================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------------------
USF&G CORPORATION
(Name of Issuer)
USF&G CORPORATION
THE ST. PAUL COMPANIES, INC.
(Name of Person(s) Filing Statement)
ZERO COUPON CONVERTIBLE
SUBORDINATED NOTES DUE 2009
OF USF&G CORPORATION
(Title of Class of Securities)
903290-AD6
(CUSIP Number of Class of Securities)
JOHN F. HOFFEN
CORPORATE SECRETARY
USF&G CORPORATION
6225 CENTENNIAL WAY
BALTIMORE, MARYLAND 21209
(410) 547-3000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Person(s) Filing Statement)
Copies to:
BRUCE A. BACKBERG JOSEPH B. FRUMKIN
SENIOR VICE PRESIDENT AND CHIEF LEGAL COUNSEL SULLIVAN & CROMWELL
THE ST. PAUL COMPANIES, INC. 125 BROAD STREET
385 WASHINGTON STREET NEW YORK, NEW YORK 10004
ST. PAUL, MINNESOTA 55102 (212) 558-4000
(612) 310-7911
MAY 15, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
------------------------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$108,767,123.10 $21,754
|_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid:
Form or registration no.:
Filing Party:
Date Filed:
- ------------------
* The transaction value shown is only for the purpose of calculating the
filing fee. The amount shown reflects the cost of purchasing $175,233,000
principal amount at maturity of Notes at the repurchase price $620.70 per
$1,000 principal amount at maturity. The amount of the filing fee is
calculated in accordance with Section 13(e)(3) of the Securities Exchange
Act of 1934, as amended.
================================================================================
<PAGE>
INTRODUCTORY STATEMENT
This Schedule 13E-4 relates to a change of control offer (the "Offer")
by USF&G Corporation, a Maryland corporation ("USF&G") and a wholly owned
subsidiary of The St. Paul Companies, Inc., a Minnesota corporation ("St.
Paul"), to purchase for cash, on the terms and subject to the conditions set
forth in the Change of Control Notice and Offer to Purchase dated May 15, 1998
(the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of
Transmittal"), any and all of the outstanding Zero Coupon Convertible
Subordinated Notes due 2009 of USF&G (the "Notes"). The Notes are convertible
into shares of Common Stock, no par value ("St. Paul Common Stock"), of St. Paul
at, after giving effect to the two-for-one stock split declared by the Board of
Directors of St. Paul on shares of St. Paul Common Stock held of record as of
May 6, 1998 (the "Stock Split"), a conversion rate of 16.6434 shares of St. Paul
Common Stock per $1,000 principal amount at maturity of Notes. Copies of the
Offer to Purchase and the related Letter of Transmittal are filed as exhibits
(a)(1) and (a)(2) hereto.
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the Notes is USF&G, a wholly owned subsidiary of St. Paul. The
address of USF&G's principal executive office is 6225 Centennial Way, Baltimore,
Maryland 21209. The Notes are convertible into St. Paul Common Stock. The
address of St. Paul's principal executive office is 385 Washington Street, St.
Paul, Minnesota 55102.
(b) The securities which are the subject of the Offer are the Notes. The Notes
are convertible into shares of St. Paul Common Stock, after giving effect to the
Stock Split, at a conversion rate of 16.6434 shares of St. Paul Common Stock per
$1,000 principal amount at maturity of Notes. St. Paul is a joint and several
obligor with USF&G with respect to the due and punctual payment of the principal
of, and premium, if any, and interest on, the Notes when due and all other
monetary obligations under the terms of the Notes and the Indenture. As of May
14, 1998, there was $175,233,000 aggregate principal amount at maturity of Notes
outstanding. The Offer is for any and all Notes, in denominations of $1,000
principal amount at maturity or integral multiples thereof, at a price equal to
$620.70 per $1,000 principal amount at maturity of Notes. To the best knowledge
of USF&G and St. Paul, no Notes are being purchased from any officer, director
or affiliate of USF&G or St. Paul.
(c) The information set forth in the section of the Offer to Purchase entitled
"Market Price Information" is incorporated herein by reference.
(d) USF&G and St. Paul are filing this statement. The addresses of USF&G and St.
Paul are set forth in Item 1(a). USF&G is a wholly owned subsidiary of St. Paul.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the section of the Offer to Purchase entitled
"Sources and Amount of Funds" is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the section of the Offer to Purchase
entitled "The Offer--Purpose and Effects of the Offer" is incorporated herein by
reference. Notes repurchased under the Offer will cease to be outstanding and
will be delivered to The Chase Manhattan Bank, as successor to Chemical Bank, as
Trustee, for cancellation immediately after such repurchase.
-1-
<PAGE>
(a) The information set forth in the section of the Offer to Purchase entitled
"The Offer--General" is incorporated herein by reference.
(b) The information set forth in the section of the Offer to Purchase entitled
"Recent Developments--The Merger" is incorporated herein by reference.
(c) The information set forth in the section of the Offer to Purchase entitled
"Recent Developments--The Merger" is incorporated herein by reference.
(d) None.
(e) None.
(f) None.
(g) None.
(h) Not applicable.
(i) Not applicable.
(j) The information set forth in the cover page to the Offer to Purchase and the
section of the Offer to Purchase entitled "Available Information" is
incorporated by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Not applicable.
ITEM 5. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in the cover page to the Offer to Purchase and
the sections of the Offer to Purchase entitled "The Offer--General," "The
Offer--Purpose and Effects of the Offer" and "Recent Developments" is
incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the cover page of the Offer to Purchase and
the section of the Offer to Purchase entitled "The Depositary" is incorporated
herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) The following documents, which have been filed by USF&G (File No. 1-8233)
with the Securities and Exchange Commission (the "Commission") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference:
(1) USF&G's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
(2) USF&G's Current Reports on Form 8-K dated January 19, 1998,
January 22, 1998 and February 26, 1998.
-2-
<PAGE>
(3) USF&G's Proxy Statement relating to the Merger dated January 27, 1998
and mailed to its shareholders on January 28, 1998.
The following documents, which have been filed by St. Paul (File No.
0-3021) with the Commission under the Exchange Act, are incorporated herein by
reference:
(1) St. Paul's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(2) St. Paul's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998.
(3) St. Paul's Current Reports on Form 8-K dated April 24, 1998, April
27, 1998, May 5, 1998 and May 14, 1998.
(4) St. Paul's Proxy Statement/Prospectus relating to the Merger dated
January 27, 1998 and mailed to its stockholders on January 28, 1998.
(5) St. Paul's Proxy Statement relating to its Annual Meeting of
Stockholders on May 5, 1998 dated March 19, 1998.
All documents filed with the Commission by St. Paul pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or subsequent to the date
hereof shall be deemed to be incorporated by reference herein and to be a part
hereof from the date any such document is filed.
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 hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part hereof.
(b) Not applicable.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None, except for compliance with the Exchange Act and the rules and
regulations promulgated thereunder and compliance with applicable requirements
of state securities or "blue sky" laws.
(c) None.
(d) None.
(e) Reference hereby made to the exhibits hereto which are incorporated in their
entirety herein by reference.
-3-
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Exhibit (a)(1) Change of Control Notice and Offer to Purchase, dated May
15, 1998.
Exhibit (a)(2) Letter of Transmittal.
Exhibit (a)(3) Notice of Guaranteed Delivery.
Exhibit (a)(4) Letter to clients.
Exhibit (a)(5) Letter to brokers, dealers, commercial banks, trust
companies and other nominees.
Exhibit (a)(6) Notice published in The New York Times (national edition)
on May 15, 1998.
(b) Not applicable.
(c)(1) Indenture, dated as of January 28, 1994, between USF&G, as issuer, and
Chemical Bank, as Trustee (incorporated by reference to Exhibit 4E to USF&G's
Annual Report on Form 10-K filed with the Commission for the year ended December
31, 1993).
(c)(2) First Supplemental Indenture, dated as of April 24, 1998, among St. Paul,
USF&G, as issuer, and The Chase Manhattan Bank, as successor to Chemical Bank,
as Trustee.
(c)(3) Form of Note, dated March 3, 1994 (incorporated by reference to Exhibit 4
to USF&G's Current Report on Form 8-K, dated March 3, 1994).
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
-4-
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
USF&G CORPORATION
By: /s/ John F. Hoffen, Jr.
Name: John F. Hoffen, Jr.
Title: Corporate Secretary
THE ST. PAUL COMPANIES, INC.
By: /s/ Bruce A. Backberg
Name: Bruce A. Backberg
Title: Senior Vice President and
Chief Legal Counsel
Dated: May 15, 1998
-5-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(a)(1) - Change of Control Notice and Offer to Purchase, dated May 15, 1998.
(a)(2) - Letter of Transmittal.
(a)(3) - Notice of Guaranteed Delivery.
(a)(4) - Letter to clients.
(a)(5) - Letter to brokers, dealers, commercial banks, trust companies and other
nominees.
(a)(6) - Notice published in The New York Times (national edition) on
May 15, 1998.
(c)(1) - Indenture, dated as of January 28, 1994, between USF&G, as issuer, and
Chemical Bank, as Trustee (incorporated by reference to Exhibit 4E to
USF&G's Annual Report on Form 10-K filed with the Commission for the
year ended December 31, 1993).
(c)(2) - First Supplemental Indenture, dated as of April 24, 1998, among
St. Paul, USF&G, as issuer, and The Chase Manhattan Bank, as
successor to Chemical Bank, as Trustee.
(c)(3) - Form of Note, dated March 3, 1994 (incorporated by reference to
Exhibit 4 to USF&G's Current Report on Form 8-K, dated March 3, 1994).
-6-
EXHIBIT (A)(1)
CHANGE OF CONTROL NOTICE AND
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING
ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
BY
USF&G CORPORATION
AT $620.70 PER $1,000 PRINCIPAL AMOUNT AT MATURITY
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE,
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JUNE 15, 1998, UNLESS THE OFFER IS EXTENDED (SUCH TIME AND DATE OR THE LATEST
EXTENSION THEREOF, IF EXTENDED, THE "EXPIRATION DATE"). NOTES TENDERED IN THE
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
USF&G Corporation ("USF&G"), a wholly owned subsidiary of The St. Paul
Companies, Inc. ("St. Paul"), hereby offers (the "Offer") to purchase for cash
at the Repurchase Price (as defined herein), upon the terms and subject to the
conditions set forth in this Change of Control Notice and Offer to Purchase
(this "Offer to Purchase") and in the accompanying Letter of Transmittal (the
"Letter of Transmittal"), any and all of the outstanding Zero Coupon Convertible
Subordinated Notes due 2009 of USF&G (the "Notes"). The "Repurchase Price" of
$620.70 is the Issue Price ($512.98 per $1,000 principal amount at maturity)
plus Original Issue Discount (the difference between the Issue Price and the
principal amount at maturity of the Note) accrued (at 4.5% per annum, on a
semi-annual bond equivalent basis using a 360-day year composed of twelve 30-day
months, from the Issue Date (March 3, 1994) of the Notes) through June 15, 1998,
the date that is 35 Business Days after the occurrence of the Change of Control.
The Offer is being made pursuant to the terms of the Indenture, dated as
of January 28, 1994, as amended by a First Supplemental Indenture, dated as of
April 24, 1998 (as so amended, the "Indenture"), among USF&G, St. Paul and The
Chase Manhattan Bank, as successor to Chemical Bank, as Trustee (the "Trustee"),
and the Notes which provide that, following a Change of Control (as defined
therein), each holder of Notes will have the right, at such holder's option, to
require USF&G to repurchase all or a portion of such holder's Notes at the
Repurchase Price (a "Change of Control Right"). A Change of Control occurred on
April 24, 1998, as a result of the consummation of the merger of SP Merger
Corporation, a wholly owned subsidiary of St. Paul ("Sub"), with and into USF&G,
with USF&G continuing as the surviving corporation and becoming a wholly owned
subsidiary of St. Paul (the "Merger").
As of May 14, 1998, there was $175,233,000 aggregate principal amount at
maturity of Notes outstanding. Prior to the consummation of the Merger, the
Notes were convertible into shares of Common Stock, par value $2.50 per share,
of USF&G ("USF&G Common Stock") at a conversion rate of 29.499 shares of USF&G
Common Stock per $1,000 principal amount at maturity of Notes. Upon consummation
of the Merger, pursuant to adjustment mechanisms contained in the Indenture, the
Notes became, and are currently, convertible into shares of Common Stock, no par
value, of St. Paul ("St. Paul Common Stock") at, after giving effect to the
two-for-one stock split declared by the Board of Directors of St. Paul on shares
of St. Paul Common Stock held of record as of May 6, 1998 (the "Stock Split"), a
conversion rate of 16.6434 shares of St. Paul Common Stock per $1,000 principal
amount at maturity. In connection with the Merger, St. Paul agreed to be jointly
and severally liable with USF&G for the due and punctual payment of the
principal of, and premium, if any, and interest on, the Notes when due and all
other monetary obligations under the terms of the Notes and the Indenture.
The date of this Change of Control Notice and Offer to Purchase
is May 15, 1998.
-1-
<PAGE>
There is no established trading market for the Notes. On May 14, 1998,
the closing price per share of St. Paul Common Stock, as reported on the New
York Stock Exchange, Inc. (the "NYSE") Composite Tape, was $44. A holder may
convert Notes into shares of St. Paul Common Stock until, but not after, such
Note is properly tendered to The Chase Manhattan Bank, as Depositary (the
"Depositary"), unless the tender of such Note is properly withdrawn, there is a
default in payment of the Repurchase Price or the Offer is terminated without
the purchase of Notes. Any Notes which remain outstanding after consummation of
the Offer will continue to be obligations of USF&G (and, to the extent provided
in the Indenture, St. Paul) and will continue to be convertible at the option of
the holder thereof into shares of St. Paul Common Stock.
Tenders of Notes may be withdrawn at any time prior to the Expiration
Date. In the event of a termination of the Offer, Notes tendered pursuant to the
Offer will be promptly returned to the tendering holders.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment) and applicable law, USF&G will, promptly after the Expiration
Date, purchase, by accepting for payment, and will pay for, all Notes validly
tendered (and not properly withdrawn) pursuant to the Offer, such payment to be
made by the deposit of immediately available funds by USF&G with the Depositary,
which will act as agent for tendering holders for the purpose of receiving
payment from USF&G and transmitting such payment to tendering holders.
No person has been authorized to give any information or to make any
representations other than those contained in this Offer to Purchase and, if
given or made, such information or representations must not be relied upon as
having been authorized. This Offer to Purchase and related documents do not
constitute an offer to buy or the solicitation of an offer to sell securities in
any circumstances in which such offer or solicitation is unlawful. The delivery
of this Offer to Purchase shall not, under any circumstances, create any
implication that the information contained herein is current as of any time
subsequent to the date of such information.
NEITHER USF&G NOR ST. PAUL MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT
HOLDERS SHOULD EXERCISE THEIR CHANGE OF CONTROL RIGHT AND TENDER NOTES PURSUANT
TO THE OFFER AND NEITHER USF&G NOR ST. PAUL IS, OR HAS AUTHORIZED ANY OTHER
PERSON TO, SOLICIT TENDERS OF NOTES IN CONNECTION WITH THE OFFER (OTHER THAN BY
MEANS OF THE NOTICES REQUIRED BY THE NOTES). BASED ON THE CONVERSION RATE OF
16.6434 SHARES OF ST. PAUL COMMON STOCK PER $1,000 PRINCIPAL AMOUNT AT MATURITY
OF NOTES AND THE CLOSING PRICE OF ST. PAUL COMMON STOCK ON THE NYSE COMPOSITE
TAPE ON MAY 14, 1998 OF $44, EACH $1,000 PRINCIPAL AMOUNT AT MATURITY OF NOTES
MAY CURRENTLY BE CONVERTED INTO ST. PAUL COMMON STOCK WORTH APPROXIMATELY
$732.31. BASED ON THE FOREGOING, THE PRICE BEING OFFERED BY USF&G PER $1,000
PRINCIPAL AMOUNT AT MATURITY OF NOTES (IN ACCORDANCE WITH THE TERMS OF THE NOTES
AND THE INDENTURE) IS CURRENTLY LESS THAN THE CURRENT MARKET VALUE OF THE SHARES
OF ST. PAUL COMMON STOCK ISSUABLE UPON THE CONVERSION OF SUCH NOTES. THERE CAN
BE NO ASSURANCE AS TO THE PRICE AT WHICH ST. PAUL COMMON STOCK MAY NOW OR IN THE
FUTURE TRADE OR BE SOLD. HOLDERS OF NOTES CONTEMPLATING ACCEPTING THE OFFER ARE
URGED TO CONSULT WITH THEIR OWN FINANCIAL ADVISORS BEFORE ACCEPTING THE OFFER.
Any questions or requests for assistance or for additional copies of this
Offer to Purchase or related documents may be directed to the Depositary at one
of its telephone numbers set forth on the last page of this Offer to Purchase.
Any beneficial owner owning interests in Notes may contact such beneficial
owner's broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
-2-
<PAGE>
AVAILABLE INFORMATION
St. Paul is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files, reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Prior to May 8, 1998,
USF&G was subject to the informational requirements of the Exchange Act and, in
accordance therewith, filed reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information concerning
USF&G and St. Paul can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Office at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also can be obtained, at prescribed rates, from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a site on the Internet's World Wide Web at
http://www.sec.gov. that contains reports, proxy and information statements and
other information regarding registrants that have filed electronically with the
Commission, including USF&G and St. Paul. There is no established trading market
for the Notes. The St. Paul Common Stock is listed and traded on the NYSE and
such reports, proxy statements and other information concerning St. Paul may
also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
This Offer to Purchase constitutes a part of an Issuer Tender Offer
Statement on Schedule 13E-4 (the "Schedule 13E-4") filed with the Commission by
USF&G and St. Paul pursuant to Section 13(e) of the Exchange Act and the rules
and regulations promulgated thereunder. The Schedule 13E-4 and all exhibits
thereto are incorporated in this Offer to Purchase by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by USF&G (File No. 1-8233)
with the Commission under the Exchange Act, are incorporated herein by
reference:
(a) USF&G's Annual Report on Form 10-K for the year ended December 31,
1997.
(b) USF&G's Current Reports on Form 8-K dated January 19, 1998,
January 22, 1998 and February 26, 1998.
(c) USF&G's Proxy Statement relating to the Merger dated January 27, 1998
and mailed to its shareholders on January 28, 1998.
The following documents, which have been filed by St. Paul (File No.
0-3021) with the Commission under the Exchange Act, are incorporated herein by
reference:
(a) St. Paul's Annual Report on Form 10-K for the year ended December 31,
1997.
(b) St. Paul's Quarterly Report of Form 10-Q for the quarterly period
ended March 31, 1998.
(c) St. Paul's Current Reports on Form 8-K dated April 24, 1998, April
27, 1998, May 5, 1998 and May 14, 1998.
(d) St. Paul's Proxy Statement/Prospectus relating to the Merger dated
January 27, 1998 and mailed to its stockholders on January 28, 1998.
(e) St. Paul's Proxy Statement relating to its Annual Meeting of
Stockholders on May 5, 1998 dated March 19, 1998.
-3-
<PAGE>
All documents filed with the Commission by St. Paul pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or subsequent to the date
hereof shall be deemed to be incorporated by reference herein and to be a part
hereof from the date any such document is filed.
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 hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part hereof.
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS OFFER TO PURCHASE HAS BEEN
DELIVERED UPON WRITTEN OR ORAL REQUEST TO THE ST. PAUL COMPANIES, INC., 385
WASHINGTON STREET, ST. PAUL, MINNESOTA 55102, ATTENTION: CORPORATE SECRETARY,
TELEPHONE: (612) 310-7911.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Offer to Purchase (and in the documents
incorporated by reference) contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The forward-looking
statements relate to anticipated financial performance, management's plans and
objectives for future operations, business prospects, market conditions and
other matters. The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements. In order to comply with the terms of
that safe harbor, St. Paul and USF&G note that a variety of factors could cause
the actual results of the combined company following the Merger to differ
materially from the anticipated results expressed in such forward-looking
statements. The following discussion is intended to identify certain factors
that could cause future outcomes to differ materially from those set forth in
the forward-looking statements contained in this Offer to Purchase (and in the
documents incorporated by reference).
Forward-looking statements are statements that include the words
"expects," "anticipates," "intends," "plans," "believes," "estimates," or
similar expressions. Holders of Notes should note that many factors, some of
which are discussed elsewhere in this document and in the documents incorporated
by reference herein, could cause the actual results of the combined company
following the Merger to differ materially from the anticipated results set forth
or contemplated in such forward-looking statements. You are cautioned that such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
St. Paul and USF&G to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors may affect St. Paul's, USF&G's or the combined
company's operations, markets, products, services and prices. Such factors
include, among others, the following: general economic and business conditions,
including changes in interest rates, rates of inflation and the performance of
financial markets; changes in domestic and foreign laws, regulations and taxes;
social conditions; judicial decisions and rulings; integration of the operations
of St. Paul and USF&G, including the failure to realize synergies from the
Merger; regulatory conditions to the Merger; the loss of any significant
customers; insurance claims based on natural disasters; the frequency and
severity of catastrophic events; a change in the demand for, pricing of, or
supply of reinsurance or insurance; losses due to foreign currency exchange rate
fluctuations; and changes in business strategy or development plans.
-4-
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION........................................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................4
THE OFFER....................................................................6
GENERAL...............................................................6
PURPOSE AND EFFECTS OF THE OFFER......................................6
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION..................7
ACCEPTANCE FOR PAYMENT................................................8
PROCEDURES FOR TENDERING NOTES...............................................8
TENDERING NOTES.......................................................8
GUARANTEED DELIVERY PROCEDURES.......................................11
WITHDRAWAL RIGHTS....................................................12
CERTAIN INFORMATION CONCERNING USF&G AND ST. PAUL...........................13
USF&G................................................................13
ST. PAUL.............................................................13
RECENT DEVELOPMENTS.........................................................13
THE MERGER...........................................................13
THE STOCK SPLIT......................................................13
ADJUSTMENT TO CONVERSION PRICE; JOINT AND SEVERAL OBLIGATION................14
SOURCES AND AMOUNT OF FUNDS.................................................14
MARKET PRICE INFORMATION....................................................15
THE NOTES............................................................15
ST. PAUL COMMON STOCK................................................15
SELECTED UNAUDITED HISTORICAL AND PRO FORM COMBINED FINANCIAL DATA..........16
ST. PAUL.............................................................16
USF&G................................................................17
ST. PAUL AND USF&G ..................................................18
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................20
SALE OF NOTES PURSUANT TO THE OFFER..................................20
RETENTION OF NOTES...................................................20
THE DEPOSITARY..............................................................21
MISCELLANEOUS...............................................................21
-5-
<PAGE>
THE OFFER
GENERAL
USF&G hereby offers, upon the terms and subject to the conditions set
forth in this Offer to Purchase, to purchase for cash at the Repurchase Price
any and all Notes that are properly tendered (and not properly withdrawn) prior
to the Expiration Date pursuant to the terms and conditions set forth herein.
USF&G will accept only tenders of Notes or a portion thereof which are in an
amount equal to $1,000 principal amount at maturity of Notes or integral
multiples thereof. Tenders of Notes may be withdrawn at any time prior to the
Expiration Date. In the event of a termination of the Offer, the Notes tendered
pursuant to the Offer will be promptly returned to the tendering holders.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment) and applicable law, USF&G will, promptly after the Expiration
Date, purchase, by accepting for payment, and will pay for, all Notes validly
tendered (and not properly withdrawn) pursuant to the Offer. Such payment will
be made by the deposit of immediately available funds by USF&G with the
Depositary, which will act as agent for tendering holders for the purpose of
receiving payment from USF&G and transmitting such payment to tendering holders.
Subject to the requirements of the Indenture and the Notes, USF&G expressly
reserves the right, in its sole discretion and subject to Rule 13e-4(f)(5) under
the Exchange Act, to delay acceptance for payment of or payment for Notes in
order to comply, in whole or in part, with any applicable law.
If less than all the principal amount of Notes held by a holder is
tendered and accepted pursuant to the Offer, USF&G shall issue, and the Trustee
shall authenticate and deliver to or on the order of the holder thereof, at the
expense of USF&G, new Notes of authorized denominations, in a principal amount
equal to the portion of the Notes not tendered or not accepted, as the case may
be, as promptly as practicable after the Expiration Date.
A Note may be converted into shares of St. Paul Common Stock until, but
not after, such Note is properly tendered to the Depositary unless the tender of
such Note is properly withdrawn, there is a default in payment of the Repurchase
Price or the Offer is terminated without the purchase of Notes.
After the Expiration Date, USF&G may purchase additional Notes in the
open market, in privately negotiated transactions, through subsequent tender or
exchange offers or otherwise, subject to compliance with applicable law. Any
future purchases may be on the same terms or on terms that may be more or less
favorable to Holders than the terms of the Offer. Any future purchases will
depend on various factors at that time.
PURPOSE AND EFFECTS OF THE OFFER
The Offer is being made pursuant to the Indenture, which provides that,
upon the occurrence of a Change of Control (as defined below), each holder of
Notes will have the right, at such holder's option, to require USF&G to
repurchase all or a portion of such holder's Notes, in denominations of $1,000
principal amount at maturity or integral multiples thereof, at a purchase price
equal to the Issue Price ($512.98 per $1,000 principal amount at maturity) plus
Original Issue Discount (the difference between the Issue Price and the
principal amount at maturity of the Note) accrued (at 4.5% per annum, on a
semi-annual bond equivalent basis using a 360-day year composed of twelve 30-day
months, from the Issue Date (March 3, 1994) of the Notes) through June 15, 1998,
the date that is 35 Business Days after the occurrence of the Change of Control.
A "Change of Control" is deemed to have occurred under the Notes at such time as
either of the following events shall occur:
(i) There shall be consummated any consolidation or merger of or
statutory share exchange involving USF&G in which USF&G is not the
continuing, surviving or successor corporation or pursuant to which USF&G
Common Stock would be converted into cash, securities or other property,
other than a consolidation or merger of or statutory share exchange
involving USF&G in which the holders of the
-6-
<PAGE>
USF&G Common Stock immediately prior to the consolidation, merger or
share exchange have, directly or indirectly, at least a majority of the
common equity of the continuing, surviving or successor corporation
immediately after such consolidation, merger or share exchange; or
(ii) There is a report filed on Schedule 13D or 14D-1 (or any
successor schedule, form or report) pursuant to the Exchange Act,
disclosing that any Person (for the purposes of this subparagraph 6.2
only, as the term "Person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of 50% or more of the
voting power of the USF&G Common Stock then outstanding; provided,
however, that a Person shall not be deemed beneficial owner of, or to own
beneficially, (A) any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates (as such terms are defined in the
Notes) until such tendered securities are accepted for purchase or
exchange thereunder, or (B) any securities if such beneficial ownership
(1) arises solely as a result of a revocable proxy delivered in response
to a proxy or consent solicitation made pursuant to the applicable rules
and regulations under the Exchange Act, and (2) is not also then
reportable on Schedule 13D (or any successor schedule) under the Exchange
Act.
Notwithstanding the foregoing, under the Notes, a Change in Control is not be
deemed to have occurred by virtue of USF&G, any Subsidiary (as defined in the
Notes), any employee stock ownership plan or any other employee benefit plan of
the USF&G or any Subsidiary, or any Person holding USF&G Common Stock for or
pursuant to the terms of any such employee stock ownership or benefit plan,
filing or becoming obligated to file a report under or in response to Schedule
13D or Schedule 14D-1 (or any successor schedule, form or report) under the
Exchange Act disclosing beneficial ownership by it of shares of USF&G Common
Stock, whether in excess of 50% or otherwise.
A "Change of Control" occurred on April 24, 1998 as a result of the
consummation of the Merger, pursuant to which Sub was merged with and into
USF&G, with USF&G continuing as the surviving corporation and becoming a wholly
owned subsidiary of St. Paul. This Offer to Purchase serves as the "Change of
Control Notice" required by the Notes.
The Notes purchased pursuant to the Offer will cease to be outstanding
and will be delivered to the Trustee for cancellation immediately after such
purchase. Any Notes which remain outstanding after consummation of the Offer
will continue to be obligations of USF&G (and, to the extent provided in the
Indenture, of St. Paul) and will continue to be convertible at the option of the
holder thereof into shares of St. Paul Common Stock. The Indenture does not
contain any limitations on the ability of USF&G to incur additional
indebtedness.
Holders of Notes that are not tendered pursuant to the Offer will not
have the right after the Expiration Date to exercise their Change of Control
Rights in respect of such Notes arising in respect of the Merger. Depending
upon, among other things, the amount of Notes outstanding after the consummation
of the Offer, the liquidity of untendered Notes may be adversely affected by the
Offer. If there is a market for such Notes following the Offer, such Notes may
trade at a discount compared to present trading prices depending on prevailing
interest rates, the market for securities with similar credit features, the
performance of St. Paul and other factors. Accordingly, there is no assurance
that an active market in such Notes following consummation of the Offer will
exist and no assurance as to the prices at which such Notes may trade or be
sold.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Offer will expire on the Expiration Date, unless extended pursuant to
the procedures set forth herein. Subject to the requirements of the Notes and
the Indenture, USF&G expressly reserves the right to extend the Offer by giving
oral or written notice of such extension to the Depositary. During any extension
of the Offer, all Notes previously tendered pursuant to the Offer (and not
properly withdrawn) will remain subject to the Offer and may be accepted for
payment by USF&G, subject to the withdrawal rights of Holders.
-7-
<PAGE>
USF&G also expressly reserves the right, subject to the requirements of
the Indenture, the Notes and Rule 13e-4(f)(5) under the Exchange Act and other
applicable law: (i) to delay acceptance for payment of or payment for any Notes
tendered pursuant to the Offer; and (ii) at any time, or from time to time, to
amend the terms of the Offer in any respect.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which USF&G may choose to make a public announcement of any extension,
termination or amendment of the Offer, USF&G shall have no obligation to
publish, advertise or otherwise communicate any such public announcement, other
than by issuing a release to the Dow Jones News Service, except in the case of
an announcement of an extension of the Offer, in which case USF&G shall have no
obligation to publish, advertise or otherwise communicate such announcement
other than by issuing a notice of such extension by press release or other
public announcement, which notice shall be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
ACCEPTANCE FOR PAYMENT
Upon the terms and subject to the conditions to the Offer (including if
the Offer is extended or amended, the terms of such extension or amendment) and
applicable law, USF&G will, promptly after the Expiration Date, purchase, by
accepting for payment, and will pay for all Notes properly tendered (and not
properly withdrawn) pursuant to the Offer. In all cases, payment by the
Depositary to tendering holders will be made only after timely receipt by the
Depositary of the documentation described under "Procedures for Tendering and
Withdrawing Notes--Tendering Notes."
For purposes of the Offer, USF&G shall be deemed to have accepted for
payment (and thereby to have purchased) tendered Notes as, if and when USF&G
gives oral or written notice to the Depositary of USF&G's acceptance of such
Notes for payment. Subject to the terms and conditions of the Offer, payment for
Notes so accepted will be made by deposit of the consideration therefor with the
Depositary. The Depositary will act as agent for tendering holders for the
purpose of receiving payment from USF&G and transmitting payment to such
tendering holders.
PROCEDURES FOR TENDERING NOTES
TENDERING NOTES
The tender of Notes pursuant to any of the procedures set forth in this
Offer to Purchase and in the Letter of Transmittal will constitute a binding
agreement between the tendering holder and USF&G upon the terms and subject to
the conditions of the Offer. The tender of Notes will constitute an agreement to
deliver good and marketable title to all tendered Notes prior to the Expiration
Date free and clear of all liens, charges, claims, encumbrances, interests and
restrictions of any kind.
EXCEPT AS PROVIDED IN "--GUARANTEED DELIVERY PROCEDURES", UNLESS THE
NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE DEPOSITARY PRIOR TO
THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL), USF&G MAY, AT ITS OPTION, REJECT SUCH TENDER. PAYMENT
FOR NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF TENDERED NOTES AND DELIVERY OF
ALL OTHER REQUIRED DOCUMENTS.
Only record holders of Notes are authorized to exercise a Change of
Control Right and tender their Notes pursuant to the Offer. Accordingly, to
properly exercise a Change of Control Right and tender Notes or cause Notes to
be tendered, the following procedures must be followed:
-8-
<PAGE>
Notes held through DTC. Each beneficial owner of Notes held through a
participant (a "DTC Participant") of the Depository Trust Company ("DTC") (i.e.,
a custodian bank, depositary, broker, trust company or other nominee) must
instruct such DTC Participant to cause its Notes to be tendered in accordance
with the procedures set forth in this Offer to Purchase.
To effectively tender Notes that are held through DTC, DTC Participants
should transmit their acceptance through the Automated Tender Offer Program
("ATOP"), for which the transaction will be eligible, and DTC will then edit and
verify the acceptance and send an Agent's Message to the Depositary for its
acceptance. Delivery of tendered Notes must be made to the Depositary pursuant
to the book-entry delivery procedures set forth below or the tendering DTC
participant must comply with the guaranteed delivery procedures set forth below.
No Letters of Transmittal will be required to tender notes through ATOP.
The depositary will establish an account with respect to the Notes at DTC
for purposes of the Offer within two business days after the date of this Offer
to Purchase, and any financial institution that is a participant in DTC may make
book-entry delivery of the Notes by causing DTC to transfer such Notes into the
Depositary's account in accordance with DTC's procedures for such transfer.
However, although delivery of Notes may be effected through book-entry transfer
into the Depositary's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees or an Agent's Message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be transmitted to and received by the Depositary at its address set
forth on the last page of this Offer to Purchase on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures described below. Delivery of documents to DTC does not constitute
delivery to the Depositary. The confirmation of a book-entry transfer into the
Depositary's account at DTC as described above is referred to herein as a
"Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of the Book-Entry Confirmation,
which states (i) that DTC has received an express acknowledgment from the
participant in DTC described in such Agent's Message, (ii) the principal amount
of Notes which have been tendered by such participant pursuant to the Offer,
(iii) that such participant has received this Offer to Purchase and the Letter
of Transmittal and agrees to be bound by the terms of this Offer to Purchase and
the Letter of Transmittal, and (iv) that the Company may enforce such agreement
against such participant.
Notes held by Record Holders. Each record holder must complete and sign a
Letter of Transmittal, and mail or deliver such Letter of Transmittal, and any
other documents required by the Letter of Transmittal, together with
certificate(s) representing all tendered Notes, to the Depositary at its address
set forth on the last page of this Offer to Purchase, or the Holder must comply
with the guaranteed delivery procedures set forth in this Offer to Purchase.
All signatures on a Letter of Transmittal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
NYSE Medallion Signature Program or the Stock Exchange Medallion Program;
provided, however, that signatures on a Letter of Transmittal need not be
guaranteed if such Notes are tendered for the account of an Eligible
Institution. If a Letter of Transmittal or any Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
USF&G of the authority of such person so to act must be submitted.
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, each tendering holder waives any right to receive
any notice of the acceptance for purchase of its Notes.
Lost or Missing Certificates. If a record holder desires to tender Notes
pursuant to the Offer, but the certificates representing such Notes have been
mutilated, lost, stolen or destroyed, such holder should write to or telephone
the Trustee about procedures for obtaining replacement certificates representing
such Notes, arranging for indemnification or about any other matter which
requires handling by such Trustee.
-9-
<PAGE>
Backup Federal Income Tax Withholding. Under the "backup withholding"
provisions of Federal income tax law, unless a tendering holder, or his or her
assignee (in either case, the "Payee"), satisfies the conditions described in
Instruction 5 of the Letter of Transmittal or is otherwise exempt, the aggregate
purchase price may be subject to backup withholding tax at a rate of 31%. To
prevent backup withholding, each Payee should complete and sign the Substitute
Form W-9 provided in the Letter of Transmittal. See Instruction 5 of the Letter
of Transmittal.
Effect of Letter of Transmittal. Subject to and effective upon the
acceptance for purchase of and payment for Notes tendered thereby, by executing
and delivering a Letter of Transmittal a tendering holder of Notes (i)
irrevocably sells, assigns and transfers to USF&G, all right, title and interest
in and to all the Notes tendered thereby and (ii) waives any and all rights with
respect to the Notes (including without limitation any existing or past defaults
and their consequences in respect of the Note and the Indenture under which the
Notes were issued), (iii) releases and discharges USF&G and St. Paul from any
and all claims such holder may have now, or may have in the future arising out
of, or related to, the Notes including without limitation any claims that such
holder is entitled to receive additional principal or interest payments with
respect to the Notes or to participate in any redemption or defeasance of the
Notes and (iv) irrevocably constitutes and appoints the Depositary the true and
lawful agent and attorney-in-fact of such holder with respect to any such
tendered Notes, with full power of substitution and resubstitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver certificates representing such Notes, or transfer ownership of such
Notes, on the account books maintained by DTC, together, in any such case, with
all accompanying evidences of transfer and authenticity, to USF&G, (b) present
such Notes for transfer on the relevant security register and (c) receive all
benefits or otherwise exercise all rights of beneficial ownership of such Notes
(except that the Depositary will have no rights to, or control over, funds from
USF&G, except as agent for USF&G, for the purchase price for any tendered Notes
that are purchased by USF&G), all in accordance with the terms of the Offer.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Notes will be resolved by USF&G, whose
determination will be final and binding. USF&G reserves the absolute right to
reject any or all tenders that are not in proper form or the acceptance of which
may, in the opinion of counsel for USF&G, be unlawful. USF&G also reserves the
absolute right to waive any condition to the Offer and any irregularities or
conditions of tender as to particular Notes. USF&G's interpretation of the terms
and conditions of the Offer (including the instructions in the Letter of
Transmittal) will be final and binding. Unless waived, any irregularities in
connection with tenders must be cured within such time as USF&G shall determine.
USF&G and the Depositary shall not be under any duty to give notification of
defects in such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Notes received by the Depositary
that are not properly tendered and as to which the irregularities have not been
cured or waived will be returned by the Depositary to the tendering holder,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
LETTERS OF TRANSMITTAL AND NOTES MUST BE SENT ONLY TO THE DEPOSITARY. DO
NOT SEND LETTERS OF TRANSMITTAL OR NOTES TO USF&G OR ST. PAUL.
THE METHOD OF DELIVERY OF NOTES AND LETTERS OF TRANSMITTAL, ANY REQUIRED
SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH DTC AND ANY ACCEPTANCE THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE
PERSONS TENDERING AND DELIVERING ACCEPTANCES OR LETTERS OF TRANSMITTAL AND,
EXCEPT AS OTHERWISE PROVIDED IN THE LETTER OF TRANSMITTAL, DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE
OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
-10-
<PAGE>
GUARANTEED DELIVERY PROCEDURES
DTC Participants. A DTC Participant who wishes to cause its Notes to be
tendered, but who cannot transmit its acceptance through ATOP prior to the
Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"),
including (as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities dealer, municipal securities broker, government
securities dealer or government securities broker; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings institution that is a participant in a Securities
Transfer Association recognized program; and
(b) prior to 12:00 a.m., New York City time, on the Expiration Date, the
Depositary receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form provided herewith;
and
(c) Book-Entry Confirmation of the transfer into the Depositary's account
at DTC, and all other documents required by the Letter of Transmittal, are
received by the Depositary within three New York Stock Exchange trading days
after the date of receipt by the Depositary of such Notice of Guaranteed
Delivery.
Record Holders. A record holder who wishes to tender its Notes but (x)
whose Notes are not immediately available and will not be available for
tendering prior to the Expiration Date, or (y) who cannot deliver its Notes, the
Letter of Transmittal, or any other required documents, to the Depositary prior
to the Expiration Date, may effect a tender if:
(a) the tender is made by or through an Eligible Institution; and
(b) prior to 12:00 a.m., New York City time, on the Expiration Date, the
Depositary receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form provided herewith;
and
(c) a properly completed and executed Letter of Transmittal, as well as
the certificate(s) representing all tendered Notes in proper form for transfer,
and all other documents required by the Letter of Transmittal, are received by
the Depositary within three New York Stock Exchange trading days after the date
of receipt by the Depositary of such Notice of Guaranteed Delivery.
Under no circumstances will interest be paid by USF&G by reason of any
delay in making payment to any person using the guaranteed delivery procedures
described above.
-11-
<PAGE>
WITHDRAWAL RIGHTS
Tenders of Notes (or any portion of such Notes in integral multiples of
$1,000 principal amount at maturity) may be withdrawn at any time prior to the
Expiration Date.
Notes held through DTC. A DTC Participant who has transmitted its
acceptance through ATOP in respect of Notes held through DTC may, prior to the
Expiration Date, withdraw the instruction given thereby by (i) withdrawing its
acceptance through ATOP, or (ii) delivering to the Depositary by mail, hand
delivery or facsimile transmission of notice of withdrawal of such instruction.
Such notice of withdrawal must contain the name and number of the DTC
Participant, the principal amount of Notes to which such withdrawal relates and
the signature of the DTC Participant. Withdrawal of such an instruction will be
effective upon receipt of such notice of withdrawal by the Depositary.
Notes held by Record Holders. A holder may withdraw its tender of Notes,
prior to the Expiration Date, by delivering to the Depositary by mail, hand
delivery or facsimile transmission of notice of withdrawal. Any such notice of
withdrawal must (i) specify the name of the person who tendered the Notes to be
withdrawn, (ii) contain a description of the Notes to be withdrawn and identify
the certificate number or numbers shown on the particular certificates
evidencing such Notes and the aggregate principal amount at maturity represented
by such Notes and (iii) be signed by the holder of such Notes in the same manner
as the original signature on the Letter of Transmittal by which such Notes were
tendered (including any required signature guarantees), or be accompanied by (x)
documents of transfer in a form acceptable to USF&G, in its sole discretion and
(y) a properly completed irrevocable proxy that authorized such person to effect
such revocation on behalf of such holder. If the Notes to be withdrawn have been
delivered or otherwise identified to the Depositary, a signed notice of
withdrawal is effective immediately upon receipt by the Depositary even if
physical release is not yet effected. Any Notes properly withdrawn will be
deemed to be not validly tendered for purposes of the Offer.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
NYSE Medallion Signature Program or the Stock Exchange Medallion Program;
provided, however, that signatures on the notice of withdrawal need not be
guaranteed if the Notes being withdrawn are held for the account of an Eligible
Institution.
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC Participant or a holder, as the case may be, in the same
manner as the person's name appears on its transmission through ATOP or Letter
of Transmittal, as the case may be, to which such withdrawal relates. If a
notice of withdrawal is signed by a trustee, partner, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, such person must so indicate
when signing and must submit with the revocation appropriate evidence of
authority to execute the notice of withdrawal. A holder or DTC Participant may
withdraw a tender only if such withdrawal complies with the provisions of this
Offer to Purchase.
A withdrawal of an instruction previously given pursuant to the
transmission of an acceptance through ATOP or a withdrawal of a tender by a
holder may be rescinded only by (i) a new transmission of acceptance through
ATOP, or (ii) execution and delivery of a new Letter of Transmittal, as the case
may be, in accordance with the procedures described herein.
-12-
<PAGE>
CERTAIN INFORMATION CONCERNING USF&G AND ST. PAUL
USF&G
USF&G is a holding company with assets of $15.8 billion whose principal
subsidiaries are engaged in underwriting property and casualty insurance and
life insurance/annuities. Property and casualty insurance is written primarily
by United States Fidelity and Guaranty Company, founded in 1896, and is sold
principally through independent agents supported by USF&G 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, managing general agents
and regional and national brokerage firms. As a result of the Merger, USF&G
became a wholly owned subsidiary of St. Paul on April 24, 1998. USF&G's
principal offices are located at 6225 Centennial Way, Baltimore, Maryland 21209,
and its telephone number is (410) 547-3000.
ST. PAUL
St. Paul and its subsidiaries comprise one of the oldest insurance
organizations in the United States, dating back to 1853. St. Paul is a
management company principally engaged, through its subsidiaries, in property
and casualty insurance and reinsurance underwriting. St. Paul also has
operations in the asset management-investment banking industry through its
majority ownership of The John Nuveen Company. As a management company, St. Paul
oversees the operations of its subsidiaries and provides them with capital,
management and administrative services. St. Paul's executive offices are located
at 385 Washington Street, St. Paul, Minnesota 55102, and its telephone number is
(612) 310-7911.
RECENT DEVELOPMENTS
THE MERGER
On April 24, 1998, pursuant to the terms of an Agreement and Plan or
Merger, dated as of January 19, 1998, and as amended through February 26, 1998,
among St. Paul, Sub and USF&G, the Merger was consummated with USF&G becoming a
wholly owned subsidiary of St. Paul. In connection with the Merger, each
outstanding share of USF&G Common Stock (other than shares held by USF&G and
shares held by St. Paul or any direct or indirect wholly owned subsidiary of St.
Paul) was converted into 0.2821 (or, after giving effect to the stock split
described below, 0.5642) of a share of St. Paul Common Stock.
THE STOCK SPLIT
At their annual meeting on May 5, 1998 the shareholders of St. Paul
approved a proposal to increase the number of authorized shares of St. Paul
Common Stock. Thereafter, the Board of Directors of St. Paul declared a
two-for-one stock split (issuing one additional share of St. Paul Common Stock
for each outstanding share of St. Paul Common Stock) on shares of St. Paul
Common Stock held of record as of May 6, 1998. As a consequence, the Notes,
after giving effect to the two-for-one stock split, are convertible at a
conversion rate of 16.6434 shares of St. Paul Common Stock per $1,000 principal
amount at maturity of Notes.
-13-
<PAGE>
ADJUSTMENT TO CONVERSION PRICE; JOINT AND SEVERAL OBLIGATION
Prior to the consummation of the Merger, the Notes were convertible into
shares of USF&G Common Stock at a conversion rate of 29.499 shares of USF&G
Common Stock per $1,000 principal amount at maturity of Notes. Upon consummation
of the Merger, pursuant to adjustment mechanisms contained in the Indenture, the
Notes became, and are currently, convertible into shares of St. Paul Common
Stock at a conversion rate (after giving effect to the stock split) of 16.6434
shares of St. Paul Common Stock per $1,000 principal amount at maturity of
Notes. In connection with the Merger, St. Paul agreed to be jointly and
severally liable with USF&G for the due and punctual payment of the principal
of, and premium, if any, and interest on, the Notes when due and all other
monetary obligations of USF&G under the Indenture and the Notes. The obligations
of St. Paul in respect of the Notes shall be subordinate and junior in right of
payment to the Senior Debt (as defined in the Indenture) of St. Paul to the same
extent and in the same manner that the Notes are subordinate and junior in right
of payment to the Senior Debt of USF&G pursuant to the Indenture. The assumption
by St. Paul of payment obligations in respect of the Notes will be deemed to be
a third-party beneficiary agreement for the benefit of the holders of the Notes.
SOURCES AND AMOUNT OF FUNDS
The precise amount of funds required by USF&G to purchase Notes tendered
pursuant to the Offer and to pay the fees and expenses related to the Offer will
not be known until the Expiration Date. If all outstanding Notes were tendered
and purchased, the aggregate amount of funds required to pay the Repurchase
Price would be approximately $108,767,000. Because the price being offered by
USF&G per $1,000 principal amount at maturity of Notes (in accordance with the
terms of the Notes) is currently less than the current market value of the
shares of St. Paul Common Stock issuable upon the conversion of such Notes, it
is not currently expected that holders of a substantial principal amount at
maturity of Notes will accept the Offer and tender their Notes. As a
consequence, USF&G does not expect that a significant amount of funds will be
required to purchase Notes tendered and accepted pursuant to the Offer. USF&G
expects that any funds required to purchase tendered Notes will be available
from working capital. If additional funds are required to purchase Notes
accepted pursuant to the Offer, USF&G intends to obtain such funds from one or
more additional sources of financing which may include working capital, loans
from affiliates (including St. Paul) and/or loans from banks or other
traditional third party sources of financing under new or existing loan or
credit agreements.
-14-
<PAGE>
MARKET PRICE INFORMATION
THE NOTES
There is no established trading market for the Notes.
HOLDERS CONTEMPLATING ACCEPTING THE OFFER ARE URGED TO CONSULT WITH THEIR
OWN FINANCIAL ADVISORS BEFORE ACCEPTING THE OFFER.
ST. PAUL COMMON STOCK
St. Paul Common Stock is listed and traded on the NYSE under the symbol
"SPC". The following table sets forth the high and low sales prices per share of
St. Paul Common Stock reported on the NYSE Composite Tape, for the periods
indicated, as adjusted for a two for one stock split on shares of St. Paul
Common Stock held of record as of May 6, 1998.
St. Paul
Common Stock
--------------
High Low
------ ------
1996
First Quarter............................................ 30 1/4 26 3/4
Second Quarter........................................... 28 1/8 25 1/16
Third Quarter............................................ 27 15/16 25 5/16
Fourth Quarter........................................... 30 3/8 26 3/4
1997
First Quarter............................................ 36 5/16 28 13/16
Second Quarter........................................... 40 1/8 31 1/2
Third Quarter............................................ 41 13/32 36 9/32
Fourth Quarter........................................... 42 3/4 38 3/4
1998
First Quarter............................................ 47 3/16 37 5/16
Second Quarter (through May 14, 1998).................... 45 3/8 39 15/16
On May 14, 1998, the closing sales price of the St. Paul Common Stock, as
reported on the NYSE Composite Tape, was $44 per share.
HOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE ST. PAUL
COMMON STOCK PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE OFFER OR THE
CONVERSION OF THE NOTES.
-15-
<PAGE>
SELECTED UNAUDITED HISTORICAL AND PRO FORMA
COMBINED FINANCIAL DATA
The following tables are being provided to assist you in your analysis of
the Offer and present selected historical financial and operating data of St.
Paul and USF&G and selected unaudited pro forma combined financial and operating
data after giving effect to the Merger as a "pooling of interests." St. Paul's
and USF&G's selected historical data for each of the three years in the period
ended December 31, 1997 and St. Paul's selected historical data for the three
month periods ended March 31, 1998 and March 31, 1997 have been derived from
financial statements filed with the Commission. You should be aware that the pro
forma combined financial data are presented for illustrative purposes only and
are not necessarily an indication of the financial position or operating results
that would have occurred if the Merger had been completed at such times or that
will occur upon consummation of the Merger. The pro forma combined financial
data do not give effect to any cost saving which may result from the integration
of St. Paul's and USF&G's operations, nor do they consider any reorganization
costs that are expected to occur as a result of the Merger. Additionally, the
pro forma combined income statement data do not include any transaction costs
relating to the Merger. The following selected financial data should be read in
conjunction with the related historical and pro forma combined financial
statements and notes thereto incorporated by reference herein.
ST. PAUL
SELECTED UNAUDITED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE THREE
MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31
----------------------------- ----------------------------------------------
1998 1997 1997 1996 1995
------------- ------------- ------------- -------------- --------------
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums earned................................ $ 1,115 $ 1,171 $ 4,616 $ 4,448 $ 3,971
Net investment income.......................... 219 219 886 807 741
Realized gains................................. 45 95 408 219 85
Asset management-investment banking............ 71 59 262 220 221
17 13 47 40 38
Other.......................................... ------------- ------------- ------------- -------------- --------------
Total revenues ............................ 1,467 1,557 6,219 5,734 5,056
Insurance losses and loss adjustment expenses.. 811 869 3,345 3,318 2,864
Policy acquisition, operating and
administrative expenses.................... 463 443 1,855 1,717 1,523
39 53 246 141 131
Income tax expense............................. ------------- ------------- ------------- -------------- --------------
$ 154 $ 192 $ 773 $ 558 $ 538
Income from continuing operations........... ------------- ------------- ------------- -------------- --------------
Income from continuing operations per
common
share(1)................................... $ 0.83 $ 1.05 $ 4.20 $ 3.06 $ 2.94
Cash dividends declared per common share(2) $ 0.25 $ 0.24 $ 0.94 $ 0.88 $ 0.80
BALANCE SHEET DATA:
Total assets................................... $ 21,127 $ 20,390 $ 21,501 $ 20,681 $ 18,519
Total debt..................................... 655 708 783 689 697
Company-obligated mandatorily redeemable
preferred securities of St. Paul Capital
L.L.C. 207 207 207 207 207
Net change in unrealized gains on
investments and foreign currency............ 61 (203) 59 9 617
Shareholders' equity........................... 4,819 3,904 4,627 4,004 3,730
Book value per common share(2)................. $ 28.58 23.26 $ 27.53 $ 23.97 $ 22.15
Number of common shares outstanding(2)......... 168,050,000 167,050,000 167,455,600 166,396,822 167,951,728
PROPERTY/LIABILITY INSURANCE:
GAAP underwriting result....................... $ (61) $ (51) $ (180) $ (216) $ (103)
Statutory combined ratio:(3)
Loss and loss expense ratio................. 72.8 74.2 72.5 74.6 72.1
Underwriting expense ratio.................. 34.7 33.3 32.6 30.9 29.7
----------- ----------- ----------- ------------ -----------
Combined ratio.............................. 107.5 107.5 105.1 105.5 101.8
----------- ----------- ----------- ------------ -----------
<FN>
- ---------------------------
(1) Income from continuing operations per common share for all years presented
is calculated on a "diluted" basis in accordance with SFAS No. 128
(2) Adjusted to reflect the two-for-one stock split on shares of St. Paul
Common Stock held of record as of May 6, 1998.
(3) The combined ratio is not derived from the GAAP financial statements.
</FN>
</TABLE>
-16-
<PAGE>
USF&G
SELECTED UNAUDITED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums earned..................................... $ 2,682 $ 2,731 $ 2,666
Net investment income............................... 691 705 733
Realized gains...................................... 15 44 7
16 18 53
Other............................................... -------- -------- -------
Total revenues .................................. 3,404 3,498 3,459
Insurance losses and loss adjustment expenses
and policy benefits............................... 2,071 2,181 2,178
Policy acquisition, operating and administrative
expenses.......................................... 1,062 1,058 1,086
Income tax expense (benefit)........................ 77 (2) (14)
Income from continuing operations................. $ 194 261 209
------------
Income from continuing operations per common 1.63 1.95 1.53
share(1).......................................... $ $ $
Cash dividends declared per common share............ $ 0.26 $ 0.20 $ 0.20
BALANCE SHEET DATA:
Total assets........................................ $ 15,819 $ 14,407 $ 14,651
Total debt.......................................... 521 482 607
Company-obligated mandatorily redeemable
preferred securities of USF&G Capital
Trusts............................................ 296 100 0
Net change in unrealized gains on investments
and foreign currency.............................. 105 (209) 418
Shareholders' equity................................ 2,077 1,969 1,984
Book value per common share......................... $ 17.84 $ 15.48 $ 14.68
Number of common shares outstanding................. 116,402,199 114,240,489 119,606,095
PROPERTY/LIABILITY INSURANCE:
GAAP underwriting result............................ $ (99) $ (167) $ (156)
Statutory combined ratio: (2)
Loss and loss expense ratio...................... 70.5 72.1 72.4
Underwriting expense ratio....................... 32.8 33.5 33.4
--------------- --------------- --------------
Combined ratio................................... 103.3 105.6 105.8
--------------- --------------- --------------
<FN>
- ---------------------------
(1) Income from continuing operations per common share for all years presented
is calculated on a "diluted" basis in accordance with SFAS No. 128
(2) The combined ratio is not derived from the GAAP financial statements.
</FN>
</TABLE>
-17-
<PAGE>
ST. PAUL AND USF&G
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL AND OPERATING DATA
<TABLE>
FOR THE THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------------
1998 1997 1997 1996 1995
---------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums earned......................................$ 1,782 $ 1,840 $ 7,298 $ 7,179 $ 6,637
Net investment income................................ 397 391 1,577 1,512 1,474
Realized gains....................................... 50 95 423 263 92
Asset management-investment banking.................. 71 59 262 220 221
24 17 63 58 91
Other................................................ --------- --------- --------- --------- ---------
Total revenues from continuing operations.......... 2,324 2,402 9,623 9,232 8,515
Insurance losses and loss adjustment expenses and
policy benefits.................................... 1,331 1,385 5,370 5,466 5,010
Policy acquisition, operating and administrative
expenses........................................... 743 708 2,917 2,775 2,609
56 72 339 151 128
Income tax expense................................... --------- --------- --------- --------- ---------
$ 194 $ 237 $ 997 $ 840 $ 768
Income from continuing operations................. --------- --------- --------- --------- ---------
Income from continuing operations per common
share(1)(2)........................................ $ 0.77 $ 0.94 $ 3.96 $ 3.26 $ 2.96
Cash dividends declared per common share............. $ 0.25 $ 0.24 $ 0.94 $ 0.88 $ 0.80
AS OF THE
THREE MONTHS AS OF THE YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------
MARCH 31, 1998 1997 1996 1995
--------------- --------- --------- --------
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
BALANCE SHEET DATA:
Total assets................................................. $ 37,063 $ 37,365 $ 35,151 $ 33,243
Total debt................................................... 1,142 1,304 1,171 1,304
Company-obligated mandatorily redeemable preferred
securities of Subsidiaries................................. 503 503 307 207
Net change in unrealized gains on investments and foreign
currency................................................... 53 164 (200) 1,035
Shareholders' equity......................................... 6,846 6,586 5,853 5,572
Book value per common share(2)............................... $ 29.13 $ 28.18 $ 24.42 $ 22.72
Number of common shares outstanding(2)....................... 234,488,833 233,129,721 230,851,306 235,433,487
PROPERTY/LIABILITY INSURANCE:
GAAP underwriting result..................................... $ (94) $ (233) $ (350) $ (227)
Statutory combined ratio: (3)
Loss and loss expense ratio................................ 72.3 71.1 73.2 71.7
34.6 32.7 31.9 31.1
Underwriting expense ratio................................. ------------- ------------ ----------- -----------
Combined ratio............................................. 106.9 103.8 105.1 102.8
------------- ------------ ----------- -----------
<FN>
- ---------------------------
(1) Income from continuing operations per common share for all years presented
is calculated on a "diluted" basis in accordance with SFAS No. 128
(2) Adjusted to reflect an exchange ratio in the Merger equal to 0.5642 and to
reflect the two-for-one Stock Split on shares of St. Paul Common Stock
held of record as of May 6, 1998.
(3) The combined ratio is not derived from the GAAP financial statements.
</FN>
</TABLE>
-18-
<PAGE>
ST. PAUL AND USF&G
Notes to Selected Unaudited Historical and Pro Forma
Combined Financial Data
1. DESCRIPTION OF TRANSACTIONS AND BASIS OF PRESENTATION
The Merger Agreement provided that each share of USF&G Common Stock be
converted into and become the right to receive Merger consideration as
determined by the Exchange Ratio. For purposes of the selected unaudited pro
forma combined financial data, the Exchange Ratio of 0.5642 has been used.
2. RECLASSIFICATIONS
Certain items in USF&G's historical financial statements have been
reclassified to conform to St. Paul's presentation.
St. Paul sold its insurance brokerage operation, Minet, in April 1997.
St. Paul's historical financial data for all periods presented reflect
Minet as a discontinued operation.
3. PER COMMON SHARE DATA
The proforma combined per common share data has been computed based on the
combined historical income from continuing operations as adjusted for
retroactive changes in certain accounting methods of both companies in order
to achieve conformity on the combined historical weighted average common
shares outstanding. For purposes of this calculation, USF&G's weighted
average common shares outstanding were multiplied by the assumed Exchange
Ratio.
Income from continuing operations per common share data for all years
presented is calculated on a "diluted" basis in accordance with SFAS No.
128.
4. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
Liabilities for unpaid losses and loss adjustment expenses related to
workers' compensation coverages were discounted to present value in the
historical financial statements of USF&G. The St. Paul did not discount
workers' compensation reserves. On a combined basis, St. Paul and USF&G will
discount certain workers' compensation reserves using an interest rate of up
to four percent. Accordingly, the pro forma adjustments for all periods
presented include a reduction in insurance losses and loss adjustment
expenses to conform the accounting policies of both companies. Those pro
forma adjustments to the combined income statement data for the years ended
December 31, 1997, 1996 and 1995 are $46 million, $33 million and $32
million, respectively.
5. ADJUSTMENTS TO RECORD ANTICIPATED TRANSACTION COSTS
Transaction costs of the Merger, representing investment banker and other
professional fees, are expected to be approximately $28 million. The
selected unaudited pro forma combined income statement data do not reflect
these charges. The selected unaudited pro forma combined balance sheet data
reflects these charges.
6. INCOME TAXES
The income tax effect of adjustments made to the Selected Unaudited Pro
Forma Combined Financial Data were calculated using St. Paul's statutory
rate of 35%.
7. STOCK SPLIT
Historical per share data for St. Paul and pro forma combined per share
data has been adjusted to reflect the two-for-one stock split of St. Paul
Common Stock held of record as of May 6, 1998.
-19-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is for general information only and is based
on the federal income tax law now in effect, which is subject to change,
possibly retroactively. This summary does not discuss all aspects of federal
income taxation which may be relevant to any particular holder of the Notes
in light of such holder's individual investment circumstances or to certain
types of holders subject to special tax rules (e.g., financial institutions,
broker-dealers, insurance companies, tax-exempt organizations, and foreign
taxpayers), nor does it address specific state, local or foreign tax
consequences. This summary assumes that the holders of the Notes have held
their Notes as "capital assets" under the Internal Revenue Code of 1986, as
amended (the "Code"). EACH HOLDER IS URGED TO CONSULT SUCH HOLDER'S TAX
ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF THE OFFER.
SALE OF NOTES PURSUANT TO THE OFFER
The receipt of cash by a holder of the Notes in exchange for the Notes
will be a taxable transaction for federal income tax purposes and may also
be a taxable transaction under applicable state, local or foreign tax laws.
Such holder will recognize gain or loss in an amount equal to the difference
between (i) the amount of cash received (other than in respect of accrued
interest) and (ii) such holder's adjusted tax basis in the Notes. Subject to
the market discount rules discussed below, such gain or loss will be capital
gain or loss and will be long-term gain or loss if such holder has held such
Notes for more than one year. Long-term capital gain of an individual holder
who is a citizen or resident of the United States will be subject to a
maximum tax rate of 28% in respect of Notes held for more than one year. The
maximum tax rate is reduced to 20% in respect of Notes held for more than
eighteen months.
The payment of accrued interest with respect to a Note generally will be
treated as ordinary income.
An exception to the capital gain treatment described above applies to a
holder who holds a Note with a "market discount." Market discount is the
amount by which the holder's basis in the Note immediately after its
acquisition is exceeded by "revised issue price" of the Note (which is
generally equal to the issue price of the Note plus the amount of "original
issue discount" (as defined in the Code) that has accrued on the Note since
its issuance). (However, a Note will be considered to have no market
discount if such excess is less than 1/4 of 1% of the stated redemption
price of the Note at maturity multiplied by the number of complete years
from the holder's acquisition date of the Note to its maturity date.) The
gain realized by the holder of a market discount Note on its purchase by
USF&G will be treated as ordinary income to the extent that market discount
has accrued (on a straight line basis or, at the election of the holder, on
a constant interest basis) from the holder's acquisition date to the date of
sale, unless the holder has elected to include market discount in income
currently as it accrues. Gain in excess of such accrued market discount will
be subject to the capital gains rules described above.
RETENTION OF NOTES
Although the matter is not entirely free from doubt, holders who retain
their Notes should not recognize any gain or loss by reason of St. Paul's
agreement to be jointly and severally liable with USF&G for the due and
punctual payment of the principal of, and premium, if any, and interest on,
the Notes when due and all other monetary obligations under the terms of the
Notes and the Indenture.
-20-
<PAGE>
THE DEPOSITARY
The Depositary for the Offer is The Chase Manhattan Bank. All deliveries,
correspondence and questions sent or presented to the Depositary relating
to the Offer should be directed to one of the addresses or telephone
numbers set forth on the last page of this Offer to Purchase. Requests
for information or additional copies of the Offer to Purchase and the
related Letter of Transmittal should be directed to the Depositary.
USF&G will pay the Depositary reasonable and customary compensation for
their services in connection with the Offer, plus reimbursement for
reasonable out-of-pocket expenses. USF&G will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
liabilities under the Federal securities laws.
Brokers, dealers, commercial banks and trust companies will be reimbursed
by USF&G for customary mailing and handling expenses incurred by them in
forwarding material to their customers. USF&G will not pay any fees or
commissions to any broker, dealer or other person (other than the
Depositary) in connection with the solicitation of tenders of Notes pursuant
to the Offer.
MISCELLANEOUS
USF&G is not aware of any jurisdiction where the making of the Offer is
not in compliance with the laws of such jurisdiction. If USF&G becomes aware
of any jurisdiction where the making of the Offer would not be in compliance
with such laws, USF&G will make a good faith effort to comply with any such
laws or seek to have such laws declared inapplicable to the Offer. If, after
such good faith effort, USF&G cannot comply with any such applicable laws,
the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of the Notes residing in such jurisdiction.
-21-
<PAGE>
The Letter of Transmittal, properly completed and duly executed, together
with certificates evidencing Notes and any other required documents should
be sent or delivered by holders of Notes or their broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
By Courier: By Registered Mail: By Hand:
---------- ------------------ -------
Chase Bank of Texas, N.A. Chase Bank of Texas, N.A. The Chase Manhattan Bank
Corporate Trust Services Corporate Trust Services Corporate Trust-Securities
1201 Main Street, 18th floor P O Box 219052 Window
Dallas, TX 75202 Dallas, TX 75221-9053 55 Water Street
Room 234, North Building
New York, NY 10041
By Facsimile: (214) 672-5932
Confirm by Telephone: (214) 672-5678 or (212) 946-3487
Any questions or requests for assistance or for additional copies of
this Offer to Purchase or related documents may be directed to the
Depositary at one of its telephone numbers set forth above.
-22-
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO TENDER ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
PURSUANT TO THE CHANGE OF CONTROL NOTICE AND OFFER TO PURCHASE
DATED MAY 15, 1998
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO
PURCHASE, THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON JUNE 15, 1998, UNLESS THE OFFER IS EXTENDED (SUCH TIME AND
DATE OR THE LATEST EXTENSION THEREOF, IF EXTENDED, THE "EXPIRATION DATE").
NOTES TENDERED IN THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK (THE "DEPOSITARY")
By Courier: By Registered Mail: By Hand:
---------- ------------------ -------
Chase Bank of Texas, N.A. Chase Bank of Texas, N.A. The Chase Manhattan Bank
Corporate Trust Services Corporate Trust Services Corporate Trust-Securities
1201 Main Street, 18th floor P O Box 219052 Window
Dallas, TX 75202 Dallas, TX 75221-9053 55 Water Street
Room 234, North Building
New York, NY 10041
By Facsimile: (214) 672-5937
Confirm by Telephone: (214) 672-5678 or (214) 672-3487
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN AND IN THE OFFER TO PURCHASE (AS DEFINED
BELOW) SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
By execution hereof, the undersigned acknowledges receipt of the Change of
Control Notice and Offer to Purchase, dated May 15, 1998 (as the same may
be amended from time to time, the "Offer to Purchase"), of USF&G Corporation
("USF&G") and this Letter of Transmittal and instructions hereto (the
"Letter of Transmittal"), which together constitute USF&G's offer to
purchase (the "Offer") all of the outstanding Zero Coupon Convertible
Subordinated Notes due 2009 of USF&G (the "Notes"), upon the terms and
subject to the conditions set forth in the Offer to Purchase.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE PAYMENT FOR THE NOTES TO BE
PURCHASED PURSUANT TO THE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR
NOTES TO THE DEPOSITARY PRIOR TO THE EXPIRATION DATE.
-1-
<PAGE>
This Letter of Transmittal is to be used by holders of the Notes if
certificates representing Notes are to be physically delivered to the
Depositary herewith by holders of Notes. This Letter of Transmittal is also
being supplied for informational purposes only to persons who hold notes in
book-entry form through the facilities of The Depositary Trust Company
("DTC"). Tender of Notes held through DTC must be made pursuant to the
procedures described under "Procedures for Tendering Notes -- Tendering
Notes -- Notes Held Through DTC" in the Offer to Purchase.
In order to properly complete this Letter of Transmittal, a holder of
Notes must (i) complete the box entitled "Description of Notes Tendered;"
(ii) if appropriate, check and complete the boxes relating to guaranteed
delivery, Special Issuance or Payment Instructions and Special Delivery
Instructions; (iii) sign the Letter of Transmittal; and (iv) complete
Substitute Form W-9. Each holder of Notes should carefully read the detailed
Instructions contained herein prior to completing this Letter of
Transmittal.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Offer.
If holders desire to tender Notes pursuant to the Offer and (i)
certificates representing such holder's Notes are not lost but are not
immediately available or time will not permit this Letter of Transmittal,
certificates representing such Notes or other required documents to reach
the Depositary prior to the Expiration Date, or (ii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
holders may effect a tender of such Notes in accordance with the guaranteed
delivery procedures described under "Procedure for Tendering Notes --
Guaranteed Delivery Procedures" in the Offer to Purchase. See Instruction 1
below.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Offer to Purchase.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Depositary.
See Instruction 9 below.
------------------
USF&G is not aware of any jurisdiction where the making of the Offer
would not be in compliance with applicable laws. If USF&G becomes aware of
any jurisdiction where the making of the Offer would not be in compliance
with such laws, USF&G will make a good faith effort to comply with any such
laws or seek to have such laws declared inapplicable to the Offer. If after
such good faith effort, USF&G cannot comply with any such applicable laws,
the Offer will not be made to, nor will tenders be accepted from or on
behalf of, the holders of Notes residing in such jurisdiction.
------------------
|_| CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s):___________________________________________
Window Ticket No. (if any):________________________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
Name of Eligible Institution that Guaranteed Delivery:_____________________
-2-
<PAGE>
List below the Notes to which this Letter of Transmittal relates. If the
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule
to this Letter of Transmittal. Tenders of Notes will be accepted only in
principal amounts at maturity equal to $1,000 or integral multiples thereof.
DESCRIPTION OF NOTES TENDERED
Aggregate Aggregate
Principal Principal
Amount Amount
Name(s) and Address(es) Certificate at Maturity at Maturity
of Registered Holder(s) Number* Represented Tendered**
(Please fill in, if blank)
TOTAL PRINCIPAL AMOUNT
AT MATURITY OF NOTES
* Need not be completed by holders tendering by book-entry transfer
(see below).
** Unless otherwise indicated in the column labeled "Aggregate Principal
Amount at Maturity Tendered" and subject to the terms and conditions of
the Offer to Purchase, a holder will be deemed to have tendered the
entire aggregate principal amount at maturity represented by the Notes
indicated in the column labeled "Aggregate Principal Amount at Maturity
Represented." See Instruction 2.
-3-
<PAGE>
SPECIAL ISSUANCE OR
PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2 THROUGH 6)
To be completed ONLY if certificates for Notes representing principal
amount at maturity not tendered or not purchased and/or the check for the
purchase price for principal amount at maturity of Notes purchased are to be
issued to the order of someone other than the registered holder(s) of the
Notes or the name of the registered holder(s) of the Notes needs to be
corrected or changed.
Issue: |_| Notes
|_| Checks
(Complete as applicable)
Name:________________________________________________________________________
(PLEASE PRINT)
Address:_____________________________________________________________________
(PLEASE PRINT)
_____________________________________________________________________
ZIP CODE
_____________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 HEREIN)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2 THROUGH 6)
To be completed ONLY if certificates for Notes representing principal
amount at maturity not tendered and/or the check for the purchase price for
principal amount at maturity of Notes purchased are to be sent to an
address different from that shown in the box entitled "Description of Notes
Tendered" within this Letter of Transmittal.
Deliver: |_| Notes
|_| Checks
(Complete as applicable)
Name:________________________________________________________________________
(PLEASE PRINT)
Address:______________________________________________________________________
(PLEASE PRINT)
______________________________________________________________________
ZIP CODE
______________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 HEREIN)
-4-
<PAGE>
HOLDERS WHO WISH TO ACCEPT THE OFFER AND TENDER THEIR NOTES MUST COMPLETE
THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Offer, the
undersigned hereby tenders to USF&G the principal amount at maturity of
Notes indicated above.
Subject to and effective upon the acceptance for purchase of and payment
for Notes tendered hereby, by executing and delivering a Letter of
Transmittal, a tendering holder of Notes (i) irrevocably sells, assigns and
transfers to USF&G, all right, title and interest in and to all the Notes
tendered hereby, (ii) waives any and all rights with respect to the Notes
(including without limitation any existing or past defaults and their
consequences in respect of the Note and the Indenture under which the Notes
were issued), (iii) releases and discharges USF&G from any and all claims
such holder may have now, or may have in the future arising out of, or
related to, the Notes including without limitation any claims that such
holder is entitled to receive additional principal or interest payments with
respect to the Notes or to participate in any redemption or defeasance of
the Notes and (iv) irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of such holder with respect to
any such tendered Notes, will full power of substitution and resubstitution
(such power of attorney being deemed to be an irrevocable power coupled with
an interest) to (a) deliver certificates representing such Notes, or
transfer ownership of such Notes, on the account books maintained by DTC,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to USF&G, (b) present such Notes for transfer on the relevant
security register and (c) receive all benefits or otherwise exercise all
rights of beneficial ownership of such Notes (except that the Depositary
will have no rights to, or control over, funds from USF&G, except as agent
for USF&G, for the purchase price for any tendered Notes that are purchased
by USF&G), all in accordance with the terms of the Offer.
The undersigned understands that tenders of Notes may be withdrawn by
written notice of withdrawal received by the Depositary at any time prior to
the Expiration Date. See Instruction 1.
The undersigned hereby represents and warrants that the undersigned (i)
owns the Notes tendered and is entitled to tender such Notes and (ii) has
full power and authority to tender, sell, assign and transfer the Notes
tendered hereby and that when such Notes are accepted for purchase and
payment by USF&G, USF&G will acquire good title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claim or right. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary or USF&G to be
necessary or desirable to complete the sale, assignment and transfer of the
Notes tendered hereby.
For the purposes of the Offer, the undersigned understands that USF&G
will be deemed to have accepted for purchase validly tendered Notes (or
defectively tendered Notes with respect to which USF&G has waived such
defect) only if, as and when USF&G gives oral or written notice thereof to
the Depositary. Payment for Notes purchased pursuant to the Offer will be
made by deposit of the purchase price for such Notes with the Depositary,
which will act as agent for tendering holders for the purpose of receiving
payments from USF&G and transmitting such payments to such holders.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Letter of Transmittal shall
be binding upon the undersigned's heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and
other legal representatives.
The undersigned understands that valid tender of Notes pursuant to any
one of the procedures described under "Procedures for Tendering Notes" in
the Offer to Purchase and in the instructions hereto will constitute a
-5-
<PAGE>
binding agreement between the undersigned and USF&G upon the terms and
subject to the conditions of the Offer, including the undersigned's waiver
of any existing defaults and their consequences in respect of the Notes and
the Indenture (including, without limitation, a default in the payment of
interest).
The undersigned understands that the delivery and surrender of the
Notes is not effective, and the risk of loss of the Notes does not pass to
the Depositary, until receipt by the Depositary of this Letter of
Transmittal, or a facsimile hereof, properly completed and duly executed,
together with all accompanying evidences of authority and any other required
documents in form satisfactory to USF&G. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance for payment of
any tender of Notes pursuant to the procedures described in the Offer to
Purchase and the form and validity (including time of receipt of notices of
withdrawal) of all documents will be determined by USF&G, in its sole
direction, which determination shall be final and binding on all parties.
Unless otherwise indicated herein under "Special Issuance or Payment
Instructions," the undersigned hereby requests that any Notes representing
principal amounts at maturity not tendered be issued in the name(s) of the
undersigned, and checks constituting payments for Notes purchased in
connection with the Offer be issued to the order of the undersigned.
Similarly, unless otherwise indicated herein under "Special Delivery
Instructions," the undersigned hereby requests that any Notes representing
principal amounts at maturity not tendered and checks constituting payments
for Notes to be purchased in connection with the Offer be delivered to the
undersigned at the address(es) shown herein. In the event that the "Special
Issuance or Payment Instructions" box or the "Special Delivery Instructions"
box, or both, are completed, the undersigned hereby requests that any Notes
representing principal amounts not tendered be issued in the name(s) of,
certificates for such Notes be delivered to, and checks constituting
payments for Notes purchased in connection with the Offer be issued in the
name(s) of, and be delivered to, the person(s) at the address(es) so
indicated, as applicable. The undersigned recognizes that USF&G has no
obligation pursuant to the "Special Issuance or Payment Instructions" box to
transfer any Notes from the name of the registered holder(s) thereof if
USF&G does not accept for purchase any of the principal amount at maturity
of such Notes so tendered.
-6-
<PAGE>
PLEASE SIGN BELOW
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
NOTES REGARDLESS OF WHETHER NOTES
ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the registered holder(s)
of Notes exactly as his (their) name(s) appear(s) on certificate(s) for
Notes or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Letter of Transmittal. If
the signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below under "Capacity" and submit evidence satisfactory to USF&G of such
person's authority to so act. See Instruction 3 below.
If the signature appearing below is not of the registered holder(s) of
the Notes, then the registered holder(s) must sign a valid power of
attorney.
_____________________________________________________________________________
_____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Date: _______________, 1998
Name(s):_____________________
_____________________
(PLEASE PRINT)
Capacity:_________________________
Address:____________________________________
____________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No.: ( )
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (IF REQUIRED - SEE INSTRUCTION 3 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
_____________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
_____________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER
(INCLUDING AREA CODE) OF ELIGIBLE INSTITUTION)
_____________________________________________________________________________
(AUTHORIZED SIGNATURE)
_____________________________________________________________________________
(PRINTED NAME)
_____________________________________________________________________________
(TITLE)
Date: _______________, 1998
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. PROCEDURES FOR TENDERING NOTES; GUARANTEED DELIVERY PROCEDURES;
WITHDRAWAL OF TENDERS. To tender the Notes in the Offer, certificates
representing such Notes, together with a properly completed and duly
executed copy (or facsimile) of this Letter of Transmittal, and any other
documents required by this Letter of Transmittal must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date. The method of delivery of this Letter of Transmittal, certificates for
Notes and all other required documents to the Depositary is at the election
and risk of holders. If such delivery is to be made by mail, it is suggested
that holders use properly insured registered mail, return receipt requested,
and that the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Depositary prior to such date. Except as otherwise
provided below, the delivery will be deemed made when actually received or
confirmed by the Depositary. THIS LETTER OF TRANSMITTAL AND NOTES SHOULD BE
SENT ONLY TO THE DEPOSITARY, AND NOT TO USF&G OR ST. PAUL.
This Letter of Transmittal is also being supplied for informational
purposes only to persons who hold notes in book-entry form through the
facilities of DTC. Tender of Notes held through DTC must be made pursuant to
the procedures described under "Procedures for Tendering Notes -- Tendering
Notes -- Notes Held Through DTC" in the Offer to Purchase.
Except as provided herein for the book-entry or guaranteed delivery
procedures, unless the Notes being tendered are deposited with the
Depositary on or prior to the Expiration Date (accompanied by the
appropriate, properly completed and duly executed Letter of Transmittal and
any required signature guarantees and other documents required by this
Letter of Transmittal), USF&G may, in its sole discretion, reject such
tender. Payment for Notes will be made only against deposit of tendered
Notes.
By executing this Letter of Transmittal (or a facsimile thereof), a
tendering holder waives any right to receive any notice of the acceptance
for payment of tendered Notes.
For a full description of the procedures for tendering Notes, see
"Procedures for Tendering Notes-- Tendering Notes" in the Offer to Purchase.
If a holder desires to tender Notes pursuant to the Offer and (i)
certificates representing such holder's Notes are not lost but are not
immediately available or time will not permit this Letter of Transmittal,
certificates representing Notes or other required documents to reach the
Depositary on or prior to the Expiration Date or (ii) the procedures for
book-entry transfer cannot be completed on or prior to the Expiration Date,
such holder may effect a tender of such Notes in accordance with the
guaranteed delivery procedures described under "Procedures for Tendering
Notes -- Guaranteed Delivery Procedures" in the Offer to Purchase.
Tenders of Notes may be withdrawn at any time prior to the Expiration
Date pursuant to the procedures described under "Procedures For Tendering
Notes -- Withdrawal Rights" in the Offer to Purchase.
2. PARTIAL TENDERS. Tenders of Notes pursuant to the Offer will be
accepted only in principal amounts at maturity equal to $1,000 or integral
multiples thereof. If less than the entire principal amount at maturity of
any Notes evidenced by a submitted certificate is tendered, the tendering
holder must fill in the principal amount at maturity tendered in the last
column of the box entitled "Description of Notes Tendered" herein. The
entire principal amount at maturity represented by the certificates for all
Notes delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount at maturity of
all Notes is not tendered, certificates for the principal amount at maturity
of Notes not tendered will be sent to the holder unless otherwise provided
in the appropriate box on this Letter of Transmittal (see Instruction 4),
promptly after the Notes are accepted for purchase.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENT:
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Notes tendered hereby, the signature(s) must
correspond with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A HOLDER OF NOTES WHO IS NOT
THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID POWER OF
-8-
<PAGE>
ATTORNEY, WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN
ELIGIBLE INSTITUTION.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
tendered Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many copies of this Letter
of Transmittal and any necessary accompanying documents as there are
different names in which certificates are held.
If this Letter of Transmittal is signed by the holder, and the certificates
for any principal amount at maturity of Notes not tendered for purchase are
to be issued (or if any principal amount at maturity of Notes that is not
tendered for purchase is to be reissued or returned) to the holder, and
checks constituting payments for Notes to be purchased in connection with
the Offer are to be issued to the order of the holder, then the holder need
not endorse any certificates for tendered Notes nor provide a separate
bond power. In any other case (including if this Letter of Transmittal is
not signed by the holder), the holder must either properly endorse the
certificates for Notes tendered or transmit a separate properly completed
bond power with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered holder(s) appear(s) on such Notes),
with the signature on the endorsement or bond power guaranteed by an
Eligible Institution, unless such certificates or bond powers are executed
by an Eligible Institution.
If this Letter of Transmittal or any certificates representing Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing,
and proper evidence satisfactory to USF&G of their authority so to act must
be submitted with this Letter of Transmittal.
Endorsements on certificates for Notes and signatures on bond powers
provided in accordance with this Instruction 3 by registered holders not
executing this Letter of Transmittal must be guaranteed by an Eligible
Institution.
No signature guarantee is required if: (i) this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
payments for the Notes to be purchased are to be made, or any Notes for
principal amounts not tendered for purchase are to be issued, directly to
such registered holder(s) and neither the "Special Issuance or Payment
Instructions" box nor the "Special Delivery Instructions" box of this Letter
of Transmittal has been completed; or (ii) such Notes are tendered for the
account of an Eligible Institution. In all other cases, all signatures on
Letters of Transmittal accompanying Notes must be guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE OR PAYMENT AND SPECIAL DELIVERY INSTRUCTIONS. Tendering
holders should indicate in the applicable box or boxes the name and address
to which certificates representing Notes for principal amounts at maturity
not tendered or not accepted for purchase or checks constituting payments
for Notes purchased in connection with the Offer are to be issued or sent,
if different from the name and address of the holder signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated. If no instructions are given, Notes not tendered or not accepted
for purchase will be returned to the holder of the Notes tendered.
5. TAXPAYER IDENTIFICATION NUMBER AND SUBSTITUTE FORM W-9. Each tendering
holder is required to provide the Depositary with the holder's correct
taxpayer identification number ("TIN"), generally the holder's social
security or federal employer identification number, on Substitute Form W-9,
which is provided under "Important Tax Information" below, or,
alternatively, to establish another basis for exemption from backup
withholding. A holder must cross out item (2) in the Certification box on
Substitute Form W-9 if such holder is subject to backup withholding.
Failure to provide the information on the form may subject the tendering
holder to 31% federal income tax backup withholding on the payments made to
the holder or other payee with respect to Notes purchased pursuant to the
Offer. The box in Part 3 of the form should be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within 60 days, thereafter the
Depositary will withhold 31% from all such payments with respect to the
Notes to be purchased until a TIN is provided to the Depositary.
6. TRANSFER TAXES. USF&G will pay all transfer taxes, if any, payable
on the purchase and transfer of Notes purchased pursuant to the Offer,
except in the case of deliveries of certificates for Notes for principal
-9-
<PAGE>
amounts at maturity not tendered for payment that are to be registered or
issued in the name of any person other than the holder of Notes tendered
hereby, in which case the amount of any transfer taxes (whether imposed on
the registered holder or such other person) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including the time of receipt) and acceptance for payment of any tenders of
Notes pursuant to the procedures described in the Offer to Purchase and the
form and validity (including the time of receipt of notices of withdrawal)
of all documents will be determined by USF&G, in its sole discretion, which
determination shall be final and binding on all parties. USF&G reserves the
absolute right to reject any or all tenders determined by it not to be in
proper form or the acceptance of or payment for which may be unlawful. USF&G
also reserves the absolute right to waive any of the conditions of the Offer
and any defect or irregularity in the tender of any particular Notes.
USF&G's interpretations of the terms and conditions of the Offer (including
without limitation the instructions in this Letter of Transmittal) shall be
final and binding. No alternative, conditional or contingent tenders will be
accepted. Unless waived, any irregularities in connection with tenders must
be cured within such time as USF&G shall determine. None of USF&G, the
Depositary or any other person will be under any duty to give notification
of any defects or irregularities in such tenders or will incur any liability
to holders for failure to give such notification. Tenders of such Notes
shall not be deemed to have been made until such irregularities have been
cured or waived. Any Notes received by the Depositary that are not properly
tendered and as to which the irregularities have not been cured or waived
will be returned by the Depositary to the tendering holders, unless such
holders have otherwise provided herein, as promptly as practical following
the Expiration Date.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR NOTES. Any holder
of Notes whose certificates for Notes have been mutilated, lost, stolen or
destroyed should contact the Depositary at the address indicated above for
further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering Notes and requests for assistance or additional
copies of the Offer to Purchase and this Letter of Transmittal may be
directed to, and additional information about the Offer may be obtained from
the Depositary, whose address and telephone number appears herein.
-10-
<PAGE>
IMPORTANT INFORMATION
Under federal income tax laws, a holder whose tendered Notes are
accepted for payment is required by law to provide the Depositary (as payer)
with such holder's correct TIN on Substitute Form W-9 included herein or
otherwise establish a basis for exemption from backup withholding. If such
holder is an individual, the TIN is his social security number. If the
Depositary is not provided with the correct TIN, a $50 penalty may be
imposed by the Internal Revenue Service, and payments made with respect to
Notes purchased pursuant to the Offer may be subject to backup withholding.
Failure to comply truthfully with the backup withholding requirements also
may result in the imposition of severe criminal and/or civil fines and
penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute
Form W-9 to the Depositary. A foreign person, including entities, may
qualify as an exempt recipient by submitting to the Depositary a properly
completed Internal Revenue Service Form W-8, signed under penalties of
perjury, attesting to that holder's foreign status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Notes
purchased pursuant to the Offer, the holder is required to provide the
Depositary with either: (i) the holder's correct TIN by completing the form
included herein, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such holder is awaiting a TIN) and that (A) the holder has
not been notified by the Internal Revenue Service that the holder is subject
to backup withholding as a result of failure to report all interest or
dividends or (B) the Internal Revenue Service has notified the holder that
the holder is no longer subject to backup withholding; or (ii) an adequate
basis for exemption.
NUMBER TO GIVE THE DEPOSITARY
The holder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the registered holder
of the Notes. If the Notes are held in more than one name or are held not in
the name of the actual owner, consult the"Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" included herein for
additional guidance on which number to report.
-11-
<PAGE>
PAYER'S NAME: THE CHASE MANHATTAN BANK
SUBSTITUTE PART I - PLEASE PROVIDE YOUR TIN IN
FORM W-9 THE BOX AT RIGHT AND CERTIFY ________________________
BY SIGNING AND DATING BELOW. Social Security Number
OR________________________
Employer Identification
Number
(If awaiting TIN write
"Applied For")
Payer's Request for Taxpayer PART II -- For Payees Exempt from Backup
Identification Number (TIN) Withholding, see the enclosed Guidelines and
complete as instructed therein.
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to back-up withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to
back-up withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
back-up withholding.
CERTIFIED INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to back-up withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to back-u withholding, not cross out item (2). SIGNATURE DATE , 19
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF TAXPAYER AWAITING IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration or (b) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a taxpayer identification
number within 60 days, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
__________________________ ___________________, 1998
Signature Date
-12-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-000. Employer Identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the Payer.
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL
SECURITY SECURITY
NUMBER OF: NUMBER OF:
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 8. Corporate The corporation
2. Two or more The actual owner of the 9. Association, club, The organization
account or, if religious, charitable,
combined funds, educational or other
any one of the tax-exempt
individuals (1) organization
3. Custodian account of a The minor (2) 10. Partnership The partnership
minor (Uniform Gift
to Minors Act)
4. a. The usual revocable The grantor-trustee (1) 11. A broker or registered The broker or nominee
savings trust (grantor nominee
is also trustee)
b. So-called trust The grantor-trustee (1)
account that is not a
legal or valid trust
under state law
5. Sole proprietorship The owner (3)
6. Sole proprietorship The owner (3)
7. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself is
not designated in
the account title.)
(4)
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
</FN>
</TABLE>
-13-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
(the "IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees
exempt from backup withholding and for which no information reporting is
required. For interest and dividends, all listed payees are exempt except
item (9). For broker transactions, payees listed in (1) through (13) and a
person registered under the Investment Advisers Act of 1940 who regularly
acts as a broker are exempt. Payments subject to reporting under sections
6041 and 6041A are generally exempt from backup withholding only if made to
payees described in items (1) through (7), except that a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from
backup withholding for barter exchange transactions, patronage dividends,
and payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A State, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding also include the following:
o Payments to nonresident aliens subject to withholding
under section 1441.
o Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
Payments of interest generally not subject to backup
withholding include the following:
o Payments of interest on obligations issued by
individuals. NOTE: You may be subject to backup
withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and
you have not provided your correct taxpayer
identification number to the payer.
o Payments of tax-exempt interest (including exempt interest dividends
under section 852).
o Payments described in section 6049(b)(5) to
nonresident aliens.
o Payments on tax-free covenant bonds under section
1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid by you.
Payments that are not subject to information reporting are
also not subject to backup withholding. For details see sections 6041,
6041(A)(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations
under such sections.
PRIVACY ACT NOTICE. Section 6109 requires you to give your correct taxpayer
identification number to persons who must file information returns with
the IRS to report interest, dividends, and certain other income paid to
you, mortgage interest you paid, the acquisition or abandonment of secured
property, cancellation of debt, or contributions you made to an IRA. The
IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your taxpayer identification
number whether or not you are qualified to file a tax return. Payers must
generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no
backup withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications
or affirmations may subject you to criminal penalties including fines
and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
-14-
EXHIBIT (A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF CERTIFICATES FOR
ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
Capitalized terms used but not defined herein have the meanings given them
in the Change of Control Notice and Offer to Purchase, dated May 15, 1998
(the "Offer to Purchase").
This Notice of Guaranteed Delivery may be used to cause a tender of
Zero Coupon Convertible Subordinated Notes (the "Notes") due 2009 of USF&G
Corporation ("USF&G") by (i) a record holder of Notes if certificates for
the Notes are not immediately available or time will not permit all required
documents to reach the Depositary on or prior to the Expiration Date or (ii)
by a DTC Participant if the procedures for book-entry transfer described in
the Offer to Purchase cannot be completed on a timely basis.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK (THE "DEPOSITARY")
By Courier: By Registered Mail: By Hand:
Chase Bank of Texas, N.A. Chase Bank of Texas, N.A. The Chase Manhattan Bank
Corporate Trust Services Corporate Trust Services Corporate Trust-Securities
1201 Main Street, 18th floor P O Box 219052 Window
Dallas, TX 75202 Dallas, TX 75221-9053 55 Water Street
Room 234, North Building
New York, NY 10041
By Facsimile: (214) 672-5932
Confirm by Telephone: (214) 672-5678 or (212) 946-3487
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
By execution hereof, the undersigned acknowledges receipt of the Offer to
Purchase and the Letter of Transmittal.
On the terms and subject to the conditions of the Offer to Purchase and the
Letter of Transmittal, the undersigned hereby represents that it is the
holder of the Notes being tendered (or caused to be tendered) hereby and is
entitled to tender (or cause to be tendered) such Notes as contemplated by
the Offer and, pursuant to the guaranteed delivery procedures described in
the Offer to Purchase and Letter of Transmittal, hereby tenders (or causes a
tender) to USF&G of the aggregate principal amount of Notes indicated below.
Except as stated in the Offer to Purchase, all authority herein conferred
or agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
A record holder must execute this Notice of Guaranteed Delivery exactly as
its name appears on its Notes and a DTC Participant must execute this Notice
of Guaranteed Delivery exactly as its name is registered with DTC. If
signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in
a fiduciary or representative capacity, such person must set forth his or
her name, address and capacity as indicated below and submit evidence to
USF&G of such person's authority so to act.
-1-
<PAGE>
Aggregate Principal Amount at Maturity of Notes
Tendered:______________________________ ______________________________
Certificate Nos. for Notes (if available): ______________________________
SIGNATURE(S) OF HOLDER(S)
__________________________________
__________________________________ Dated:______________, 199_
Name(s) of Holders:
/_/ Check Box if being executed by a DTC ______________________________
Participant: ______________________________
Please Type or Print
DTC Participant's Number:______________ ______________________________
Address
Transaction Code Number:_______________ ______________________________
Zip Code
Account Number:________________________ ______________________________
Area Code and Telephone No.
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States
or another "Eligible Guarantor Institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, hereby guarantees that,
within three New York Stock Exchange trading days from the date of receipt
by the Depositary of this Notice of Guaranteed Delivery, a properly
completed and validly executed Letter of Transmittal (or a facsimile
thereof), together with Notes tendered hereby in proper form for transfer,
(or confirmation of the book-entry transfer of such Notes into the
Depositary's account at the Depositary Trust Company, pursuant to the
procedures for book-entry transfer set forth under "Procedure for Tendering
Notes" in the Offer to Purchase) and all other required documents will be
delivered by the undersigned to the Depositary.
- --------------------------------------- -----------------------------------
NAME OF FIRM TITLE
- --------------------------------------- -----------------------------------
AUTHORIZED SIGNATURE ADDRESS ZIP CODE
- --------------------------------------- -----------------------------------
NAME (PLEASE TYPE OR PRINT) AREA CODE AND TELEPHONE NO.
The institution which completes this form must deliver to the Depositary
the guarantee, the Letter of Transmittal (or facsimile thereof) and
certificates for Notes within the time periods specified herein. Failure to
do so could result in a financial loss to such institution.
DO NOT SEND CERTIFICATES FOR NOTES WITH THIS FORM. THEY SHOULD BE SENT WITH
THE LETTER OF TRANSMITTAL.
-2-
EXHIBIT (A)(4)
USF&G CORPORATION
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING
ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JUNE 15, 1998, UNLESS THE OFFER IS EXTENDED (SUCH TIME AND DATE OR THE
LATEST EXTENSION THEREOF, IF EXTENDED, THE "EXPIRATION DATE"). NOTES
TENDERED IN THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
May 15, 1998
TO OUR CLIENTS:
Enclosed for your consideration is a Change of Control Notice and Offer to
Purchase, dated May 15, 1998 (as the same may be amended from time to time,
the "Offer to Purchase"), and a Form of Letter of Transmittal and
instructions thereto (the "Letter of Transmittal"), relating to the offer
(the "Offer") by USF&G Corporation ("USF&G") to purchase for cash any and
all of its outstanding zero coupon convertible subordinated notes due 2009
(the "Notes"). The "Repurchase Price" of $620.70 is the Issue Price ($512.98
per $1,000 principal amount at maturity) plus Original Issue Discount (the
difference between the Issue Price and the principal amount at maturity of
the Note) accrued (at 4.5% per annum, on a semi-annual bond equivalent basis
using a 360-day year composed of twelve 30-day months, from the Issue Date
(March 3, 1994) of the Notes) through June 15, 1998, the date that is 35
Business Days after the occurrence of the Change of Control (as defined in
the Offer to Purchase).
The materials are being forwarded to you as the beneficial owner of Notes
carried by us for your account or benefit but not registered in your name. A
tender of any notes may only be made by us as the registered holder and
pursuant to your instructions. Therefore, the company urges beneficial
owners of notes registered in the name of a broker, dealer, commercial bank,
trust company or any other nominee to contact such registered holder
promptly if they wish to tender Notes in the Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Notes held by us for your account or benefit pursuant to the
terms and conditions set forth in the Offer to Purchase and the Letter of
Transmittal. We urge you to read carefully the Offer to Purchase and the
Letter of Transmittal before instructing us to tender your Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Notes on your behalf in accordance with the
provisions of the Offer. Notes tendered pursuant to the offer may be validly
withdrawn, subject to the procedures described in the Offer to Purchase, at
any time prior to the expiration date.
Your attention is directed to the following:
1. The Offer is for any and all outstanding Notes.
2. The Offer and withdrawal rights will expire on the expiration date.
3. Any transfer taxes incident to the transfer of Notes from the tendering
holder to USF&G will be paid by USF&G, except as provided in the Offer to
Purchase and the instructions to the Letter of Transmittal.
If you wish to have us tender any or all of your Notes held by us for your
account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. If you authorize
the tender of your Notes, all such Notes will be tendered unless otherwise
specified below. The accompanying Letter of Transmittal is furnished to you
for informational purposes only and may not be used by you to tender notes
held by us and registered in our name for your account or benefit.
-1-
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Offer.
This will instruct you to tender the principal amount of Notes indicated
below held by you for the account or benefit of the undersigned pursuant to
the terms of and conditions set forth in the Offer to Purchase and the
Letter of Transmittal.
Box 1 /_/ Please tender ALL my Notes held by you for my account or benefit.
Box 2 /_/ Please tender LESS than all my Notes. I wish to tender $ principal
amount of Notes.
Box 3 /_/ Please do not tender any Notes held by you for my account or benefit.
Date:________________, 1998
- --------------------------------------------
- --------------------------------------------
SIGNATURE(S)
- --------------------------------------------
- --------------------------------------------
PLEASE PRINT NAME(S) HERE
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN, YOUR SIGNATURE(S) HEREON
SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL OF YOUR NOTES.
-2-
EXHIBIT (A)(5)
USF&G CORPORATION
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING
ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JUNE 15, 1998, UNLESS THE OFFER IS EXTENDED (SUCH TIME AND DATE OR THE
LATEST EXTENSION THEREOF, IF EXTENDED, THE "EXPIRATION DATE"). NOTES
TENDERED IN THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
May 15, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Enclosed for your consideration is a Change of Control Notice and Offer to
Purchase, dated May 15, 1998 (as the same may be amended from time to time,
the "Offer to Purchase"), and a form of Letter of Transmittal and
instructions thereto (the "Letter of Transmittal") relating to the offer
(the "Offer") by USF&G Corporation ("USF&G") to purchase for cash any and
all of the outstanding Zero Coupon Convertible Subordinated Notes due 2009
of USF&G (the "Notes"). The "Repurchase Price" of $620.70 is the Issue Price
($512.98 per $1,000 principal amount at maturity) plus Original Issue
Discount (the difference between the Issue Price and the principal amount at
maturity of the Note) accrued (at 4.5% per annum, on a semi-annual bond
equivalent basis using a 360-day year composed of twelve 30-day months, from
the Issue Date (March 3, 1994) of the Notes) through June 15, 1998, the date
that is 35 Business Days after the occurrence of the Change of Control (as
defined in the Offer to Purchase).
We are asking you to contact your clients for whom you hold Notes
registered in your name or in the name of your nominee. USF&G will pay all
transfer taxes, if any, applicable to the tender of Notes, except as
otherwise provided in the Offer to Purchase and the Letter of Transmittal.
Enclosed is a copy of each of the following documents for forwarding to
your clients:
1. The Offer to Purchase.
2. A Blue Letter of Transmittal, including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9, for your use in
connection with the tender of Notes by record holders and for the
information of your clients.
3. A Yellow form of letter addressed "To Our Clients" that may be sent to
your clients for whose accounts you hold Notes registered in your name
or the name of your nominee, with space provided for obtaining the
clients' instructions with regard to the Offer.
4. A Pink Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Notes are not lost but not immediately available, or
if the procedure for book-entry transfer cannot be completed on or
prior to the Expiration Date.
5. A return envelope addressed to an affiliate of The Chase Manhattan
Bank, as Depositary (the "Depositary").
Your prompt action is requested. Notes tendered pursuant to the Offer may
be validly withdrawn, subject to the procedures described in the Offer to
Purchase, at any time prior to the Expiration Date.
Please refer to "Procedures for Tendering Notes" in the Offer to Purchase
for a description of the procedures which must be followed to tender Notes
in the Offer.
Additional copies of the enclosed materials may be obtained from the
Depositary at (214) 672-5678 or (212) 946-3487.
Very truly yours,
USF&G CORPORATION
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY, THE TRUSTEE, OR THE DEPOSITARY, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
-2-
EXHIBIT (A)(6)
The announcement is neither an offer to purchase nor a solicitation of
an offer to sell these securities. The Offer is made only pursuant
to the Offer to Purchase and the related Letter of Transmittal
(which are incorporated by reference herein) and is not
being made to (nor will tenders be accepted from)
holders of Notes in any jurisdiction in which
the Offer or the acceptance thereof
would not be in compliance with
the securities laws of such
jurisdiction.
CHANGE OF CONTROL NOTICE AND OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING
ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF
USF&G CORPORATION
BY
USF&G CORPORATION
AT $620.70 PER $1,000 PRINCIPAL AMOUNT AT MATURITY
USF&G Corporation ("USF&G") is offering to purchase for cash at the
Repurchase Price, upon the terms and subject to the conditions set forth in
the Change of Control Notice and Offer to Purchase dated May 15, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal, any and all
of the outstanding Zero Coupon Convertible Subordinated Notes Due 2009 of
USF&G (the "Notes"). See the Offer to Purchase for capitalized terms used
but not defined herein. Unless the context otherwise requires, the term
"Offer to Purchase" includes the Letter of Transmittal.
The Offer is being made pursuant to the terms of the Notes and the
Indenture, which provide that, following a Change of Control, USF&G is
required to repurchase any and all Notes from each holder of Notes that
properly exercises its Change of Control Right at a purchase price equal to
the Issue Price ($512.98 per $1,000 principal amount at maturity) plus
Original Issue Discount (the difference between the Issue Price and the
principal amount at maturity of the Note) accrued (at 4.5% per annum, on a
semi-annual bond equivalent basis using a 360-day year composed of twelve
30-day months, from the Issue Date (March 3, 1994) of the Notes) through the
date that is 35 Business Days after the occurrence of the Change of Control.
A change of control occurred on April 24, 1998 as a result of the
consummation of the merger of SP Merger Corporation ("Sub"), a wholly owned
subsidiary of The St. Paul Companies, Inc. ("SPC"), with and into USF&G,
with USF&G continuing as the surviving corporation and becoming a wholly
owned subsidiary of SPC (the "Merger").
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JUNE 15, 1998, UNLESS THE OFFER IS EXTENDED (SUCH TIME AND DATE OR THE
LATEST THEREOF, IF EXTENDED, THE "EXPIRATION DATE"). NOTES TENDERED IN THE
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
As of May 14, 1998, there was $175,233,000 aggregate principal amount at
maturity of Notes outstanding. Prior to consummation of the Merger, the
Notes were convertible into shares of Common Stock, par value $2.50, of
USF&G ("USF&G Common Stock") at a conversion rate of 29.499 shares of USF&G
Common Stock per $1,000 principal amount at maturity of Notes. Upon
consummation of the Merger, pursuant to adjustment mechanisms contained in
the Indenture, the Notes became, and are currently, convertible into shares
of Common Stock, no par value, of SPC ("St. Paul Common Stock") at, after
giving effect to the two-for-one stock split on shares of St. Paul Common
Stock held of record as of May 6, 1998, a conversion rate of 16.6434 shares
of St. Paul Common Stock per $1,000 principal amount at maturity of Notes.
There is no established trading market for the Notes. On May 14, 1998, the
closing price per share of St. Paul Common Stock, as reported on the New
York Stock Exchange, Inc. Composite Tape, was $44. A holder may convert
Notes into shares of St. Paul Common Stock until, but not after, such Note
is properly tendered to The Chase Manhattan Bank, as Depositary (the
"Depositary"), unless the tender of such Note is properly withdrawn or there
is a default in payment of the Repurchase Price. Any Notes which remain
outstanding after consummation of the Offer will continue to be obligations
of USF&G (and, to the extent provided in the Indenture, SPC) and will
continue to be convertible at the option of the holder thereof into shares
of St. Paul Common Stock. Tenders of Notes may be withdrawn at any time
prior to the Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment) and applicable law, USF&G will purchase, by
accepting for payment, and will pay for all Notes validly tendered (and not
properly withdrawn) pursuant to the Offer, promptly after the Expiration
Date, such payment to be made by the deposit of immediately available funds
by USF&G with the Depositary, which will act as agent for tendering holders
for the purpose of receiving payment from USF&G and transmitting such
payment to tendering holders.
-1-
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Offer to Purchase and, if
given or made, such information or representations must not be relied upon
as having been authorized.
Any questions or requests for assistance or for copies of the Offer to
Purchase or related documents may be directed to the Depositary at the
telephone numbers set forth below. Any beneficial owner owning interests in
Notes may contact such beneficial owner's broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
Corporate Trust Services
1201 Main Street, 18th floor
Dallas, Texas 75202
Telephone: (214) 672-5678 or (212) 946-3487
May 15, 1998
-2-
EXHIBIT (2)
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of April 24, 1998 (this "First
Supplemental Indenture"), among The St. Paul Companies, Inc., a Minnesota
corporation, having its principal office at 385 Washington Street, St. Paul,
Minnesota 55102 ("St. Paul"), USF&G Corporation, a Maryland corporation (the
"Company"), and The Chase Manhattan Bank (formerly known as Chemical Bank),
as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have executed and delivered an
Indenture, dated as of January 28, 1994 (the "Indenture"), pursuant to which
the Company has issued Zero Coupon Convertible Subordinated Notes due 2009
(the "Securities");
WHEREAS, on the date hereof, pursuant to an Agreement and Plan of
Merger, dated as of January 19, 1998, as amended through February 26, 1998,
among the Company, St. Paul and SP Merger Corporation, a Maryland
corporation and a wholly owned subsidiary of St. Paul ("Merger Sub"), (i)
Merger Sub is being merged with and into the Company, with the Company
continuing as the surviving corporation and a wholly owned subsidiary of St.
Paul (the "Merger") and (ii) each outstanding share of common stock, par
value $2.50 per share ("USF&G Common Stock"), of the Company (other than
shares of USF&G Common Stock owned by St. Paul or any direct or indirect
subsidiary of St. Paul, or shares of USF&G Common Stock owned by the Company
or any direct or indirect subsidiary of the Company (in each case not held
on behalf of third parties)) is being converted into 0.2821 of a share of
common stock, without par value, of St. Paul ("St. Paul Common Stock");
WHEREAS, the Company has delivered to the Trustee, pursuant to Section
801(3) of the Indenture, an Officers' Certificate and an Opinion of Counsel,
each stating that the Merger and this First Supplemental Indenture comply
with Section 801 of the Indenture and that all conditions precedent in the
Indenture relating to the Merger have been complied with;
WHEREAS, Section 1209 of the Indenture provides, among other things,
that in case of any merger of the Company with another Person, the Company
shall execute and deliver to the Trustee a supplemental indenture providing
that the Holder of each Security then outstanding of any series that is
convertible into Company Common Stock shall have the right to convert such
Security into the kind and amount of shares of stock or other securities or
property receivable upon such merger by a Holder of the number of shares of
Company Common Stock into which such Security might have been converted
immediately prior to such merger, subject to compliance with the other
provisions of the Indenture, such Security and such supplemental indenture,
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in such Security;
WHEREAS, Section 901(10) of the Indenture permits the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time
to time, without the consent of any Holders of Securities, to enter into one
or more supplemental indentures for the purpose of making provision with
respect to the conversion rights of Holders of Securities pursuant to
-1-
<PAGE>
Article Twelve of the Indenture, including providing for the conversion of
the Securities into any security (other than common stock of the Company);
WHEREAS, in connection with the foregoing, the Company is required by
Section 1204 of the Indenture to prepare and mail to each Holder of
Securities a notice setting forth the adjusted conversion price and to
prepare and file with the Trustee an Officers' Certificate showing in
reasonable detail the facts upon which the adjustment is based and the
manner of computing such adjustment;
WHEREAS, St. Paul desires to assume, jointly and severally, with the
Company, the due and punctual payment of the principal of, and premium,
if any, and interest on, the Securities when due;
WHEREAS, Section 901(9) of the Indenture permits the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time
to time, without the consent of any Holders of Securities, to enter into one
or more supplemental indentures for the purpose of making provisions with
respect to matters arising under the Indenture, provided that such action
does not adversely affect the interests of the Holders of the Securities in
any material respect; and
WHEREAS, St. Paul and the Company have requested that the Trustee execute
and deliver this First Supplemental Indenture pursuant to Section 901 of
the Indenture, and all requirements necessary to make this First
Supplemental Indenture a valid instrument in accordance with its terms
have been performed and the execution and delivery of this First
Supplemental Indenture have been duly authorized in all respects by each of
St. Paul and the Company.
NOW, THEREFORE, St. Paul, the Company and the Trustee covenant and agree as
follows:
ARTICLE I
AUTHORIZATION; DEFINITIONS
Section 101. First Supplemental Indenture. This First Supplemental
Indenture is supplemental to, and is entered into in accordance with
Sections 801, 901 and 1209 of, the Indenture, and except as modified,
amended and supplemented by this First Supplemental Indenture, the
provisions of the Indenture are in all respects ratified and confirmed and
shall remain in full force and effect.
Section 102. Definitions. Except as expressly provided in Section 201
of this First Supplemental Indenture below and unless the context shall
otherwise require, all terms which are defined in Section 101 of the
Indenture shall have the same meanings, respectively, in this First
Supplemental Indenture as such terms are given in said Section 101 of the
Indenture.
ARTICLE II
AMENDMENTS TO THE INDENTURE
Section 201. Amendments to Section 101 of the Indenture. (a) Section 101
of the Indenture is hereby amended by inserting the following definitions:
-2-
<PAGE>
"First Supplemental Indenture" means the First Supplemental
Indenture, dated as of April , 1998, among the Company, St. Paul and
the Trustee, to the Indenture.
"St. Paul" means The St. Paul Companies, Inc., a Minnesota corporation.
"Successor Issuer" has the meaning specified in Section 1212
of the Indenture, as amended by the First Supplemental Indenture.
"Successor Securities" has the meaning specified in Section 1212
of the Indenture, as amended by the First Supplemental Indenture.
(b) The terms "Board of Directors," "Board Resolution,"
"Company Request," "Company Order," "Officers' Certificate," "Opinion of
Counsel," "Outstanding," "Paying Agent," "Senior Debt," "Subsidiary" and
"Vice President" are hereby amended by adding the words "or any Successor
Issuer, as applicable" after the words "the Company" in each place they
appear in the Indenture.
Section 202. Amendments to Section 105 of the Indenture. (a) The title of
Section 105 is hereby amended to read as follows: "Notices, Etc., to
Trustee, Company and any Successor Issuer."
(b) Subsection (1) of Section 105 of the Indenture is hereby
amended by inserting the phrase ", any Successor Issuer" after the word
"Holder" in the first line of such subsection.
(c) Subsection (2) of Section 105 of the Indenture is hereby
amended by inserting the phrase ", any Successor Issuer" after the word
"Trustee" in the first line of such subsection and by deleting the period at
the end of the last line of such subsection and inserting ", or" in its
stead.
(d) Section 105 of the Indenture is hereby further amended by
inserting the following after subsection (2) of Section 105:
(3) any Successor Issuer, by the Trustee, the Company
or any Holder shall be sufficient for every purpose hereunder
if made, given, furnished or filed in writing to or with any
Successor Issuer at the address of such Successor Issuer set
forth in the supplemental indenture executed by such Successor
Issuer pursuant to Section 1209 of this Indenture.
Section 203. Amendment to Section 704 of the Indenture. (a) The title of
Section 704 of the Indenture is hereby amended to read as follows: "Reports
by Company and Any Successor Issuer."
(b) Section 704 of the Indenture is hereby amended by adding
the words "and any Successor Issuer" after the words "The Company" at the
beginning of such section.
Section 204. Amendments to Article Nine. (a) The first paragraph of
Section 901 of the Indenture is hereby amended by adding the words "any
Successor Issuer, when authorized by a Board Resolution," after
the words "the Company, when authorized by a Board Resolution,".
-3-
<PAGE>
(b) Section 901 of the Indenture is hereby further amended by
adding the words "or any Successor Issuer" after the words "the Company" in
each place it occurs in Section 901 of the Indenture other than in the first
paragraph of Section 901 of the Indenture.
(c) Section 901 of the Indenture is hereby further amended by adding
the words "or, if the Securities shall be convertible into Successor
Securities, Successor Securities" after the words "Common Stock of the
Company" in the penultimate line of subsection (10) of Section 901 of the
Indenture.
(d) The first paragraph of Section 902 of the Indenture is hereby
amended by adding the words ", any Successor Issuer," after the first
reference to "the Company" in the third line of such paragraph.
(e) The first paragraph of Section 902 of the Indenture is hereby
further amended by adding the words "any Successor Issuer, when
authorized by a Board Resolution," after "Resolution" in the fourth line of
such paragraph.
(f) Section 907 of the Indenture is hereby amended by adding the words
"or any Successor Issuer" after the words "the Company" in each place it
occurs in Section 907 of the Indenture.
Section 205. Amendment to Article Ten. (a) Section 1002 of the Indenture
is hereby amended by adding the words "and any Successor Issuer" after the
words "the Company" in each place it occurs in Section 1002.
(b) Section 1003 of the Indenture is hereby amended by: (i) adding the
words "or any Successor Issuer" after the words "the Company" in each place
such words appear in Section 1003, except that the words "and any
Successor Issuer" shall be added after the words "the Company" in the sixth
line of the fifth paragraph of Section 1003 and (ii) by substituting the
words "one or the other" for the word "it" in the second line of the second
paragraph of Section 1003.
Section 206. Amendment to Article Twelve. (a) Article Twelve of the
Indenture is hereby amended by adding the following after Section 1211:
Section 1212. Additional Conversion Adjustments.
From and after the time the Holder of any Security then outstanding
of any series that is convertible into Common Stock of the Company
shall have the right in accordance with Section 1209 of this Indenture
to convert such Security into securities (the "Successor Securities")
of any Person other than the Company (a "Successor Issuer"), all
references in this Article Twelve to the words "the Company" shall for
all purposes of this Indenture and such series of Security be deemed to
be references to the Successor Issuer and all references in this
Article Twelve to the words "Common Stock" or "shares of Common Stock"
shall for all purposes of this Indenture and such series of Security
be deemed to be references to the Successor Securities; provided,
however, that the foregoing shall not apply (i) to the reference to
"the Company" in the phrase "Defaulted Interest by the Company" at the
end of the second sentence of the first paragraph of Section 1202 of
this Indenture, (ii) in any place the words "the Company" appear in
the second paragraph of Section 1202 of the Indenture, (iii) to the
second reference to the Company in the fourth line of Section 1209 of
the Indenture or (iv) in any place the words "the Company" or "the
Company's" appear in Section 1211 of the Indenture.
-4-
<PAGE>
(b) The first paragraph of Section 1209 of the Indenture is hereby
amended by adding the words "and St. Paul" after the words "in such
share exchange, as the case may be" in the sixth line of such section; and
(c) Section 1211 of the Indenture is hereby amended by adding the
words "or St. Paul" and "or St. Paul's" after the words "the Company" and
"the Company's," respectively, in each place such words appear in
Section 1211.
ARTICLE III
CONVERSION
Section 301. Conversion of Securities. In accordance with the provisions
of Section 1209 of the Indenture, following the Merger, a Holder of a
Security shall have the right to convert such Security into shares of
St. Paul Common Stock at a rate of 8.3217 shares of St. Paul Common Stock
per $1,000 principal amount at maturity of the Securities (the "Adjusted
Conversion Rate").
Section 302. Certain Adjustments. In accordance with the provisions of
Section 1204 of the Indenture, following the Merger, upon the occurrence
of an event with respect to St. Paul which would have required an
adjustment to the Conversion Price pursuant to Article Twelve of the
Indenture if such event had occurred with respect to the Company prior to
the Merger, the Adjusted Conversion Rate shall be adjusted in a manner as
nearly equivalent as may be practicable to the adjustment to the Conversion
Rate which would have been required pursuant to Article Twelve of the
Indenture if such event had occurred with respect to the Company prior to
the Merger.
ARTICLE IV
ASSUMPTION AND SUBORDINATION
Section 401. Assumption. (a) St. Paul hereby irrevocably and
unconditionally assumes, jointly and severally with the Company,
responsibility for the due and punctual payment of the principal of, and
premium, if any, and interest on, the Securities when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under the Indenture and the Securities.
The parties acknowledge and agree that notwithstanding the foregoing, the
Company shall remain fully liable for all of its obligations under the terms
of the Securities and the Indenture, and no rights of the Trustee or any
Holder of the Securities existing under the Securities or Indenture prior to
the execution of the First Supplemental Indenture shall be deemed to be
amended, abridged, reduced or otherwise affected by the First Supplemental
Indenture, except to the extent permitted by Section 901(10) or required by
Section 1209 of the Indenture.
(b) Notwithstanding anything to the contrary in the Indenture
as amended by this First Supplemental Indenture, St. Paul does not assume
responsibility for or guarantee the performance by the Company of any of the
Company's covenants, agreements or obligations of the Company under the
Securities or the Indenture. In particular, neither St. Paul nor any
Subsidiary of St. Paul (other than the Company and its Principal Insurance
Subsidiaries) shall be subject to Section 1005 of the Indenture.
-5-
<PAGE>
(c) Payment by either the Company or St. Paul of the principal of,
and premium, if any, and interest on, any Security shall discharge the
obligation of both the Company and St. Paul to make such payment.
Section 402. Subordination. The obligations of St. Paul under Section 401
of this First Supplemental Indenture shall be subordinate and junior in
right of payment to the Senior Debt of St. Paul to the same extent and in
the same manner that the Securities are subordinate and junior in right of
payment to the Senior Debt of the Company pursuant to Article Fifteen of
the Indenture.
ARTICLE V
MISCELLANEOUS
Section 501. Confirmation of Indenture. The Indenture, as supplemented
and amended by this First Supplemental Indenture, is in all respects
ratified and confirmed, and the Indenture, this First Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
Section 502. Concerning the Trustee. The Trustee accepts the Indenture,
as supplemented by this First Supplemental Indenture, and agrees to perform
the same upon the terms and conditions set forth therein as so
supplemented. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this First Supplemental
Indenture or the due execution hereof by the Company or St. Paul or for or
in respect of the recitals contained herein, all of which are made by the
Company and St. Paul solely.
Section 503. Governing Law. This First Supplemental Indenture, the
the Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles of conflicts of laws.
Section 504. Separability. In case any one or more of the provisions
contained in this First Supplemental Indenture shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this First Supplemental Indenture, but this First Supplemental
Indenture shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
Section 505. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same
instrument.
Section 506. Effectiveness. This First Supplemental Indenture shall become
effective upon the effectiveness of the Merger.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first
above written.
THE ST. PAUL COMPANIES, INC.
By: /s/Bruce A. Backberg
Name: Bruce A. Backberg
Title: Senior Vice President and
Chief Legal Counsel
USF&G CORPORATION
By: /s/Dan L. Hale
Name: Dan L. Hale
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK, AS TRUSTEE
By: /s/Michael A. Smith
Name: Michael A. Smith
Title: Vice President
-7-
