-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R4jTxnJCwixhEV4og9VQpgICwbdXlCmfUK+tJQAwM2J2PQq/865kaXueit8oPhzG 6SJdjlVJK97x7y4LbMBvsA== 0001047469-99-003596.txt : 19990208 0001047469-99-003596.hdr.sgml : 19990208 ACCESSION NUMBER: 0001047469-99-003596 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990205 GROUP MEMBERS: ST PAUL COMPANIES INC /MN/ GROUP MEMBERS: THE ST. PAUL COMPANIES, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ST PAUL COMPANIES INC /MN/ CENTRAL INDEX KEY: 0000086312 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 410518860 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-12896 FILM NUMBER: 99522942 BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6123107911 FORMER COMPANY: FORMER CONFORMED NAME: SAINT PAUL COMPANIES INC DATE OF NAME CHANGE: 19900730 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ST PAUL COMPANIES INC /MN/ CENTRAL INDEX KEY: 0000086312 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 410518860 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6123107911 FORMER COMPANY: FORMER CONFORMED NAME: SAINT PAUL COMPANIES INC DATE OF NAME CHANGE: 19900730 SC 13E4 1 SC 13E4 ================================================================================ 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) ------------------------ ST. PAUL FIRE AND MARINE INSURANCE COMPANY (Name of Issuer) ST. PAUL FIRE AND MARINE INSURANCE COMPANY THE ST. PAUL COMPANIES, INC. (Name of Person(s) Filing Statement) Zero Coupon Convertible Subordinated Notes Due 2009 of ST. PAUL FIRE AND MARINE INSURANCE COMPANY (as successor to USF&G Corporation) (Title of Class of Securities) 903290-AD6 (CUSIP Number of Class of Securities) Sandra Ulsaker Wiese Corporate Secretary St. Paul Fire and Marine Insurance Company 385 Washington Street St. Paul, Minnesota 55102 (651) 310-7911 (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 (651) 310-7911 February 5, 1999 (Date Tender Offer First Published, Sent or Given to Security Holders) ------------------------ CALCULATION OF FILING FEE - --------------------------------------- --------------------------------------- Transaction Valuation* Amount of Filing Fee - --------------------------------------- --------------------------------------- $112,160,162 $22,433 - --------------------------------------- --------------------------------------- / / 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 $175,026,000 principal amount at maturity of Notes at the repurchase price of $640.82 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. ================================================================================ INTRODUCTORY STATEMENT This Schedule 13E-4 relates to an offer to purchase (the "Offer") by St. Paul Fire and Marine Insurance Company, a Minnesota corporation ("Fire & Marine") and a wholly owned subsidiary of The St. Paul Companies, Inc., a Minnesota corporation ("St. Paul"), for cash, on the terms and subject to the conditions set forth in the Offer to Purchase dated February 5, 1999 (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 (the "Notes") issued by USF&G Corporation, a Maryland corporation ("USF&G"). On April 24, 1998, SP Merger Corporation, a wholly owned subsidiary of St. Paul, merged with and into USF&G, with USF&G continuing as the surviving corporation and a wholly owned subsidiary of St. Paul. On February 2, 1999, USF&G merged with and into Fire & Marine with Fire & Marine continuing as the surviving corporation. The Notes are convertible into shares of Common Stock, no par value ("St. Paul Common Stock"), of St. Paul at 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 Fire & Marine, as successor to USF&G. The address of Fire & Marine's principal executive office is 385 Washington Street, St. Paul, Minnesota 55102. 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 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 Fire & Marine 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 February 4, 1999, there was $175,026,000 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 $640.82 per $1,000 principal amount at maturity of Notes. At the election of Fire & Marine, the Offer is being made in cash only. To the best knowledge of Fire & Marine and St. Paul, no Notes are being purchased from any officer, director or affiliate of Fire & Marine 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) Fire & Marine and St. Paul are filing this statement. The addresses of Fire & Marine and St. Paul are set forth in Item 1(a). Fire & Marine 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. -1- 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 by Fire & Marine 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. (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 USF&G Merger" and "Recent Developments-- The F&M Merger" is incorporated herein by reference. (c) The information set forth in the section of the Offer to Purchase entitled "Recent Developments--The USF&G Merger" is incorporated herein by reference. (d) None. (e) None. (f) None. (g) None. (h) Not applicable. (i) Not applicable. (j) Not applicable. 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 information set forth in the section of the Offer to Purchase entitled "St. Paul Selected Unaudited Financial Information" is incorporated by reference herein. 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: -2- (1) St. Paul's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (2) St. Paul's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and September 30, 1998. (3) St. Paul's Current Reports on Form 8-K dated April 24, 1998, April 27, 1998, May 5, 1998, May 14, 1998, October 6, 1998 and February 3, 1999. (4) St. Paul's Proxy Statement/Prospectus relating to the USF&G 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- ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a) Exhibit (a)(1) Offer to Purchase, dated February 5, 1999. 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. (b) Not applicable. (c)(1) Indenture, dated as of January 28, 1994, between USF&G, as issuer, and Chemical Bank, as Trustee. (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) Second Supplemental Indenture, dated as of January 1, 1999, among USF&G, as issuer, Fire & Marine and The Chase Manhattan Bank as successor to Chemical Bank, as Trustee. (c)(4) Form of Note, dated March 3, 1994. (d) Not applicable. (e) Not applicable. (f) Not applicable. -4- 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. ST. PAUL FIRE AND MARINE INSURANCE COMPANY By: /s/ Bruce A. Backberg ------------------------------ Name: Bruce A. Backberg Title: Senior Vice President and Chief Legal Counsel THE ST. PAUL COMPANIES, INC. By: /s/ Bruce A. Backberg ------------------------------ Name: Bruce A. Backberg Title: Senior Vice President and Chief Legal Counsel Dated: February 5, 1999 -5- EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- (a)(1) Offer to Purchase, dated February 5, 1999. (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. (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 (incorporated by reference to Exhibit (c)(2) to USF&G and St. Paul's Issuer Tender Offer Statement on Schedule 13E-4 filed with the Commission dated May 15, 1998). (c)(3) Second Supplemental Indenture, dated as of January 1, 1999, among USF&G, as Issuer, Fire & Marine and The Chase Manhattan Bank as successor to Chemical Bank, as Trustee. (c)(4) 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- EX-99.(A)(1) 2 OFFER TO PURCHASE Exhibit (a)(1) OFFER TO PURCHASE FOR CASH ANY AND ALL OF THE OUTSTANDING ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009 ISSUED BY USF&G CORPORATION BY ST. PAUL FIRE AND MARINE INSURANCE COMPANY (AS SUCCESSOR TO USF&G CORPORATION) AT $640.82 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 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 5, 1999, 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. - -------------------------------------------------------------------------------- St. Paul Fire and Marine Insurance Company ("Fire & Marine" or the "Bidder"), a wholly owned subsidiary of The St. Paul Companies, Inc. ("St. Paul"), hereby offers (the "Offer") to purchase for cash at $640.82 per $1,000 principal amount at maturity (the "Repurchase Price"), upon the terms and subject to the conditions set forth in this 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 (the "Notes") issued by USF&G Corporation ("USF&G"). This Offer to Purchase constitutes the Company Notice required by the Notes to be sent to the holders of the Notes. On April 24, 1998, SP Merger Corporation, a wholly owned subsidiary of St. Paul merged (the "USF&G Merger") with and into USF&G, with USF&G continuing as the surviving corporation and a wholly owned subsidiary of St. Paul. On February 2, 1999, USF&G merged (the "F&M Merger") with and into Fire & Marine, with Fire & Marine continuing as the surviving corporation. The date of this Offer to Purchase is February 5, 1999. The Offer is being made pursuant to the terms of the Indenture, dated as of January 28, 1994, among USF&G and Chemical Bank, as Trustee (the "Trustee") as amended by a First Supplemental Indenture, dated as of April 24, 1998, among USF&G, St. Paul and The Chase Manhattan Bank, as successor to Chemical Bank, as Trustee, and a Second Supplemental Indenture, dated as of January 1, 1999, among Fire & Marine, USF&G and The Chase Manhattan Bank, as Trustee (as so amended, the "Indenture") and the Notes which provide that, on March 3, 1999 (the "Payment Date") each holder of Notes has the right, at such holder's option, to require Fire & Marine (as successor to USF&G) to repurchase all or a portion of such holder's Notes at the Repurchase Price (a "Repurchase Right"). Fire & Marine has elected to pay the Repurchase Price in cash. The Bidder will accept for payment on March 3, 1999 any Notes validly delivered on or before that date and pay for such Notes in accordance with the terms of the Notes. The Bidder also agrees for the benefit of holders of Notes to redeliver to such holders any Notes accepted for payment prior to the Expiration Date if the holder (i) delivers written notice to the Depositary prior to the Expiration Date (in the same manner set forth herein for withdrawal of a tender) specifying the Notes the holder wishes to have redelivered and (ii) returns to the Bidder's account at the Depositary within two business days of the Expiration Date all amounts paid by the Bidder in respect of such Notes. Under the Notes, any purchase by Fire & Marine of Notes pursuant to the valid exercise of a Repurchase Right must be consummated by delivery of the cash consideration to be received by the holder of such Note no later than the second business day following the later of the Purchase Date and the time of delivery (or transfer by book-entry) of the Note. In order to comply with certain requirements of the Securities Exchange Act of 1934, as amended, ("Exchange Act"), the Bidder has set the initial expiration date of the Offer at 12:00 Midnight, New York City time, on March 5, 1999. In accordance with the requirements of the Notes, the Bidder will accept for payment any Notes validly delivered on or before March 3, 1999 and pay for such Notes on or before March 5, 1999. As of February 4, 1999, there was $175,026,000 aggregate principal amount at maturity of Notes outstanding. Prior to the consummation of the USF&G 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 USF&G 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 USF&G 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 whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations under the Notes and the Indenture. Payment by either Fire & Marine or St. Paul of the Redemption Price for Notes validly tendered and not withdrawn pursuant to the Offer will discharge the obligation of both Fire & Marine and St. Paul to make such payment. Pursuant to the Second Supplemental Indenture, Fire & Marine agreed to assume USF&G's obligations under the Indenture upon consummation of the F&M Merger. There is no established trading market for the Notes. On February 4, 1999, the closing price per share of St. Paul Common Stock, as reported on the New York Stock Exchange, Inc. (the "NYSE") Composite Tape, was $30 5/8. The Bidder has elected to pay the Repurchase Price in cash. 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 Fire & Marine (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. Tnders 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. -2- 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, the Bidder will promptly 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 the Bidder or St. Paul with the Depositary, which will act as agent for tendering holders for the purpose of receiving payment from the Bidder 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 FIRE & MARINE NOR ST. PAUL MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT HOLDERS SHOULD EXERCISE THEIR REPURCHASE RIGHT AND TENDER NOTES PURSUANT TO THE OFFER AND NEITHER FIRE & MARINE 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 FEBRUARY 4, 1999 OF $30 5/8, EACH $1,000 PRINCIPAL AMOUNT AT MATURITY OF NOTES MAY CURRENTLY BE CONVERTED INTO ST. PAUL COMMON STOCK WORTH APPROXIMATELY $509.70. BASED ON THE FOREGOING, THE PRICE BEING OFFERED BY THE BIDDER PER $1,000 PRINCIPAL AMOUNT AT MATURITY OF NOTES (IN ACCORDANCE WITH THE TERMS OF THE NOTES AND THE INDENTURE) IS CURRENTLY MORE 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. -3- AVAILABLE INFORMATION St. Paul is subject to the informational requirements of the Exchange Act, and in accordance therewith, files, reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information concerning 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 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 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 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 Reports of Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and September 30, 1998. (c) St. Paul's Current Reports on Form 8-K dated April 24, 1998, April 27, 1998, May 5, 1998, May 14, 1998, October 6, 1998 and February 3, 1999. (d) St. Paul's Proxy Statement/Prospectus relating to the USF&G 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. 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. -4- 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 ST. PAUL FIRE AND MARINE INSURANCE COMPANY, 385 WASHINGTON STREET, ST. PAUL, MINNESOTA 55102, ATTENTION: CORPORATE SECRETARY, TELEPHONE: (615)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. The forward-looking statements relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, market conditions and other matters. St. Paul and Fire & Marine note that a variety of factors could cause the actual results of the combined company following the USF&G 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 USF&G 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 Fire & Marine 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 or Fire & Marine'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; the continuing integration of the operations of St. Paul and USF&G, including the failure to realize synergies from the USF&G 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. -5- TABLE OF CONTENTS Page AVAILABLE INFORMATION..................................................... 4 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 4 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............................ 5 THE OFFER.................................................................. 8 GENERAL.................................................................... 8 PURPOSE AND EFFECTS OF THE OFFER........................................... 8 EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION....................... 9 ACCEPTANCE FOR PAYMENT..................................................... 9 PROCEDURES FOR TENDERING NOTES............................................. 10 TENDERING NOTES............................................................ 10 GUARANTEED DELIVERY PROCEDURES............................................. 12 WITHDRAWAL RIGHTS.......................................................... 13 CERTAIN INFORMATION CONCERNING FIRE & MARINE AND ST. PAUL.................. 15 FIRE & MARINE.............................................................. 15 ST. PAUL................................................................... 15 RECENT DEVELOPMENTS........................................................ 15 THE USF&G MERGER........................................................... 15 THE F&M MERGER............................................................. 15 ST. PAUL'S FOURTH QUARTER AND YEAR-END 1998 EARNINGS RESULTS............... 15 ADJUSTMENT TO CONVERSION PRICE; JOINT AND SEVERAL OBLIGATION............... 17 SOURCES AND AMOUNT OF FUNDS................................................ 17 MARKET PRICE INFORMATION................................................... 18 THE NOTES.................................................................. 18 -6- ST. PAUL COMMON STOCK...................................................... 18 SELECTED FINANCIAL INFORMATION............................................. 19 CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 20 SALE OF NOTES PURSUANT TO THE OFFER........................................ 20 THE DEPOSITARY............................................................. 21 MISCELLANEOUS.............................................................. 21 -7- THE OFFER GENERAL The Bidder 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. The Bidder 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, the Bidder will, promptly 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 the Bidder with the Depositary, which will act as agent for tendering holders for the purpose of receiving payment from the Bidder and transmitting such payment to tendering holders. The Bidder will accept for payment on March 3, 1999 any Notes validly delivered on or before that date and pay for such Notes in accordance with the terms of the Notes. The Bidder also agrees for the benefit of holders of Notes to redeliver to such holders any Notes accepted for payment prior to the Expiration Date if the holder (i) delivers written notice to the Depositary prior to the Expiration Date (in the same manner set forth herein for withdrawal of a tender) specifying the Notes the holder wishes to have redelivered and (ii) returns to the Bidder's account at the Depositary within two business days of the Expiration Date all amounts paid by the Bidder in respect of such Notes. Subject to the requirements of the Indenture and the Notes, the Bidder 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, the Bidder shall issue, and the Trustee shall authenticate and deliver to or on the order of the holder thereof, at the expense of the Bidder, 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, the Bidder 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 terms of the Indenture and the Notes which provide that, on the Payment Date, each holder of Notes has a Repurchase Right. Fire & Marine has elected to pay the Repurchase Price in cash. The Bidder will accept for payment on March 3, 1999 any Notes validly delivered on or before that date and pay for such Notes in accordance with the terms of the Notes. The Bidder also agrees for the benefit of holders of Notes to redeliver to such holders any Notes accepted for payment prior to the Expiration Date if the holder (i) delivers written notice to the Depositary prior to the Expiration Date (in the same manner set forth herein -8- for withdrawal of a tender) specifying the Notes the holder wishes to have redelivered and (ii) returns to the Bidder's account at the Depositary within two business days of the Expiration Date all amounts paid by the Bidder in respect of such Notes. Under the Notes, any purchase by Fire & Marine of Notes pursuant to the valid exercise of a Repurchase Right must be consummated by delivery of the cash consideration to be received by the holder of such Note and no later than the second business day following the later of the Purchase Date and the time of delivery (or transfer by book-entry) of the Note. In order to comply with certain requirements of the Exchange Act, the Bidder has set the initial expiration date of the Offer at 12:00 Midnight, New York City time, on March 5, 1999. Notes purchased by Fire & Marine 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 Fire & Marine as successor to 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 the Bidder 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 Repurchase Rights in respect of such Notes arising in respect of the Offer. 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, the Bidder 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 the Bidder, subject to the withdrawal rights of holders. The Bidder 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 the Bidder may choose to make a public announcement of any extension, termination or amendment of the Offer, the Bidder 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 The Bidder 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 -9- 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, the Bidder will promptly purchase, by accepting for payment, and 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, the Bidder shall be deemed to have accepted for payment (and thereby to have purchased) tendered Notes as, if and when the Bidder gives oral or written notice to the Depositary of the Bidder'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 the Bidder and transmitting payment to such tendering holders. The Bidder will accept for payment on March 3, 1999 any Notes validly delivered on or before that date and pay for such Notes in accordance with the terms of the Notes. The Bidder also agrees for the benefit of holders of Notes to redeliver to such holders any Notes accepted for payment prior to the Expiration Date if the holder (i) delivers written notice to the Depositary prior to the Expiration Date (in the same manner set forth herein for withdrawal of a tender) specifying the Notes the holder wishes to have redelivered and (ii) returns to the Bidder's account at the Depositary within two business days of the Expiration Date all amounts paid by the Bidder in respect of such Notes. 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 the Bidder 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), THE BIDDER 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 Repurchase Right and tender their Notes pursuant to the Offer. Accordingly, to properly exercise a Repurchase Right and tender Notes or cause Notes to be tendered, the following procedures must be followed: 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. -10- 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 the Bidder 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. 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. -11- 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 the Bidder, 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 Fire & Marine 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 the Bidder, (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 the Bidder, except as agent for the Bidder, for the purchase price for any tendered Notes that are purchased by the Bidder), 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 the Bidder, whose determination will be final and binding. The Bidder 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 the Bidder, be unlawful. The Bidder also reserves the absolute right to waive any condition to the Offer and any irregularities or conditions of tender as to particular Notes. The Bidder' 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 the Bidder shall determine. The Bidder 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 FIRE & MARINE 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. GUARANTEED DELIVERY PROCEDURES -12- 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 midnight, 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 midnight, 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 the Bidder by reason of any delay in making payment to any person using the guaranteed delivery procedures described above. 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. -13- 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 the Bidder, 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. The Bidder will accept for payment on March 3, 1999 any Notes validly delivered on or before that date and pay for such Notes in accordance with the terms of the Notes. The Bidder also agrees for the benefit of holders of Notes to redeliver to such holders any Notes accepted for payment prior to the Expiration Date if the holder (i) delivers written notice to the Depositary prior to the Expiration Date (in the same manner set forth herein for withdrawal of a tender) specifying the Notes the holder wishes to have redelivered and (ii) returns to the Bidder's account at the Depositary within two business days of the Expiration Date all amounts paid by the Bidder in respect of such Notes. -14- CERTAIN INFORMATION CONCERNING FIRE & MARINE AND ST. PAUL FIRE & MARINE Fire & Marine is a wholly owned subsidiary of St. Paul. Fire & Marine and it subsidiaries underwrites property and liability, and life insurance and provides insurance-related products and services to commercial, professional and individual customers throughout the United States, underwriting insurance through its Specialized Commercial, Commercial, Personal Insurance, Reinsurance and Life business segments. Fire & Marine's principal offices are located at 385 Washington Street, St. Paul, Minnesota 55102, and its telephone number is (615) 310-7911. 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 liability insurance and reinsurance underwriting and life insurance. St. Paul also has operations in the asset management 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 (615) 310-7911. RECENT DEVELOPMENTS THE USF&G MERGER On April 24, 1998, the USF&G Merger was consummated with USF&G continuing as the surviving corporation and a wholly owned subsidiary of St. Paul. In connection with the USF&G 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, 0.5642) of a share of St. Paul Common Stock. THE F&M MERGER On February 2, 1999, the F&M Merger was consummated with F&M continuing as the surviving corporation. ST. PAUL'S FOURTH QUARTER AND YEAR-END 1998 EARNINGS RESULTS 1998 operating earnings presented in the following paragraphs include a $458 million after-tax USF&G Merger-related charge taken in the second quarter and a $22 million after-tax restructuring charge taken in the fourth quarter, and exclude realized investment gains. On January 28, 1999, St. Paul reported operating earnings of $111.2 million for the quarterly period ended December 31, 1998, or $0.44 per share on a diluted basis, as compared to $206.9 million, or $0.82 per share (on a diluted basis), for the same period in 1997. St. Paul also reported net income of $104.0 million for the quarterly period ended December 31, 1998, or $0.41 per share, as compared to net income of $255.8 million, or $1.01 per share, for the same period in 1997. -15- Operating losses for the year ended December 31, 1998 were $61.9 million, or $0.26 per share (on a diluted basis), compared with 1997 operating earnings of $742.9 million, or $2.95 per share (on a diluted basis) for the year ended December 31, 1997. Net income was $65.2 million, or $0.22 per share for the year ended December 31, 1998, compared with net income of $929.3 million, or $3.69 per share for the year ended December 31, 1997. Consolidated assets of St. Paul as of December 31, 1998, were $38.3 billion, compared with $37.4 billion as of December 31, 1997. Common shareholders' equity was $6.6 billion at 1998 year-end, or $28.22. During the fourth quarter of 1998, St. Paul repurchased 3.8 million of its common shares for a total cost of $135 million. -16- ADJUSTMENT TO CONVERSION PRICE; JOINT AND SEVERAL OBLIGATION Prior to the consummation of the USF&G 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 USF&G 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 USF&G Merger, St. Paul irrevocably and unconditionally assumed, jointly and severally with Fire & Marine, responsibility for the due and punctual payment for the principal of, and premium, if any, and interest on, the Notes when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of Fire & Marine under the Notes and the Indenture. Payment by either Fire & Marine or St. Paul of the Redemption Price for the Notes validly tendered and not withdrawn pursuant to the Offer will discharge the obligation of both Fire & Marine and St. Paul to make such payment. The obligations of St. Paul in respect of the Notes is 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 Fire & Marine (as successor to USF&G) pursuant to the Indenture. SOURCES AND AMOUNT OF FUNDS The precise amount of funds required by the Bidder 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 $112,160,162. Fire & Marine expects that any funds required to purchase tendered Notes will be available from 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. Under the Indenture, St. Paul irrevocably and unconditionally has assumed, jointly and severally with Fire & Marine, responsibility for the due and punctual payment for the principal of, and premium, if any, and interest on, the Notes when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of Fire & Marine under the Notes and the Indenture. Payment by either Fire & Marine or St. Paul of the Repurchase Price for the Notes validly tendered and not withdrawn pursuant to the Offer will discharge the obligation of both Fire & Marine and St. Paul to make such payment. -17- 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 the Stock Split. St. Paul Common Stock ----------------- Calendar Quarter High Low -------- ------- 1996 First Quarter......................................... 30 1/4 26 3/4 Second Quarter........................................ 28 25 1/16 Third Quarter......................................... 27 15/16 25 5/16 Fourth Quarter........................................ 30 26 3/4 1997 First Quarter......................................... 36 5/16 28 13/16 Second Quarter........................................ 40 31 1/22 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........................................ 45 1/8 39 15/16 Third Quarter......................................... 43 5/8 28 1/16 Fourth Quarter........................................ 37 1/2 29 9/16 1999 First Quarter (through February 4, 1999)............. 36 28 1/2 On February 4, 1999, the closing sales price of the St. Paul Common Stock, as reported on the NYSE Composite Tape, was $305/8 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. -18- ST. PAUL SELECTED FINANCIAL INFORMATION The following table presents selected financial information of St. Paul after giving effect to the USF&G Merger as a "pooling of interests." St. Paul's selected historical financial information for each of the two years in the period ended December 31, 1997 and for the nine month periods ended September 30, 1998 and September 30, 1997 have been derived from financial statements filed with the Commission. The following selected financial information should be read in conjunction with the related historical combined financial statements and notes thereto incorporated by reference herein.
(UNAUDITED) (AUDITED) AS OF OR FOR THE NINE MONTHS AS OF OR FOR THE YEAR ENDED ENDED SEPTEMBER 30, DECEMBER 31, -------------------------- -------------------------- 1998 1997 1997 1996 ----------- ----------- ----------- ----------- (IN THOUSANDS EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Total revenues ........................... 6,912,265 7,219,643 9,623,179 9,231,537 ----------- ----------- ----------- ----------- Income (loss) from continuing operations $ (38,801) $ 741,282 $ 997,042 $ 840,461 Income (loss) from continuing operations per common share(1)....................... $ (0.21) $ 2.95 $ 3.96 $ 3.26 BALANCE SHEET DATA: Total assets................................ $37,504,363 $37,358,828 35,146,236 Total debt.................................. 1,097,742 1,304,008 1,170,676 Company-obligated mandatorily redeemable preferred securities of St. Paul Capital L.L.C.................... 502,700 502,700 307,000 Shareholders' equity........................ 6,609,115 6,608,168 5,847,456 Book value per common share(2).............. $ 27.83 $ 28.27 24.39 Number of common shares outstanding(2)...... 236,872 233,130 230,851
- -------------------- (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. NOTES TO SELECTED FINANCIAL INFORMATION 1. DESCRIPTION OF TRANSACTIONS AND BASIS OF PRESENTATION Pursuant to the USF&G Merger each share of USF&G Common Stock was converted into the right to receive, after giving effect to the Stock Split, 0.5642 of a Share of St. Paul Common Stock, the assumed Exchange Ratio used in the preparation of Selected Unaudited Financial Information (the "Exchange Ratio"). 2. RECLASSIFICATIONS Certain items in USF&G's historical financial statements have been reclassified to conform to St. Paul's presentation. 3. PER COMMON SHARE DATA The per common share data has been computed based on the combined historical income from continuing operations as adjusted for conforming changes in certain accounting methods of St. Paul and USF&G. For purposes of this calculation, USF&G's weighted average common shares outstanding were multiplied by the Exchange Ratio. -19- 4. USF&G MERGER-RELATED CHARGE Relating to the USF&G Merger, St. Paul recorded an after-tax charge of $458 million in the second quarter of 1998, which is reflected in the September 1998 loss from continuing operations. -20- 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, traders of securities that elect to mark to market 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. The payment of accrued interest with respect to a Note generally will be treated as ordinary income. An exception to the capital gains 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 the "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 3 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 the Bidder 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 rules described above. -21- 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. The Bidder will pay the Depositary reasonable and customary compensation for their services in connection with the Offer, plus reimbursement for reasonable out-of-pocket expenses. The Bidder 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 the Bidder for customary mailing and handling expenses incurred by them in forwarding material to their customers. The Bidder 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 The Bidder is not aware of any jurisdiction where the making of the Offer is not in compliance with the laws of such jurisdiction. If the Bidder becomes aware of any jurisdiction where the making of the Offer would not be in compliance with such laws, the Bidder 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, the Bidder 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. -22- 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 Window 1201 Main Street, 18th floor P O Box 219052 55 Water Street Dallas, TX 75202 Dallas, TX 75221-9053 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. -23- EX-99.(A)(2) 3 LETTER OF TRANSMITTAL Exhibit (a)(2) LETTER OF TRANSMITTAL To Tender Zero Coupon Convertible Subordinated Notes Due 2009 issued by USF&G CORPORATION, Pursuant to the Offer to Purchase Dated February 5, 1999 - -------------------------------------------------------------------------------- SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 5, 1999, 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, NA Chase Bank of Texas, NA The Chase Manhattan Bank Corporate Trust Services Corporate Trust Services Corporate Trust-Securities Window 1201 Main Street, 18th floor P O Box 219052 55 Water Street Dallas, TX 75202 Dallas, TX 75221-9053 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 Offer to Purchase, dated February 5, 1999 (as the same may be amended from time to time, the "Offer to Purchase"), of St. Paul Fire and Marine Insurance Company ("Fire & Marine" or the "Bidder") and this Letter of Transmittal and instructions hereto (the "Letter of Transmittal"), which together constitute the Bidder's offer to purchase (the "Offer") all of the outstanding Zero Coupon Convertible Subordinated Notes Due 2009 (the "Notes") issued by USF&G, 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. 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 C Tendering Notes C 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 C 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. ------------- The Bidder is not aware of any jurisdiction where the making of the Offer would not be in compliance with applicable laws. If the Bidder becomes aware of any jurisdiction where the making of the Offer would not be in compliance with such laws, the Bidder 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, the Bidder 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: ----------------------------- -2- Name of Eligible Institution that Guaranteed Delivery: -------------------------- List below the Notes to which this Letter of Transmittal relates. If 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 at Maturity Name(s) and Address(es) of Registered Holder(s) Certificate at Maturity Tendered** (Please fill in, if blank) Number* Represented - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- - ----------------------------------------------------------------- --------------- ---------------- ----------------- 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- - -------------------------------------------------------------------------------- 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- 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 the Bidder 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 the Bidder, 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 the Bidder 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 as 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 the Bidder, (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 the Bidder, except as agent for the Bidder, for the purchase price of any tendered Notes that are purchased by the Bidder), 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 the Bidder, the Bidder 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 the Bidder 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 the Bidder will be deemed to have accepted for purchase validly tendered Notes (or defectively tendered Notes with respect to which the Bidder has waived such defect) only if, as and when the Bidder 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 the Bidder 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. -5- 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 binding agreement between the undersigned and the Bidder 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 the Bidder. 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 the Bidder, 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 the Bidder 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 the Bidder does not accept for purchase any of the principal amount at maturity of such Notes so tendered. -6- - -------------------------------------------------------------------------------- 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 the Bidder 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: , 1999 --------------- 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: , 1999 --------------- - -------------------------------------------------------------------------------- -7- 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 FIRE & MARINE 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 C Tendering Notes C 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), the Bidder 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 C 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 C 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 -8- 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 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 the Bidder 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. -9- 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. 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, the tender holder should write "Applied For" in the space provided for the TIN. 6. TRANSFER TAXES. The Bidder 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 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 the Bidder, in its sole discretion, which determination shall be final and binding on all parties. The Bidder 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. The Bidder 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. The Bidder'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 the Bidder shall determine. None of the Bidder, 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- 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- PAYER'S NAME: THE CHASE MANHATTAN BANK - ------------------------------------- ----------------------------------------- ------------------------------------- SUBSTITUTE Part I - PLEASE PROVIDE YOUR TIN IN THE FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND --------------------------------- DATING BELOW. Social Security Number OR --------------------------------- Employer Identification Number (If awaiting TIN write AApplied For") - ------------------------------------- ------------------------------------------------------------------------------- Payer's Request for Taxpayer Part II -- For Payees Exempt from Backup Withholding, see the enclosed Identification Number (TIN) 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-up 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 - -------------------------------------------------------------------------------- -12- 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. ==================================================================================================================== FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF: SECURITY NUMBER OF: ==================================================================================================================== 1. Individual The individual 8. Corporate The corporation 2. Two or more The actual owner of 9. Association, club, The organization the account or, if religious, charitable, combined funds, any educational or other one of the individuals tax-exempt organization (1) 3. Custodian account of a The minor (2) 10. Partnership The partnership minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee (1) 11. A broker or registered The broker or nominee revocable savings nominee trust (grantor is also trustee) b. So-called trust The actual owner (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, The legal entity (Do or 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) ====================================================================================================================
(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. -13- 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 AIRS") 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 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. Wilfully 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- EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY Exhibit (a)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF CERTIFICATES FOR ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009 ISSUED BY USF&G CORPORATION Capitalized terms used but not defined herein have the meanings given them in the Offer to Purchase, dated February 5, 1999 (the "Offer to Purchase"). This Notice of Guaranteed Delivery may be used to cause a tender of Zero Coupon Convertible Subordinated Notes Due 2009 (the "Notes") issued by 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 Window 1201 Main Street, 18th floor P O Box 219052 55 Water Street Dallas, TX 75202 Dallas, TX 75221-9053 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 the Bidder 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 the Bidder of such person's authority so to act. - ----------------------------------------------------------- ----------------------------------------------------------- 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 ----------------------------------------------------------- ADDRESS DTC Participant's Number: _________________________________ ----------------------------------------------------------- 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- EX-99.(A)(4) 5 CLIENT LETTER Exhibit (a)(4) OFFER TO PURCHASE FOR CASH ANY AND ALL OF THE OUTSTANDING ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009 ISSUED BY USF&G CORPORATION - -------------------------------------------------------------------------------- SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 5, 1999, 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. - -------------------------------------------------------------------------------- February 5, 1999 TO OUR CLIENTS: Enclosed for your consideration is a Offer to Purchase, dated February 5, 1999 (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 St. Paul Fire and Marine Insurance Company ("Fire & Marine" or the "Bidder") to purchase for cash at $640.82 per $1,000 principal amount at maturity (the "Repurchase Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the accompanying Letter of Transmittal, any and all of the outstanding Zero Coupon Convertible Subordinated Notes Due 2009 (the "Notes") issued by USF&G Corporation ("USF&G"). 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 the Bidder will be paid by the Bidder, 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. 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: , 1999 - ---------------------------------------------- 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- EX-99.(A)(5) 6 BROKER DEALER LETTER Exhibit (a)(5) OFFER TO PURCHASE FOR CASH ANY AND ALL OF THE OUTSTANDING ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2009 ISSUED BY USF&G CORPORATION - -------------------------------------------------------------------------------- SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 5, 1999, 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. - -------------------------------------------------------------------------------- February 5, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Enclosed for your consideration is an Offer to Purchase, dated February 5, 1999 (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 St. Paul Fire and Marine Insurance Company ("Fire & Marine" or the "Bidder") and The St. Paul Companies, Inc. ("St. Paul", together with Fire & Marine, the "Bidder") to purchase cash at $640.82 per $1,000 principal amount at maturity (the "Repurchase Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the accompanying Letter of Transmittal, any and all of the outstanding Zero Coupon Convertible Subordinated Notes Due 2009 (the "Notes") issued by USF&G Corporation ("USF&G"). We are asking you to contact your clients for whom you hold Notes registered in your name or in the name of your nominee. The Bidder 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, ST. PAUL FIRE & MARINE INSURANCE COMPANY 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. EX-99.(C)(3) 7 2ND SUPP INDENTURE DTD. 1.1.99 Exhibit (c)(3) SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE, dated as of January 1, 1999 (this "Second Supplemental Indenture"), among St. Paul Fire and Marine Insurance Company ("F&M"), a Minnesota corporation and a wholly owned subsidiary of The St. Paul Companies, Inc. ("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 has issued Zero Coupon Convertible Subordinated Notes due 2009 (the "Securities") under and pursuant to an Indenture, dated as of January 28, 1994, as amended and supplemented by the First Supplemental Indenture (the "First Supplemental Indenture"), dated as of April 24, 1998 (as so supplemented and amended, the "Indenture"); WHEREAS, on the date hereof, pursuant to an Agreement and Plan of Merger, dated as of January 1, 1999, between the Company and F&M, the Company is being merged with and into F&M, with F&M continuing as the surviving corporation (the "Merger"); WHEREAS, pursuant to the First Supplemental Indenture, St. Paul jointly and severally assumed with the Company the due and punctual payment of the principal of, and premium, if any, and interest on the Securities when due, as more fully set forth therein; 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 Second 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 901(1) 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 the Securities, to enter into one or more supplemental indentures for the purpose of evidencing succession of another Person to the Company and the assumption by such successor of the covenants of the Company in the Indenture and in the Securities; and WHEREAS, F&M and the Company have requested that the Trustee execute and deliver this Second Supplemental Indenture pursuant to Section 901 of the Indenture, and all requirements necessary to make this Second Supplemental Indenture a valid instrument in accordance with its terms have been performed and the execution and delivery of this Second Supplemental Indenture have been duly authorized in all respects by each of F&M and the Company. NOW, THEREFORE, the Company, F&M, and the Trustee covenant and agree as follows: ARTICLE I AUTHORIZATION; DEFINITIONS Section 101. SECOND SUPPLEMENTAL INDENTURE. This Second Supplemental Indenture is supplemental to, and is entered into in accordance with Sections 801 and 901 of, the Indenture, and except as modified, amended and supplemented by this Second Supplemental Indenture, the provisions of the Indenture, including the First Supplemental 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 Second 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 Second 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: "F&M" means St. Paul Fire and Marine Insurance Company, a wholly owned subsidiary of St. Paul. "Second Supplemental Indenture" means the Second Supplemental Indenture to the Indenture, dated as of January 1, 1999, among the Company, F&M, and the Trustee. ARTICLE III ASSUMPTION AND SUBORDINATION Section 301. ASSUMPTION. F&M hereby irrevocably and unconditionally assumes, pursuant to Section 801 of the Indenture, all of the obligations and covenants of the Company under the Securities, including without limitation the due and punctual payment of the principal of (and premium, if any), and interest (including any Additional Interest) on all the Securities when due, and the performance or observance of every covenant of the Indenture on the part of the Company to be performed or observed. It is understood and agreed that F&M shall be fully liable for all 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 this Second Supplemental Indenture shall be deemed to be amended, abridged, reduced or otherwise affected by the Second Supplemental Indenture. The conversion rights set forth in the Indenture shall continue to be governed as set forth in such Article Twelve of the Indenture and the First Supplemental Indenture. Section 302. SUBORDINATION. The obligations of F&M under Section 301 of this Second Supplemental Indenture shall be subordinate and junior in right of payment to the Senior Debt of F&M 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 IV MISCELLANEOUS Section 401. CONFIRMATION OF INDENTURE. The Indenture, as supplemented and amended by this Second Supplemental Indenture, is in all respects ratified and confirmed, and the Indenture, this Second Supplemental Indenture and all indentures supplemental thereto shall be read, taken and construed as one and the same instrument. Section 402. CONCERNING THE TRUSTEE. The Trustee accepts the Indenture, as supplemented by this Second 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 Second Supplemental Indenture or the due execution hereof by the Company or F&M or for or in respect of the recitals contained herein, all of which are made by the Company and F&M solely. Section 403. GOVERNING LAW. This Second Supplemental Indenture 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 404. SEPARABILITY. In case any one or more of the provisions contained in this Second 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 Second Supplemental Indenture, but this Second Supplemental Indenture shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. Section 405. COUNTERPARTS. This Second 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 406. EFFECTIVENESS. This Second Supplemental Indenture shall become effective upon the effectiveness of the Merger. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the day and year first above written. ST. PAUL FIRE AND MARINE INSURANCE COMPANY By: /s/ Thomas A. Bradley ------------------------------------ Name: Thomas A. Bradley Title: Senior Vice President USF&G CORPORATION By: /s/ John A. MacCall ------------------------------------ Name: John A. MacCall Title: Executive Vice President THE CHASE MANHATTAN BANK, AS TRUSTEE By: /s/ Francine Springer ------------------------------------ Name: Francine Springer Title: Assistant Vice President -----END PRIVACY-ENHANCED MESSAGE-----