of the holder or
at the option of the Corporation, and may include provisions pursuant to which
the number of shares of Common Stock or other securities of the Corporation or
the securities of another corporation, as the case may be, to be received by the
holders of Debt Securities would be calculated according to the market price of
Common Stock or other securities of the Corporation as of a time stated in the
Prospectus Supplement. (Indentures, Article Twelve)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
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The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of the Subordinated
Debt Securities will be entitled to receive or retain any payment in respect of
the principal of (and premium, if any) or interest, if any, on the Subordinated
Debt Securities. (Subordinated Indenture, Section 1502)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Corporation who are not holders of Senior Debt or Subordinated
Debt Securities may recover less, ratably, than holders of Senior Debt and may
recover more, ratably, than the holders of the Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the Holders of
the Subordinated Debt Securities will be entitled to receive any payment upon
the principal of (or premium, if any) or interest, if any, on the Subordinated
Debt Securities. (Subordinated Indenture, Section 1503)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt, or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Subordinated Indenture, Section 1504)
For purposes of the subordination provisions, the payment, issuance and delivery
of cash, property or securities (other than stock and certain subordinated
securities of the Corporation) upon conversion of a Subordinated Debt Security
will be deemed to constitute payment on account of the principal of such
Subordinated Debt Security. (Subordinated Indenture, Section 1516)
"Debt" means (without duplication and without regard to any portion of
principal amount that has not accrued and to any interest component thereof
(whether accrued or imputed) that is not due and payable) with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (v) every
capital lease obligation of such Person, (vi) every Hedging Obligation, (vii)
every obligation of others secured by a lien on any asset of such Person,
whether or not such obligation is assumed by such Person, (viii) every
obligation of the type referred to in clauses (i) through (vii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise, and (ix) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements to any liability
of the kind described in any of the preceding clauses (i) through (viii).
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to
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the Corporation to the extent that such claim for post-petition interest is
allowed in such proceeding) payable on, and fees, expenses, reimbursement
obligations, indemnity obligations and other amounts due on or in connection
with, any Debt incurred, assumed or guaranteed by the Corporation, whether on or
prior to the date of the Subordinated Indenture or thereafter incurred, assumed
or guaranteed, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are not superior in right of payment to the Subordinated Debt Securities or to
other Debt which is pari passu with, or subordinated to the Subordinated Debt
Securities; provided, however, that Senior Debt shall not be deemed to include
(i) the Subordinated Debt Securities; or (ii) Intercompany Debt in excess of
$250,000,000.
"Intercompany Debt" means Debt of the Corporation to United States Fidelity
and Guaranty Company and its subsidiaries.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Corporation. The Senior Debt Securities, when issued, will constitute Senior
Debt.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee. In
such a case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of Outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee for such Depositary and except in the circumstances
described in the applicable Prospectus Supplement. (Indentures, Sections 204 and
305)
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security and a
description of the Depositary will be contained in the applicable Prospectus
Supplement.
THE TRUSTEE
The Indentures contain limitations on the right of the applicable Trustee,
as a creditor of the Corporation, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim as
security or otherwise. In addition, the applicable Trustee may be deemed to have
a conflicting interest and may be required to resign as Trustee if at the time
of a default under the Indenture it is a creditor of the Corporation.
The applicable Trustee or its affiliates may act as depositary for funds of,
make loans to and perform other services for, or may be a customer of, the
Corporation in the ordinary course of business.
GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with the
laws of the State of New York, but without regard to principles of conflicts of
laws.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Corporation consists of 240,000,000
shares of common stock, $2.50 par value per share (the "Common Stock") and
12,000,000 shares of preferred stock, $50.00 par value per share, of which
4,000,000 shares are classified as $4.10 Series A Convertible Exchangeable
Preferred Stock (the "Series A Preferred Stock"), 1,300,000 shares are
classified as Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock"), 3,800,000 shares are classified as $5.00 Series C Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock") and 1,200,000 are
classified as Junior Participating Preferred Stock (the "Junior Preferred
Stock"). As of December 31, 1993, there were issued and outstanding 85,009,482
shares of Common Stock, 4,000,000 shares of Series A Preferred Stock, 1,300,000
shares of Series B Preferred Stock and 3,800,000 shares of Series C Preferred
Stock. The shares of Junior Preferred Stock have been reserved for issuance in
connection with the Corporation's shareholder rights plan and no shares of the
Junior Preferred Stock currently are outstanding.
The following summary of the terms of the Corporation's capital stock does
not purport to be complete and is qualified in its entirety by reference to the
applicable provisions of Maryland law and the Corporation's Articles of
Incorporation, as amended (the "Charter").
The Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock rank on a parity with each other and rank senior to the Junior
Preferred Stock and the Common Stock as to dividends and upon liquidation.
The Transfer Agent and Registrar for the Corporation's Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Junior
Preferred Stock is First Chicago Trust Company, New York, New York ("First
Chicago Trust").
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share of Common
Stock held. Cumulative voting for the election of directors is not provided for
in the Charter or the by-laws. Subject to the prior rights of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Junior Preferred Stock and any other preferred stock which may be classified
and issued, the holders of the Common Stock of the Corporation are entitled to
receive, pro-rata, such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and are also entitled to share,
pro-rata, in any other distribution to shareholders. There are no redemption or
sinking fund provisions and no direct limitations in any indenture or agreement
on the payment of dividends. Payment of dividends by the Corporation is not
subject to restrictions under the Maryland Insurance Code. However, payment of
dividends to the Corporation by its insurance subsidiaries is subject to certain
restrictions under Maryland and other state insurance laws. Such restrictions as
well as other contractual restrictions may limit the amount of dividends that
may be paid by the Corporation. All shares of Common Stock sold hereunder will
be fully paid and non-assessable.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock (the "Preferred
Stock") to which any Prospectus Supplement may relate. Certain terms of any
series of the Preferred Stock offered by any Prospectus Supplement will be
described in the Prospectus Supplement relating to such series of the Preferred
Stock. If so indicated in the Prospectus Supplement, the terms of any such
series, including any Depositary Shares (as defined below) issued in respect
thereof, may differ from the terms set forth below. The description of certain
provisions of the Preferred Stock set forth below and in any
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Prospectus Supplement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Corporation's Charter which is an
exhibit to this Registration Statement and the articles supplementary to the
Corporation's Charter which has been or will be filed with the Commission in
connection with the offering of such series of Preferred Stock.
General. Under the Corporation's Charter, the Corporation is authorized to
issue 12,000,000 shares of Preferred Stock, in one or more series. The Board of
Directors is authorized to fix and determine the terms, limitations and relative
rights and preferences of any of the series of the Preferred Stock including,
without limitation, any voting rights thereof, to divide and issue any Preferred
Stock in series, and to fix and determine the variations among series to the
extent permitted by law. The Corporation may amend from time to time its Charter
to increase the number of authorized shares of Preferred Stock. Any such
amendment would require the approval of the holders of a majority of the
outstanding shares of Common Stock, and the approval of the holders of a
majority of the outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (together with any other shares of
Preferred Stock which may be then outstanding and have similar rights) voting
together as a single class and the holders of two-thirds of the outstanding
shares of the Series B Preferred Stock voting separately as a class.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below, unless otherwise provided in the Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the title of
such Preferred Stock and the number of shares offered; (ii) the amount of
liquidation preference per share; (iii) the price at which such Preferred Stock
will be issued; (iv) the dividend rate (or method of calculation), the dates on
which dividends shall be payable, whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to cumulate; (v) any redemption or sinking fund provisions of such Preferred
Stock; (vi) the terms of any right to convert or exchange the Preferred Stock
into other securities or property of the Corporation; (vii) whether the
Corporation has elected to offer Depositary Shares (as defined below); and
(viii) any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions of such
Preferred Stock.
The Preferred Stock will, when issued, be fully paid and non-assessable and
have no preemptive rights. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and liquidation
rights in all respects with each other series of the Preferred Stock.
Dividend Rights. Holders of the Preferred Stock of each series will be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, out of assets of the Corporation legally available therefor, cash
dividends at such rates and on such dates as are set forth in the Prospectus
Supplement relating to such series of the Preferred Stock. Such rate may be
fixed or variable or both. Each such dividend will be payable to the holders of
record as they appear on the stock record books of the Corporation (or, if
applicable, the records of the Depositary referred to below under "Depositary
Shares") on such record dates as will be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof. Dividends on any series of
the Preferred Stock may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating thereto.
Each series of Preferred Stock will be entitled to dividends as described in
the Prospectus Supplement relating to such series, which may be based upon one
or more methods of determination. Different series of the Preferred Stock may be
entitled to dividends at different rates or based upon different methods of
determination.
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Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of each
series of Preferred Stock will be entitled to receive out of assets of the
Corporation available for distribution to shareholders, before any distribution
of assets is made to holders of Common Stock or any other class of stock ranking
junior to such series of the Preferred Stock upon liquidation, liquidating
distributions in the amount set forth in the Prospectus Supplement relating to
such series of the Preferred Stock plus an amount equal to accrued and unpaid
dividends for the then-current dividend period and, if such series of the
Preferred Stock is cumulative, for all dividend periods prior thereto, all as
set forth in the Prospectus Supplement with respect to such shares.
Redemption. A series of the Preferred Stock may be redeemable, in whole or
in part, at the option of the Corporation, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times and
at the redemption prices set forth in the Prospectus Supplement relating to such
series. After the date fixed for redemption, the shares of Preferred Stock so
called for redemption will no longer be deemed to be outstanding and rights of
the holders of such shares will cease, except the right to receive the moneys
payable upon such redemption and any money or other property to which the
holders of such shares were entitled upon such redemption, upon surrender to the
Corporation of the certificates evidencing such shares.
Conversion and Exchange. The terms, if any, on which shares of any series of
Preferred Stock are convertible into Common Stock or exchangeable for Debt
Securities will be set forth in the Prospectus Supplement relating thereto. Such
terms may include provisions for conversion, either mandatory, at the option of
the holder, or at the option of the Corporation, in which case the number of
shares of Common Stock or the amount of Debt Securities to be received by the
holders of Preferred Stock would be calculated as of a time and in the manner
stated in the Prospectus Supplement.
Transfer Agent and Registrar. The transfer agent, registrar and dividend
disbursement agent for a particular series of Preferred Stock will be named in
the Prospectus Supplement relating to such series of Preferred Stock. The
registrar for shares of such series of Preferred Stock will send notices to
shareholders of any meetings at which holders of such series of the Preferred
Stock have the right to elect directors of the Corporation or to vote on any
other matter.
Voting Rights. Except as indicated in the Prospectus Supplement relating to
a particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of the Preferred Stock will not be entitled to any
voting rights.
Depositary Shares. The Corporation may, at its option, elect to offer
receipts for fractional interests ("Depositary Shares") in Preferred Stock. In
such event, receipts ("Depositary Receipts") for Depositary Shares, each of
which will represent a fraction (to be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock) of a share of a particular
series of Preferred Stock, will be issued as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Corporation and the depositary named in the Prospectus Supplement relating
to such shares (the "Preferred Stock Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, subscription
and liquidation rights). The following summary of certain provisions of the
Deposit Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Deposit
Agreement, including the definitions therein of certain terms. Whenever
particular sections of the Deposit Agreement are referred to, it is intended
that such sections shall be incorporated herein by
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reference. Copies of the forms of Deposit Agreement and Depositary Receipt are
filed as exhibits to the Registration Statement of which this Prospectus is a
part, and the following summary is qualified in its entirety by reference to
such exhibits.
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Shares relating to such Preferred Stock in proportion to
the numbers of such Depositary Shares owned by such holders. (Deposit Agreement,
Section 4.01)
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares in an equitable manner, unless the Preferred Stock Depositary
determines that it is not feasible to make such distribution, in which case the
Preferred Stock Depositary may sell such property and distribute the net
proceeds from such sale to such holders. (Deposit Agreement, Section 4.02)
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary and upon payment of the taxes, charges and fees
provided for in the Deposit Agreement and subject to the terms thereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office, to or upon his or her order, of the number of whole shares of the
related series of Preferred Stock and any money or other property, if any,
represented by such Depositary Shares.
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of such series of Preferred Stock held by the Preferred Stock Depositary.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Corporation redeems shares of Preferred
Stock held by the Preferred Stock Depositary, the Preferred Stock Depositary
will redeem as of the same redemption date the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot, pro rata or by any other equitable method as may be
determined by the Preferred Stock Depositary. (Deposit Agreement, Section 2.08)
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
the Preferred Stock represented by such holder's Depositary Shares. The
Preferred Stock Depositary will endeavor, insofar as practicable, to vote the
amount of the Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Corporation will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting shares of the Preferred
Stock to the extent it does not receive specific instructions from the holder of
Depositary Shares representing such Preferred Stock. (Deposit Agreement, Section
4.05)
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Corporation and the Preferred Stock Depositary. However, any
amendment which materially and adversely alters the rights of the holders of
Depositary Shares will not be effective unless such amendment has been approved
by the holders of at least a majority of the Depositary Shares then outstanding.
(Deposit
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Agreement, Section 6.01) The Deposit Agreement will only terminate if (i) all
outstanding Depositary Shares have been redeemed or (ii) there has been a final
distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding-up of the Corporation and such distribution
has been distributed to the holders of Depositary Receipts. (Deposit Agreement,
Section 6.02)
The Corporation will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements. The
Corporation will pay charges of the Preferred Stock Depositary in connection
with the initial deposit of the Preferred Stock and issuance of Depositary
Receipts, all withdrawals of shares of Preferred Stock by owners of Depositary
Shares and any redemption of the Preferred Stock. Holders of Depositary Receipts
will pay other transfer and other taxes and governmental charges and such other
charges as are expressly provided in the Deposit Agreement to be for their
accounts. (Deposit Agreement, Section 5.07)
The Preferred Stock Depositary may resign at any time by delivering to the
Corporation notice of its election to do so, and the Corporation may at any time
remove the Preferred Stock Depositary, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depositary and its
acceptance of such appointment. Such successor Preferred Stock Depositary must
be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
(Deposit Agreement, Section 5.04)
The Preferred Stock Depositary will forward all reports and communications
from the Corporation which are delivered to the Preferred Stock Depositary and
which the Corporation is required or otherwise determines to furnish to the
holders of the Preferred Stock. (Deposit Agreement, Section 4.07)
Neither the Preferred Stock Depositary nor the Corporation will be liable
under the Deposit Agreement to holders of Depositary Receipts other than for its
negligence, willful misconduct or bad faith. Neither the Corporation nor the
Preferred Stock Depositary will be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Corporation and the Preferred Stock
Depositary may rely upon written advice of counsel or accountants, or upon
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Receipts or other persons believed to be competent and on
documents believed to be genuine. (Deposit Agreement, Section 5.03)
OUTSTANDING PREFERRED STOCK
The Corporation currently has outstanding three classes of Preferred Stock.
Series A Preferred Stock. Subject to the limitations discussed herein, the
holders of the Series A Preferred Stock are entitled to receive, when and as
declared by the Board of Directors out of funds legally available therefor,
cumulative dividends at the annual rate of $4.10 per share. Dividends are
payable quarterly, in arrears, on January 31, April 30, July 31 and October 31
in each year. Unless full cumulative dividends on all outstanding Series A
Preferred Stock and any other class of preferred stock ranking on a parity with
the Series A Preferred Stock as to dividends and upon liquidation ("Parity
Stock") have been paid, the Corporation will not declare or pay any dividend on,
or set aside or apply any amount to the redemption or purchase of, any shares of
the Common Stock or any other class of stock ranking junior to the Series A
Preferred Stock (except for dividends payable only in, or rights to subscribe
for or purchase, shares of junior stock).
Except as indicated below, or except as expressly required by applicable
law, the holders of shares of Series A Preferred Stock have no voting rights.
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During any period in which dividends on the Series A Preferred Stock or any
outstanding Parity Stock are cumulatively in arrears in the amount of six or
more full quarterly dividends, the number of directors of the Corporation will
be increased by two and the holders of shares of Series A Preferred Stock,
voting together as a class with the holders of any other class or series of
Parity Stock having a similar voting right, will have the right to elect two
additional directors to the Corporation's Board of Directors to fill such newly
created directorships until all such dividends have been paid in full.
The approval of two-thirds of the outstanding shares of Series A Preferred
Stock and Parity Stock, voting together as a single class, shall be required in
order to amend the Charter of the Corporation to affect adversely the rights of
the holders of the Series A Preferred Stock or to authorize or create any class
of stock having rights senior with respect to dividends and upon liquidation to
the Series A Preferred Stock. In addition, the approval of a majority of the
outstanding shares of Series A Preferred Stock and Parity Stock, voting together
as a single class, shall be required in order to increase the number of shares
of preferred stock authorized in the Charter or to create any other class of
stock (but not any other series of preferred stock) ranking on a parity with the
Series A Preferred Stock as to dividends and upon liquidation.
At the option of the holders of the Series A Preferred Stock, such shares
may be converted into shares of Common Stock of the Corporation at the then
applicable conversion rate. The current conversion rate is 1.179 shares of
Common Stock for each share of Series A Preferred Stock (equivalent to a
conversion price of $42.40 per share). The conversion rate is subject to
adjustment in certain events, including stock dividends, subdivisions, splits
and combinations, and certain other distributions of rights or warrants to
purchase Common Stock at less than the then current market price (as defined),
and distributions to all holders of Common Stock of evidences of indebtedness or
assets of the Corporation other than cash out of earned surplus. The conversion
rate has been adjusted under this provision as a result of dividend payments by
the Corporation on its Common Stock notwithstanding the deficit in its earned
surplus account.
The Series A Preferred Stock is exchangeable in whole but not in part at the
option of the Corporation on any dividend payment date for the Corporation's
8.20% Convertible Subordinated Debentures due October 31, 2011 (the
"Debentures") at a rate of $50.00 principal amount of the Debentures plus cash
in the amount of accrued but unpaid dividends, if any, for each share of Series
A Preferred Stock.
The Series A Preferred Stock is redeemable at the option of the Corporation
for cash, as a whole or in part, at redemption prices declining to $50.00 per
share on October 31, 1996, plus accrued and unpaid dividends to the redemption
date. The Corporation may not purchase or redeem less than all the Series A
Preferred Stock and any other series of Parity Stock if, as of such time, the
Corporation has failed to pay all accrued and unpaid dividends thereon.
In case of the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, holders of any shares of Series A Preferred Stock
are entitled to receive $50.00 per share, plus an amount equal to any dividends
accrued and unpaid to the payment date, before any distribution is made to the
holders of any junior stock.
Series B Preferred Stock. The 1,300,000 shares of the Series B Preferred
Stock were issued in three subseries: 650,000 shares of the Series B Cumulative
Convertible Preferred Stock 1995 (the "Series B Preferred Stock 1995"); 325,000
shares of the Series B Cumulative Convertible Preferred Stock 1996 (the "Series
B Preferred Stock 1996"); and 325,000 shares of the Series B Cumulative
Convertible Preferred Stock 1997 (the "Series B Preferred Stock 1997"). Subject
to the limitations discussed herein, the holders of the Series B Preferred Stock
are entitled to receive, when and as declared by the Board of Directors out of
funds legally available therefor, cumulative dividends at the annual rate of
$10.25 per share. Dividends are payable quarterly, in arrears, on January 31,
April 30, July 31 and October 31 of each year. Unless full cumulative dividends
on all
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outstanding Series B Preferred Stock and any other Parity Stock have been paid,
the Corporation will not declare or pay any dividend on, or set aside or apply
any amount to the redemption or purchase of, any shares of the Common Stock or
any other class of stock ranking junior to the Series B Preferred Stock.
Holders of Series B Preferred Stock have limited voting rights similar to
those of the Series A Preferred Stock except that under the terms of the Series
B Preferred Stock the right to elect two additional directors accrues when
dividends on the Series B Preferred Stock are cumulatively in arrears in the
amount of two or more full quarterly dividends. A special class vote of holders
of two-thirds of the outstanding Series B Preferred Stock is necessary in order
to (i) authorize the issuance of a new, or to increase the authorized number of
any existing, class of capital stock senior or superior to the Series B
Preferred Stock as to dividends and upon liquidation, (ii) increase the number
of shares of preferred stock or create any additional Parity Stock authorized in
the Charter, (iii) reissue any shares of Series B Preferred Stock that have been
redeemed or (iv) take any action to cause any amendment, alteration or repeal of
any of the provisions of the Charter that would materially adversely affect the
rights of holders of Series B Preferred Stock.
At the option of the holders of the Series B Preferred Stock, such shares
may be converted into shares of Common Stock at the then applicable conversion
rate. The current conversion rate for the Series B Preferred Stock is 8.316
shares of Common Stock per converted share of Series B Preferred Stock
(equivalent to a conversion price of $12.025 per share). The conversion rate is
subject to adjustment in certain events, including stock dividends,
subdivisions, splits and combinations, and certain distributions of rights or
warrants to purchase Common Stock at less than the then current market price (as
defined), and distributions to all holders of Common Stock of evidences of
indebtedness or assets of the Corporation (other than regular quarterly Common
Stock dividends consistent with the Corporation's current dividend policy and
future dividends payable out of consolidated earned surplus or current
earnings).
The Series B Preferred Stock is redeemable at the option of the Corporation
for cash, as a whole or in part, at any time or from time to time, as follows:
(i) the Series B Preferred Stock 1995, at any time on or after June 1, 1994;
(ii) the Series B Preferred Stock 1996, at any time on or after June 1, 1995;
and (iii) the Series B Preferred Stock 1997, at any time on or after June 1,
1996; at a per share redemption price equal to the liquidation value of $100.00
and accrued and unpaid dividends plus, beginning after June 1, 1997, a premium
which declines to zero on June 1, 2001. Notwithstanding the foregoing, no
redemption may be effected prior to June 1, 1997, unless the closing price of
the Common Stock exceeds 150% of the then current Series B conversion price on
the date notice of redemption is given and for each of the twenty prior
consecutive trading days.
In the event that there shall occur a "change in control" (as defined below)
of the Corporation, then, at the election of each holder of Series B Preferred
Stock, the Corporation will issue and sell additional nonredeemable equity
securities and apply the net proceeds thereof to redeem the Series B Preferred
Stock at the appropriate redemption price, plus accrued dividends, but only if
and to the extent any such proceeds are raised. The term "change in control"
means any acquisition by any person or group of 50% or more of the combined
voting power of the outstanding voting securities of the Corporation, a sale of
substantially all of the assets of the Corporation, or a merger of the
Corporation with or into another person which results in the exchange,
conversion, reclassification or cancellation of the Common Stock of the
Corporation.
In case of the voluntary liquidation, dissolution or winding-up of the
Corporation, holders of any shares of Series B Preferred Stock are entitled to
receive $100.00 per share, plus an amount equal to any dividends accrued and
unpaid to the payment date, before any distribution is made to the holders of
any junior stock.
Series C Preferred Stock. Subject to the limitations discussed herein, the
holders of the Series C Preferred Stock are entitled to receive, when and as
declared by the Board of Directors
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out of funds legally available therefor, cumulative preferential dividends at
the annual rate of $5.00 per share. Dividends are payable quarterly, in arrears,
on January 31, April 30, July 31 and October 31 in each year. Unless full
cumulative dividends on all outstanding Series C Preferred Stock and any other
Parity Stock have been paid and sufficient funds have been set apart for the
payment of the dividend for the current dividend period with respect to the
Series C Preferred Stock, the Corporation will not declare or pay any dividend
on or set aside or apply any amount to the redemption or purchase of, any shares
of the Common Stock or on any other class of stock ranking junior to the Series
C Preferred Stock (except for dividends payable only in, or rights to subscribe
for or purchase, shares of junior stock).
Holders of Series C Preferred Stock have limited voting rights similar to
those of the Series A Preferred Stock except that under the terms of the Series
C Preferred Stock the right to elect two additional directors accrues when
dividends on the Series C Preferred Stock are cumulatively in arrears in the
amount of two or more full quarterly dividends.
At the option of the holders of the Series C Preferred Stock, such shares
may be converted into shares of Common Stock of the Corporation at the then
applicable conversion rate. The present conversion rate is 4.158 shares of
Common Stock for each share of Series C Preferred Stock (equivalent to a
conversion price of $12.025 per share). The conversion rate is subject to
adjustment in certain events, including stock dividends, subdivisions, splits
and combinations, and certain other distributions of rights or warrants to
purchase Common Stock at less than the then current market price (as defined),
and distributions to all holders of Common Stock of evidences of indebtedness or
assets of the Corporation (other than regular quarterly Common Stock dividends
consistent with the Corporation's current dividend policy and future dividends
payable out of consolidated earned surplus or current earnings). The conversion
rate is also subject to further adjustment in the event of certain transactions
pursuant to a plan under which all or substantially all the Common Stock is to
be exchanged or converted into the right to receive cash, securities or other
assets.
The Series C Preferred Stock is redeemable, commencing on June 13, 1994, at
the option of the Corporation for cash, as a whole or in part, at redemption
prices declining to $50 per share on June 13, 2001, plus accrued and unpaid
dividends to the redemption date. The Corporation may not purchase or redeem
less than all the Series C Preferred Stock and any other series of Parity Stock
if, as of such time, the Corporation has failed to pay all accrued and unpaid
dividends thereon.
In case of the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, holders of any shares of Series C Preferred Stock
are entitled to receive $50 per share, plus an amount equal to any dividends
accrued and unpaid to the payment date, before any distribution is made to the
holders of any junior stock.
SHAREHOLDER RIGHTS PLAN
The Corporation has a shareholder rights plan (the "Plan") to deter coercive
or unfair takeover tactics and to prevent a potential purchaser from gaining
control of the Corporation without offering a fair price to all of the
Corporation's shareholders. Under the Plan, each outstanding share of the
Corporation's Common Stock has one preferred share purchase right (a "Right")
expiring in 1997. Each Right entitles the registered holder to purchase 1/100 of
a share of Junior Preferred Stock for $140. The Rights cannot be exercised
unless certain events occur that might lead to a concentration in ownership of
Common Stock. Under certain conditions, the Rights may be exercised for (i)
Common Stock having a value of twice the exercise price, or (ii) shares of
common stock of a purchaser having a value of twice the exercise price. The
Corporation will generally be entitled to redeem the Rights, at $.05 per Right,
any time before the tenth day after a 20% position in the Corporation is
acquired. The Form 8-A setting forth a description of the Plan is
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an exhibit to the Registration Statement of which this Prospectus is a part and
is incorporated by reference herein.
SPECIAL STATUTORY REQUIREMENTS FOR CERTAIN TRANSACTIONS
Business Combination Statute. The Maryland General Corporation Law
establishes special requirements with respect to "business combinations" between
Maryland corporations and "interested stockholders" unless exemptions are
applicable. Among other things, the law prohibits for a period of five years a
merger and other specified or similar transactions between a corporation and an
interested stockholder and requires a super-majority vote for such transactions
after the end of such five-year period.
"Interested stockholders" are all persons owning beneficially, directly or
indirectly, more than 10% of the outstanding voting stock of a Maryland
corporation. "Business combinations" include any merger or similar transaction
subject to a statutory vote and additional transactions involving transfers of
assets or securities in specified amounts to interested stockholders or their
affiliates. Unless an exemption is available, transactions of these types may
not be consummated between a Maryland corporation and an interested stockholder
or its affiliates for a period of five years after the most recent date on which
the stockholder became an interested stockholder and thereafter may not be
consummated unless recommended by the board of directors of the Maryland
corporation and approved by the affirmative vote of at least 80% of the votes
entitled to be cast by all holders of outstanding shares of voting stock and 66
2/3% of the votes entitled to be cast by all holders of outstanding shares of
voting stock other than the interested stockholder. A business combination with
an interested stockholder which is approved by the board of directors of a
Maryland corporation at any time before an interested stockholder first becomes
an interested stockholder is not subject to the special voting requirements. An
amendment to a Maryland corporation's charter electing not to be subject to the
foregoing requirements must be approved by the affirmative vote of at least 80%
of the votes entitled to be cast by all holders of outstanding shares of voting
stock and 66 2/3% of the votes entitled to be cast by holders of outstanding
shares of voting stock who are not interested stockholders. Any such amendment
is not effective until 18 months after the vote of stockholders and does not
apply to any business combination of a corporation with a stockholder who was an
interested stockholder on the date of the stockholder vote. The Corporation has
not adopted any such amendment to its Charter.
Control Share Acquisition Statute. Maryland law imposes limitations on the
voting rights in a "control share acquisition." The Maryland statute defines a
"control share acquisition" at the 20%, 33 1/3% and 50% acquisition levels, and
requires a two-thirds stockholder vote (excluding shares owned by the acquiring
person and certain members of management) to accord voting rights to stock
acquired in a control share acquisition. The statute also requires Maryland
corporations to hold a special meeting at the request of an actual or proposed
control share acquiror generally within 50 days after a request is made with the
submission of an "acquiring person statement," but only if the acquiring person
(i) posts a bond for the cost of the meeting and (ii) submits a definitive
financing agreement to the extent that financing is not provided by the
acquiring person. In addition, unless the charter or by-laws provide otherwise,
the statute gives the Maryland corporation, within certain time limitations,
various redemption rights if there is a stockholder vote on the issue and the
grant of voting rights is not approved, or if an "acquiring person statement" is
not delivered to the target within 10 days following a control share
acquisition. Moreover, unless the charter or by-laws provide otherwise, the
statute provides that if, before a control share acquisition occurs, voting
rights are accorded to control shares which results in the acquiring person
having majority voting power, then minority stockholders have appraisal rights.
An acquisition of shares may be exempted from the control share statute provided
that a charter or by-law provision is adopted for such purpose prior to the
control share acquisition. There are no such provisions in the charter or by-
laws of the Corporation.
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Reference is made to the full text of the foregoing statutes for their
entire terms, and the partial summary contained in this Prospectus is not
intended to be complete.
Insurance Acquisitions Disclosure and Control Act. Under the Maryland
Insurance Code, unless certain filings are made with the Maryland Insurance
Commissioner, no person may acquire any voting security or security convertible
into a voting security of an insurance holding company, such as the Corporation,
which controls one or more Maryland insurance companies if, as a result of such
acquisition, such person would "control" such insurance holding company. The
acquisition may not proceed unless it has been approved by the Maryland
Insurance Commissioner within 60 days after such filings have been submitted.
"Control" is presumed to exist if a person, directly or indirectly, owns or
controls 10% or more of the voting securities of another person. This
presumption may be rebutted by establishing by a preponderance of evidence that
control does not exist in fact.
Reference is made to the full text of the statute for its entire terms, and
this partial summary is not intended to be complete.
DESCRIPTION OF WARRANTS
The Corporation may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants") as well as other types of Warrants to purchase
Securities. Warrants may be issued independently or together with any Securities
and may be attached to or separate from such Securities. The Warrants are to be
issued under warrant agreements (each a "Warrant Agreement") to be entered into
between the Corporation and a bank or trust company, as warrant agent (the
"Warrant Agent"), all as shall be set forth in the Prospectus Supplement
relating to the Warrants being offered pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including the
following: (i) the title of such Debt Warrants; (ii) the aggregate number of
such Debt Warrants; (iii) the price or prices at which such Debt Warrants will
be issued; (iv) the currency or currencies, including composite currencies or
currency units, in which the price of such Debt Warrants may be payable; (v) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (vi) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (vii) the currency or currencies, including composite currencies or
currency units, in which the principal of (or premium, if any), or interest, if
any, on the Debt Securities purchasable upon exercise of such Debt Warrants will
be payable; (viii) the date, if any, on and after which such Debt Warrants and
the related Debt Securities will be separately transferable; (ix) the principal
amount of Debt Securities purchasable upon exercise of each Debt Warrant, and
the price at which and the currency, including composite currency or currency
unit, in which such principal amount of Debt Securities may be purchased upon
such exercise; (x) the date on which the right to exercise such Debt Warrants
shall commence, and the date on which such right shall expire; (xi) the maximum
or minimum number of such Debt Warrants which may be exercised at any time;
(xii) a discussion of material federal income tax considerations, if any; and
(xiii) any other terms of such Debt Warrants and terms, procedures and
limitations relating to the exercise of such Debt Warrants.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt
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Warrants, holders of Debt Warrants will not have any of the rights of holders of
the Debt Securities purchasable upon such exercise and will not be entitled to
payments of principal of (or premium, if any) or interest, if any, on the Debt
Securities purchasable upon such exercise.
PREFERRED STOCK AND COMMON STOCK WARRANTS
The Corporation may issue Warrants exercisable for Preferred Stock or Common
Stock. The applicable Prospectus Supplement will describe the following terms of
any such Warrants in respect of which this Prospectus is being delivered: (i)
the title of such Warrants; (ii) whether such Warrants are exercisable for
Preferred Stock or Common Stock; (iii) the price or prices at which such
Warrants will be issued; (iv) the currency or currencies, including composite
currencies or currency units, in which the price of such Warrants may be
payable; (v) if applicable, the designation and terms of the Preferred Stock or
Common Stock with which such Warrants are issued, and the number of such
Warrants issued with each such share of Preferred Stock or Common Stock; (vi) if
applicable, the date on and after which such Warrants and the related Preferred
Stock or Common Stock will be separately transferable; (vii) if applicable, a
discussion of material federal income tax considerations; and (viii) any other
terms of such Warrants, including terms, procedures and limitations relating to
the exchange and exercise of such Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount of Debt Securities, Preferred Stock or Common Stock, as the
case may be, at such exercise price as shall in each case be set forth in, or be
determinable as set forth in, the Prospectus Supplement relating to the Warrants
offered thereby. Warrants may be exercised at any time up to the close of
business on the expiration date set forth in the Prospectus Supplement relating
to the Warrants offered thereby. After the close of business on the expiration
date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the Prospectus Supplement,
the Corporation will, as soon as practicable, forward the Securities purchasable
upon such exercise. If less than all of the Warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining Warrants.
PLAN OF DISTRIBUTION
The Corporation may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Sales of Common Stock offered hereby may be effected from time to time in
one or more transactions on the New York Stock Exchange or in negotiated
transactions or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at other negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Corporation or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents.
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Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Corporation and any profit on the resale of Securities
by them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Corporation will be described, in the Prospectus
Supplement.
Under agreements which may be entered into by the Corporation, underwriters
and agents who participate in the distribution of Securities may be entitled to
indemnification by the Corporation against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Corporation will authorize
underwriters or other persons acting as the Corporation's agents to solicit
offers by certain institutions to purchase Securities from the Corporation
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Corporation. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Corporation in the
ordinary course of business.
The Securities may or may not be listed on a national securities exchange or
a foreign securities exchange (other than the Common Stock, which is listed on
the New York Stock Exchange, the Pacific Stock Exchange, the London Stock
Exchange and the Swiss Exchanges in Basle, Geneva and Zurich). Any Common Stock
sold pursuant to a Prospectus Supplement will be listed on the New York Stock
Exchange, subject to official notice of issuance. No assurances can be given
that there will be an active trading market for the Securities.
VALIDITY OF SECURITIES
The legal validity of the Securities offered hereby will be passed upon for
the Corporation by Piper & Marbury L.L.P., Baltimore, Maryland and for any
underwriters or agents by Davis Polk & Wardwell, New York, New York. Davis Polk
& Wardwell will rely upon the opinion of Piper & Marbury L.L.P. as to certain
matters governed by Maryland law. L.P. Scriggins, a Director of the Corporation,
is a partner of Piper & Marbury L.L.P. As of January 1, 1994 lawyers in the firm
of Piper & Marbury L.L.P. beneficially owned in the aggregate approximately
20,000 shares of Common Stock or Common Stock equivalents of the Corporation.
EXPERTS
The consolidated financial statements of the Corporation incorporated in
this Prospectus by reference to Form 10-K for the year ended December 31, 1992
have been audited by Ernst & Young, independent auditors, as set forth in their
report thereon included therein and incorporated by reference herein. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three month periods ended March 31, 1993 and 1992, and the
three-and six-month periods ended June 30, 1993 and 1992, and the three- and
nine-month periods ended September 30, 1993 and 1992, incorporated by reference
in this Registration Statement, the independent auditors have
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reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports included in the Corporation's quarterly reports on Form 10-Q for the
quarters ended March 31, 1993, June 30, 1993, and September 30, 1993, and
incorporated by reference herein, state that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. The independent
auditors are not subject to the liability provisions of Section 11 of the
Securities Act for their reports on the unaudited interim financial information
because those reports are not "reports" or a "part" of the Registration
Statement prepared or certified by the auditors within the meaning of Sections 7
and 11 of the Securities Act.
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