THE ST. PAUL COMPANIES, INC.
1994 STOCK INCENTIVE PLAN
1. Purpose. The purposes of The St. Paul Companies,
Inc. 1994 Stock Incentive Plan (the "Plan") are (i) to
promote the interests of The St. Paul Companies, Inc. (the
"Company") and its shareholders by attracting and retaining
key officers and Non-Employee Directors of the Company and
its subsidiaries upon whom major responsibilities rest for
the successful administration and management of the
Company's business, (ii) to provide such officers and Non-
Employee Directors with incentive-based compensation in the
form of Company stock, which is supplemental to any other
compensation or benefit plans, based upon the Company's
sustained financial performance, (iii) to encourage decision
making based upon long-term goals and (iv) to align the
interest of such officers and Non-Employee Directors with
that of the Company's shareholders by encouraging them to
acquire a greater ownership position in the Company.
2. Definitions. Wherever used herein, the following
terms shall have the respective meanings set forth below:
"Award" means an award to a Participant made in
accordance with the terms of the Plan.
"Board" means the Board of Directors of the Company.
"Committee" means the Executive Compensation Committee
of the Board, or a subcommittee of that committee.
"Common Stock" means the common stock of the Company.
"Disinterested Person" means "disinterested person" as
defined in Rule 16b-3 of the Securities and Exchange
Commission, as amended from time to time, and, generally,
means any member of the Board who is not at the time of
acting on a matter, and within the previous year has not
been, an officer of the Company or a subsidiary.
"Participant" means an employee of the Company or its
subsidiaries who is selected by the Committee to participate
in the Plan or a Non-Employee Director who is granted
options under the provisions of Section 20 and/or Section 21
of the Plan.
3. Shares Subject to the Plan. Subject to adjustment
as provided in Section 16, the number of shares of Common
Stock which shall be available and reserved for the grant of
Awards under the Plan shall not exceed two million
(2,000,000) (or four million (4,000,000) if the Board and
the shareholders, at their May 3, 1994 meeting, approve the
two-for-one stock split described in the proxy statement for
the May 3, 1994 annual meeting of the shareholders of the
Company (the "Stock Split")). The shares of Common Stock
issued under the Plan will come from authorized and unissued
shares. Shares of Common Stock subject to an Award that
expires unexercised, that is forfeited, terminated or
canceled, in whole or in part, shall thereafter again be
available for grant under the Plan. No more than twenty per
cent (20%) of all shares subject to the Plan may be granted
to Participants as restricted stock.
4. Administration. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute
a quorum, and the acts of a majority shall be the acts of
the Committee.
Subject to the provisions of the Plan and except where
inconsistent with the provisions of Section 20, 21 and 22 of
the Plan, the Committee shall (i) select the Participants,
determine the type of Awards to be made to Participants,
determine the shares subject to Awards, and (ii) have the
authority to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the
administration of the Plan, to determine the terms and
provisions of any agreements entered into hereunder, and to
make all other determinations necessary or advisable for the
administration of the Plan. The Committee may correct any
defect, supply any omission or reconcile any inconsistency
in the Plan or in any Award in the manner and to the extent
it shall deem desirable to carry it into effect. The
determinations of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive.
5. Eligibility. Non-Employee Directors shall become
Participants under the provisions of Section 20 of the Plan
and may become Participants under Section 21 of the Plan.
In addition, the Committee shall select from time to time as
Participants in the Plan such officers of the Company or its
subsidiaries who are responsible for the management of the
Company or a subsidiary or who are expected to contribute in
a substantial measure to the successful performance of the
Company. No employee shall have at any time the right (i)
to be selected as a Participant, (ii) to be entitled to an
Award, or (iii) having been selected for an Award, to
receive any further Awards.
6. Awards. Awards under the Plan may consist of:
stock options (either incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code, or
nonstatutory stock options), Rights and restricted stock.
Awards of restricted stock may provide the Participant with
dividends or dividend equivalents and voting rights prior to
vesting (whether based on a period of time or based on
attainment of specified performance conditions).
7. Stock Options. The Committee shall establish the
option price at the time each stock option is granted, which
price shall not be less than the closing price of a share of
the Common Stock on the New York Stock Exchange on the date
of grant, or the fair market value of a share of the Common
Stock if it is not so listed, as determined by the
Committee. Stock options shall be exercisable for such
period as specified by the Committee, but in no event may
options become exercisable less than one year after the date
of grant (except in the case of a Change of Control) or be
exercisable for a period of more than ten (10) years after
their date of grant. The option price of each share as to
which a stock option is exercised shall be paid in full at
the time of such exercise. Such payment shall be made in
cash (including check, bank draft or money order), by tender
of shares of Common Stock owned by the Participant valued at
fair market value as of the date of exercise, subject to
such guidelines for the tender of Common Stock as the
Committee may establish, in such other consideration as the
Committee deems appropriate, or by a combination of cash,
shares of Common Stock and such other consideration. No
Participant may be
granted Awards of stock options with respect to more than
four hundred thousand (400,000) shares (eight hundred
thousand (800,000) shares if the Stock Split is approved) of
Common Stock during the term of the Plan, subject to
adjustment as provided in Section 16.
8. Stock Appreciation Rights. Stock appreciation, or
similar rights (each a "Right") may be granted either
concurrently with or subsequent to the date of grant of the
related stock option. A Right shall entitle the
Participant to receive from the Company an amount equal to
the increase of the fair market value of one (1) share of
Common Stock on the date of exercise of the Right over the
fair market value of one (1) share of Common Stock on the
date of grant. The Committee shall determine in its sole
discretion whether the Right shall be settled in cash,
Common Stock or a combination of cash and Common Stock. In
no event may Rights with respect to more than four hundred
thousand (400,000) shares (eight hundred thousand (800,000)
shares if the Stock Split is approved) of Common Stock in
the aggregate be granted to any Participant during the term
of the Plan, subject to adjustment as provided in Section
16.
9. Termination of Stock Options and Rights. Each
option and any related Rights shall terminate:
If the Participant is then living, at the earliest of
the following times:
(i) ten (10) years after the date of grant of the
option;
(ii) three (3) years after termination of employment
because of retirement;
(iii) one (1) month after termination of employment
other than termination because of retirement or through
discharge for cause provided, however, that if any
option is not fully exercisable at the time of such
termination of employment, such option shall expire on
the date of such termination of employment to the
extent not then exercisable;
(iv) immediately upon termination of employment through
discharge for cause; or
(v) any other time set forth in the agreement
describing and setting the terms of the Award, which
time shall not exceed ten (10) years after the date of
grant.
If the Participant dies while employed by the Company
or any subsidiary, or if no longer so employed dies
prior to termination of the entire option under
Section 9 (ii) or (iii) hereof, the Participant's
options and Rights shall terminate one (1) year after
the date of death, but subject to earlier termination
pursuant to Section 9 (i) or (v). However,
notwithstanding the provisions of Section 9 (v), to
the extent an option is exercisable on the date of the
Participant's death, it shall remain exercisable until
the earlier of one hundred eighty (180) days following
the date of death or ten (10) years after the date of
grant. To the extent an option is exercisable after
the death
of the Participant, it may be exercised by the person
or persons to whom the Participant's rights under the
agreement have passed by will or by the applicable laws
of descent and distribution.
10. Restricted Stock. Restricted stock may be granted
in the form of actual shares of Common Stock which shall be
evidenced by a certificate registered in the name of the
Participant but held by the Company until the end of the
restricted period. Any employment conditions, performance
conditions and the length of the period for vesting of
restricted stock shall be established by the Committee in
its discretion. In no event will Awards of restricted stock
to any one Participant total more than fifty thousand
(50,000) shares (one hundred thousand (100,000) shares if
the Stock Split is approved) of Common Stock during the term
of the Plan, subject to adjustment as provided in Section
16. Any performance conditions applied to any Award of
restricted stock may include earnings per share, net income,
operating income, total shareholder return, market share,
return on equity, achievement of profit or revenue targets
by a business unit, or any combination thereof. No Award of
restricted stock may vest earlier than one year from the
date of grant (except in the case of a Change of Control).
11. Agreements. Each Award under the Plan shall be
evidenced by an agreement setting forth the terms and
conditions, as determined by the Committee, which shall
apply to such Award, in addition to the terms and conditions
specified in the Plan.
12. Change of Control. In the event of a Change of
Control, as hereinafter defined, (i) all Rights shall become
exercisable in full, (ii) the restrictions applicable to all
shares of restricted stock shall lapse and such shares shall
be deemed fully vested; and (iii) subject to any limitations
set forth in agreements documenting any stock option Awards,
all stock options shall become immediately exercisable in
full. The Committee may, in its discretion, include such
further provisions and limitations in any agreement
documenting such Awards as it may deem equitable and in the
best interests of the Company.
"Change of Control" means a change of control of the
Company of a nature that would be required to be reported
(assuming such event has not been "previously reported") in
response to Item 1(a) of the Current Report on Form 8-K, as
in effect on May 3, 1994, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934; provided that, without
limitation, such a change in control shall be deemed to have
occurred at such time as (a) any "person" within the meaning
of Section 14(d) of the Securities Exchange Act of 1934,
other than the Company, a subsidiary or any employee benefit
plan(s) sponsored by the Company or any subsidiary is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or
indirectly, of fifty per cent (50%) or more of the Common
Stock; or (b) individuals who constitute the Board on May 3,
1994, cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director
subsequent to May 3, 1994, whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least three quarters of the directors comprising
the Board on May 3,
1994 (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a
nominee for director, without objection to such nomination)
shall be, for purposes of this clause (b), considered as
though such person were a member of the Board on May 3,
1994.
13. Withholding. The Company and its subsidiaries
shall have the right to deduct from any payment to be made
pursuant to the Plan, or to require prior to the issuance or
delivery of any shares of Common Stock or the payment of
cash under the Plan, any taxes required by law (whether
federal, state, local or foreign) to be withheld therefrom.
The Committee may, in its discretion, permit a Participant
to elect to satisfy such withholding obligation by having
the Company retain the number of shares of Common Stock
whose fair market value equals the amount required to be
withheld. Any fraction of a share of Common Stock required
to satisfy such obligation shall be disregarded and the
amount due shall instead be paid in cash to the Participant.
14. Nontransferability. No amount payable or other
right under the Plan shall be subject in any manner to
alienation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind nor in any
manner be subject to the debts or liabilities of any person,
except by will or the laws of descent and distribution, and
any attempt to so alienate or subject any such amount,
whether presently or thereafter payable, or any such right
shall be void.
15. No Right to Employment. No person shall have any
claim or right to be granted an Award, and the grant of an
Award shall not be construed as giving a Participant the
right to continue in the employ of the Company or its
subsidiaries. Further, the Company and its subsidiaries
expressly reserve the right at any time to dismiss a
Participant without any liability, or any claim under the
Plan, except as provided herein or in any agreement entered
into hereunder.
16. Adjustment of and Changes in Common Stock. In the
event of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, combination or exchange of
shares or other change in the corporate structure or shares
of stock of the Company, or any distributions to common
shareholders other than regular cash dividends, the
Committee may make such substitution or adjustment, if any,
as it deems to be equitable, as to the number or kind of
shares of Common Stock or other securities issued or
reserved for issuance pursuant to the Plan and to
outstanding Awards.
17. Amendment. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time,
provided that (i) no amendment shall be made without
stockholder approval if such approval is necessary in order
for the Plan to continue to comply with Rule 16b-3 under the
Securities Exchange Act of 1934 and (ii) no amendment,
suspension or termination may adversely affect any
outstanding Award without the consent of the Participant to
whom such Award was made. Section 20 of this Plan may not
be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules
thereunder.
18. Governing Law. The Plan shall be construed and
its provisions enforced and administered in accordance with
the laws of the State of Minnesota.
19. Effective Date. The Plan shall be effective as of
May 4, 1994. Subject to earlier termination pursuant to
Section 17, the Plan shall have a term of ten (10) years
from its effective date.
20. Automatic Grant to Non-Employee Directors.
Commencing with the first meeting of the Board in November
1994, each year on the date of the first meeting of the
Board in November of each such year, each Non-Employee
Director who is a director of the Company as of such date
shall, without any Committee action, automatically be
granted a stock option to purchase five hundred (500) shares
(one thousand (1,000) shares if the Stock Split is approved)
of Common Stock (subject to adjustment upon changes in
capitalization of the Company as provided in Section 16 of
the Plan). Each such option shall be evidenced by and
subject to the provisions of an agreement setting forth the
terms described in Section 22 and such additional terms of
the Plan as are not inconsistent with the terms of Section
22.
21. Discretionary Grant to Non-Employee Directors.
The Board may, subsequent to the effective date of the Plan,
permit Non-Employee Directors to choose to receive all or a
portion of their basic annual retainer in the form of stock
options valued in accordance with a method deemed
appropriate by the Committee. Each such option shall be
evidenced by and subject to the provisions of an agreement
setting forth the terms described in Section 22 and such
additional terms of the Plan as are not inconsistent with
the terms of Section 22.
22. Non-Employee Director Options. Options granted
pursuant to Section 20 or 21 shall have an exercise price
per share equal to 100% of the fair market value of one (1)
share of Common Stock on the date the option is granted,
shall become exercisable in full one (1) year after the date
of grant, and shall remain exercisable until terminated in
accordance with Section 9 of the Plan, provided that (i)
Section 9(iii) shall be applied without regard to the words
"or through discharge for cause," (ii) Sections 9(iv) and
(v) shall not be applicable and (iii) references in Section
9 to "employment" and "termination of employment" shall, for
the purposes of Sections 20 and 21, refer to "service as a
director" and "termination of service as a director."
Payment of the exercise price of the shares to be
purchased under options granted under Section 20 and 21 must
be made in cash only (including check, bank draft or money
order) at the time of exercise of such option.
The provisions of Sections 20 and 21 shall control with
respect to options granted under either Section 20 or 21,
respectively, over any other inconsistent provisions of the
Plan. It is intended that the provisions of Sections 20 and
21 shall not cause the Non-Employee Directors to cease to be
considered Disinterested Persons and, as a result, the
provisions of Sections 20 and 21 shall be interpreted to be
consistent with the foregoing intent.
Non-Employee Directors may not be granted options under
the Plan other than pursuant to the provisions of Section 20
and 21. No Rights may be granted to Non-Employee Directors.