THE ST. PAUL COMPANIES, INC.
SPECIAL LEVERAGED STOCK PURCHASE PLAN
1. Purpose and Term. The purpose of The St. Paul Companies,
Inc. Special Leveraged Stock Purchase Plan (the "Plan") is
to increase senior officers' ownership of Company common
stock and to provide those officers with a stronger, more
immediate focus on shareholder value creation. The Plan
shall become effective upon the approval of the shareholders
of the Company and will terminate December 31, 2009.
However, Purchase Loans may be made through December 31,
2009.
2. Definitions. Wherever used herein, the following terms
shall have the respective meanings set forth below:
"Board" means the Board of Directors of the Company.
"Committee" means the Personnel and Compensation Committee
of the Board, or, if no longer established, the Board.
"Common Stock" means the common stock of the Company.
"Company" means The St. Paul Companies, Inc.
"Drawdown" means any advance of funds under a Note.
"Notes" or "Note" means the Secured Promissory Notes in form
of the attached Exhibit A entered into by each Participant
with the Company.
"Participant" means an employee of the Company or its
subsidiaries who is selected by the Committee to participate
in the Plan.
"Pledge Agreement" means the Pledge and Custody Agreement
entered into by each Participant and the Company in the form
of the attached Exhibit B
"Purchase Loan" means loans made pursuant to this Plan.
"Purchased Stock" means the shares of Company Common Stock
purchased with the loan proceeds.
"Retirement" means termination of employment which entitles
the Participant to an immediate pension under the terms of
The St. Paul Companies, Inc. Employees Retirement Plan.
3. Eligibility. The Committee shall select from time to time
as Participants in the Plan such senior executives of the
Company or its subsidiaries who are expected to contribute
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 a Purchase Loan, or
(iii) having been selected for a Purchase Loan, to receive
any further Purchase Loans.
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, the Committee shall
(i) select the Participants and determine the amount of the
loans to be made to Participants, 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 Purchase Loan 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. Loans. Company shall provide each Participant with a full-
recourse interest bearing Purchase Loan, the proceeds of
which shall be used by the Participant to purchase Common
Stock on the open market within the next available window
period. Funds shall be advanced upon the Participant
providing the Company with evidence that shares of Common
Stock have been purchased. The total amount that each
Participant shall be allowed to borrow under this Plan shall
be as determined by the Committee. Each Drawdown and the
total amount of all Drawdowns under each Note shall in no
event be greater than the cost of the Purchased Stock,
including commissions. Each Drawdown shall be at least
$25,000 and as a condition precedent to any additional
Drawdown the market value of the Pledged Securities shall at
least be equal to the amount outstanding under the Note
Purchase Loans will accrue interest at the "applicable
federal rate" (as determined by Section 1274(d) of the
Internal Revenue Code) as of the date the advances were made
for loans of such maturity, compounded annually. While
interest on the Purchase Loans will accrue at the applicable
federal rate, interest will not be payable until the loan
terminates. Accrued but unpaid interest on the Purchase
Loans will be added to the principal balance of the Purchase
Loan. Each Purchase Loan will be payable no later than five
years after the date it is made. The Participant may prepay
at any time.
The payment of the Purchase Loans will be accelerated if a
Participant's service is terminated because of resignation
or involuntary termination. In those instances, the
Purchase Loan must be paid within 30 days following such
event. If a Participant's termination of service is due to
Retirement, death, disability or following a Change of
Control (as defined below), the Purchase Loan must be repaid
over a two-year period following such event, but no later
than the stated due date of the Purchase Loan. The Purchase
Loan may also be prepaid at any time at the Participant's
option.
Purchase Loans shall be evidenced by the Participant's
execution of a Secured Promissory Note in the form of the
attached Exhibit A
"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 6, 1997, 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, or fifty percent (50%) or more of the Common
Stock; or (b) individuals who constitute the Board on May 6,
1997, cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director
subsequent to May 6, 1997, 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 6, 1997 (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 6, 1997.
6. Pledged Securities. The Participant shall pledge the
Purchased Stock and such additional securities as may be
necessary, to secure the Purchase Loan by executing a Pledge
Agreement in the form of the attached Exhibit B.
Participants will be permitted at any time to sell the
Purchased Stock so pledged, provided that the proceeds from
such sale must be applied against the outstanding balance of
the Purchase Loan.
Participants would be entitled to any shareholder dividends,
and to vote any pledged securities, including the Purchased
Stock.
7. 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.
8. No Right to Employment. No person shall have any claim or
right to be granted a Purchase Loan, and the grant of a
Purchase Loan 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.
9. Amendment. The Board of Directors upon the recommendation
of the Committee may amend, suspend, or terminate the Plan
at any time provided no amendment, suspension or termination
of the Plan may cause the Plan to fail to meet the
requirements of Rule 16b-3, or such successor rule as may
hereinafter be in effect, or Section 162(m) of the Internal
Revenue Code or may, without the consent of the Participant,
adversely affect such Participant's rights under the Plan in
any material aspect. No such amendment shall be made
without the approval of the Company's shareholders to the
extent such approval is required by law or agreement.
10. Governing Law. The Plan shall be construed and its
provisions enforced and administered in accordance with the
laws of the State of Minnesota.