<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
----
For the quarterly period ended June 30, 1995
--------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR
---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File Number 0-3021
--------
THE ST. PAUL COMPANIES, INC.
----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Minnesota 41-0518860
------------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
385 Washington St., Saint Paul, MN 55102
------------------------------------ ------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (612) 221-7911
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of the Registrant's Common Stock, without par value,
outstanding at August 8, 1995, was 84,538,776.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited), Three
and Six Months Ended June 30, 1995 and 1994 3
Consolidated Balance Sheets, June 30, 1995
(Unaudited) and December 31, 1994 4
Consolidated Statements of Common Shareholders' Equity,
Six Months Ended June 30, 1995 (Unaudited) and
Twelve Months Ended December 31, 1994 6
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements (Unaudited) 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
PART II. OTHER INFORMATION
Item 1 through Item 6 23
Signatures 25
EXHIBIT INDEX 26
<PAGE>
PART I FINANCIAL INFORMATION
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Premiums earned $991,827 845,957 1,937,897 1,691,359
Net investment income 190,176 167,250 376,565 335,658
Insurance brokerage fees
and commissions 77,052 74,298 144,113 140,748
Investment banking-asset
management 54,262 53,201 107,878 106,799
Realized investment gains 9,347 14,897 12,324 36,680
Other 8,064 9,546 19,410 17,680
--------- --------- --------- ---------
Total revenues 1,330,728 1,165,149 2,598,187 2,328,924
--------- --------- --------- ---------
Expenses:
Insurance losses and loss
adjustment expenses 723,390 591,946 1,403,829 1,259,634
Policy acquisition expenses 219,228 193,468 426,922 384,819
Operating and administrative 244,856 220,541 476,036 443,274
--------- --------- --------- ---------
Total expenses 1,187,474 1,005,955 2,306,787 2,087,727
--------- --------- --------- ---------
Income before income taxes 143,254 159,194 291,400 241,197
Income tax expense (benefit):
Federal current 44,192 42,152 91,260 62,850
Other (13,905) (10,720) (23,423) (13,852)
--------- --------- --------- ---------
Total income tax expense 30,287 31,432 67,837 48,998
--------- --------- --------- ---------
Net income $112,967 127,762 223,563 192,199
========= ========= ========= =========
Net income per common share:
Primary $1.30 1.49 2.57 2.22
========= ========= ========= =========
Fully diluted $1.24 1.43 2.47 2.14
========= ========= ========= =========
Dividends declared on
common stock $0.40 0.375 0.80 0.75
========= ========= ========= =========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
ASSETS 1995 1994
------ ---------- ----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $9,621,174 8,828,684
Equities, at estimated market value 662,461 531,042
Real estate, at cost less accumulated
depreciation of $66,125 (1994; $60,234) 617,867 528,144
Venture capital, at estimated market value 335,407 330,032
Other investments 51,371 46,539
Short-term investments, at cost 1,057,047 898,081
---------- ----------
Total investments 12,345,327 11,162,522
Cash 37,271 46,664
Investment banking inventory securities 59,618 148,031
Reinsurance recoverables:
Unpaid losses 1,518,114 1,533,250
Paid losses 138,733 88,900
Receivables:
Underwriting premiums 1,230,363 1,107,788
Insurance brokerage activities 759,145 891,823
Interest and dividends 184,057 182,938
Other 122,646 88,657
Deferred policy acquisition expenses 337,825 324,358
Ceded unearned premiums 239,371 255,687
Deferred income taxes 610,289 790,508
Office properties and equipment, at cost
less accumulated depreciation
of $255,503 (1994; $243,945) 475,854 477,570
Goodwill 292,916 279,308
Other assets 183,246 117,816
---------- ----------
Total assets $18,534,775 17,495,820
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
(In thousands)
June 30, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ------------ -----------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $9,693,382 9,423,429
Unearned premiums 2,169,679 2,109,170
---------- ----------
Total insurance reserves 11,863,061 11,532,599
Debt 586,512 622,624
Payables:
Insurance brokerage activities 1,088,163 1,191,089
Income taxes 192,209 183,659
Reinsurance premiums 177,428 155,833
Accrued expenses and other 666,033 600,211
Other liabilities 446,391 472,336
---------- ----------
Total liabilities 15,019,797 14,758,351
---------- ----------
Company-obligated minority interest
in St. Paul Capital L.L.C. (Note 8) 207,000 -
Series B convertible preferred stock;
1,450 shares authorized; 1,007 shares
outstanding (1,012 shares in 1994) 145,245 146,102
Guaranteed obligation - PSOP (137,589) (141,567)
---------- ----------
Net convertible preferred stock 7,656 4,535
---------- ----------
Common shareholders' equity:
Common stock, 240,000 shares authorized; 84,481
shares outstanding (84,202 shares in 1994) 454,406 445,222
Retained earnings 2,513,794 2,362,286
Guaranteed obligation - ESOP (37,849) (44,410)
Unrealized appreciation of investments 402,179 13,948
Unrealized loss on foreign currency translation (32,208) (44,112)
---------- ----------
Total common shareholders' equity 3,300,322 2,732,934
---------- ----------
Total liabilities, minority interest,
preferred stock and common
shareholders' equity $18,534,775 17,495,820
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Common Shareholders' Equity
(In thousands)
Six Twelve
Months Ended Months Ended
June 30 December 31
------------ ------------
1995 1994
---- ----
(Unaudited)
Common stock:
Beginning of period $445,222 438,559
Stock issued under stock option and
other incentive plans 9,239 11,130
Reacquired common stock (55) (4,467)
---------- ----------
End of period 454,406 445,222
---------- ----------
Retained earnings:
Beginning of period 2,362,286 2,082,832
Net income 223,563 442,828
Dividends declared on common stock (67,021) (124,921)
Dividends declared on PSOP preferred
stock, net of taxes (4,285) (8,448)
Reacquired common shares (749) (30,005)
---------- ----------
End of period 2,513,794 2,362,286
---------- ----------
Guaranteed obligation - ESOP:
Beginning of period (44,410) (56,005)
Principal payments 6,561 11,595
---------- ----------
End of period (37,849) (44,410)
---------- ----------
Unrealized appreciation of investments,
net of taxes:
Beginning of period 13,948 588,844
Change during the period 388,231 (574,896)
---------- ----------
End of period 402,179 13,948
---------- ----------
Unrealized loss on foreign currency
translation, net of taxes:
Beginning of period (44,112) (49,102)
Change during the period 11,904 4,990
---------- ----------
End of period (32,208) (44,112)
---------- ----------
Total common shareholders' equity $3,300,322 2,732,934
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Six Months Ended
June 30
-----------------------
1995 1994
------ ------
OPERATING ACTIVITIES
Underwriting:
Net income $244,253 201,956
Adjustments:
Change in net insurance reserves 334,822 202,539
Change in underwriting premiums receivable (130,344) (56,662)
Provision for deferred taxes (31,570) (19,038)
Realized gains (9,133) (33,661)
Other (102,901) 80,230
---------- ----------
Total underwriting 305,127 375,364
---------- ----------
Insurance brokerage:
Net loss (23,061) (19,478)
Adjustments:
Change in premium balances 22,410 15,353
Change in accounts payable and
accrued expenses (19,988) (18,693)
Depreciation and goodwill amortization 12,241 9,396
Other 23,970 (6,650)
---------- ----------
Total insurance brokerage 15,572 (20,072)
---------- ----------
Investment banking-asset management:
Net income 24,165 21,832
Adjustments:
Change in inventory securities 88,413 226,255
Change in short-term investments (115,154) (168,990)
Change in open security transactions (17,195) 6,040
Change in short-term borrowings - (80,383)
Other 37,742 35,145
---------- ----------
Total investment banking-asset management 17,971 39,899
---------- ----------
Parent company and consolidating eliminations:
Net loss (21,794) (12,111)
Realized gains (3,191) (3,019)
Adjustments 29,931 (5,612)
---------- ----------
Total parent company and
consolidating eliminations 4,946 (20,742)
---------- ----------
Net cash provided by operating activities 343,616 374,449
---------- ----------
INVESTING ACTIVITIES
Purchase of investments (1,272,747) (1,097,732)
Sales and maturities of investments 850,757 826,723
Change in short-term investments (33,468) 48,430
Change in open security transactions 60,929 (53,593)
Net purchases of office properties and equipment (22,544) (18,101)
Other (44,759) 15,721
---------- ----------
Net cash used in investing activities (461,832) (278,552)
---------- ----------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (71,184) (67,105)
Proceeds from issuance of monthly income
preferred securities 207,000 -
Proceeds from issuance of debt 65,500 57,151
Reacquired common shares (497) (33,570)
Repayment of debt (95,306) (20,350)
Other 3,170 (18,819)
---------- ----------
Net cash provided by (used in) financing
activities 108,683 (82,693)
---------- ----------
Effect of exchange rate changes on cash 140 (280)
---------- ----------
Increase (decrease) in cash (9,393) 12,924
Cash at beginning of period 46,664 25,420
---------- ----------
Cash at end of period $37,271 38,344
========== ==========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
June 30, 1995
Note 1 Basis of Presentation
-----------------------------
The consolidated financial statements include The St. Paul Companies,
Inc. and subsidiaries, and have been prepared in conformity with
generally accepted accounting principles.
These financial statements rely, in part, on estimates. In the opinion
of management, all necessary adjustments have been reflected for a fair
presentation of the results of operations, financial position and cash
flows in the accompanying unaudited consolidated financial statements.
The results for the period are not necessarily indicative of the results
to be expected for the entire year.
Reference should be made to the "Notes to Consolidated Financial
Statements" on pages 45 to 60 of the Registrant's annual report to
shareholders for the year ended December 31, 1994. The amounts in those
notes have not changed except as a result of transactions in the
ordinary course of business or as otherwise disclosed in these notes.
Some figures in the 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation. These
reclassifications had no effect on net income or common shareholders'
equity, as previously reported.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 2 Earnings per Share
--------------------------
Earnings per common share (EPS) amounts were calculated by dividing net
income, as adjusted, by the adjusted average common shares outstanding.
Three Months Ended Six Months Ended
June 30 June 30
---------------- ----------------
1995 1994 1995 1994
------ ------ ------ ------
(In thousands)
PRIMARY
Net income, as reported $112,967 127,762 223,563 192,199
PSOP preferred dividends declared
(net of taxes) (2,139) (2,105) (4,285) (4,214)
-------- -------- -------- --------
Net income, as adjusted $110,828 125,657 219,278 187,985
======== ======== ======== ========
FULLY DILUTED
Net income, per financial statements $112,967 127,762 223,563 192,199
Additional PSOP expense (net of taxes)
due to assumed conversion of
preferred stock (871) (947) (1,745) (1,897)
Dividend on monthly income preferred
securities (net of taxes) 1,009 - 1,009 -
-------- -------- -------- --------
Net income, as adjusted $113,105 126,815 222,827 190,302
======== ======== ======== ========
ADJUSTED AVERAGE COMMON SHARES
OUTSTANDING
Primary 85,362 84,561 85,277 84,788
======== ======== ======== ========
Fully diluted 91,157 88,678 90,231 88,935
======== ======== ======== ========
Adjusted average common shares outstanding include the common and common
equivalent shares outstanding for the period and, for fully diluted EPS,
common shares that would be issuable upon conversion of PSOP preferred
stock and monthly income preferred securities.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 3 Investments
-------------------
Investment Activity. A summary of investment transactions is presented
below.
Six Months Ended June 30
------------------------------
1995 1994
------ ------
(In thousands)
Purchases:
Fixed maturities $761,513 660,534
Equities 376,182 344,006
Real estate 102,426 48,094
Venture capital 27,344 36,964
Other investments 5,282 8,134
--------- ---------
Total purchases 1,272,747 1,097,732
--------- ---------
Proceeds from sales and maturities:
Fixed maturities:
Sales 126,205 140,896
Maturities and redemptions 352,244 305,213
Equities 334,704 357,026
Venture capital 30,598 11,987
Real estate 4,839 -
Other investments 2,167 11,601
--------- ---------
Total sales and maturities 850,757 826,723
--------- ---------
Net purchases $421,990 271,009
========= =========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Change in Unrealized Appreciation. The increase (decrease) in
unrealized appreciation of investments recorded in common shareholders'
equity was as follows:
Six Months Ended Twelve Months Ended
June 30, 1995 December 31, 1994
------------------ -------------------
(In thousands)
Fixed maturities $505,121 (847,554)
Equities 79,857 (30,106)
Venture capital 9,099 (4,064)
-------- -------
Total change in pretax
unrealized appreciation 594,077 (881,724)
Increase (decrease) in deferred
tax asset due to change
in unrealized appreciation (205,846) 306,828
-------- --------
Total change in unrealized
appreciation, net of taxes $388,231 (574,896)
======== ========
Restricted Funds. Premiums collected by the brokerage operations from
insureds, but not yet remitted to insurance carriers, are restricted as
to use by business practices. These restricted funds are included in
short-term investments and totaled $388 million at June 30, 1995, and
$385 million at December 31, 1994.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 4 Income Taxes
--------------------
The components of the income tax provision are as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
------ ------ ------ ------
(In thousands)
Federal current tax expense $44,192 42,152 91,260 62,850
Federal deferred tax benefit (17,396) (15,559) (31,017) (21,628)
------- ------- ------- -------
Total federal income tax
expense 26,796 26,593 60,243 41,222
Foreign income taxes 2,265 3,664 5,135 5,461
State income taxes 1,226 1,175 2,459 2,315
------- ------- ------- -------
Total income tax expense $30,287 31,432 67,837 48,998
======= ======= ======= =======
Note 5 Contingent Liabilities
------------------------------
In the ordinary course of conducting business, some of the company's
subsidiaries have been named as defendants in various lawsuits. Some of
these lawsuits attempt to establish liability under insurance contracts
issued by those companies. Plaintiffs in these lawsuits are asking for
money damages or to have the court direct the activities of our operations
in certain ways. Although it is possible that the settlement of a
contingency may be material to the company's results of operations and
liquidity in the period in which the settlement occurs, the company believes
that the total amounts that it or its subsidiaries will ultimately have to
pay in all of these lawsuits will have no material effect on its overall
financial position.
In some cases, plaintiffs seek to establish coverage for their liability
under environmental protection laws. See "Environmental Pollution and
Asbestos Claims" in Management's Discussion and Analysis for information on
these claims.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 6 Debt
------------
Debt consists of the following:
June 30, December 31,
1995 1994
------------------ -----------------
Book Fair Book Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
Medium-term notes $270,037 272,100 204,433 189,400
Commercial paper 179,570 179,570 275,635 275,635
9 3/8% notes 99,977 104,400 99,971 102,800
Guaranteed ESOP debt 30,556 32,100 36,112 37,200
Pound sterling loan notes 6,372 6,372 6,473 6,473
------- ------- ------- -------
Total debt $586,512 594,542 622,624 611,508
======= ======= ======= =======
Note 7 Reinsurance
-------------------
The company's consolidated financial statements reflect the effects of
assumed and ceded reinsurance transactions. Assumed reinsurance refers to
the company's acceptance of certain insurance risks that other insurance
companies have underwritten. Ceded reinsurance involves transferring
certain insurance risks the company has underwritten to other insurance
companies who agree to share these risks. The primary purpose of ceded
reinsurance is to protect the company from potential losses in excess of the
amount it is prepared to accept.
The company expects those with whom it has ceded reinsurance to honor their
obligations. In the event these companies are unable to honor their
obligations, the company will pay these amounts. The company has
established allowances for possible nonpayment of amounts due to it.<PAGE>
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The effect of assumed and ceded reinsurance on premiums written, premiums
earned and insurance losses and loss adjustment expenses is as follows:
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands)
Premiums written:
Direct $947,804 806,107 1,752,006 1,570,700
Assumed 307,008 274,852 525,522 437,476
Ceded (159,686) (159,840) (266,039) (282,486)
--------- --------- --------- ---------
Net premiums written $1,095,126 921,119 2,011,489 1,725,690
========= ========= ========= =========
Premiums earned:
Direct $921,372 802,802 1,786,954 1,595,417
Assumed 239,556 198,180 433,745 365,387
Ceded (169,101) (155,025) (282,802) (269,445)
--------- --------- --------- ---------
Net premiums earned $991,827 845,957 1,937,897 1,691,359
========= ========= ========= =========
Insurance losses and loss
adjustment expenses:
Direct $666,432 508,124 1,241,982 1,051,336
Assumed 170,814 183,366 375,546 359,533
Ceded (113,856) (99,544) (213,699) (151,235)
--------- --------- --------- ---------
Net insurance losses and
loss adjustment expenses $723,390 591,946 1,403,829 1,259,634
========= ========= ========= =========
Note 8 Company-obligated Minority Interest in St. Paul Capital L.L.C.
----------------------------------------------------------------------
On May 16, 1995, the company issued, through St. Paul Capital
L.L.C.,("SPCLLC") 4,140,000 convertible monthly income preferred securities
(MIPS), generating gross proceeds of $207 million. The MIPS pay an annual
dividend of 6% of the liquidation preference of $50 per security. The
company directly or indirectly owns all of the common securities of SPCLLC,
a special purpose limited liability company which was formed for the purpose
of issuing these preferred securities. The MIPS are guaranteed by the
company and are convertible into 0.8475 shares of the company's common stock
(equivalent to a conversion price of $59 per common share). The securities
are noncallable for four years.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
SPCLLC used the proceeds of the MIPS sale and common capital contributions
from the company (together totaling $262 million) to purchase 6% convertible
subordinated debentures issued by the company. These debentures are due May
31, 2025 and interest is payable monthly. The debentures are eliminated in
the company's consolidated balance sheet.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1995
Consolidated Results
--------------------
Consolidated pretax earnings of $143 million in the second quarter were
down 10% from second quarter 1994 earnings of $159 million. An increase
in catastrophe losses and other expenses in the underwriting segment
drove the decline in quarterly earnings. Results from the company's
insurance brokerage and investment banking-asset management operations
improved slightly over the second quarter of 1994. For the first half
of 1995, pretax earnings of $291 million were $50 million higher than
the first six months of 1994, primarily due to improved results in the
underwriting segment.
Net income in the second quarter was $113 million, or $1.24 per share,
compared with net income of $128 million, or $1.43 per share, in the
second quarter of 1994. Net income of $224 million, or $2.47 per share,
for the first six months of 1995 increased 16% over comparable 1994 net
income of $192 million, or $2.14 per share.
Consolidated revenues in the second quarter totaled $1.33 billion, an
increase of 14% over second quarter 1994 revenues of $1.17 billion.
Year-to-date revenues in 1995 were 12% higher than the same period of
1994. Growth in insurance premiums earned drove the increased revenue
in 1995.
Results by Segment
------------------
Pretax results by industry segment were as follows (in millions):
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Pretax income (loss):
Underwriting:
GAAP underwriting results ($26) (14) (41) (97)
Net investment income 181 164 359 329
Realized investment gains 8 14 9 34
Other (18) (4) (22) (17)
---- ---- ---- ----
Total underwriting 145 160 305 249
Insurance brokerage (4) (5) (18) (14)
Investment banking-asset management 20 18 39 35
Parent and other (18) (14) (35) (29)
---- ---- ---- ----
Income before income taxes $143 159 291 241
==== ==== ==== ====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Underwriting
------------
Pretax earnings in the underwriting segment totaled $145 million in the
second quarter, down 9% from earnings of $160 million in the same period
of 1994. A $12 million deterioration in underwriting results, driven by
an increase in catastrophe losses, and an increase in other expenses
were partially offset by a $17 million increase in investment income.
The following summarizes key financial results by underwriting
operation:
% of Three Months Six Months
1995 Ended June 30 Ended June 30
Written -------------- --------------
($ in Millions) Premiums 1995 1994 1995 1994
--------------- -------- ---- ---- ---- ----
Specialized Commercial:
Written Premiums 33% $355 278 639 541
Underwriting Results ($26) (22) (46) (56)
Combined Ratio 106.0 106.6 106.2 108.5
Personal Insurance:
Written Premiums 16% $179 168 329 313
Underwriting Results ($3) (6) (10) (17)
Combined Ratio 101.1 102.8 102.7 105.1
Commercial:
Written Premiums 14% $142 120 289 241
Underwriting Results ($11) (15) (15) (49)
Combined Ratio 107.9 112.5 105.2 120.3
Medical Services:
Written Premiums 13% $129 130 266 295
Underwriting Results $25 37 51 71
Combined Ratio 85.8 78.3 85.5 79.3
---- ----- ----- ----- -----
Total St. Paul Fire &
Marine:
Written Premiums 76% $805 696 1,523 1,390
Underwriting Results ($15) (6) (20) (51)
Combined Ratio 101.3 100.5 101.2 103.1
Reinsurance:
Written Premiums 20% $244 196 400 277
Underwriting Results $1 (3) (4) (32)
Combined Ratio 95.5 97.7 99.4 113.0
International:
Written Premiums 4% $46 29 88 59
Underwriting Results ($12) (5) (17) (14)
Combined Ratio 127.5 121.1 120.8 125.4
---- ----- ----- ----- -----
Total:
Written Premiums 100% $1,095 921 2,011 1,726
GAAP Underwriting Results ($26) (14) (41) (97)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 72.9 70.0 72.4 74.5
Underwriting Expense Ratio 28.5 30.2 29.3 30.7
----- ----- ----- -----
Combined Ratio 101.4 100.2 101.7 105.2
===== ===== ===== =====
Combined Ratio Including
Policyholders' Dividends 101.6 100.3 101.9 105.2
===== ===== ===== =====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
In the first quarter of 1995, the commercial underwriting operations of
the company's business center previously known as St. Paul Personal &
Business Insurance were transferred to the Commercial business center.
The company's Personal Insurance business center, as renamed, now
consists exclusively of personal insurance coverages for individuals.
Amounts for 1994 have been reclassified to conform to the 1995
presentation.
Written premiums of $1.1 billion in the second quarter were 19% higher
than comparable 1994 premiums of $921 million. In the Specialized
Commercial category, new business in the National Accounts and
Construction business sectors accounted for the majority of the 28%
increase in premium volume over 1994. Reinsurance written premiums were
nearly $50 million higher than the same quarter of 1994, primarily due
to approximately $40 million in incremental premiums from the renewal of
reinsurance business acquired from a subsidiary of the CIGNA Corporation
in 1994. New business in several classes of coverages accounted for the
19% increase in Commercial premium volume over the second quarter of
1994. Medical Services' written premiums in the second quarter were
level with the same quarter last year.
Written premiums for the first half of 1995 increased 17% over the same
period of 1994, primarily due to premium growth in Reinsurance,
Specialized Commercial and Commercial.
The GAAP underwriting loss in the second quarter was $26 million,
compared with 1994's second quarter loss of $14 million. Catastrophe
losses of $55 million, primarily stemming from spring storms in Texas
and the Midwest, severely impacted second quarter underwriting results
and more than offset underlying improvement in loss experience and
reduced expense ratios in many lines of business. The second quarter of
1994 included virtually no catastrophe losses. Key factors in the
increase in second quarter underwriting losses compared to 1994 were as
follows:
- Medical Services - $12 million worse than 1994 - The magnitude
of favorable prior year loss development was less than that
experienced in 1994, resulting in a reduced underwriting profit.
- International - $7 million worse than 1994 - An increase in
losses in Canada was the primary factor in the deterioration
from 1994.
- Commercial - $4 million better than 1994 - Favorable prior year
loss development and reduced expenses more than offset a $23
million increase in catastrophe losses in the quarter.
- Specialized Commercial - $4 million worse than 1994 - A $20
million increase in catastrophe losses and deterioration in
results from the company's participation in insurance pools were
substantially offset by a decline in involuntary costs and
reduced underwriting expenses.
The year-to-date GAAP underwriting loss of $41 million was
significantly better than the 1994 six-month loss of $97 million.
Catastrophe losses in the first half of 1995 totaled $71 million,
compared with $88 million
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
for the same period of 1994. Improvement in noncatastrophe loss
experience, particularly in the Commercial business center, and the
decline in catastrophe losses were the primary factors driving the
reduction in underwriting losses in 1995.
Pretax investment income in the underwriting segment for the second
quarter was $181 million, up 10% from $164 million in 1994. Year-to-
date investment income was $30 million ahead of last year. The increase
over 1994 was primarily due to a general rise in interest rates over the
last 18 months and strong cash flows from operations, which has fueled a
$500 million increase in investments since June 30, 1994. The average
yield on taxable fixed maturity purchases, which have constituted the
majority of investment purchases in 1995, was 8.0% in the first six
months of 1995, compared with 7.1% for the same period of 1994. For the
first time in several years, the company began investing in tax-exempt
fixed maturities in the second quarter, due to increasing yields on
those securities and changes in the company's consolidated tax position
which make tax-exempt investments more attractive.
The weighted average pretax yield on the underwriting segment's fixed
maturities portfolio was 7.3% at June 30, 1995, and approximately 95% of
that portfolio was rated at investment grade levels (BBB or better).
Environmental Pollution and Asbestos Claims
-------------------------------------------
The company's underwriting operations continue to receive claims under
policies written many years ago alleging injuries from environmental
pollution or alleging covered property damages for the cost to clean up
polluted sites. The company has also received asbestos claims arising
out of product liability coverages under general liability policies.
Significant legal issues, primarily pertaining to issues of coverage,
exist with regard to the company's alleged liability for both pollution
and asbestos claims. In the company's opinion, court decisions in
certain jurisdictions have tended to expand insurance coverage beyond
the intent of the original policies.
The company's ultimate liability for pollution claims is extremely
difficult to estimate. Insured parties have submitted claims for losses
not covered in the insurance policy, and the ultimate resolution of
these claims may be subject to lengthy litigation, making it difficult
to estimate the company's potential liability. In addition, variables,
such as the length of time necessary to clean up a polluted site, and
controversies surrounding the identity of the responsible party and the
degree of remediation deemed necessary, make it difficult to estimate
the total cost of a pollution claim. Estimating the ultimate liability
for asbestos claims is equally difficult. The primary factors
influencing the estimate of the total cost of these claims are case law
and a history of prior claim development, both of which are still
developing.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Because of the significant uncertainties associated with pollution and
asbestos claims, and the likelihood that they will not be resolved in
the near future, the company is unable to estimate its ultimate exposure
to these claims and cannot quantify a range of reasonably possible
losses in addition to recorded reserves at this time. However, the
company is continually evaluating its exposure to these claims in an
effort to quantify such a range. The company's results of operations in
future periods may be materially impacted by these claims, but the
company believes it is unlikely that such claims will materially impact
its financial position or liquidity.
Prior to 1994, the company made no specific allocation for pollution or
asbestos claims of its IBNR (incurred but not reported) reserves, but
rather identified reserves for only reported claims (case reserves). In
the third quarter of 1994, the company specifically allocated for
pollution and asbestos claims a portion of previously established IBNR
reserves.
The following table represents a reconciliation of total gross and net
pollution reserve development for the six months ended June 30, 1995,
and the years ended Dec. 31, 1994 and 1993. Amounts in the "net" column
are reduced by reinsurance.
1995 1994 1993
Pollution (six months) ---- ----
--------- ----------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $275 200 105 73 88 62
Incurred losses 31 35 71 56 32 22
IBNR allocation - - 132 95 - -
Paid losses (16) (14) (33) (24) (15) (11)
--- --- --- --- --- ---
Ending reserves $290 221 275 200 105 73
=== === === === === ===
Many significant pollution claims currently being brought against
insurance companies arise out of contamination that occurred 20 to 30
years ago. Since 1970, the company's Commercial General Liability
policy form has included a specific pollution exclusion, and, since
1986, an industry standard absolute pollution exclusion.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
The following table represents a reconciliation of total gross and net
reserve development for asbestos claims for the six months ended June
30, 1995, and the years ended Dec. 31, 1994 and 1993:
1995 1994 1993
Asbestos (six months) ---- ----
-------- ----------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $185 145 62 48 70 54
Incurred losses 7 9 13 14 17 15
IBNR allocation - - 127 95 - -
Paid losses (9) (5) (17) (12) (25) (21)
--- --- --- --- --- ---
Ending reserves $183 149 185 145 62 48
=== === === === === ===
Most of the asbestos claims the company has received pertain to policies
written prior to 1986. Since 1986, the company's Commercial General
Liability policy has used the industry standard absolute pollution
exclusion, which the company believes applies to asbestos claims.
Total gross pollution and asbestos reserves at June 30, 1995, of $473
million represented approximately 5% of gross consolidated reserves of
$9.7 billion.
Insurance Brokerage
-------------------
The insurance brokerage segment (Minet) incurred a pretax loss of $4
million in the second quarter, a slight improvement over the comparable
1994 loss of $5 million. Investment income increased $4 million, and
brokerage fees and commissions grew 5% over the second quarter of 1994.
Salaries and related expenses increased 7% due to increased staffing
levels associated with Minet's continuing effort to develop new business
opportunities. Minet's pretax loss for the first half of 1995 was $18
million, compared with a loss of $14 million in the first six months of
1994. The competitive market environment for brokerage services
worldwide continues to have a negative impact on Minet's results.
Investment Banking-Asset Management
-----------------------------------
The company's portion of The John Nuveen Company's second quarter pretax
earnings was $20 million, compared with $18 million in 1994. For the
first half of 1995, the company's portion was $39 million, compared with
$35 million in 1994. The company currently owns 77% of Nuveen.
The municipal bond market has stabilized somewhat compared to last year
but still remains challenging. For the first time since the second
quarter of 1994, Nuveen's asset management revenues increased over the
comparable prior quarter as a result of the increased market value of
managed assets. Assets under management totaled $31.4 billion at June
30, an increase of $1.7 billion
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
since year-end 1994. Nuveen's underwriting and distribution revenues in
the first half of 1995 were more than double the comparable 1994 total,
primarily due to inventory positioning profits resulting from more
favorable market conditions in 1995. Unit Investment Trust sales in
1995 were $570 million, compared with $612 million in the first half of
1994.
Capital Resources
-----------------
Common shareholders' equity of $3.3 billion at quarter-end was 21%
higher than year-end 1994 equity of $2.7 billion. The increase in
equity was driven by the company's earnings and growth in the unrealized
appreciation of the company's fixed maturities portfolio. The declining
interest rate environment during the first half of 1995 fueled a rally
in the bond market, which in turn has resulted in a $330 million
increase (net of taxes) in the market value of the company's portfolio.
On May 16, 1995, the company completed the sale of 4,140,000 convertible
monthly income preferred securities (MIPS) bearing a dividend rate of
6%. Each preferred security is convertible at the option of the holder
into 0.8475 shares of the company's common stock. Gross proceeds from
the sale were $207 million. A portion of the proceeds was used to
reduce the company's commercial paper debt, with the remainder invested
in fixed maturity securities and available for general corporate
purposes.
Total debt outstanding at the end of the quarter was $587 million, down
from $623 million at the end of 1994. The $95 million decline in
commercial paper was partially offset by the issuance of $66 million of
medium-term notes. The ratio of debt to total capitalization at June
30, 1995, was 14%, down from 19% at year-end 1994 due to the decline in
debt and the significant increase in shareholders' equity. The MIPS are
"hybrid" equity securities and are included in total capital.
The company anticipates no major capital expenditures in 1995.
The company's ratio of earnings to fixed charges was 8.93 for the first
six months of 1995, compared with 8.34 for the same period of 1994. The
company's ratio of earnings to combined fixed charges and preferred
stock dividends was 6.93 for the first six months of 1995, compared with
6.52 for the same period of 1994. Fixed charges consist of interest
expense before reduction for capitalized interest and one-third of
rental expense, which is considered to be representative of an interest
factor.
Liquidity
---------
Liquidity refers to the company's ability to generate sufficient funds
to meet the cash requirements of its business operations. Net cash
provided by operations was $344 million in the first half of 1995,
compared with $374 million in 1994. The company's liquidity position
remains strong due to the underwriting segment's cash flows from
underwriting and investment activities.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 5 to the consolidated
financial statements included in Part I of this report is
incorporated herein by reference.
In late May of 1995, a purported class action lawsuit brought
in the District Court of Brazoria County, Texas was served on
three subsidiaries of the company on behalf of persons who
allegedly paid $400 million from 1983 through 1985 for
interests in certain limited partnerships that Damson Oil
Corporation ("Damson") served as general partner. The
complaint in this lawsuit (Olin Nelson, et al. v. St. Paul Fire
and Marine Insurance Company, St. Paul Surplus Lines Insurance
Company ("Surplus Lines") and St. Paul Specialty Underwriting,
Inc.) alleges, among other things, that the defendants
conspired with Damson to mislead the investors as to the
protection afforded by certain insurance policies issued by
Surplus Lines in violation of the Texas Deceptive Trade
Practices Act and other laws. The plaintiffs seek unspecified
actual damages, treble damages, punitive damages, attorney
fees, costs, and pre- and post-judgment interest. The
defendants have removed the case to the U.S. District Court for
the Southern District of Texas, and plaintiffs are seeking to
have the case remanded to the Texas state court. These
proceedings are being vigorously contested by the defendants,
and the company recognizes that the final outcome of these
proceedings, if adverse to the defendants, may materially
impact the results of operations of the company in the period
in which that outcome occurs, but believes it should not have a
material adverse effect on its liquidity or overall financial
position.
Item 2. Changes in Securities.
i) On August 1, 1995, The company's Board of Directors approved
certain amendments to the company's Shareholder Protection
Rights Agreement (the "Rights Agreement") to, among other
things, add a "flip-in" feature. On December 4, 1989, the
company's Board of Directors approved the Rights Agreement and
declared a dividend of one Right for each outstanding share of
the company's common stock. Each Right entitles the registered
holder under certain circumstances to purchase from the company
one two-thousandth of a share of the company's Series A Junior
Participating Preferred Stock at a current exercise price of
$92.50 per right, subject to adjustment. The Rights currently
trade with the company's common stock, and no separate Rights
certificates have been distributed. The Rights will separate
from the common stock and become exercisable under conditions
and at times specified in the Rights Agreement.<PAGE>
<PAGE>
The "flip-in" feature of the amended Rights Agreement provides
that if any person together with its affiliates and associates
becomes the beneficial owner of 15% or more of the outstanding
shares of the company's common stock, each Right (other than
those held by the 15%-or-more shareholder and its affiliates,
associates, successors and assigns) will entitle the holder to
purchase, at the exercise price, shares of the company's common
stock having a market value equal to two times the exercise
price (i.e., in exchange for payment of the exercise price,
currently $92.50, a holder of a Right will receive shares of
the company's common stock with a market value of $185).
In addition, the Rights Agreement was amended to provide that
the Rights would flip-in (and the holder of each Right, other
than an Adverse Person, as described below, and its affiliates,
associates, successors and assigns would be entitled to the
benefits described in the preceding paragraph) upon a
determination of the Board of Directors that a person is an
"Adverse Person." An "Adverse Person" is a person who
beneficially owns at least 10% of the outstanding shares of the
company's common stock and who, in the determination of the
Board of Directors, either (i) intends to take certain actions
not in the company's or a shareholder's best interests or (ii)
is likely to cause a material adverse impact on the company,
the company's employees, customers, suppliers, creditors or
other constituencies.
A copy of the amended and restated Shareholder Protection
Rights Agreement is included as an exhibit hereto. The
foregoing summary of the amendments to the Rights Agreement is
not complete and is qualified in its entirety by reference to
the amended and restated Shareholder Protection Rights
Agreement.
ii) In connection with the offering of Convertible Monthly Income
Securities (MIPS) discussed in Note 8 to the Consolidated
Financial Statements, the company designated a new series of
preferred stock as Series C Cumulative Convertible Preferred
Stock (the "Series C Preferred"). The Series C Preferred would
only be issued in the event of certain circumstances, including
the vote of a majority of the aggregate liquidation preference
of MIPS to effectively elect to exchange the MIPS for
depositary shares, each representing a 1/100th interest in a
share of Series C Preferred. The Series C Preferred, if
issued, would have dividend, conversion and other terms
substantially similar to the terms of the Convertible MIPS,
except that, among other things, the holders of the Series C
Preferred would have the right to elect two additional
directors of the company whenever dividends on the Series C
Preferred are in arrears for 18 months. The Series C Preferred
would not be subject to mandatory redemption.
The "Certificate of Designation of The St. Paul Companies,
Inc. Series C Cumulative Convertible Preferred Stock" is now a
part of the company's Restated Articles of Incorporation, which
are filed as an exhibit hereto.
<PAGE>
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. An Exhibit Index is set forth on page 26 of this
report.
(b) Reports on Form 8-K.
The Registrant filed a Form 8-K Current Report, dated July
24, 1995, pertaining to the Registrant's press release of
second quarter 1995 financial results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ST. PAUL COMPANIES, INC.
(Registrant)
Date: August 10, 1995 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
Date: August 10, 1995 By /s/ Howard E. Dalton
--------------------
Howard E. Dalton
Senior Vice President
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
-------
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession*..............................
(3) (i) Articles of incorporation **..........................
(ii) By-laws*..............................................
(4) Instruments defining the rights of security holders,
including indentures**..................................
(i) Amended and Restated Shareholder Protection Rights
Agreement**..........................................
(10) Material contracts*........................................
(11) Statement re computation of per share earnings**...........
(12) Statement re computation of ratios**.......................
(15) Letter re unaudited interim financial information*.........
(18) Letter re change in accounting principles*.................
(19) Report furnished to security holders*......................
(22) Published report regarding matters submitted to
vote of security holders*...............................
(23) Consents of experts and counsel*...........................
(24) Power of attorney*.........................................
(27) Financial data schedule**..................................
(99) Additional exhibits*.......................................
* These items are not applicable.
** This exhibit is included only with the copies of this report that are
filed with the Securities and Exchange Commission. However, a copy
of the exhibit may be obtained from the Registrant for a reasonable
fee by writing to Legal Services, The St. Paul Companies, 385
Washington Street, Saint Paul, MN 55102.<PAGE>
<PAGE>
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
THE ST. PAUL COMPANIES, INC.
ARTICLE I
The name of the corporation is THE ST. PAUL COMPANIES, INC.
ARTICLE II
The address of the registered office of the
corporation is 385 Washington Street, St. Paul, Minnesota
55102.
ARTICLE III
The aggregate number of shares that the corporation
has authority to issue is two hundred forty-five million
shares which shall consist of five million undesignated
shares and two hundred forty million shares of voting common
stock. All shares of voting common stock shall have equal
rights and preferences. The board of directors of the
corporation is authorized to establish, from the
undesignated shares, one or more classes and series of
shares, to designate each such class and series and to fix
the relative rights and preferences of each such class and
series, provided that in no event shall the board of
directors fix a preference with respect to a distribution in
liquidation in excess of $100 per share plus accrued and
unpaid dividends, if any. No shares shall confer on the
holder any right to cumulate votes in the election of
directors. All shareholders are denied preemptive rights,
unless, with respect to some or all of the undesignated
shares, the board of directors shall grant preemptive
rights. The corporation may, without any new or additional
consideration, issue shares of voting common stock or any
other class or series pro rata to the holders of the same or
one or more other classes or series of shares.
Each share of common stock with a par value of One
Dollar Fifty Cents which is issued and outstanding (and has
not been reacquired by the corporation) as of the effective
date of these Restated Articles of Incorporation is hereby
reclassified into one share of voting common stock and each
certificate representing a share or shares of common stock
with a par value of One Dollar Fifty Cents shall represent
the same number of shares of voting common stock.
<PAGE>
ARTICLE IV
An action required or permitted to be taken at a board
meeting may be taken by written action signed by the number
of directors that would be required to act in taking the
same action at a meeting of the board at which all directors
were present.
ARTICLE V
Where shareholder approval, authorization or adoption
is required by Chapter 302A, Minnesota Statutes, for any of
the following transactions, the vote required for such
approval, authorization or adoption shall be the affirmative
vote of the holders of at least two-thirds of the voting
power of all voting shares:
(a) Any plan of merger;
(b) Any plan of exchange;
(c) Any sale, lease, transfer or other disposition of all or
substantially all of the corporation's property and
assets, including its good will, not in the usual and
regular course of its business; or
(d) Any dissolution of the corporation.
The shareholder vote required for approval,
authorization or adoption of an amendment to these Restated
Articles of Incorporation (other than an amendment to this
article) shall be the affirmative vote of the holders of at
least one-half of the voting power of all voting shares. The
shareholder vote required for approval, authorization or
adoption of an amendment to this article shall be the
affirmative vote of the holders of at least two-thirds of
the voting power of all voting shares. The provisions of
this article are not intended either to require that the
holders of the shares of any class or series of shares vote
separately as a class or series or to affect or increase any
class or series vote requirement of Chapter 302A, Minnesota
Statutes.
ARTICLE VI
A director of this Corporation shall have no personal
liability to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director,
to the full extent such immunity is permitted from time to
time under the Minnesota Business Corporation Act.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect
any right or protection of a Director of the Corporation
existing at the time of such repeal or modification.
<PAGE>
STATEMENT OF THE ST. PAUL COMPANIES, INC.
WITH RESPECT TO
SERIES B CONVERTIBLE PREFERRED STOCK
Pursuant to Section 302A.401, Subd. 3(b)
of Minnesota Statutes
The undersigned officers of The St. Paul Companies,
Inc. (the "Corporation"), being duly authorized by the Board
of Directors of the Corporation, do hereby certify that the
following resolution was duly adopted by the Board of
Directors of the Corporation on January 24, 1990 pursuant to
Minnesota Statutes, Section 302A.401, Subd. 3(a):
RESOLVED, That there is hereby established, out of the
presently available undesignated shares of the Corporation,
a series of Preferred Stock of the Corporation designated as
stated below and having the relative rights and preferences
that are set forth below (the "Series"):
1. Designation and Amount. The Series shall be
designated as "Series B Convertible Preferred Stock" (the
"Series B Preferred"). The number of shares constituting the
Series shall be one million four hundred fifty thousand
(1,450,000), which number may from time to time be decreased
(but not below the number of shares then outstanding) by
action of the Board of Directors of the Corporation (the
"Board of Directors"). Shares of Series B Preferred shall
have a preference upon liquidation, dissolution or winding
up of the Corporation of One Hundred Dollars ($100.00) per
share, which preference amount does not represent a
determination by the Board of Directors for the purpose of
the Corporation's capital accounts.
2. Rank. The Series B Preferred shall, with respect to
dividend rights and rights on liquidation, winding up or
dissolution of the Corporation, rank prior to the
Corporation's Series A Junior Participating Preferred Stock
and to the Corporation's voting common stock (the "Common
Stock") (together, the "Junior Stock") and shall, with
respect to dividend rights and rights on liquidation,
winding up or dissolution of the Corporation, rank junior to
all other classes and series of equity securities of the
Corporation, now or hereafter authorized, issued or
outstanding, other than any classes or series of equity
securities of the Corporation ranking on a parity with the
Series B Preferred as to dividend rights and rights upon
liquidation, winding up or dissolution of the Corporation
(the "Parity Stock").
3. Dividends. (a) Holders of outstanding shares of
Series B Preferred shall be entitled to receive, when, as
and if declared by the Board of Directors, to the extent
permitted by applicable law,
<PAGE>
cumulative quarterly cash dividends at the annual rate of
Eleven and 724/1000 Dollars ($11.724) per share, in
preference to and in priority over any dividends with
respect to Junior Stock.
(b) Dividends on the outstanding shares of Series B
Preferred shall begin to accrue and be cumulative
(regardless of whether such dividends shall have been
declared by the Board of Directors) from and including the
date of original issuance of each share of the Series B
Preferred, and shall be payable in arrears on January 17,
April 17, July 17 and October 17 of each year (each of such
dates a "Dividend Payment Date"), commencing April 17, 1990.
Each such dividend shall be payable to the holder or holders
of record as they appear on the stock books of the
Corporation at the close of business on such record dates,
not more than thirty (30) calendar days and not less than
ten (10) calendar days preceding the Dividend Payment Dates
therefor, as are determined by the Board of Directors (each
of such dates a "Record Date"). In any case where the date
fixed for any dividend payment with respect to the Series B
Preferred shall not be a Business Day, then such payment
need not be made on such date but may be made on the next
preceding Business Day with the same force and effect as if
made on the date fixed therefor, without interest.
(c) The amount of any dividends "accumulated" on any
share of Series B Preferred at any Dividend Payment Date
shall be deemed to be the amount of any unpaid dividends
accrued thereon to and excluding such Dividend Payment Date
regardless of whether declared, and the amount of dividends
"accumulated" on any share of Series B Preferred at any date
other than a Dividend Payment Date shall be calculated as
the amount of any unpaid dividends accrued thereon to and
excluding the last preceding Dividend Payment Date
regardless of whether declared, plus an amount calculated on
the basis of the annual dividend rate for the period from
and including such last preceding Dividend Payment Date to
and excluding the date as of which the calculation is made
(regardless of whether declared). The amount of dividends
payable with respect to a full dividend period on
outstanding shares of Series B Preferred shall be computed
by dividing the annual dividend rate by four and the amount
of dividends payable for any period shorter than a full
quarterly dividend period (including the initial dividend
period) shall be computed on the basis of thirty (3O)-day
months, a three hundred sixty (360)-day year and the actual
number of days elapsed in the period.
(d) So long as the shares of Series B Preferred shall
be outstanding, if (i) the Corporation shall be in default
or in arrears with respect to the payment of dividends
(regardless of whether declared) on any outstanding shares
of Series B Preferred or any other classes or series of
equity securities of the Corporation other than Junior Stock
or (ii) the Corporation shall be in default or in arrears
with respect to the mandatory or optional redemption,
purchase or other acquisition, retirement or other
requirement of, or with respect to, any sinking or other
similar fund or agreement for the redemption, purchase
<PAGE>
or other acquisition, retirement or other requirement of, or
with respect to, any shares of the Series B Preferred or any
other classes or series of equity securities of the
Corporation other than Junior Stock, then the Corporation
may not (A) declare, pay or set apart for payment any
dividends on any shares of Junior Stock, or (B) make any
payment on account of, or set apart payment for, the
purchase or other acquisition, redemption, retirement or
other requirement of, or with respect to, any sinking or
other similar fund or agreement for the purchase or other
acquisition, redemption, retirement or other requirement of,
or with respect to, any shares of Junior Stock or any
warrants, rights, calls or options exercisable or
exchangeable for or convertible into Junior Stock, other
than with respect to any rights that are now or in the
future may be issued and outstanding under or pursuant to
the Shareholder Protection Rights Agreement dated as of
December 4, 1989 between the Corporation and First Chicago
Trust Company of New York as Rights Agent, as it may be
amended in any respect or extended from time to time or
replaced by a new shareholders' rights plan of any scope or
nature (provided that in any amended or extended plan or in
any replacement plan any redemption of rights feature
permits only nominal redemption payments) (the "Rights
Agreement"), or (C) make any distribution in respect of any
shares of Junior Stock or any warrants, rights, calls or
options exercisable or exchangeable for or convertible into
Junior Stock, whether directly or indirectly, and whether in
cash, obligations, or securities of the Corporation or other
property, other than dividends or distributions of Junior
Stock which is neither convertible into nor exchangeable or
exercisable for any securities of the Corporation other than
Junior Stock or rights, warrants, options or calls
exercisable or exchangeable for or convertible into Junior
Stock or (D) permit any corporation or other entity
controlled directly or indirectly by the Corporation to
purchase or otherwise acquire or redeem any shares of Junior
Stock or any warrants, rights, calls or options exercisable
or exchangeable for or convertible into shares of Junior
Stock.
(e) Dividends in arrears with respect to the
outstanding shares of Series B Preferred may be declared and
paid or set apart for payment at any time and from time to
time, without reference to any regular Dividend Payment
Date, to the holder or holders of record as they appear on
the stock books of the Corporation at the close of business
on the Record Date established with respect to such payment
in arrears. If there shall be outstanding shares of Parity
Stock, and if the payment of dividends on any shares of the
Series B Preferred or the Parity Stock is in arrears, the
Corporation, in making any dividend payment on account of
any shares of the Series B Preferred or Parity Stock, shall
make such payment ratably upon all outstanding shares of the
Series B Preferred and Parity Stock in proportion to the
respective amounts of accumulated dividends in arrears upon
such shares of the Series B Preferred and Parity Stock to
the date of such dividend payment. The Holder or holders of
Series B Preferred shall not be entitled to any dividends,
whether payable in cash, obligations or securities of the
Corporation or other property, in excess of the accumulated
dividends
<PAGE>
on shares of Series B Preferred. No interest, or sum of
money in lieu of interest, shall be payable in respect of
any dividend or other payment or payments which may be in
arrears with respect to the Series B Preferred. All
dividends paid with respect to the Series B Preferred shall
be paid pro rata to the holders entitled thereto.
(f) Subject to the foregoing provisions hereof and
applicable law, the Board of Directors (i) may declare and
the Corporation may pay or set apart for payment dividends
on any Junior Stock or Parity Stock, (ii) may make any
payment on account of or set apart payment for a sinking
fund or other similar fund or agreement for the purchase or
other acquisition, redemption, retirement or other
requirement of, or with respect to, any Junior Stock or
Parity Stock or any warrants, rights, calls or options
exercisable or exchangeable for or convertible into any
Junior Stock or Parity Stock, (iii) may make any
distribution in respect to any Junior Stock or Parity Stock
or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into any Junior Stock or
Parity Stock, whether directly or indirectly, and whether in
cash, obligations or securities of the Corporation or other
property and (iv) may purchase or otherwise acquire, redeem
or retire any Junior Stock or Parity Stock or any warrants,
rights, calls or options exercisable or exchangeable for or
convertible into any Junior Stock or Parity Stock, and the
holder or holders of the Series B Preferred shall not be
entitled to share therein.
4. Voting Rights. The holder or holders of Series B
Preferred shall have no right to vote for any purpose,
except as required by applicable law and except as provided
in this Section 4.
(a) So long as any shares of Series B Preferred remain
outstanding, the affirmative vote of the holder or holders
of at least a majority (or such greater number as required
by applicable law) of the votes entitled to be cast with
respect to the then outstanding Series B Preferred, voting
separately as one class, at a meeting duly held for that
purpose, shall be necessary to repeal, amend or otherwise
change any of the provisions of the articles of
incorporation of the Corporation in any manner which
materially and adversely affects the rights or preferences
of the Series B Preferred. For purposes of the preceding
sentence, the increase (including the creation or
authorization) or decrease in the amount of authorized
capital stock of any class or series (excluding the Series B
Preferred) shall not be deemed to be an amendment which
materially and adversely affects the rights or preferences
of the Series B Preferred.
(b) The holder or holders of Series B Preferred shall
be entitled to vote on all matters submitted to a vote of
the holders of Common Stock, voting together with the
holders of Common Stock as if one class. Each share of
Series B Preferred in such case shall be entitled to a
number of votes equal to the number of shares of Common
Stock into which such share of Series B Preferred could have
been converted on the
<PAGE>
record date for determining the holders of Common Stock
entitled to vote on a particular matter.
5. Optional Redemption. (a) The Series B Preferred
shall be redeemable, in whole or in part at any time and
from time to time, to the extent permitted by applicable
law, at the option of the Corporation, (i) on or before
December 31, 1994, if (A) there is a change in any statute,
rule or regulation of the United States of America which has
the effect of limiting or making unavailable to the
Corporation all or any of the tax deductions for amounts
paid (including dividends) on the Series B Preferred when
such amounts are used as provided under Section 404(k)(2) of
the Internal Revenue Code of 1986, as amended and in effect
on the date shares of Series B Preferred are initially
issued, or (B) the Plan is not initially determined by the
Internal Revenue Service to be qualified within the meaning
of 401(a) and 4975(e)(7) of the Internal Revenue Code of
1986, as amended, or (C) the Plan is terminated by the Board
of Directors or otherwise, at the greater of (l) $144.30 per
share plus accumulated and unpaid dividends, without
interest, to and excluding the date fixed for redemption, or
(2) the Fair Market Value of the Series B Preferred
redeemed, or (ii) after December 31, 1994, at the following
redemption prices per share if redeemed during the twelve
(12)-month period ending on and including December 31 in
each of the following years:
Redemption Price
Year per Share
---- ----------------
1995 $149.52
1996 148.22
1997 146.92
1998 145.62
1999 and thereafter 144.30
plus accumulated and unpaid dividends, without interest, to
and excluding the date fixed for redemption.
(b) Payment of the redemption price shall be made by
the Corporation in cash or shares of Common Stock, or a
combination thereof, as permitted by paragraph (d) of this
Section 5. On and after the date fixed for redemption,
dividends on shares of Series B Preferred called for
redemption shall cease to accrue, such shares shall no
longer be deemed to be outstanding and all rights in respect
of such shares shall cease, except the right to receive the
redemption price.
(c) Unless otherwise required by law, notice of
redemption shall be sent to the holder or holders of Series
B Preferred at the address shown on the books of the
Corporation by first class mail, postage prepaid, mailed not
less than twenty (20) days nor more than sixty (60) days
prior to the redemption date. Each such notice shall state:
(i) the redemption date; (ii) the total number of shares of
the Series B Preferred to be redeemed and, if fewer than all
the shares are to be redeemed, the number of such shares to
be redeemed;
<PAGE>
(iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for
payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue from and after
such redemption date; and (vi) the conversion rights of the
shares to be redeemed, the period within which conversion
rights may be exercised, and the then current Conversion
Price and number of shares of Common Stock issuable upon
conversion of a share of Series B Preferred at the time.
Upon surrender of the certificates for any shares so called
for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors
shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the date fixed for
redemption and at the redemption price.
(d) The Corporation, at its option, may make payment of
the redemption price required upon redemption of shares of
Series B Preferred in cash or in shares of Common Stock, or
in a combination of such shares and cash, any such shares to
be valued for such purpose at the average Current Market
Price for the five (5) consecutive trading days ending on
the trading day next preceding the date of redemption.
6. Other Redemption Rights. Shares of Series B
Preferred shall be redeemed by the Corporation at the option
of the holder at any time and from time to time, to the
extent permitted by applicable law, upon notice to the
Corporation accompanied by the properly endorsed certificate
or certificates given not less than five (5) Business Days
prior to the date fixed by the holder in such notice for
such redemption, when and to the extent necessary (a) for
such holder to provide for distributions required to be made
under The St. Paul Companies, Inc. Savings Plus Preferred
Stock Ownership Plan and Trust, an employee stock ownership
plan and trust within the meaning of 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Plan and
Trust"), as the same may be amended, or any successor plans,
or (b) for such holder to make payment of principal or
interest due and payable (whether as scheduled or upon
acceleration) on the 9.40% Note dated January 24, 1990, due
January 31, 2005 made by Norwest Bank Minnesota, National
Association, not individually but solely as Trustee for the
Plan and Trust, payable to the order of St. Paul Fire and
Marine Insurance Company or registered assigns, in the
principal amount of One Hundred Fifty Million Dollars
($150,000,000) or other indebtedness of the Plan and Trust
or if funds otherwise available are not adequate to make a
required payment pursuant to such Note or other
indebtedness, in each case at a redemption price of the
greater of (l) $144.30 per share plus accumulated and unpaid
dividends, without interest, to and excluding the date fixed
for redemption, or (2) the Fair Market Value of the Series B
Preferred redeemed. Upon surrender of the shares to be
redeemed, such shares shall be redeemed by the Corporation
on the date fixed for redemption and at the applicable
redemption price and such price shall be paid within five
(5) Business Days after such date of redemption, without
interest. The terms and provisions of Sections
<PAGE>
5(b) and 5(d) are applicable to any redemption under this
Section 6.
7. Liquidation Preference. In the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the holder or holders of outstanding
shares of Series B Preferred shall be entitled to receive
out of the assets of the Corporation available for
distribution to shareholders, before any distribution of
assets shall be made to the holders of shares of Junior
Stock, an amount equal to One Hundred Dollars ($100.00) per
share. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the amounts
payable with respect to the Series B Preferred and any
Parity Stock are not paid in full, the holder or holders of
the Series B Preferred and of such Parity Stock shall share
ratably in any such distribution of assets of the
Corporation in proportion to the full respective
preferential amounts to which they are entitled. After
payment to the holder or holders of the Series B Preferred
of the full preferential amount provided for in this Section
7 and after the payment of any other preferential amounts to
the holder or holders of other equity securities of the
Corporation, the holder or holders of the Series B Preferred
shall be entitled to share in distributions of any remaining
assets with the holders of Common Stock, pro-rata on an as-
if-converted basis, to the extent of $44.30 per share plus
accumulated and unpaid dividends, without interest, to and
excluding the date fixed for such distribution of assets.
Written notice of any liquidation, dissolution or winding up
of the Corporation shall be given to the holder or holders
of Series B Preferred not less than twenty (20) days prior
to the payment date. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, securities or other
consideration) of all or any part of the property or assets
of the Corporation, nor the consolidation or merger or other
business combination of the Corporation with or into any
other corporation or corporations, shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, unless such voluntary sale,
conveyance, exchange or transfer shall be in connection with
a plan of liquidation, dissolution or winding up of the
Corporation.
8. Conversion Rights. (a) The holder of any Series B
Preferred shall have the right, at the holder's option, at
any time and from time to time, to convert any or all of
such shares into the number of shares of Common Stock of the
Corporation determined by dividing One Hundred Forty-four
and 30/100 Dollars ($144.30) for each share of Series B
Preferred to be converted by the then effective Conversion
Price per share of Common Stock, except that if any shares
of Series B Preferred are called for redemption by the
Corporation or submitted for redemption by the holder
thereof, according to the terms and provisions of this
Resolution, the conversion rights pertaining to such shares
shall terminate at the close of business on the date fixed
for redemption (unless the Corporation defaults in the
payment of the applicable redemption price). No fractional
shares of Common Stock shall be issued
<PAGE>
upon conversion of Series B Preferred, but if such
conversion results in a fraction, an amount shall be paid in
cash by the Corporation to the converting holder equal to
same fraction of the Current Market Price of the Common
Stock on the effective date of the conversion.
(b) The initial conversion price, which is Seventy-two
and 15/100 Dollars ($72.15) per share of Common Stock, shall
be subject to appropriate adjustment from time to time as
follows and such initial conversion price or the latest
adjusted conversion price is referred to in this Resolution
as the "Conversion Price":
(i) In case the Corporation shall, at any time or from
time to time while any of the shares of the Series B
Preferred is outstanding (A) pay a dividend in shares of
Common Stock, (B) subdivide outstanding shares of Common
Stock into a larger number of shares or (C) combine
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to
such action shall be adjusted so that the holder of any
shares of the Series B Preferred thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Common Stock of the Corporation which such holder would
have owned or have been entitled to receive immediately
following such action had such shares of the Series B
Preferred been converted immediately prior thereto. An
adjustment made pursuant to this Section 8(b)(i) shall
become effective retroactively to immediately after the
record date for determination of the shareholders entitled
to receive the dividend in the case of a dividend and shall
become effective immediately after the effective date in the
case of a subdivision or combination.
(ii) In case the Corporation shall, at any time or from
time to time while any of the shares of the Series B
Preferred is outstanding, distribute or issue rights,
warrants, options or calls to all holders of shares of
Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into or
exercisable or exchangeable for Common Stock), at a per
share price less than the Current Market Price on the record
date referred to below, the Conversion Price shall be
adjusted so that it shall equal the Conversion Price
determined by multiplying the Conversion Price in effect
immediately prior to the record date of the distribution or
issuance of such rights, warrants, options or calls by a
fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on such record date plus
the number of shares which the aggregate offering price of
the total number of shares of Common Stock so offered would
purchase at such Current Market Price, and the denominator
of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of
additional shares of Common Stock offered for subscription
or purchase. For the purpose of this Section 8(b)(ii), the
distribution or issuance of rights, warrants, options or
calls to subscribe for or purchase securities convertible
into Common Stock shall be deemed to be
<PAGE>
the issuance of rights, warrants, options or calls to
purchase the shares of Common Stock into which such
securities are convertible at an aggregate offering price
equal to the aggregate offering price of such securities
plus the minimum aggregate amount (if any) payable upon
conversion of such securities into shares of Common Stock;
provided, however, that if all of the shares of Common Stock
subject to such rights, warrants, options or calls have not
been issued when such rights, warrants, options or calls
expire, then the Conversion Price shall promptly be
readjusted to the Conversion Price which would then be in
effect had the adjustment upon the distribution or issuance
of such rights, warrants, options or calls been made on the
basis of the actual number of shares of Common Stock issued
upon the exercise of such rights, warrants, options or
calls. An adjustment made pursuant to this Section 8(b)(ii)
shall become effective retroactively immediately after the
record date for the determination of shareholders entitled
to receive such rights, warrants, options or calls. This
Section 8(b)(ii) shall be inapplicable with respect to any
rights issued or to be issued pursuant to or governed by the
Rights Agreement.
(iii) In the event the Corporation shall, at any time
or from time to time while any of the shares of Series B
Preferred are outstanding, issue, sell or exchange shares of
Common Stock (other than pursuant to (a) any right or
warrant now or hereafter outstanding to purchase or acquire
shares of Common Stock (including as such a right or warrant
any security convertible into or exchangeable for shares of
Common Stock), (b) any rights issued or to be issued
pursuant to or governed by the Rights Agreement and (c) any
employee, officer or director incentive or benefit plan or
arrangement (including any employment, severance or
consulting agreement) of the Corporation or any subsidiary
of the Corporation heretofore or hereafter adopted) for a
consideration having a Fair Market Value, on the date of
such issuance, sale or exchange, less than the Fair Market
Value of such shares on the date of issuance, sale or
exchange, then, subject to the provisions of Sections
8(b)(v) and (vii), the Conversion Price shall be adjusted by
multiplying such Conversion Price by the fraction the
numerator of which shall be the sum of (x) the Fair Market
Value of all the shares of Common Stock outstanding on the
day immediately preceding the first public announcement of
such issuance, sale or exchange plus (y) the Fair Market
value of the consideration received by the Corporation in
respect of such issuance, sale or exchange of shares of
Common Stock, and the denominator of which shall be the
product of (a) the Fair Market Value of a share of Common
Stock on the day immediately preceding the first public
announcement of such issuance, sale or exchange multiplied
by (b) the sum of the number of shares of Common Stock
outstanding on such day plus the number of shares of Common
Stock so issued, sold or exchanged by the Corporation. In
the event the Corporation shall, at any time or from time to
time while any shares of Series B Preferred are outstanding,
issue, sell or exchange any right or warrant to purchase or
acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for
shares of Common Stock), other than any such issuance (a) to
holders of shares of Common Stock
<PAGE>
as a dividend or distribution (including by way of a
reclassification of shares or a recapitalization of the
Corporation), (b) pursuant to any employee, officer or
director incentive or benefit plan or arrangement (including
any employment, severance or consulting agreement) of the
Corporation or any subsidiary of the Corporation heretofore
or hereafter adopted, (c) of rights issued or to be issued
pursuant to or governed by the Rights Agreement and (d)
which is covered by the terms and provisions of Section
8(b)(ii) hereof, for a consideration having a Fair Market
Value, on the date of such issuance, sale or exchange, less
than the Non-Dilutive Amount, then, subject to the
provisions of Sections 8(b)(v) and (vii) hereof, the
Conversion Price shall be adjusted by multiplying such
Conversion Price by a fraction the numerator of which shall
be the sum of (I) the Fair Market Value of all the shares of
Common Stock outstanding on the day immediately preceding
the first public announcement of such issuance, sale or
exchange plus (II) the Fair Market Value of the
consideration received by the Corporation in respect of such
issuance, sale or exchange of such right or warrant plus
(III) the Fair Market Value at the time of such issuance of
the consideration which the Corporation would receive upon
exercise in full of all such rights or warrants, and the
denominator of which shall be the product of (x) the Fair
Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (y) the sum of the
number of shares of Common Stock outstanding on such day
plus the maximum number of shares of Common Stock which
could be acquired pursuant to such right or warrant at the
time of the issuance, sale or exchange of such right or
warrant (assuming shares of Common Stock could be acquired
pursuant to such right or warrant at such time).
(iv) In the event the Corporation shall, at any time or
from time to time while any of the shares of Series B
Preferred are outstanding, make an Extraordinary
Distribution in respect of the Common Stock, whether by
dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a
recapitalization or reclassification effected by a merger
or consolidation to which Section 8(c) hereof does not
apply) or effect a Pro Rata Repurchase of Common Stock, the
Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall,
subject to Sections 8(b)(v) and (vii) hereof, be adjusted by
multiplying such Conversion Price by the fraction the
numerator of which is the difference between (a) the product
of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro
Rata Repurchase multiplied by (y) the Fair Market Value of a
share of Common Stock on the day before the ex-dividend date
with respect to an Extraordinary Distribution which is paid
in cash and on the distribution date with respect to an
Extraordinary Distribution which is paid other than in cash,
or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any
Pro Rata Repurchase which is not a tender offer, as the case
may be, and
<PAGE>
(b) the Fair Market Value of the Extraordinary Distribution
or the aggregate purchase price of the Pro Rata Repurchase,
as the case may be, and the denominator of which shall be
the product of (x) the number of shares of Common Stock
outstanding immediately before such Extraordinary Dividend
or Pro Rata Repurchase minus, in the case of a Pro Rata
Repurchase, the number of shares of Common Stock repurchased
by the Corporation multiplied by (y) the Fair Market Value
of a share of Common Stock on the day before the ex-dividend
date with respect to an Extraordinary Distribution which is
paid in cash and on the distribution date with respect to an
Extraordinary Distribution which is paid other than in cash,
or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any
Pro Rata Repurchase which is not a tender offer, as the case
may be. The Corporation shall send each holder of Series B
Preferred (i) notice of its intent to make any dividend or
distribution and (ii) notice of any offer by the Corporation
to make a Pro Rata Repurchase, in each case at the same time
as, or as soon as practicable after, such offer is first
communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the
Common Stock is listed or admitted to trading) to holders of
Common Stock. Such notice shall indicate the intended record
date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer
for a Pro Rata Repurchase and the purchase price payable by
the Corporation pursuant to such offer, as well as the
Conversion Price and the number of shares of Common Stock
into which a share of Series B Preferred may be converted at
such time.
(v) If the Corporation shall make any dividend or
distribution on the Common Stock or issue any Common Stock,
other capital stock or other security of the Corporation or
any rights or warrants to purchase or acquire any such
security, which transaction does not result in an adjustment
to the Conversion Price pursuant to this Section 8, the
Board of Directors shall consider whether such action is of
such a nature that an adjustment to the Conversion Price
should equitably be made in respect of such transaction. If
in such case the Board of Directors determines that an
adjustment to the Conversion Price should be made, an
adjustment shall be made effective as of such date, as
determined by the Board of Directors (which adjustment shall
in no event adversely affect the rights or preferences of
the Series B Preferred as set forth herein). The
determination of the Board of Directors as to whether an
adjustment to the Conversion Price should be made pursuant
to the foregoing provisions of this Section 8(b)(v), and, if
so, as to what adjustment should be made and when, shall be
final and binding on the Corporation and all shareholders of
the Corporation.
(vi) In addition to the foregoing adjustments, the
Corporation may, but shall not be required to, make such
adjustments in the Conversion Price as it considers to be
advisable in order that any event treated for federal income
tax purposes as a dividend of stock or
<PAGE>
stock rights shall either not be taxable to the recipients
or shall be taxable to the recipients to the minimum extent
reasonable under the circumstances, as determined by the
Board of Directors in its sole discretion.
(vii) In no event shall an adjustment in the Conversion
Price be required unless such adjustment would result in an
increase or decrease of at least one percent (1%) in the
Conversion Price then in effect; provided, however, that any
such adjustments that are not made shall be carried forward
and taken into account in determining whether any subsequent
adjustment is required. In no event shall the Conversion
Price be adjusted to an amount less than any minimum
required by law. Except as set forth in this Section 8, the
Conversion Price shall not be adjusted for the issuance of
Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or carrying
the right or option to purchase or otherwise acquire the
foregoing, in exchange for cash, other property or services.
(viii) Whenever an adjustment in the Conversion Price
is required, the Corporation shall forthwith place on file
with its transfer agent (or if the Corporation performs the
functions of a transfer agent, with the corporate secretary)
a statement signed by its chief executive officer or a vice
president and by its secretary, assistant secretary or
treasurer, stating the adjusted Conversion Price determined
as provided herein. Such statements shall set forth in
reasonable detail such facts as shall be necessary to show
the reason and the manner of computing such adjustment. As
soon as practicable after the adjustment of the Conversion
Price, the Corporation shall mail a notice thereof to each
holder of shares of the Series B Preferred of such
adjustment.
(ix) In the event that at any time, as a result of an
adjustment made pursuant to this Section 8, the holder of
any shares of Series B Preferred hereafter surrendered for
conversion shall be entitled to receive any securities other
than shares of Common Stock, thereafter the amount of such
other securities so receivable upon conversion of any shares
of Series B Preferred shall be subject to adjustment from
time to time in a manner and on terms as nearly as
equivalent as practicable to the provisions with respect to
the Common Stock contained in this Section 8, and the
provisions of this Section 8 with respect to the Common
Stock shall apply on like terms to any such other
securities.
(c) In case of any consolidation or merger of the
Corporation with or into any other corporation (other than a
merger in which the Corporation is the surviving
corporation), or in case of any sale or transfer of
substantially all -the assets of the Corporation, or in case
of reclassification, capital reorganization or change of
outstanding shares of Common Stock (other than combinations
or subdivisions described in Section 8(b)(i) and other than
Extraordinary Distributions described in Section 8(b)(iv)),
there shall be no adjustment to the Conversion Price then in
effect, but appropriate provisions shall be
<PAGE>
made so that any holder of Series B Preferred shall be
entitled, after the occurrence (or, if applicable, the
record date) of any such event ("Transaction"), to receive
on conversion the consideration which the holder would have
received had the holder converted such holder's Series B
Preferred to Common Stock immediately prior to the
occurrence of the Transaction and had such holder, if
applicable, elected to receive the consideration in the form
and manner elected by the plurality of the electing holders
of Common Stock. In any such Transaction, effective
provisions shall be made to ensure that the holder or
holders of the Series B Preferred shall receive the
consideration that they are entitled to receive pursuant to
the provisions hereof, and in particular, as a condition to
any consolidation or merger in which the holders of
securities into which the Series B Preferred is then
convertible are entitled to receive equity securities of
another corporation, such other corporation shall expressly
assume the obligation to deliver, upon conversion of the
Series B Preferred, such equity securities as the holder or
holders of the Series B Preferred shall be entitled to
receive pursuant to the provisions hereof. Notwithstanding
the foregoing provisions of this Section 8(c), in the event
the consideration to be received pursuant to the provisions
hereof is not to be constituted solely of employer
securities within the meaning of 409(1) of the Internal
Revenue Code of 1986, as amended, or any successor
provisions of law, and of a cash payment in lieu of any
fractional securities, then the outstanding shares of Series
B Preferred shall be deemed converted by virtue of the
Transaction immediately prior to the consummation thereof
into the number and kind of securities into which such
shares of Series B Preferred could have been voluntarily
converted at such time and such securities shall be entitled
to participate fully in the Transaction as if such
securities had been outstanding on the appropriate record,
exchange or distribution date. In the event the Corporation
shall enter into any agreement providing for any
Transaction, then the Corporation shall as soon as
practicable thereafter (and in any event at least ten (10)
Business Days before consummation of the Transaction) give
notice of such agreement and the material terms thereof to
each holder of Series B Preferred and each such holder shall
have the right, to the extent permitted by applicable law,
to elect, by written notice to the Corporation, to receive,
upon consummation of the Transaction (if and when the
Transaction is consummated), from the Corporation or the
successor of the Corporation, in redemption of such Series B
Preferred, a cash payment per share equal to the amount
determined according to the following table, with the
redemption date to be deemed to be the same date that the
Transaction giving rise to the redemption election is
consummated:
<PAGE>
Transaction
Consummated in Year Redemption Price
Ending December 31 per Share
--------------------- ----------------
1990 $156.02
1991 154.72
1992 153.42
1993 152.12
1994 150.82
1995 149.52
1996 148.22
1997 146.92
1998 145.62
1999 and thereafter 144.30
plus accumulated and unpaid dividends, without interest, to
and excluding such deemed redemption date. No such notice of
redemption by the holder of Series B Preferred shall be
effective unless given to the Corporation prior to the close
of business at least two (2) Business Days prior to
consummation of the Transaction.
(d) The holder or holders of Series B Preferred as they
appear on the stock books of the Corporation at the close of
business on a dividend payment Record Date shall be entitled
to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
subsequent conversion thereof or the Corporation's default
on payment of the dividend due on such Dividend Payment
Date; provided, however, that the holder or holders of
Series B Preferred subject to redemption on a redemption
date after such Record Date and before such Dividend Payment
Date shall not be entitled under this provision to receive
such dividend on such Dividend Payment Date. However, shares
of Series B Preferred surrendered for conversion during the
period after any dividend payment Record Date and before the
corresponding Dividend Payment Date (except shares subject
to redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the dividend
payable on such shares on such Dividend Payment Date. The
holder or holders of Series B Preferred as they appear on
the stock books of the Corporation at the close of business
on a dividend payment Record Date who convert shares of
Series B Preferred on a Dividend Payment Date shall be
entitled to receive the dividend payable on such Series B
Preferred by the Corporation on such Dividend Payment Date,
and the converting holders need not include payment in the
amount of such dividend upon surrender of shares of Series B
Preferred for conversion. Except as provided above, the
Corporation shall make no payment or allowance for unpaid
dividends (whether or not accumulated and in arrears) on
converted shares or for dividends on the shares of Common
Stock issuable upon such conversion.
(e) Each conversion of shares of Series B Preferred
into shares of Common Stock shall be effected by the
surrender of the certificate or certificates representing
the shares to be converted, accompanied
<PAGE>
by instruments of transfer satisfactory to the Corporation
and sufficient to transfer such shares to the Corporation
free of any adverse claims (the "Converting Shares"), at the
principal executive office of the Corporation (or such other
office or agency of the Corporation as the Corporation may
designate by written notice to the holder or holders of
Series B Preferred) at any time during its respective usual
business hours, together with written notice by the holder
of such Converting Shares, stating that such holder desires
to convert the Converting Shares, or a stated number of the
shares represented by such certificate or certificates, into
such number of shares of Common Stock into which such shares
may be converted (the "Converted Shares"). Such notice shall
also state the name or names (with addresses and federal
taxpayer identification numbers) and denominations in which
the certificate or certificates for the Converted Shares are
to be issued, shall include instructions for the delivery
thereof and shall include such other information as the
Corporation or its agents may reasonably request. Promptly
after such surrender and the receipt of such written notice
and the receipt of any required transfer documents and
payments representing dividends as described above, the
Corporation shall issue and deliver in accordance with the
surrendering holder's instructions the certificate or
certificates evidencing the Converted Shares issuable upon
such conversion, and the Corporation will deliver to the
converting holder (without cost to the holder) a certificate
(which shall contain such legends as were set forth on the
surrendered certificate or certificates) representing any
shares of Series B Preferred which were represented by the
certificate or certificates that were delivered to the
Corporation in connection with such conversion, but which
were not converted.
(f) Such conversion, to the extent permitted by
applicable law, shall be deemed to have been effected at the
close of business on the date on which such certificate or
certificates shall have been surrendered and such notice and
any required transfer documents and payments representing
dividends shall have been received by the Corporation, and
at such time the rights of the holder of the Converting
Shares as such holder shall cease, and the person or persons
in whose name or names the certificate or certificates for
the Converted Shares are to be issued upon such conversion
shall be deemed to have become the holder or holders of
record of the Converted Shares. Upon issuance of shares in
accordance herewith, such Converted Shares shall be deemed
to be fully paid and nonassessable. From and after the
effectiveness of any such conversion, shares of the Series B
Preferred so converted shall, upon compliance with
applicable law, be restored to the status of authorized but
unissued undesignated shares, until such shares are once
more designated as part of a particular series by the Board
of Directors.
(g) Notwithstanding any provision herein to the
contrary, the Corporation shall not be required to record
the conversion of, and no holder of shares shall be entitled
to convert, shares of Series B Preferred into shares of
Common Stock unless such conversion is
<PAGE>
permitted under applicable law; provided, however, that the
Corporation shall be entitled to rely without independent
verification upon the representation of any holder that the
conversion of shares by such holder is permitted under
applicable law, and in no event shall the Corporation be
liable to any such holder or any third party arising from
any such conversion whether or not permitted by applicable
law.
(h) The Corporation will pay any and all stamp,
transfer or other similar taxes that may be payable in
respect of the issuance or delivery of Common Stock received
upon conversion of the shares of Series B Preferred, but
shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issuance
or delivery of Common Stock in a name other than that in
which such shares of Series B Preferred were registered and
no such issuance or delivery shall be made unless and until
the person requesting such conversion shall have paid to the
Corporation the amount of any and all such taxes or shall
have established to the satisfaction of the Corporation that
such taxes have been paid in full.
(i) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its
authorized but unissued stock, for the purpose of effecting
the conversion of the shares of the Series B Preferred, such
number of its duly authorized shares of Common Stock or
other securities as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the
Series B Preferred.
(j) Whenever the Corporation shall issue shares of Common
Stock upon conversion of shares of Series B Preferred as
contemplated by this Section 8, the Corporation shall issue
together with each such share of Common Stock one Right (as
defined in the Rights Agreement) pursuant to the terms and
provisions of the Rights Agreement.
9. Transfer Restriction. Shares of Series B Preferred
shall be issued only to the Plan and Trust and the
certificate or certificates representing such shares so
issued may be registered in the name of the Plan and Trust
or in the name of one or more Trustees acting on behalf of
the Plan and Trust (or the nominee name of any such
trustee). In the event the Plan and Trust, acting through
any such trustee or otherwise, should transfer beneficial or
record ownership of one or more shares of Series B Preferred
to any person or entity, the shares of Series B Preferred
so transferred, upon such transfer and without any further
action by the Corporation or the Plan and Trust or anyone
else, shall be automatically converted, as of the time of
such transfer, into shares of Common Stock on the terms
otherwise provided for the voluntary conversion of shares of
Series B Preferred into shares of Common Stock pursuant to
Section 8 hereof and no transferee of such share or shares
shall thereafter have or receive any of the rights and
preferences of the shares of Series B Preferred so
converted. Certificates representing shares of Series B
Preferred shall be legended to
<PAGE>
reflect the aforesaid restriction on transfer. Shares of
Series B Preferred may also be subject to restrictions on
transfer which relate to the securities laws of the United
States of America or any state or other jurisdiction
thereof.
10. No other Rights. The shares of Series B Preferred
shall not have any rights or preferences, except as set
forth herein or as otherwise required by applicable law.
11. Rules and Regulations. The Board of Directors shall
have the right and authority from time to time to prescribe
rules and regulations as it may determine to be necessary or
advisable in its sole discretion for the administration of
the Series B Preferred in accordance with the foregoing
provisions and applicable law.
12 . Definitions . For purposes of this Resolution, the
following definitions shall apply:
"Adjustment Period" shall mean the period of five (5)
consecutive trading days preceding the date as of which the
Fair Market Value of a security is to be determined.
"Business Day" shall mean each day that is not a Saturday,
Sunday or a day on which state or federally chartered
banking institutions in New York, New York are not required
to be open.
"Current Market Price" of publicly traded shares of Common
Stock or any other class of capital stock or other security
of the Corporation or any other issuer for any day shall
mean the last reported sales price, regular way, or, in the
event that no sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange
Composite Tape or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such
security is listed or admitted to trading or, if not listed
or admitted to trading on any national securities exchange,
on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or, if such security is not quoted on such
National Market System, the average of the closing bid and
asked prices on each such day in the over-the-counter market
as reported by NASDAQ or, if bid and asked prices for such
security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for
such day as furnished by any New York Stock Exchange member
firm regularly making a market in such security selected for
such purpose by the Board of Directors or a committee
thereof.
"Extraordinary Distribution" shall mean any dividend or
other distribution to holders of Common Stock (effected
while any of the shares of Series B Preferred are
outstanding) (i) of cash (other than a regularly scheduled
quarterly dividend not exceeding 135% of the average
quarterly dividend for the four quarters immediately
preceding such dividend), where the aggregate amount of such
cash dividend or
<PAGE>
distribution together with the amount of all cash dividends
and distributions made during the preceding period of twelve
(12) months, when combined with the aggregate amount of all
Pro Rata Repurchases (for this purpose, including only that
portion of the aggregate purchase price of such Pro Rata
Repurchase which is in excess of the Fair Market Value of
the Common Stock repurchased as determined on the applicable
expiration date (including all extensions thereof) of any
tender offer or exchange offer which is a Pro Rata
Repurchase, or the date of purchase with respect to any
other Pro Rata Repurchase which is not a tender offer or
exchange offer made during such period), exceeds ten percent
(10%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the day before the ex-dividend
date with respect to such Extraordinary Distribution which
is paid in cash and on the distribution date with respect to
an Extraordinary Distribution which is paid other than in
cash, and/or (ii) of any shares of capital stock of the
Corporation (other than shares of Common Stock), other
securities of the Corporation (other than securities of the
type referred to in Section 8(b)(ii) or (iii) hereof),
evidences of indebtedness of the Corporation or any other
person or any other property (including shares of any
subsidiary of the Corporation) or any combination thereof.
The Fair Market Value of an Extraordinary Distribution for
purposes of Section 8(b)(iv) hereof shall be equal to the
sum of the Fair Market Value of such Extraordinary
Distribution plus the amount of any cash dividends (other
than regularly scheduled dividends not exceeding 135% of the
aggregate quarterly dividends for the preceding period of
twelve (12) months) which are not Extraordinary
Distributions made during such 12-month period and not
previously included in the calculation of an adjustment
pursuant to Section 8(b)(iv) hereof.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the
Corporation or any other issue which are publicly traded,
the average of the Current Market Prices of such shares or
securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded
or of any other property shall mean the fair value thereof
as determined by an independent investment banking or
appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board
of Directors or a committee thereof, or, if no such
investment banking or appraisal firm is in the good faith
judgment of the Board of Directors or such committee
available to make such determination, as determined in good
faith by the Board of Directors or such committee. The Fair
Market Value of the Series B Preferred for purposes of
Section 5(a) hereof and for purposes of Section 6 hereof
shall be as determined by an independent appraiser,
appointed by the Corporation in accordance with the
provisions of the Plan and Trust, as of the most recent
Valuation Date, as defined in the Plan and Trust.
<PAGE>
"Non-Dilutive Amount" in respect of an issuance, sale or
exchange by the Corporation of any right or warrant to
purchase or acquire shares of Common Stock (including any
security convertible into or exchangeable for shares of
Common Stock) shall mean the difference between (i) the
product of the Fair Market Value of a share of Common Stock
on the day preceding the first public announcement of such
issuance, sale or exchange multiplied by the maximum number
of shares of Common Stock which could be acquired on such
date upon the exercise in full of such rights and warrants
(including upon the conversion or exchange of all such
convertible or exchangeable securities), whether or not
exercisable (or convertible or exchangeable) at such date,
and (ii) the aggregate amount payable pursuant to such
right or warrant to purchase or acquire such maximum number
of shares of Common Stock; provided, however, that in no
event shall the Non-Dilutive Amount be less than zero. For
purposes of the foregoing sentence, in the case of a
security convertible into or exchangeable for shares of
Common Stock, the amount payable pursuant to a right or
warrant to purchase or acquire shares of Common Stock shall
be the Fair Market Value of such security on the date of
the issuance, sale or exchange of such security by the
Corporation.
"Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or any subsidiary thereof,
whether for cash, shares of capital stock of the
Corporation, other securities of the Corporation, evidences
of indebtedness of the Corporation or any other person or
any other property (including shares of a subsidiary of the
Corporation), or any combination thereof, effected while
any of the shares of Series B Preferred are outstanding,
pursuant to any tender offer or exchange offer subject to
Section 13(e) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor provision of
law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided,
however, that no purchase of shares by the Corporation or
any subsidiary thereof made in open market transactions
shall be deemed a Pro Rata Repurchase. For purposes of this
definition, shares shall be deemed to have been purchased
by the Corporation or any subsidiary thereof "in open
market transactions" if they have been purchased
substantially in accordance with the requirements of Rule
10b-18, as in effect under the Exchange Act, on the date
shares of Series B Preferred are initially issued by the
Corporation or on such other terms and conditions as the
Board of Directors or a committee thereof shall have
determined are reasonably designed to prevent such
purchases from having a material effect on the trading
market for the Common Stock.
<PAGE>
CERTIFICATE OF DESIGNATION
OF
THE ST. PAUL COMPANIES, INC.
Series C Cumulative Convertible Preferred Stock
THE UNDERSIGNED, Bruce A. Backberg, the Vice
President and Corporate Secretary of The St. Paul Companies,
Inc. (the "Corporation"), does hereby certify that pursuant
to Minnesota Statutes Section 302A.401, Subd.3(a),
resolutions as hereinafter set forth were adopted by written
consent executed by a majority of the Directors as of May 9,
1995.
RESOLVED, that there is hereby established, out of the
presently available undesignated shares of the
Corporation, a series of Preferred Stock of the
Corporation designated and having such terms and
relative rights, preferences and privileges as set
forth in Exhibit A attached hereto (the "Series C
Preferred Stock").
RESOLVED FURTHER, that the Vice President and Corporate
Secretary or any Assistant Secretary of the Corporation
shall prepare a Certificate of Designation describing
the Series C Preferred Stock and cause the same to be
filed with the Secretary of State of the State of
Minnesota.
IN WITNESS WHEREOF, the undersigned has signed
this Certificate of Designation this 16th day of May, 1995.
/s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President and Corporate
Secretary
<PAGE>
EXHIBIT A
SECTION 1. Designation and Amount; Special
Purpose; Restriction on Senior Series.
(A) The shares of this series of Preferred Stock
shall be designated as "Series C Cumulative Convertible
Preferred Stock" ("Series C Preferred Stock") and the number
of shares constituting such series shall be 41,400, without
par value.
(B) Shares of Series C Preferred Stock shall be
issued by the conversion and exchange agent (the "Conversion
Agent") for the Series C Preferred Stock only upon the
exchange of 6% Convertible Subordinated Debentures due 2025
of the Corporation (the "Subordinated Debentures"), and
accrued interest thereon following a valid exchange election
(an "Exchange Election") by the holders of a majority of the
aggregate liquidation preference of the outstanding 6%
Convertible Monthly Income Preferred Securities, liquidation
preference $50 per security (the "St. Paul Capital Preferred
Securities"), of St. Paul Capital L.L.C., a Delaware limited
liability company ("St. Paul Capital"), to cause the
St. Paul Capital Preferred Securities then outstanding to be
exchanged for depositary shares, each representing a one
hundredth (1/100th) interest in a share of Series C
Preferred Stock (the "Depositary Shares"), issued pursuant
to the Deposit Agreement, dated as of May 16, 1995, among
the Corporation, The Chase Manhattan Bank (National
Association), as Depositary, and the holders from time to
time of the receipts described therein (the "Deposit
Agreement"), in the manner prescribed in the Amended and
Restated Limited Liability Company Agreement of St. Paul
Capital, dated as of May 16, 1995 (the "L.L.C. Agreement").
(C) So long as any St. Paul Capital Preferred
Securities are outstanding, the Corporation shall not
authorize or issue any other class or series of capital
stock ranking senior as to the payment of dividends or
amounts upon liquidation, dissolution or winding-up to the
Series C Preferred Stock without the approval of the holders
of not less than 66% of the aggregate liquidation preference
of the St. Paul Capital Preferred Securities then
outstanding.
SECTION 2. Dividends and Distributions.
(A)(1) The holders of shares of Series C Pre-
ferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors of the Corporation out of
funds legally available therefor, cumulative cash dividends
in an amount per share per annum equal to $300 (equivalent
to a rate per annum of 6% of the stated liquidation
preference of $5,000 per share of Series C Preferred Stock),
calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and for any period shorter than a
full monthly dividend period, dividends will be computed on
the basis of the actual number of days elapsed in such
period, and payable in United States dollars monthly in
arrears on the last day of each calendar month of each year.
<PAGE>
(2) Dividends, when, as and if declared by the
Board of Directors of the Corporation out of funds legally
available therefor, shall be paid on the last day of each
month. Such dividends will accrue and be cumulative whether
or not they have been earned or declared and whether or not
there are funds of the Corporation legally available for the
payment of dividends. Dividends on the Series C Preferred
Stock shall be cumulative from the date of the Exchange
Election. Accumulated but unpaid dividends, if any
(including arrearages at the rate of 6% per annum compounded
monthly), on the St. Paul Capital Preferred Securities on
the date of the Exchange Election shall constitute, and be
treated as, accumulated and unpaid dividends on the Series C
Preferred Stock as of the date of the issuance thereof. The
record date for each dividend payment date shall be the day
immediately preceding such dividend payment date, provided
that such day is a day on which banking institutions in The
City of New York are not authorized or obligated by law or
executive order to be closed (a "Business Day"). In the
event that any date on which dividends are payable on the
Series C Preferred Stock is not a Business Day, then payment
of the dividend payable on such date will be made on the
next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay)
except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and
effect as if made on such date.
(B) In the event that full cumulative dividends
on the Series C Preferred Stock have not been declared and
paid or set apart for payment when due, then the Corporation
shall not, and shall not permit any direct or indirect
majority-owned subsidiary of the Corporation (except any of
The John Nuveen Company, a Delaware corporation, and its
consolidated subsidiaries) to, declare or pay any dividend
on, or redeem, purchase, acquire for value or make a
liquidation payment with respect to, any Pari Passu Stock or
Junior Stock (each as defined herein) (other than as a
result of a reclassification of Pari Passu Stock or Junior
Stock or the exchange or conversion of one class or series
of Pari Passu Stock or Junior Stock for another class or
series of Pari Passu Stock or Junior Stock, respectively),
or make any guarantee payments with respect to the foregoing
(other than payments under the Guarantee Agreement dated as
of May 16, 1995 of the Corporation in favor of the holders
of St. Paul Capital Preferred Securities with respect to
such securities or dividends or guarantee payments to the
Corporation).
When dividends are not paid in full, all dividends
declared upon the Series C Preferred Stock and all dividends
declared upon any Pari Passu Stock shall be paid ratably in
proportion to the respective amounts of dividends
accumulated and unpaid on the Series C Preferred Stock and
accumulated and unpaid on such Pari Passu Stock. "Pari
Passu Stock" means the Series B Convertible Preferred Stock,
liquidation preference $100 per share (the "Senior B
Preferred Stock") of the Corporation, together with any
preference stock or preferred stock of
the Corporation, or any guarantee now or hereafter entered
into by the Corporation in respect of any preferred or
preference stock of any affiliate of the Corporation,
ranking, in such case, as to the payment
<PAGE>
of dividends and amounts upon liquidation, dissolution and
winding-up on a parity with the Series C Preferred Stock.
"Junior Stock" means Common Stock, the Series A Junior
Participating Preferred Stock, without par value, of the
Corporation, and any other class or series of capital stock
of the Corporation or any of its affiliates which by its
express terms ranks junior in the payment of dividends or
amounts upon liquidation, dissolution or winding-up to the
Series C Preferred Stock.
SECTION 3. Voting Rights.
(A) In the event that full cumulative dividends
on the Series C Preferred Stock have not been paid for
18 monthly dividend periods (including for this purpose any
arrearage with respect to St. Paul Capital Preferred
Securities), the number of directors of the Corporation
constituting the entire Board of Directors shall be
increased by two (2) persons and the holders of the Series C
Preferred Stock shall have the right to elect two persons to
fill such positions at any regular meeting of shareholders
or special meeting held in place thereof, or at a special
meeting of the holders of the Series C Preferred Stock
called as hereinafter provided. Whenever all arrearages of
dividends on the Series C Preferred Stock then outstanding
shall have been paid and dividends thereon for the current
monthly period shall have been paid or declared and set
apart for payment, then the right of the holders of the
Series C Preferred Stock to elect such additional two (2)
directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case
of any similar future arrearages in dividends), and the
terms of office of all persons elected as directors by the
holders of the Series C Preferred Stock shall forthwith
terminate and the number of directors of the Corporation
shall be reduced accordingly. At any time after such voting
power shall have been so vested in the holders of shares of
the Series C Preferred Stock, the Secretary of the
Corporation may, and upon the written request for a special
meeting signed by the holders of at least 10% of all
outstanding Series C Preferred Stock (addressed to the
Secretary at the principal office of the Corporation) shall,
call a special meeting of the holders of the Series C
Preferred Stock for the election of the two (2) directors to
be elected by them as herein provided; such call to be made
by notice similar to that provided for in the by-laws for a
special meeting of the shareholders or as required by law.
If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of
Series C Preferred Stock may call such meeting, upon the
notice above provided, and for that purpose shall have
access to the stock books and records of the Corporation.
The directors elected at any such special meeting shall hold
office until the next regular meeting of the shareholders or
special meeting held in place thereof if such office shall
not have previously terminated as above provided. In case
any vacancy shall occur among the directors elected by the
holders of the Series C Preferred Stock, a successor shall
be elected by the Board of Directors to serve until the next
regular meeting of the shareholders or special meeting held
in place thereof upon the nomination of the then remaining
director elected by the holders of the Series C Preferred
Stock or the successor of such remaining director.
<PAGE>
(B) Except as otherwise required by law or set
forth herein, holders of Series C Preferred Stock shall have
no voting rights and their consent shall not be required for
the taking of any corporate action. So long as any shares
of Series C Preferred Stock are outstanding, the consent of
the holders of not less than 66% of the outstanding shares
of Series C Preferred Stock, given in person or by proxy
either at a regular meeting or at a special meeting called
for that purpose, at which the holders of Series C Preferred
Stock shall vote separately as a series, shall be necessary
for effecting, validating or authorizing any one or more of
the following:
(1) The amendment, alteration or repeal of any of
the provisions of the Restated Articles of Incorpora-
tion, as amended, of the Corporation, or any amendment
thereto or any other certificate filed pursuant to law
(including any such amendment, alteration or repeal
effected by any merger or consolidation to which the
Corporation is a party) that would adversely affect any
of the rights, powers or preferences of outstanding
shares of Series C Preferred Stock; provided, however,
that any amendment or amendments to the provisions of
the Restated Articles of Incorporation, as amended, so
as to authorize or create, or to increase the
authorized amount of, any Pari Passu Stock or any
Junior Stock shall not be deemed to adversely affect
the voting powers, rights or preferences of the holders
of the Series C Preferred Stock;
(2) The creation of any shares of any class or
series or any security convertible into shares of any
class or series of capital stock ranking prior to the
Series C Preferred Stock in the distribution of assets
on any liquidation, dissolution or winding-up of the
Corporation or in the payment of dividends; or
<PAGE>
(3) Any merger or consolidation with or into, or
any sale, transfer, exchange or lease of all or substan-
tially all of the assets of the Corporation to, any
other corporation, in either case that would adversely
affect any of the rights, powers or preferences of
outstanding shares of Series C Preferred Stock;
provided, that so long as the convertible subordinated
debentures of the Corporation issued pursuant to the
Indenture, dated as of May 16, 1995, among the
Corporation, St. Paul Capital L.L.C. ("St. Paul
Capital") and The Chase Manhattan Bank (National
Association), as Trustee, are exchangeable for shares
of Series C Preferred Stock, that the consent of the
holders of not less than 66_% of the aggregate
liquidation preference of the 6% Convertible Monthly
Income Preferred Securities of St. Paul Capital, given
in person or by proxy at a meeting called for that
purpose, shall be necessary for effecting validity or
authorizing any one or more of the foregoing actions.
(C) For purposes of this Section 3, while
St. Paul Capital Preferred Securities are outstanding and
owned by any entity other than the Corporation, St. Paul
Capital, or their subsidiaries or affiliates, any St. Paul
Capital Preferred Securities owned by the Corporation,
St. Paul Capital or their subsidiaries or affiliates shall
not have the voting rights referred to in this Section.
SECTION 4. Redemption.
(A) If at any time following the Conversion
Expiration Date (as defined below), less than five percent
(5%) of the shares of Series C Preferred Stock remain
outstanding, such shares of Series C Preferred Stock are
redeemable, at the option of the Corporation, in whole but
not in part, from time to time, at a redemption price equal
to the liquidation preference, plus accumulated and unpaid
dividends, whether or not earned or declared, to the date of
redemption (the "Redemption Price").
(B) Unless otherwise required by law, notice of
redemption will be sent to the holders of Series C Preferred
Stock by first-class mail, postage prepaid, mailed not less
than thirty (30), nor more than sixty (60) days prior to the
redemption date. Each such notice shall state: (i) the
redemption date; (ii) the Redemption Price; (iii) the place
or places where receipts for Depositary Shares representing
such shares are to be surrendered for payment of the
Redemption Price; and (iv) that dividends on the shares to
be redeemed will cease to accrue on such redemption date.
Upon surrender of the receipts for Depositary Shares
representing the shares so called for redemption (properly
endorsed or assigned for transfer, if the Board of Directors
of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation on
the date fixed for redemption at the Redemption Price.
<PAGE>
SECTION 5. Liquidation, Dissolution or
Winding-Up.
(A) Upon any voluntary or involuntary liquida-
tion, dissolution, winding-up or termination of the
Corporation, the holders of Series C Preferred Stock at the
time outstanding will be entitled to receive out of the net
assets of the Corporation available for payment to
shareholders and subject to the rights of the holders of any
stock of the Corporation ranking senior to or on a parity
with the Series C Preferred Stock in respect of distri-
butions upon liquidation, dissolution, winding-up or
termination of the Corporation, before any amount shall be
paid or distributed with respect to any Junior Stock,
liquidating distributions in the amount of $50 per share
plus an amount equal to all accrued and unpaid dividends
thereon (whether or not earned or declared) to the date
fixed for distribution. If, upon any liquidation,
dissolution, winding-up or termination of the Corporation,
the amounts payable with respect to the Series C Preferred
Stock and the Pari Passu Stock are not paid in full, the
holders of the Series C Preferred Stock and the Pari Passu
Stock shall share ratably in any distribution of assets
based on the proportion of their full respective liquidation
preference to the entire amount of the unpaid aggregate
liquidation preference of the Series C Preferred Stock and
the Pari Passu Stock. After payment of the full amount to
which they are entitled as provided by the foregoing
provisions of this Section 5(A), the holders of shares of
Series C Preferred Stock shall not be entitled to any
further right or claim to any of the remaining assets of the
Corporation.
(B) Neither the merger or consolidation of the
Corporation with or into any other corporation, nor the
merger or consolidation of any other corporation with or
into the Corporation, nor the sale, transfer, exchange or
lease of all or any portion of the assets of the Corpora-
tion, shall be deemed to be a dissolution, liquidation or
winding-up of the affairs of the Corporation for purposes of
this Section 5.
(C) Written notice of any voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation, stating the payment date or dates when, and the
place or places where, the amounts distributable to holders
of Series C Preferred Stock in such circumstances shall be
payable, shall be given by first-class mail, postage pre-
paid, mailed not less than twenty (20) days prior to any
payment date stated therein, to the holders of Series C
Preferred Stock, at the address shown on the books of the
Corporation or the transfer agent for the Series C Preferred
Stock; provided, however, that a failure to give notice as
provided above or any defect therein shall not affect the
Corporation's ability to consummate a voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation.
<PAGE>
SECTION 6. Conversion Rights of Series C
Preferred Stock.
(A) The shares of Series C Preferred Stock are
convertible at any time before the close of business on the
Conversion Expiration Date (as defined in the L.L.C.
Agreement), at the option of the holder thereof, into shares
of Common Stock at the initial conversion price of $59 per
share of Common Stock, subject to adjustment, as provided in
Section 7 (as so adjusted, the "Conversion Price"). For
this purpose, each share of Series C Preferred Stock shall
be taken at $5,000.
(B) Holders of record of Series C Preferred Stock at
the close of business on a dividend payment record date will
be entitled to receive the dividend payable on such shares
of Series C Preferred Stock on the corresponding dividend
payment date notwithstanding the conversion thereof
following such dividend payment record date but on or prior
to such dividend payment date. Except as provided in the
immediately preceding sentence, the Corporation will make no
payment or allowance for accumulated and unpaid dividends,
whether or not in arrears, on converted shares of Series C
Preferred Stock.
(C) No fractional shares of Common Stock will be
issued as a result of conversion, but in lieu thereof, the
Corporation shall pay a cash adjustment in an amount equal
to the same fraction of the Closing Price (as hereinafter
defined) on the date on which the certificate or certifi-
cates for such shares were duly surrendered for conversion,
or, if such date is not a Trading Day (as hereinafter
defined), on the next Trading Day.
(D) Any holder of shares of Series C Preferred Stock
desiring to convert such shares into shares of Common Stock
shall surrender the certificate or certificates representing
the shares of Series C Preferred Stock being converted, duly
assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto),
at the principal executive office of the Corporation or the
offices of the transfer agent for the Series C Preferred
Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time
be designated by notice to the holders of the Series C
Preferred Stock by the Corporation or the transfer agent for
the Series C Preferred Stock, accompanied by written notice
of conversion, on any day prior to the Conversion Expiration
Date that is a Business Day. Such notice of conversion
shall specify (i) the number of shares of Series C Preferred
Stock to be converted and the name or names in which such
holder desires the certificate or certificates for Common
Stock and for any shares of Series C Preferred Stock not to
be so converted to be issued (subject to compliance with
applicable legal requirements if any of such certificates
are to be issued in a name other than the name of the
holder), and (ii) the address to which such holder wishes
delivery to be made of such new certificates to be issued
upon such conversion.
<PAGE>
(E) Upon surrender of a certificate representing a
share or shares of Series C Preferred Stock for conversion,
the Corporation shall issue and send by hand delivery (with
receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof, at the address designated by
such holder, a certificate or certificates representing the
number of shares of Common Stock to which such holder shall
be entitled upon conversion. In the event that there shall
have been surrendered a certificate or certificates
representing shares of Series C Preferred Stock, only part
of which are to be converted, the Corporation shall issue
and deliver to such holder or such holder's designee in the
manner provided in the immediately preceding sentence a new
certificate or certificates representing the number of
shares of Series C Preferred Stock that shall not have been
converted.
(F) The issuance by the Corporation of shares of
Common Stock upon a conversion of shares of Series C
Preferred Stock into shares of Common Stock made at the
option of the holder thereof shall be effective upon the
surrender by such holder or such holder's designee of the
certificate or certificates for the shares of Series C
Preferred Stock to be converted, duly assigned or endorsed
for transfer to the Corporation (or accompanied by duly
executed stock powers relating thereto). The person or
persons entitled to receive the Common Stock issuable upon
such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as
of the close of business on the effective date of the
conversion. No allowance or adjustment shall be made in
respect of dividends payable to holders of Common Stock of
record as of any date prior to such effective date.
(G) Whenever the Corporation shall issue shares
of Common Stock upon conversion of shares of Series C
Preferred Stock as contemplated by this Section 6, the
Corporation shall issue, together with each such share of
Common Stock, one right to purchase Series A Junior
Participating Preferred Stock of the Corporation (or other
securities in lieu thereof) pursuant to the Shareholder
Protection Rights Agreement, dated as of December 4, 1989
(the "Rights Agreement"), between the Corporation and First
Chicago Trust Company of New York, as Rights Agent, as such
Rights Agreement may from time to time be amended, or any
similar rights issued to holders of Common Stock of the
Corporation in addition thereto or in replacement therefor
(such rights, together with any additional or replacement
rights, being collectively referred to as the "Rights"),
whether or not such Rights shall be exercisable at such
time, but only if such Rights are issued and outstanding and
held by other holders of Common Stock of the Corporation (or
are evidenced by outstanding share certificates representing
Common Stock) at such time and have not expired or been
redeemed.
(H) (i) On and after May 31, 1999, the Corporation
shall have the right, at its option, to cause the conversion
rights set forth in this Section to expire, provided that
the Current Market Price (as defined below) of the Common
Stock of the Corporation on each of 20 Trading Days within
any period of 30 consecutive Trading Days, including the
last Trading Day of such period, exceeds 120% of the
Conversion Price in effect on such Trading Day;
<PAGE>
(ii) In order to exercise its option to cause the
conversion rights of holders of shares of Series C Preferred
Stock to expire, the Corporation must issue a press release
for publication on the Dow Jones News Service and such other
print and electronic media as the Corporation shall select
announcing the Conversion Expiration Date (the "Press
Release") prior to the opening of business on the second
Trading Day after a period in which the condition in the
preceding paragraph has been met (but in no event prior to
May 31, 1999). The Press Release shall state that the
Corporation has elected to exercise its right to extinguish
the conversion rights of holders of shares of Series C
Preferred Stock, specify the Conversion Expiration Date and
provide the Conversion Price of the Series C Preferred Stock
and the Current Market Price of the Common Stock, in each
case as of the close of business on the Trading Day next
preceding the date of the Press Release. If the Corporation
exercises the option described in this paragraph, the
"Conversion Expiration Date" shall be a date selected by the
Corporation which date shall be not less than 30 or more
than 60 days after the date on which the Corporation issues
the Press Release; and
(iii) In addition to issuing the Press Release,
the Company shall send notice of the expiration of con-
version rights (a "Notice of Conversion Expiration") by
first-class mail to each record holder of shares of Series C
Preferred Stock not more than four (4) Business Days after
the Corporation issues the Press Release. Such Notice of
Conversion Expiration shall state: (1) the Conversion
Expiration Date; (2) the Conversion Price of the Series C
Preferred Stock and the Current Market Price of the Common
Stock, in each case as of the close of business on the
Trading Day next preceding the date of the Notice of
Conversion Expiration; (3) the place or places at which
receipts for Depositary Shares representing shares of
Series C Preferred Stock are to be surrendered prior to the
Conversion Expiration Date for certificates representing
shares of Common Stock; and (4) such other information or
instructions as the Corporation deems necessary or advisable
to enable a holder of shares of Series C Preferred Stock to
exercise its conversion right hereunder. No defect in the
Notice of Conversion Expiration or in the mailing thereof
with respect to any shares of Series C Preferred Stock shall
affect the validity of such notice with respect to any other
share of Series C Preferred Stock. As of the close of
business on the Conversion Expiration Date, the Series C
Preferred Stock shall no longer be convertible into Common
Stock. As used in this Section, "Current Market Price" of
publicly traded shares of Common Stock for any day means the
last reported sales price, regular way on such day, or, if
no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in
either case as reported on the New York Stock Exchange
Consolidated Transaction Tape, or, if the Common Stock is
not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading if
the Common Stock is listed on a national securities
exchange, or the National Market System of the National
Association of Securities Dealers, Inc., or, if the
<PAGE>
Common Stock is not quoted or admitted to trading on such
quotation system, on the principal quotation system on which
the Common Stock may be listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted
on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common
Stock in the over-the-counter market on the day in question
as reported by the National Quotation Bureau Incorporated,
or a similar generally accepted reporting service, or, if
not so available in such manner, as furnished by any New
York Stock Exchange member firm selected from time to time
by the Board of Directors of the Corporation for that
purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.
(I) The Corporation shall at all times reserve and
keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion of shares of
Series C Preferred Stock as herein provided, free from any
preemptive or other similar rights, such number of shares of
Common Stock as shall from time to time be issuable upon the
conversion of all the shares of Series C Preferred Stock
then outstanding. All shares of Common Stock delivered upon
conversion of the Series C Preferred Stock shall be duly
authorized, validly issued, fully paid and non-assessable,
free and clear of all liens, claims, interests and other
encumbrances. The Corporation shall prepare and shall use
its best efforts to obtain and keep in force such govern-
mental or regulatory permits or other authorizations as may
be required by law, and shall comply with all applicable
requirements as to registration or qualification of the
Common Stock (and all requirements to list the Common Stock
issuable upon conversion of Series C Preferred Stock that
are at the time applicable), in order to enable the Corpora-
tion lawfully to issue and deliver to each holder of record
of Series C Preferred Stock such number of shares of its
Common Stock as shall from time to time be sufficient to
effect the conversion of all shares of Series C Preferred
Stock then outstanding and convertible into shares of Common
Stock.
<PAGE>
SECTION 7. Adjustment of Conversion Price.
(A) Adjustment of Conversion Price. The Conversion
Price at which a share of Series C Preferred Stock is con-
vertible into Common Stock shall be subject to adjustment
from time to time as follows:
(i) In case the Corporation shall pay or make a
dividend or other distribution on any class or series of
capital stock of the Corporation exclusively in Common
Stock, the Conversion Price in effect at the opening of busi-
ness on the day following the date fixed for the determina-
tion of shareholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination
and the denominator shall be the sum of such number of
shares and the total number of shares constituting such
dividend or other distribution or exchange, such reduction
to become effective immediately after the opening of
business on the day following the date fixed for such
determination. For the purposes of this subparagraph (i),
the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the
Corporation. The Corporation shall not pay any dividend or
make any distribution on shares of any class or series of
capital stock of the Corporation exclusively in Common Stock
held in the treasury of the Corporation.
(ii) In case the Corporation shall pay or make a
dividend or other distribution on its Common Stock consist-
ing exclusively of, or shall otherwise issue to all holders
of its Common Stock, rights or warrants entitling the
holders thereof to subscribe for or purchase shares of
Common Stock at a price per share less than the current
market price per share (determined as provided in subpara-
graph (vii) of this Section 7(a)) of the Common Stock on the
date fixed for the determination of shareholders entitled to
receive such rights or warrants, the Conversion Price in
effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multi-
plying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total num-
ber of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock
so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business
on the day following the date fixed for such determination.
In case any rights or warrants referred to in this subpara-
graph (ii) in respect of which an adjustment shall have been
made shall expire unexercised within 45 days after the same
shall have been distributed or issued by the Corporation,
the Conversion Price shall be readjusted at the time of such
expiration to the Conversion Price that would have been in
effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
<PAGE>
(iii) In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdi-
vision becomes effective shall be proportionately reduced,
and conversely, in case outstanding shares of Common Stock
shall each be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such
combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be,
to become effective immediately after the opening of
business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph
(iv), in case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class or series
of capital stock, cash or assets (including securities, but
excluding any rights or warrants referred to in subparagraph
(ii) of this Section 7(A), any dividend or distribution paid
exclusively in cash and any dividend or distribution
referred to in subparagraph (i) of this Section 7(A)), the
Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of
the Conversion Price reduction contemplated by this subpara-
graph (iv) by a fraction of which the numerator shall be the
current market price per share (determined as provided in
subparagraph (vii) of this Section 7(A)) of the Common Stock
on the date fixed for the payment of such distribution (the
"Reference Date") less the fair market value (as determined
in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the
Board of Directors), on the Reference Date, of the portion
of the evidences of indebtedness, shares of capital stock,
cash and assets so distributed applicable to one share of
Common Stock and the denominator shall be such current
market price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of
business on the day following the Reference Date. If the
Board of Directors determines the fair market value of any
distribution for purposes of this subparagraph (iv) by
reference to the actual or when issued trading market for
any securities comprising such distribution, it must in
doing so consider the prices in such market over the same
period used in computing the current market price per share
of Common Stock pursuant to subparagraph (vii) of this
Section 7(A). For purposes of this subparagraph (iv), any
dividend or distribution that includes shares of Common
Stock or rights or warrants to subscribe for or purchase
shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness,
shares of capital stock, cash or assets other than such
shares of Common Stock or such rights or warrants (making
any Conversion Price reduction required by this subpara-
graph (iv)) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights
or warrants (making any further Conversion Price reduction
required by subparagraph (i) or (ii) of this Section 7(A)),
except (A) the Reference Date of such dividend or distri
bution as defined in this subparagraph (iv) shall be
substituted as "the date
<PAGE>
fixed for the determination of shareholders entitled to
receive such dividend or other distribution," "the date
fixed for the determination of shareholders entitled to
receive such rights or warrants" and "the date fixed for
such determination" within the meaning of subparagraphs (i)
and (ii) of this Section 7(A) and (B) any shares of Common
Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date
fixed for such determination" within the meaning of sub-
paragraph (i) of this Section 7(A).
(v) In case the Corporation shall pay or make a
dividend or other distribution on its Common Stock exclu-
sively in cash (excluding, in the case of any regular cash
dividend on the Common Stock, the portion thereof that does
not exceed the per share amount of the next preceding
regular cash dividend on the Common Stock (as adjusted to
appropriately reflect any of the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this
Section 7(A)), or excluding all of such regular cash
dividend if the annualized amount thereof per share of
Common Stock does not exceed 15% of the current market price
per share (determined as provided in subparagraph (vii) of
this Section 7(A)) of the Common Stock on the Trading Day
(as defined in Section 7(E)) next preceding the date of
declaration of such dividend), the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which
the numerator shall be the current market price per share
(determined as provided in subparagraph (vii) of this
Section 7(A)) of the Common Stock on the date fixed for the
payment of such distribution less the amount of cash so
distributed and not excluded as provided above applicable to
one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such
reduction to become effective immediately prior to the
opening of business on the day following the date fixed for
the payment of such distribution.
(vi) In case a tender or exchange offer made by the
Corporation or any subsidiary of the Corporation for all or
any portion of the Corporation's Common Stock shall expire
and such tender or exchange offer shall involve the payment
by the Corporation or such subsidiary of consideration per
share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a reso-
lution of the Board of Directors) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant
to such tender or exchange offer (as it shall have been
amended) that exceeds 10% of the current market price per
share (determined as provided in subparagraph (vii) of this
Section 7(A)) of the Common Stock on the Trading Day (as
defined in Section 7(E)) next succeeding the Expiration
Time, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conver-
sion Price in effect immediately prior to the effectiveness
of the Conversion Price reduction contemplated by this
subparagraph (vi)
<PAGE>
by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered
or exchanged shares) at the Expiration Time multiplied by
the current market price per share (determined as provided
in subparagraph (vii) of this Section 7(A)) of the Common
Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate
consideration payable to holders of Common Stock based on
the acceptance (up to any maximum specified in the terms of
the tender or exchange offer) of all shares validly tendered
or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the
current market price per share (determined as provided in
subparagraph (vii) of this Section 7(A)) of the Common Stock
on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the
opening of business on the day following the Expiration
Time.
(vii) For the purpose of any computation under subpara-
graphs (ii), (iv), (v) and (vi) of this Section 7(A), the
current market price per share of Common Stock on any date
in question shall be deemed to be the average of the daily
Closing Prices (as defined in Section 7(E)) for the five
consecutive Trading Days selected by the Company commencing
not more than 20 Trading Days before, and ending not later
than, the earlier of the day in question and, if applicable,
the day before the "ex" date with respect to the issuance or
distribution requiring such computation; provided, however,
that if another event occurs that would require an adjust-
ment pursuant to subparagraphs (i) through (vi), inclusive,
the Board of Directors may make such adjustments to the
Closing Prices during such five Trading Day period as it
deems appropriate to effectuate the intent of the adjust-
ments in this Section 7(A), in which case any such
determination by the Board of Directors shall be set forth
in a resolution of the Board of Directors and shall be
conclusive. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or distri-
bution, means the first date on which the Common Stock
trades regular way on the New York Stock Exchange or on such
successor securities exchange as the Common Stock may be
listed or in the relevant market from which the Closing
Price was obtained without the right to receive such
issuance or distribution, and (2) when used with respect to
any tender or exchange offer means the first date on which
the Common Stock trades regular way on such securities
exchange or in such market after the Expiration Time of such
offer.
(viii) The Corporation may make such reductions in the
Conversion Price, in addition to those required by subpara-
graphs (i), (ii), (iii), (iv), (v) and (vi) of this Section
7(A), as it considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or dis-
tribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. The
Corporation from time to time may reduce the
<PAGE>
Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is
irrevocable during the period, and the Board of Directors of
the Corporation shall have made a determination that such
reduction would be in the best interest of the Corporation,
which determination shall be conclusive. Whenever the
Conversion Price is reduced pursuant to the preceding
sentence, the Corporation shall mail to holders of record of
the Series C Preferred Stock a notice of the reduction at
least fifteen (15) days prior to the date the reduced
Conversion Price takes effect, and such notice shall state
the reduced Conversion Price and the period it will be in
effect.
(ix) Notwithstanding anything herein to the contrary,
no adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease
of at least 1% in the Conversion Price; provided, however,
that any adjustments which by reason of this subparagraph
(ix) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
(x) Whenever the Conversion Price is adjusted as
herein provided:
(1) the Corporation shall compute the adjusted
Conversion Price and shall prepare a certificate signed
by the Chief Financial Officer or the Treasurer of the
Corporation setting forth the adjusted Conversion Price
and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall
forthwith be filed with the transfer agent for the
Series C Preferred Stock; and
(2) a notice stating that the Conversion Price
has been adjusted and setting forth the adjusted
Conversion Price shall as soon as practicable be mailed
by the Corporation to all record holders of shares of
Series C Preferred Stock at their last addresses as
they shall appear upon the stock transfer books of the
Corporation.
(B) Reclassification, Consolidation, Merger or Sale of
Assets. In the event that the Corporation shall be a party
to any transaction (including without limitation any
recapitalization or reclassification of the Common Stock
(other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result
of a subdivision or combination of the Common Stock), any
consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger of another
person into the Corporation (other than a merger which does
not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the
Corporation), any sale or transfer of all or substantially
all of the assets of the Corporation or any compulsory share
exchange) pursuant to which the Common Stock is converted
into the right to receive other securities, cash or other
property), then lawful provision shall be made as part of
the terms of such transaction whereby the holder of each
share of Series C Preferred Stock then outstanding shall
have the right thereafter, to convert such share only into
(i) in the case of any such
<PAGE>
transaction other than a Common Stock Fundamental Change (as
defined in Section 7(E)), the kind and amount of securities,
cash and other property receivable upon such transaction by
a holder of the number of shares of Common Stock of the
Corporation into which such share of Series C Preferred
Stock could have been converted immediately prior to such
transaction, after giving effect, in the case of any
Non-Stock Fundamental Change (as defined in Section 7(E)),
to any adjustment in the Conversion Price required by the
provisions of Section 7(D), and (ii) in the case of a Common
Stock Fundamental Change, common stock of the kind received
by holders of Common Stock as a result of such Common Stock
Fundamental Change in an amount determined pursuant to the
provisions of Section 7(D). The Corporation or the person
formed by such consolidation or resulting from such merger
or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make
provision in its certificate or articles of incorporation or
other constituent document to establish such right. Such
certificate or articles of incorporation or other consti-
tuent document shall provide for adjustments which, for
events subsequent to the effective date of such certificate
or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The above
provisions shall similarly apply to successive transactions
of the foregoing type.
(C) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or
any other distribution) on its Common Stock, other than
(A) a dividend payable in shares of Common Stock or
(B) a dividend payable in cash out of its retained
earnings that would not require an adjustment pursuant
to 7(A)(iv) or (v) or (2) authorize a tender or
exchange offer that would require an adjustment
pursuant to 7(A)(vi);
(ii) the Corporation shall authorize the granting to
all holders of Common Stock of rights or warrants to
subscribe for or purchase any shares of stock of any
class or series or of any other rights or warrants;
(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding
Common Stock, or a change in par value, or from par
value to no par value, or from no par value to par
value), or of any consolidation or merger to which the
Corporation is a party and for which approval of any
shareholders of the Corporation shall be required, or
of the sale or transfer of all or substantially all of
the assets of the Corporation or of any compulsory
share exchange whereby the Common Stock is converted
into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
<PAGE>
then the Corporation shall cause to be filed with the
transfer agent for the Series C Preferred Stock, and shall
cause to be mailed to the holders of record of the Series C
Preferred Stock, at their last addresses as they shall
appear upon the stock transfer books of the Corporation, at
least fifteen (15) days prior to the applicable record or
effective date hereinafter specified, a notice stating
(x) the date on which a record (if any) is to be taken for
the purpose of such dividend, distribution, redemption,
repurchase, rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution,
redemption, repurchase, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up (but no failure to
mail such notice or any defect therein or in the mailing
thereof shall affect the validity of the corporate action
required to be specified in such notice).
(D) Adjustments in Case of Fundamental Changes.
Notwithstanding any other provision in this Section 7 to the
contrary, if any Fundamental Change (as defined in Section
7(E)) occurs, then the Conversion Price in effect will be
adjusted immediately after such Fundamental Change as
described below. In addition, in the event of a Common
Stock Fundamental Change, each share of Series C Preferred
Stock shall be convertible solely into common stock of the
kind and amount received by holders of Common Stock as the
result of such Common Stock Fundamental Change as more
specifically provided in the following clauses (D)(i) and
(D)(ii).
For purposes of calculating any adjustment to be made pur-
suant to this Section 7(D) in the event of a Fundamental
Change, immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price of the Series C Preferred Stock shall
thereupon become the lower of (A) the Conversion Price in
effect immediately prior to such Non-Stock Fundamental
Change, but after giving effect to any other prior adjust-
ments effected pursuant to this Section 7, and (B) the
result obtained by multiplying the greater of the Applicable
Price (as defined in Section 7(E)) or the then applicable
Reference Market Price (as defined in Section 7(E)) by a
fraction of which the numerator shall be $50 and the denomi-
nator shall be an amount per share of Series C Preferred
Stock determined by the Corporation in its sole discretion,
after consultation with a nationally recognized investment
banking firm, to be the equivalent of the hypothetical
redemption price that would have been applicable if the
Series C Preferred Stock had been redeemable during such
period; and
<PAGE>
(ii) in the case of a Common Stock Fundamental Change,
the Conversion Price of the Series C Preferred Stock in
effect immediately prior to such Common Stock Fundamental
Change, but after giving effect to any other prior adjust-
ments effected pursuant to this Section 7, shall thereupon
be adjusted by multiplying such Conversion Price by a frac-
tion of which the numerator shall be the Purchaser Stock
Price (as defined in Section 7(E)) and the denominator shall
be the Applicable Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (A) 100%
by value of the consideration received by a holder of Common
Stock is common stock of the successor, acquiror or other
third party (and cash, if any, is paid with respect to any
fractional interests in such common stock resulting from
such Common Stock Fundamental Change) and (B) all of the
Common Stock shall have been exchanged for, converted into
or acquired for common stock (and cash with respect to
fractional interests) of the successor, acquiror or other
third party, the Conversion Price of the Series C Preferred
Stock in effect immediately prior to such Common Stock
Fundamental Change shall thereupon be adjusted by
multiplying such Conversion Price by a fraction of which the
numerator shall be one (1) and the denominator shall be the
number of shares of common stock of the successor, acquiror,
or other third party received by a shareholder for one share
of Common Stock as a result of such Common Stock Fundamental
Change.
(E) Definitions. The following definitions shall
apply to terms used in this Section 7:
(1) "Applicable Price" shall mean (i) in the event of
a Non-Stock Fundamental Change in which the holders of the
Common Stock receive only cash, the amount of cash received
by a shareholder for one share of Common Stock and (ii) in
the event of any other Non-Stock Fundamental Change or any
Common Stock Fundamental Change, the average of the daily
Closing Prices of the Common Stock for the ten (10) consecu-
tive Trading Days prior to and including the record date for
the determination of the holders of Common Stock entitled to
receive securities, cash or other property in connection
with such Non-Stock Fundamental Change or Common Stock
Fundamental Change, or, if there is no such record date, the
date upon which the holders of the Common Stock shall have
the right to receive such securities, cash or other
property, in each case, as adjusted in good faith by the
Board of Directors of the Corporation to appropriately
reflect any of the events referred to in subparagraphs (i),
(ii), (iii), (iv), (v) and (vi) of Section 7(A).
(2) "Closing Price" of any common stock on any day
shall mean the last reported sale price regular way on such
day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices regular
way of such common stock, in each case on the principal
national securities exchange on which such common stock is
listed, if the common stock is listed on a national securi-
ties exchange, or the NASDAQ National Market System of the
National Association of Securities Dealers, Inc., or, if the
common stock is not quoted or admitted to trading on such
quotation system, on the principal national securities
exchange or quotation system on which the common
<PAGE>
stock is listed or admitted to trading or quoted, or, if not
listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the
closing bid and asked prices of the common stock in the over-
the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similarly
generally accepted reporting service, or, if not so
available in such manner, as furnished by any New York Stock
Exchange member firm selected from time to time by the Board
of Directors of the Corporation for that purpose or, if not
so available in such manner, as otherwise determined in good
faith by the Board of Directors.
(3) "Common Stock Fundamental Change" shall mean any
Fundamental Change in which more than 50% by value (as
determined in good faith by the Board of Directors of the
Corporation) of the consideration received by holders of
Common Stock consists of common stock that for each of the
ten (10) consecutive Trading Days referred to with respect
to such Fundamental Change in Section 7(E)(1) above has been
admitted for listing or admitted for listing subject to
notice of issuance on a national securities exchange or
quoted on the NASDAQ National Market System of the National
Association of Securities Dealers, Inc.; provided, however,
that a Fundamental Change shall not be a Common Stock
Fundamental Change unless either (i) the Corporation con-
tinues to exist after the occurrence of such Fundamental
Change and the outstanding shares of Series C Preferred
Stock continue to exist as outstanding shares of Series C
Preferred Stock, or (ii) not later than the occurrence of
such Fundamental Change, the outstanding shares of Series C
Preferred Stock are converted into or exchanged for shares
of convertible preferred stock of a corporation succeeding
to the business of the Corporation, which convertible
preferred stock has powers, preferences and relative,
participating, optional or other rights, and qualifications,
limitations and restrictions, substantially similar to those
of the Series C Preferred Stock.
(4) "Fundamental Change" shall mean the occurrence of
any transaction or event in connection with a plan pursuant
to which all or substantially all of the Common Stock shall
be exchanged for, converted into, acquired for or constitute
solely the right to receive securities, cash or other
property (whether by means of an exchange offer, liquida-
tion, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided,
however, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the
Conversion Price, such Fundamental Change shall be deemed to
have occurred when substantially all of the Common Stock of
the Corporation shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive
securities, cash or other property, but the adjustment shall
be based upon the highest weighted average of consideration
per share which a holder of Common Stock could have received
in such transactions or events as a result of which more
than 50% of the Common Stock of the Corporation shall have
been exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash or
other property.
<PAGE>
(5) "Non-Stock Fundamental Change" shall mean any
Fundamental Change other than a Common Stock Fundamental
Change.
(6) "Purchaser Stock Price" shall mean, with respect
to any Common Stock Fundamental Change, the average of the
daily Closing Prices of the common stock received in such
Common Stock Fundamental Change for the ten (10) consecutive
Trading Days prior to and including the record date for the
determination of the holders of Common Stock entitled to
receive such common stock, or, if there is no such record
date, the date upon which the holders of the Common Stock
shall have the right to receive such common stock, in each
case, as adjusted in good faith by the Board of Directors of
the Corporation to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv), (v) and
(vi) of Section 7(A).
(7) "Reference Market Price" shall initially mean
$32.25 and in the event of any adjustment to the Conversion
Price other than as a result of a Non-Stock Fundamental
Change, the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the Conver-
sion Price after giving effect to any such adjustment shall
always be the same as the ratio of $32.25 to the initial
Conversion Price per share.
(8) "Trading Day" shall mean a day on which securities
are traded on the national securities exchange or quotation
system or in the over-the-counter market used to determine
the Closing Price.
(F) Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of
any shares of Common Stock pursuant to any plan providing
for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of addi-
tional optional amounts in shares of Common Stock under any
such plan, and the issuance of any shares of Common Stock or
options or rights to purchase such shares pursuant to any
employee benefit plan or program of the Corporation or
pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the
date the Series C Preferred Stock is first issued, shall not
be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the
Corporation to which any of the adjustment provisions
described above applies.
(G) Certain Additional Rights. In case the Corpora-
tion shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section
7(A)(iv) or 7(A)(v) (including, without limitation,
dividends or distributions referred to in the last sentence
of Section 7(A)(iv)), the holder of each share of Series C
Preferred Stock, upon the conversion thereof subsequent to
the close of business on the date fixed for the determina-
tion of shareholders entitled to receive such distribution
and prior to the effectiveness of the Conversion Price
adjustment in respect of such distribution, shall also be
entitled to receive for each share of Common Stock into
which such share
<PAGE>
of Series C Preferred Stock is converted, the portion of the
shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Corporation
(whose election shall be evidenced by a resolution of the
Board of Directors) with respect to all holders so
converting, the Corporation may, in lieu of distributing to
such holder any portion of such distribution not consisting
of cash or securities of the Corporation, pay such holder an
amount in cash equal to the fair market value thereof (as
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a
resolution of the Board of Directors). If any conversion of
a share of Series C Preferred Stock described in the
immediately preceding sentence occurs prior to the payment
date for a distribution to holders of Common Stock which the
holder of the share of Series C Preferred Stock so converted
is entitled to receive in accordance with the immediately
preceding sentence, the Corporation may elect (such election
to be evidenced by a resolution of the Board of Directors)
to distribute to such holder a due bill for the shares of
Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets to which such holder
is so entitled, provided that such due bill (i) meets any
applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then
traded and (ii) requires payment or delivery of such shares
of Common Stock, rights, warrants, evidences of indebted
ness, shares of capital stock, cash or assets no later than
the date of payment or delivery thereof to holders of shares
of Common Stock receiving such distribution.
(H) Stock Issuances; Multiple Adjustments. There
shall be no adjustment of the Conversion Price in case of
the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Corporation except as
specifically described in this Section 7. If any action
would require adjustment of the Conversion Price pursuant to
more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the
amount of adjustment which has the highest absolute value to
holders of Series C Preferred Stock.
SECTION 8. Ranking; Attributable Capital and
Adequacy of Surplus; Retirement of Shares.
(A) The Series C Preferred Stock shall rank
senior to all shares of Junior Stock and pari passu (i.e.,
on a parity) with Pari Passu Stock of the Corporation as to
the payment of dividends and amounts upon the liquidation,
dissolution or winding-up of the Corporation. The ranking
of any subsequent series of Preferred Stock issued by the
Corporation as compared to the Series C Preferred Stock as
to the payment of dividends and amounts upon the
liquidation, dissolution or winding-up of the Corporation
shall be as specified in the Restated Articles of
Incorporation, as amended, of the Corporation, the Certifi-
cate of Designation pertaining thereto and, if appropriate,
shall also be subject to the provisions of paragraph (C) of
Section 1 and paragraph (B) of Section 3 hereof.
<PAGE>
(B) The capital of the Corporation allocable to
the Series C Preferred Stock for purposes of the Minnesota
Business Corporation Act shall be $5,000 per share.
(C) Any shares of Series C Preferred Stock
acquired by the Corporation by reason of the conversion or
redemption of such shares, or otherwise so acquired, shall
be retired as shares of Series C Preferred Stock and
restored to the status of authorized but unissued
undesignated shares of the Corporation and may thereafter be
reissued as part of a new series of Preferred Stock as
permitted by law.
SECTION 9. Miscellaneous.
(A) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three
business days after the mailing thereof if sent by regis-
tered or certified mail (unless first-class mail shall be
specifically permitted for such notice) with postage prepaid
addressed: (i) if to the Corporation, to its office at 385
Washington Street, St. Paul, Minnesota 55102 (Attention:
Secretary) or to the transfer agent for the Series C
Preferred Stock, or such other agent of the Corporation
designated as permitted by this paragraph, or (ii) if to any
holder of the Series C Preferred Stock or Common Stock, as
the case may be, to such holder at the address of such
holder as listed in the stock record books of the
Corporation (which may include the records of any transfer
agent for the Series C Preferred Stock or Common Stock, as
the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall
have designated by notice similarly given.
(B) The term "Common Stock" as used herein means
the Corporation's Common Stock, without par value, as the
same exists at the date of filing of the Certificate of
Designation relating to the Series C Preferred Stock (the
"Certificate of Designation") with the Secretary of State of
the state of Minnesota, or any other class of stock
resulting from successive changes or reclassifications of
such Common Stock consisting solely of changes in par value,
or from par value to no par value, or from no par value to
par value. However, subject to the provisions of Sec-
tion 7(B), shares of Common Stock issuable on conversion of
shares of Series C Preferred Stock shall include only shares
of the class designated as Common Stock of the Corporation
at the date of the filing of the Certificate of Designation
with the Secretary of State of the state of Minnesota or
shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation and which are
not subject to redemption by the Corporation; provided that
if at any time there shall be more than one such resulting
class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of
shares of such class resulting from all such reclassi-
fications bears to the total number of shares of such
classes resulting from all such reclassifications.
<PAGE>
(C) The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any issuance or delivery of shares of Series C
Preferred Stock or shares of Common Stock or other secur-
ities issued on account of Series C Preferred Stock pursuant
hereto or certificates representing such shares or secur-
ities. The Corporation shall not, however, be required to
pay any such tax that may be payable in respect of any
transfer involving the issuance or delivery of shares of
Series C Preferred Stock or Common Stock or other securities
in a name other than that in which the shares of Series C
Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any
such shares or securities other than a payment to the
registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or
payment has paid to the Corporation the amount of any such
tax or has established, to the satisfaction of the Corpora-
tion, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of
Series C Preferred Stock shall not by written notice
designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered
or to whom payment upon redemption of shares of Series C
Preferred Stock should be made or the address to which the
certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be
entitled to register such shares, and make such payment, in
the name of the holder of such Series C Preferred Stock as
shown on the records of the Corporation and to send the
certificate or certificates representing such shares, or
such payment, to the address of such holder shown on the
records of the Corporation.
(E) The Corporation may appoint, and from time to
time discharge and change, a transfer agent for the
Series C Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Corporation shall send
notice thereof by first-class mail, postage prepaid, to each
holder of record of Series C Preferred Stock.
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
SHAREHOLDER PROTECTION RIGHTS AGREEMENT (as
amended and restated, the "Agreement"), dated as of
December 4, 1989, between THE ST. PAUL COMPANIES, INC., a
Minnesota corporation (the "Company"), and FIRST CHICAGO
TRUST COMPANY OF NEW YORK, a New York corporation, as
Rights Agent (the "Rights Agent", which term shall in-
clude any successor Rights Agent hereunder), as amended
as of March 9, 1990 and as amended and restated as of
August 1, 1995.
WHEREAS, the Company and the Rights Agent
entered into the Shareholder Protection Rights Agreement,
dated as of December 4, 1989, as amended March 9, 1990
(the "Original Rights Agreement"), and in connection
therewith, the Board of Directors of the Company has
authorized and declared a dividend of one right ("Right")
in respect of each outstanding share of voting common
stock, without par value (the "Common Stock"), of the
Company held of record as of the close of business on
December 19, 1989 (the "Record Date") and has authorized
the issuance of one Right in respect of each share of
Common Stock which shall become issued and outstanding
thereafter and prior to the Separation Date (as herein-
<PAGE>
after defined) and, in certain circumstances, after the
Separation Date;
WHEREAS, each Right entitles the holder thereof
to purchase one two-thousandth (1/2000) of a share (ad-
justed hereby from 1/1000 of a share for the effect of
the Company's two-for-one stock split on May 17, 1994) of
Preferred Stock of the Company (or, in certain cases,
other capital stock of the Company or of certain other
entities) pursuant to the terms and subject to the condi-
tions set forth herein; and
WHEREAS, the Company and the Rights Agent wish
to amend and restate the Original Rights Agreement in its
entirety as follows:
NOW, THEREFORE, in consideration of the premis-
es and respective agreements set forth herein, the par-
ties hereby agree as follows:
Article I - Certain Definitions
1.1 Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of
the shares of Common Stock then outstanding but shall not
include the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary
of the Company or any Person or entity organized, ap-
pointed or established by the Company for or pursuant to
the terms of any such plan.
b) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors upon a determination that the
criteria set forth in Section 3.1(a) (ii) apply to such Person.
c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the
Securities Exchange Act of 1934, as such Rule is in
effect on the date of this Agreement.
d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "Beneficially Own", any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agree-
ment, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, ex-
change rights, other rights, warrants or options, or
<PAGE>
otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "Beneficially
Own", (A) securities tendered pursuant to a tender or ex-
change offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were ac-
quired by such Person or any of such Person's Affiliates
or Associates prior to the Separation Date or pursuant to
Section 2.3(c) or Section 5.3; (ii) which such Person or
any of such Person's Affiliates or Associates, directly
or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934), in-
cluding pursuant to any agreement, arrangement or under-
standing, whether or not in writing; provided, however,
that a Person shall not be deemed the "Beneficial Owner"
of, or to "Beneficially Own", any security under this
clause (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement,
<PAGE>
arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the rules under the
Securities Exchange Act of 1934, and (B) is not also then
reportable by such Person on Schedule 13D under the
Securities Exchange Act of 1934 (or any comparable or
successor report); or (iii) which are beneficially owned,
directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has
any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described
in the proviso to clause (ii) of this paragraph (d)) or
disposing of any voting securities of the Company; pro-
vided, however, that nothing in this paragraph (d) shall
cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "Beneficially
Own", any securities acquired through such
Person's participation in good faith in a firm-commitment
underwriting until the expiration of 40 days after the
date of such acquisition. For purposes of this Agree-
ment, in determining the percentage of the outstanding
<PAGE>
shares of Common Stock with respect to which a Person is
the Beneficial Owner, all shares as to which such Person
is deemed the Beneficial Owner shall be deemed outstand-
ing.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City
of New York are generally authorized or obligated by law
or executive order to close.
(f) The "close of business" on any given date shall mean
5:00 p.m., Minnesota time, on such date; provided, howev-
er, that if such date is not a Business Day it shall mean
5:00 p.m., Minnesota time, on the next succeeding Busi-
ness Day.
(g) "Continuing Director" shall mean a director who either
(i) has been a member of the Board of Directors of the
Company since prior to the earlier of (A) the date a
Person becomes an Acquiring Person and (B) the date of a
change in a majority of directors resulting from a proxy
or consent solicitation as set forth in clause (ii) of
the first proviso to Section 5.1(a) or (ii) became a
director of the Company subsequent to such date and whose
election, or nomination for election by the Company's
shareholders, was duly approved by the Continuing Direc-
tors then on the Board, either by a specific vote or by
<PAGE>
approval of the proxy materials of the Company on behalf
of the Board of Directors in which such person is named
as nominee for director; provided, however, that in no
event shall a director be considered a "Continuing Direc-
tor" if such director is an Acquiring Person or Adverse
Person or an Affiliate or Associate thereof.
(h) "Exchange Time" shall mean the time at which the right
to exercise the Rights shall terminate pursuant to Section 3.1(c) hereof.
(i) "Exercise Price" shall mean, as of any date, the price
at which a holder may purchase the securities issuable
upon exercise of one whole Right. Until adjustment
thereof in accordance with the terms hereof, the Exercise
Price shall equal $92.50 (as adjusted from the original
Exercise Price of $185.00 to reflect the Company's two-for-one stock
split on May 17, 1994).
(j) "Expiration Date" shall mean the earlier of (i) the
Final Expiration Date, (ii) the Exchange Time and (iii)
the Redemption Date.
(k) "Final Expiration Date" shall mean December 19, 1999 or,
if the Separation Date occurs subsequent to December 19,
<PAGE>
1996 but prior to December 19, 1999, the third anniversa-
ry of the Separation Date.
(l) "Flip-in Date" shall mean the 10th day after any Stock
Acquisition Date which is not the result of a Flip-over
Transaction or Event.
(m) "Flip-over Entity", for purposes of Section 3.2, shall
mean, (i) in the case of a Flip-over Transaction or Event
described in clause (i) or (ii) of the definition
thereof, the Person issuing any securities into which
shares of Common Stock are being converted or exchanged
and, if no such securities are being issued, the other
party to such Flip-over Transaction or Event and, (ii) in
the case of a Flip-over Transaction or Event referred to
in clause (iii) of the definition thereof, the Person
receiving the greatest portion of the assets or earning
power being transferred in such Flip-over Transaction or
Event, provided in all cases that if such Person is a
subsidiary of a corporation, the parent corporation shall
be the Flip-over Entity.
(n) "Flip-over Stock" shall mean the capital stock (or
similar equity interest) with the greatest voting power
in respect of the election of directors (or persons
<PAGE>
similarly responsible for direction of the business and
affairs) of the Flip-over Entity.
(o) "Flip-over Transaction or Event" shall mean a trans-
action or series of transactions following a Stock Acquisition Date
in which, directly or indirectly, (i) the
Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 3.1(e)) and
the Company shall not be the continuing or surviving
corporation of such consolidation or merger or (ii) any
Person (other than a Subsidiary of the Company in a
transaction which complies with Section 3.1(e)) shall
engage in a share exchange with or shall consolidate
with, or merge with or into, the Company and the Company
shall be the continuing or surviving corporation of such
share exchange, consolidation or merger and, in connection with
such share exchange, consolidation or merger,
all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other
property or (iii) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating
<PAGE>
more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsid-
iary of the Company in one or more transactions each of
which complies with Section 3.1(e)).
(p) "Market Price" per share of any securities on any date
of determination shall mean the average of the daily
closing prices per share of such securities (determined
as described below) on each of the 20 consecutive Trading
Days through and including the Trading Day immediately
preceding such date; provided, however, that if an event
of a type analogous to any of the events described in
Section 2.4 hereof shall have caused the closing prices
used to determine the Market Price on any Trading Days
during such period of 20 Trading Days not to be fully
comparable with the closing price on such date, each such
closing price so used shall be appropriately adjusted in
order to make it fully comparable with the closing price
on such date. The closing price per share of any securi-
ties on any date shall be the last reported sale price,
regular way, or, in case no such sale takes place or is
quoted on such date, the average of the closing bid and
<PAGE>
asked prices, regular way, for each share of such securities,
in either case as reported in the prinicipal consolidated
transactions reporting system with respect to
securities listed or admitted to trading on the New York
Stock Exchange, Inc. or, if the securities are not listed
or admitted to trading on the New York Stock Exchange,
Inc., as reported in the principal consolidated transac-
tion reporting system with respect to securities listed
on the principal national securities exchange on which
the securities are listed or admitted to trading or, if
the securities are not listed or admitted to trading on
any national securities exchange, as reported by the
Nasdaq Stock Market or such other system then in use, or,
if on any such date the securities are not listed or
admitted to trading on any national securities exchange
or quoted by any such organization, the average of the
closing bid and asked prices as furnished by a
professional market maker making a market in the securi-
ties selected by the Board of Directors of the Company;
provided, however, that if on any such date the securities are
not listed or admitted to trading on a national
securities exchange or traded in the over-the-counter
market, the closing price per share of such securities on
such date shall mean the fair value per share of such
<PAGE>
securities on such date as determined in good faith by
the Board of Directors of the Company, after consultation
with a nationally recognized investment banking firm, and
set forth in a certificate delivered to the Rights Agent.
(q) "Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5
under the Securities Exchange Act of 1934, as such Rule
is in effect on the date of this Agreement), corporation
or other entity.
(r) "Preferred Stock" shall mean the series of Preferred
Stock, without par value, of the Company created by a
Statement with respect to Preferred Stock in substan-
tially the form set forth in Exhibit C hereto appropri-
ately completed.
(s) "Redemption Date" shall mean the date selected by the
Board of Directors to redeem the Rights pursuant to
Section 5.1 hereof.
(t) "Redemption Price" shall mean $.005 per Right (as adjusted
from the original Redemption Price of $.01 per
Right to reflect the Company's two-for-one stock split on
May 17, 1994), appropriately adjusted to reflect any
further stock split, stock dividend or similar trans-
action.
<PAGE>
(u) "Separation Date" shall mean the close of business on
the earliest of (i) the Flip-in Date, (ii) the 10th
Business Day (or such later date as the Board of Directors shall
determine after the date of the commencement
of, or first public announcement of the intent of any
Person (other than the Company, any Subsidiary of the
Company or any employee stock ownership or other employee
benefit plan of the Company or any Subsidiary of the
Company) to commence, a tender or exchange offer which,
if consummated, would result in such Person acquiring
Beneficial Ownership (when added to any shares as to
which such Person is the Beneficial Owner immediately
prior to such tender or exchange offer) of 15% or more of
the outstanding shares of Common Stock and (iii) the 10th
Business Day after the Board of Directors determines,
pursuant to the criteria set forth in Section 3.1(a)(ii)
hereof, that a Person is an Adverse Person; provided that
if any of the foregoing results in the Separation Date
being prior to the Record Date, the Separation Date shall
be the Record Date.
(v) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this defini-
tion, shall include, without limitation, a report filed
pursuant to Section 13(d) under the Securities Exchange
<PAGE>
Act of 1934) by the Company or an Acquiring Person that
an Acquiring Person has become such.
(w) "Subsidiary" of any specified Person shall mean any
corporation or other entity of which a majority of the
voting power of the equity securities or a majority of
the equity interest is Beneficially Owned, directly or
indirectly, by such Person.
(x) "Trading Day", when used with respect to any securities,
shall mean a day on which the New York Stock Exchange,
Inc. is open for the transaction of business or, if such
securities are not listed or admitted to trading on the
New York Stock Exchange, Inc., a day on which the princi-
pal national securities exchange on which such securities
are listed or admitted to trading is open for the trans-
action of business or, if the securities are not listed
or admitted to trading on any national securities ex-
change, a Business Day.
(y) "Triggering Event" shall mean any Section 3.1(a) Event
(as such term is defined in Section 3.1(a)) or any Flip-over
Transaction or Event.
<PAGE>
Article II - The Rights
2.1 Summary of Rights. As soon as practicable after the
Record Date, the Company will mail a copy of a letter to
shareholders summarizing the terms of the Rights, in
substantially the form of Exhibit A hereto, to each
holder of record of Common Stock as of the close of
business on such Record Date, at such holder's address as
shown by the records of the Company.
2.2 Legend on Common Stock Certificates. Common Stock cer-
tificates issued after the date of this Agreement but
prior to the close of business on the Separation Date
shall evidence one Right for each share of Common Stock
represented thereby and shall have impressed on, printed
on, written on or otherwise affixed to them the following
legend:
Until the close of business on the Separation
Date (as defined in the Rights Agreement re-
ferred to below), this certificate also evi-
dences and entitles the holder hereof to cer-
tain Rights as set forth in a Rights Agreement,
dated as of December 4, 1989 (as such may be
amended from time to time, the "Rights Agree-
ment"), between The St. Paul Companies, Inc.
and First Chicago Trust Company of New York, as
Rights Agent, the terms of which are hereby
incorporated herein by reference and a copy of
which is on file at the principal executive
offices of The St. Paul Companies, Inc. Under
certain circumstances, as set forth in the
Rights Agreement, such Rights may be redeemed,
may be exchanged for shares of Common Stock or
other securities or assets of the Company or a
<PAGE>
Subsidiary of the Company, may expire, may
become void (if they are "Beneficially Owned"
by an "Acquiring Person" or "Adverse Person" or
an Affiliate or Associate thereof, as such
terms are defined in the Rights Agreement, or
by any transferee of any of the foregoing) or
may be evidenced by separate certificates and
may no longer be evidenced by this certificate.
The St. Paul Companies, Inc. will mail or ar-
range for the mailing of a copy of the Rights
Agreement to the holder of this certificate
without charge within five days after the re-
ceipt of a written request therefor.
Certificates representing shares of Common Stock that
were issued and outstanding at the Record Date shall
evidence one Right for each share of Common Stock evi-
denced thereby despite the absence of the foregoing
legend, and certificates representing shares of Common
Stock issued after the Record Date but prior to the date
hereof bearing the form of legend set forth in the Origi-
nal Rights Agreement shall evidence one Right for each
share of Common Stock on the terms set forth in this
Agreement. To the extent provided in Section 5.3, Rights
shall be issued with respect to shares of Common Stock
which are issued or sold after the Separation Date.
2.3 Separation and Exercise. (a) Subject to the terms
hereof (including Sections 3.1, 5.1 and 5.16) and subject
to adjustment as herein set forth, each Right will enti-
tle the holder thereof, after the Separation Date and
prior to the Expiration Date, to purchase, for the Exer-
<PAGE>
cise Price, one two-thousandth (1/2000) of a share of
Preferred Stock.
(b) Until the close of business on the Separation Date, (i)
no Right may be exercised, and (ii) each Right will be
evidenced by the certificate for the associated share of
Common Stock (together, in the case of certificates
issued prior to the Record Date, with the letter mailed
to the record holder thereof pursuant to Section 2.1) and
will be transferable only together with, and will be
transferred by a transfer (whether with or without such
letter) of, such associated share.
(c) Subject to the terms hereof (including Sections 3.1, 5.1
and 5.16), after the close of business on the Separation
Date and prior to the close of business on the Expiration
Date, the Rights (i) may be exercised and (ii) may be
transferred independently of shares of Common Stock.
Promptly following the Separation Date, the Rights Agent
will mail to each holder of record of Common Stock as of
the close of business on the Separation Date (other than
any Person whose Rights have become void pursuant to
Section 3.1(b)), at such holder's address as shown by the
records of the Company (the Company hereby agreeing to
furnish copies of such records to the Rights Agent for
<PAGE>
this purpose), (1) a certificate (a "Rights Certificate")
in substantially the form of Exhibit B hereto appropri-
ately completed, representing the number of Rights held
by such holder at the close of business on the Separation
Date and having such marks of identification or designa-
tion and such legends, summaries or endorsements printed
thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any
rule or regulation made pursuant thereto or with any rule
or regulation of any national securities exchange or
quotation system on which the Rights may from time to
time be listed or traded, or to conform to usage, and (2)
a disclosure statement describing the Rights.
(d) Subject to the terms hereof (including Sections 3.1, 5.1
and 5.16), Rights may be exercised on any Business Day
after the close of business on the Separation Date and
prior to the close of business on the Expiration Date by
submitting to the Rights Agent the Rights Certificate
evidencing such Rights with an Election to Exercise (an
"Election to Exercise") substantially in the form at-
tached to the Rights Certificate duly completed, accompa-
nied by payment in cash, or by certified check, bank
check or money order payable to the order of the Company,
<PAGE>
of a sum equal to the Exercise Price multiplied by the
number of Rights being exercised and a sum sufficient to
cover any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or deliv-
ery of certificates for shares or depositary receipts (or
both) in a name other than that of the holder of the
Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election
to Exercise accompanied by payment as set forth in Sec-
tion 2.3(d) above, and subject to the terms hereof, the
Rights Agent will thereupon promptly (i) (A) requisition
from a transfer agent stock certificates evidencing such
number of shares of Preferred Stock, Common Stock or
other securities to be purchased (the Company hereby
irrevocably authorizing its transfer agents to comply
with all such requisitions) and, (B) if the Company
elects pursuant to Section 5.17 hereof not to issue
certificates representing fractional shares, requisition
from the depositary selected by the Company depositary
receipts representing the fractional shares to be pur-
chased or requisition from the Company the amount of cash
to be paid in lieu of fractional shares in accordance
with Section 5.17 hereof and, (ii) after receipt of such
<PAGE>
certificates, depositary receipts and/or cash, cause the
same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered (in
the case of certificates or depository receipts) in such
name or names as may be designated by such holder.
fIn case the holder of any Rights shall exercise less
than all the Rights evidenced by such holder's Rights
Certificate, a new Rights Certificate evidencing the
Rights remaining unexercised will be issued by the Rights
Agent to such holder or to such holder's duly authorized
assigns.
(g) The Company covenants and agrees that it will (i) cause
to be reserved and kept available until the Expiration
Date out of its authorized and unissued or treasury
shares of capital stock a number of shares of Preferred
Stock that will be sufficient to permit the exercise in
full of all outstanding Rights; (ii) take all such action
as may be necessary to ensure that all shares of capital
stock delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares
(subject to payment of the Exercise Price), be duly and
validly authorized, executed, issued and delivered and
fully paid and nonassessable; (iii) take all such action
<PAGE>
as may be necessary to comply with any applicable re-
quirements of the Securities Act of 1933 or the Securi-
ties Exchange Act of 1934, and the rules and regulations
thereunder, and any other applicable law, rule or regula-
tion, in connection with the issuance of any shares of
capital stock upon exercise of the Rights; (iv) if and
for so long as any shares of Preferred Stock are listed
on any national securities exchange, use its best efforts
to cause all shares of Preferred Stock issued upon exercise of
Rights to be listed on such exchange upon issuance; and (v)
pay when due and payable any and all federal
al and state transfer taxes and charges which may be
payable in respect of the original issuance or delivery
of the Rights Certificates or of any shares of capital
stock issued upon the exercise of Rights; provided that
the Company shall not be required to pay any transfer tax
or charge which may be payable in respect of any transfer
involved in the transfer or delivery of Rights Certifi-
cates or the issuance or delivery of certificates for
shares in a name other than that of the holder of the
Rights being transferred or exercised.
2.4 Exercise Price, Number of Rights. (a) In the event the
Company shall at any time after the Record Date and prior
<PAGE>
to the close of business on the Separation Date (i) de-
clare or pay a dividend on Common Stock payable in Common
Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller
number of shares of Common Stock, then (A) (x) the Exer-
cise Price in effect after such adjustment will be equal
to the Exercise Price in effect immediately prior to such
adjustment divided by the number of shares of Common
Stock (the "Expansion Factor") that a holder of one share
of Common Stock immediately prior to such dividend,
subdivision or combination would hold thereafter as a
result thereof and (y) each Right held prior to such
adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will
be deemed to be distributed among the shares of Common
Stock with respect to which the original Rights were
associated (if they remain outstanding) and the shares
issued in respect of such dividend, subdivision or combi-
nation, so that each such share of Common Stock will have
exactly one Right associated with it and (B) the number
of shares of Preferred Stock for which a Right is exercisable
shall be adjusted by dividing the number of
shares of Preferred Stock for which a right is exercisable
<PAGE>
immediately prior to such adjustment by the Expan-
sion Factor. Each adjustment made pursuant to this para-
graph shall be made as of the payment or effective date
for the applicable dividend, subdivision or combination.
In the event the Company shall at any time
after the Record Date and prior to the close of business
on the Separation Date issue any shares of Common Stock
otherwise than in a transaction referred to in the pre-
ceding paragraph, each such share of Common Stock so
issued shall automatically have one new Right associated
with it, which Right shall be evidenced by the certifi-
cate representing such share. To the extent provided in
Section 5.3, Rights shall be issued with respect to
shares of Common Stock which are issued and sold after
the Separation Date.
(b) In the event the Company shall at any time after the
Record Date and prior to the close of business on the
Separation Date issue or distribute any securities or
assets in respect of, in lieu of or in exchange for
Common Stock (other than pursuant to a regular periodic
cash dividend or a dividend paid solely in Common Stock)
whether by dividend, in a reclassification or recapital-
ization (including any such transaction involving a
merger, consolidation or binding share exchange), or
<PAGE>
otherwise, the Company shall make such adjustments, if
any, in the Exercise Price, number of Rights and/or
securities or other property purchasable upon exercise of
Rights as the Board of Directors of the Company, in its
sole discretion, may deem to be appropriate under the
circumstances in order to adequately protect the interests
of the holders of Rights generally, and the Company
and the Rights Agent shall amend this Agreement as necessary to
provide for such adjustments.
(c) Each adjustment to the Exercise Price made pursuant to
this Section 2.4 shall be calculated to the nearest cent.
Whenever an adjustment to the Exercise Price is made
pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjust-
ment and a brief statement of the facts accounting for
such adjustment, (ii) promptly file with the Rights Agent
and with each transfer agent for the Common Stock a copy
of such certificate and (iii) mail a brief summary there-
of to each holder of Rights.
(d) Irrespective of any adjustment or change in the secu-
rities purchasable upon exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may
continue to express the securities so purchasable which
<PAGE>
were expressed in the initial Rights Certificates issued
hereunder.
2.5 Date on Which Exercise Is Effective. Each Person in
whose name any certificate for shares of capital stock is
issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the
shares represented thereby on, and such certificate shall
be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment
of the Exercise Price for such Rights (and any applicable
taxes and other governmental charges payable by the
exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date
upon which the stock transfer books of the Company are
closed, such Person shall be deemed to have become the
record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which
the stock transfer books of the Company are open.
2.6 Execution, Authentication, Delivery and Dating of Rights
Certificates. The Rights Certificates shall be executed
on behalf of the Company by its Chairman of the Board,
its President or one of its Vice Presidents, under its
<PAGE>
corporate seal reproduced thereon attested by its Secretary
or one of its Assistant Secretaries. The signature
of any of these officers on the Rights Certificates may
be manual or facsimile.
Rights Certificates bearing the manual or
facsimile signatures of individuals who were at any time
the proper officers of the Company shall bind the Compa-
ny, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the countersig-
nature and delivery of such Rights Certificates.
Promptly after the Separation Date, the Company
will notify the Rights Agent of such Separation Date and
will deliver Rights Certificates executed by the Company
to the Rights Agent for countersignature, and subject to
Section 3.1(b), the Rights Agent shall manually counter-
sign and deliver such Rights Certificates to the holders
of the Rights pursuant to Section 2.3(c) hereof. No
Rights Certificate shall be valid for any purpose until
manually countersigned by the Rights Agent.
2.7 Registration, Registration of Transfer and Exchange.
(a) After the Separation Date, the Company will cause to
be kept a register (the "Rights Register") in which,
subject to such reasonable regulations as it may pre-
scribe, the Company will provide for the registration and
transfer of Rights. The Rights Agent is hereby appointed
<PAGE>
"Rights Registrar" for the purpose of maintaining the
Rights Register for the Company and registering Rights
and transfers of Rights after the Separation Date as
herein provided. In the event that the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent
will have the right to examine the Rights Register at all
reasonable times after the Separation Date.
After the Separation Date and prior to the
close of business on the Expiration Date, upon surrender
for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of Sections
2.7(c) and (d) and 5.1, the Company will execute, and the
Rights Agent will countersign and deliver, in the name of
the holder or the designated transferee or transferees,
as required pursuant to the holder's instructions, one or
more new Rights Certificates evidencing the same aggre-
gate number of Rights as did the Rights Certificate so
surrendered.
(b) Except as otherwise provided in Sections 3.1(b) and 5.1,
all Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be the valid obli-
gations of the Company, and such Rights shall be entitled
to the same benefits under this Agreement as the Rights
<PAGE>
surrendered upon such registration of transfer or ex-
change.
(c) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accom-
panied by a written instrument of transfer in form satis-
factory to the Company or the Rights Agent, as the case
may be, duly executed by the holder thereof or such
holder's attorney duly authorized in writing. As a
condition to the issuance of any new Rights Certificate
under this Section 2.7, the Company may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation
thereto.
(d) The Company shall not be required to register the trans-
fer of or exchange any Rights after such Rights have
become void under Section 3.1(b), been exchanged under
Section 3.1(c) or been redeemed or terminated under
Section 5.1.
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certifi-
cates. (a) If any mutilated Rights Certificate is
surrendered to the Rights Agent prior to the close of
business on the Expiration Date, then, subject to Sec-
tions 3.1(b) and 5.1, the Company shall execute and the
Rights Agent shall countersign and deliver in exchange
<PAGE>
therefor a new Rights Certificate evidencing the same
number of Rights as did the Rights Certificate so surren-
dered.
(b) If there shall be delivered to the Company and the
Rights Agent prior to the close of business on the Expi-
ration Date (i) evidence to their satisfaction of the de-
struction, loss or theft of any Rights Certificate and
(ii) such security or indemnity as may be required by
them to save each of them and any of their agents harm-
less, then, subject to Sections 3.1(b) and 5.1 and in the
absence of notice to the Company or the Rights Agent that
such Rights Certificate has been acquired by a bona fide
purchaser, the Company shall execute and upon its request
the Rights Agent shall countersign and deliver, in lieu
of any such destroyed, lost or stolen Rights Certificate,
a new Rights Certificate evidencing the same number of
Rights as did the Rights Certificate so destroyed, lost
or stolen.
(c) As a condition to the issuance of any new Rights Cer-
tificate under this Section 2.8, the Company may require
the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
<PAGE>
expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this
Section 2.8 in lieu of any destroyed, lost or stolen
Rights Certificate shall evidence an original additional
contractual obligation of the Company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at
any time enforceable by anyone, and, subject to Section
3.1(b), shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all
other Rights duly issued hereunder.
2.9 Persons Deemed Owners. Prior to due presentment of a
Rights Certificate (or, prior to the close of business on
the Separation Date, the associated Common Stock certifi-
cate) for registration of transfer, the Company, the
Rights Agent and any agent of the Company or the Rights
Agent may deem and treat the person in whose name such
Rights Certificate (or, prior to the close of business on
the Separation Date, such Common Stock certificate) is
registered as the absolute owner thereof and of the
Rights evidenced thereby for all purposes whatsoever,
including the payment of the Redemption Price, and nei-
ther the Company nor the Rights Agent shall be affected
by any notice to the contrary. As used in this Agree-
<PAGE>
ment, unless the context otherwise requires, the term
"holder" of any Rights shall mean the registered holder
of such Rights (or, prior to the close of business on the
Separation Date, the associated shares of Common Stock).
2.10 Delivery and Cancellation of Certificates. All Rights
Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surren-
dered to any person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be
promptly cancelled by the Rights Agent. The Company may
at any time deliver to the Rights Agent for cancellation
any Rights Certificates previously countersigned and
delivered hereunder which the Company may have acquired
in any manner whatsoever, and all Rights Certificates so
delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificates shall be countersigned in
lieu of or in exchange for any Rights Certificates can-
celled as provided in this Section 2.10, except as ex-
pressly permitted by this Agreement. The Rights Agent
shall destroy all cancelled Rights Certificates and
deliver a certificate of destruction to the Company.
2.11 Agreement of Rights Holders. Every holder of Rights by
accepting the same consents and agrees with the Company
<PAGE>
and the Rights Agent and with every other holder of
Rights that:
(a) prior to the close of business on the Separation Date,
each Right will be transferable only together with, and
will be transferred by a transfer of, the associated
share of Common Stock;
(b) after the Separation Date, the Rights Certificates will
be transferable only on the Rights Register as provided
herein;
(c) prior to due presentment of a Rights Certificate (or,
prior to the close of business on the Separation Date,
the associated Common Stock certificate) for registration
of transfer, the Company, the Rights Agent and any agent
of the Company or the Rights Agent may deem and treat the
person in whose name the Rights Certificate (or, prior to
the close of business on the Separation Date, the asso-
ciated Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced there-
by for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to
the contrary;
(d) Rights beneficially owned by certain Persons will, under
the circumstances set forth in Section 3.1(b), become
void; and
<PAGE>
(e) this Agreement may be supplemented or amended from time
to time pursuant to Section 2.4(b) or 5.4 hereof.
Article III - Certain Transactions
3.1 Flip-in. (a) In the event that prior to the close of
business on the Expiration Date (i) any Person shall
become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a Flip-over
Transaction or Event or is an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange
offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of
the members of the Board of Directors who are not offi-
cers of the Company and who are not representatives,
nominees, Affiliates or Associates of an Acquiring Per-
son, after receiving advice from one or more investment-banking
firms, to be (A) at a price which is fair to
shareholders (taking into account all factors which such
members of the Board deem relevant, including, without
limitation, prices which could reasonably be achieved if
the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (B) otherwise in
the best interests of the Company and its shareholders,
<PAGE>
or (ii) the Board of Directors of the Company shall de-
clare any Person to be an Adverse Person upon a determi-
nation that such Person, alone or together with its
Affiliates and Associates, has, at any time after this
Agreement has been filed with the Securities and Exchange
Commission as an exhibit to a filing under the Securities
Exchange Act of 1934, become the Beneficial Owner of a
number of shares of Common Stock which the Board of
Directors of the Company determines to be substantial
(which number of shares shall in no event represent less
than 10% of the outstanding shares of Common Stock) and a
determination by the Board of Directors of the Company,
after reasonable inquiry and investigation, including
consultation with such persons as such directors shall
deem appropriate and consideration of such factors as are
permitted by applicable law, that (a) such Beneficial
Ownership by such Person is intended to cause the Company
to repurchase the shares of Common Stock beneficially
owned by such Person or to cause pressure on the Company
to take action or enter into a transaction or series of
transactions intended to provide such Person with short-
term financial gain under circumstances where the Board
of Directors determines that the best long-term interests
of the Company would not be served by taking such action
<PAGE>
or entering into such transaction or series of transac-
tions at that time or (b) such Beneficial Ownership is
causing or reasonably likely to cause a material adverse
impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's
ability to maintain its competitive position) on
the business or prospects of the Company, on the Company's
employees, customers, suppliers or creditors or on
the communities in which the Company operates or is
located, then, promptly following the occurrence of any
event described in this Section 3.1(a)(i) or (ii) (a
"Section 3.1(a) Event"), proper provision shall be made
so that each holder of a Right (except as provided in
Section 3.1(b)) shall thereafter have the right to re-
ceive, upon exercise thereof at the then-current Exercise
Price in accordance with the terms of this Agreement, in
lieu of a number of one two-thousandths of a share of
Preferred Stock (as from time to time adjusted), such
number of shares of Common Stock of the Company as shall
equal the result obtained by dividing (x) the then-cur-
rent Exercise Price by (y) 50% of the Market Price per
share of Common Stock on the date of the first occurrence
of a Section 3.1(a) Event (such number of shares, the
"Adjustment Shares"); provided that the Exercise Price
<PAGE>
and the number of Adjustment Shares shall be further
adjusted, as appropriate, in order to protect the inter-
ests of the holders of Rights generally in the event that
on or after the date of such first occurrence an event
analogous to any of the events described in Section
2.4(a) or (b) shall have occurred.
(b) Notwithstanding the foregoing, any Rights that are or
were Beneficially Owned on or after the Stock Acquisition
Date by an Acquiring Person or an Adverse Person or an
Affiliate or Associate thereof or by any transferee,
direct or indirect, of any of the foregoing shall become
void, and any holder of such Rights (including trans-
ferees) shall thereafter have no right to exercise or
transfer such Rights under any provision of this Agree-
ment. If any Rights Certificate is presented for assign-
ment or exercise and the Person presenting the same will
not complete the certification set forth at the end of
the form of assignment or notice of election to exercise
and provide such additional evidence of the identity of
the Beneficial Owner and its Affiliates and Associates
(or former Beneficial Owners and their Affiliates and
Associates) as the Company shall reasonably request, then
the Company shall be entitled conclusively to deem the
Beneficial Owner thereof to be an Acquiring Person or an
<PAGE>
Adverse Person or an Affiliate or Associate thereof or a
transferee of any of the foregoing and accordingly will
deem the Rights evidenced thereby to be void and not
transferable or exercisable.
(c) The Board of Directors of the Company may, at its
option, at any time after a Section 3.1(a) Event and prior
to the time that an Acquiring Person or Adverse Person
becomes the Beneficial Owner of more than 50% of the out-
standing shares of Common Stock, elect to exchange all
(but not less than all) of the then-outstanding Rights
(which shall not include Rights that have become void
pursuant to the provisions of Section 3.1(b)) for Common
Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted in order to protect the
interests of holders of Rights generally in the event
that after the Separation Date an event of a type analo-
gous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock
(such exchange ratio, as adjusted from time to time,
being hereinafter referred to as the "Exchange Ratio").
The Board of Directors of the Company may not make an
election pursuant to this Section 3.1(c) if the number of
shares of Common Stock which is authorized by the Com-
pany's restated articles of incorporation but not out-
<PAGE>
standing or reserved for issuance for purposes other than
upon exercise of the Rights is not sufficient to permit
the exchange of all Rights in accordance with this Section 3.1(c).
Immediately upon the action of the Board of
Directors of the Company electing to exchange the Rights,
without any further action and without any notice, the
right to exercise the Rights will terminate, and each
Right (other than Rights that have become void pursuant
to Section 3.1(b)) will thereafter represent only the
right to receive a number of shares of Common Stock equal
to the Exchange Ratio. Promptly after the action of the
Board of Directors electing to exchange the Rights, the
Company shall give notice thereof (specifying the steps
to be taken to receive shares of Common Stock in exchange
for Rights) to the Rights Agent and the holders of the
Rights (other than Rights that have become void pursuant
to Section 3.1(b)) outstanding immediately prior thereto
by mailing such notice in accordance with Section 5.8.
Each Person in whose name any certificate for
shares is issued upon the exchange of Rights pursuant to
this Section 3.1(c) shall for all purposes be deemed to
have become the holder of record of the shares represent-
ed thereby on, and such certificate shall be dated the
<PAGE>
date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of any applicable
taxes and other governmental charges payable by the
holder was made; provided, however, that if the date of
such surrender and payment is a date upon which the stock
transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next
succeeding Business Day on which the stock transfer books
of the Company are open.
(d) In the event that the number of shares of Common Stock
which is authorized by the Company's restated articles of
incorporation but not outstanding or reserved for issu-
ance for purposes other than upon exercise of the Rights
is not sufficient to permit the exercise in full of the
Rights in accordance with Section 3.1(a) (and the Company
has not elected to exchange securities for Rights pursuant to
Section 3.1(c)), the Company shall (A) determine
the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") and, (B) with
respect to each Right (subject to Section 3.1(b) hereof),
make adequate provision to substitute for the Adjustment
Shares, upon the exercise of such Right and payment of
the applicable Exercise Price, (1) cash, (2) a reduction
<PAGE>
in the Exercise Price, (3) Common Stock or other equity
securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock, such as
the Preferred Stock, which the Board of Directors of the
Company has deemed to have essentially the same value or
economic rights as shares of Common Stock (such shares of
preferred stock being referred to as "Common Stock Equiv-
alents")), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the
amount of any reduction in the Exercise Price), where
such aggregate value has been determined by the Board of
Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by
the Board of Directors of the Company; provided, however,
that if the Company shall not have made adequate provi-
sion to deliver value pursuant to clause (B) above within
30 days following the later of (x) the first occurrence
of a Section 3.1(a) Event and (y) the date on which the
Company's right of redemption pursuant to Section 5.1
expires (the later of (x) and (y) being referred to
herein as the "Section 3.1(a) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender
<PAGE>
for exercise of a Right and without requiring payment of
the Exercise Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread.
For purposes of the preceding sentence, the term "Spread"
shall mean the excess of (i) the Current Value over (ii)
the Exercise Price. If the Board of Directors of the
Company shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could
be authorized for issuance upon exercise in full of the
Rights, the 30-day period set forth above may be extended
to the extent necessary, but not more than 90 days after
the Section 3.1(a) Trigger Date, in order that the Com-
pany may seek shareholder approval for the authorization
of such additional shares (such 30-day period, as it may
be extended, is herein called the "Substitution Period").
To the extent that the Company determines that some
action needs to be taken pursuant to the first and/or
third sentences of this Section 3.1(d), the Company (1)
shall provide, subject to Section 3.1(b) hereof, that
such action shall apply uniformly to all outstanding
Rights and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in
order to seek such shareholder approval for such authori-
<PAGE>
zation of additional shares and/or to decide the appro-
priate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue
a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 3.1(d),
the value of each Adjustment Share shall be the Market
Price per share of the Common Stock on the Section 3.1(a)
Trigger Date, and the per-share or per-unit value of any
Common Stock Equivalent shall be deemed to equal the Mar-
ket Price per share of the Common Stock on such date.
(e) The Company covenants and agrees that, after the
Separation Date, it will not, except as permitted by Section
5.1 or Section 5.4, take (or permit any Subsidiary to
take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to
be afforded by the Rights.
3.2 Flip-over. (a) Prior to the close of business on the
Expiration Date, the Company will not enter into any
agreement with respect to, consummate, permit to occur or
suffer to exist any Flip-over Transaction or Event unless
<PAGE>
the Company shall have taken such action as shall be
necessary to ensure and provide, and shall have entered
into a supplemental agreement with the Flip-over Entity,
for the benefit of the holders of the Rights, providing,
that upon consummation or occurrence of the Flip-over
Transaction or Event, (i) each holder of a Right, except
as provided in Section 3.1(b) hereof, shall thereafter
have the right to receive, upon the exercise thereof at
the then-current Exercise Price in accordance with the
terms of this Agreement, such number of validly autho-
rized and issued, fully paid, nonassessable and freely
tradable shares of Flip-over Stock, not subject to any
liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained
by dividing (1) the then-current Exercise Price by (2)
50% of the Market Price per share of the Flip-over Stock
on the date of consummation of such Flip-over Transaction
or Event (such right to be appropriately adjusted in
order to protect the interests of the holders of Rights
generally in the event that after such date of consumma-
tion or occurrence an event of a type analogous to any of
the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Flip-over Stock), (ii) the
Flip-over Entity shall thereafter be liable for, and
<PAGE>
shall assume, by virtue of such Flip-over Transaction or
Event and such supplemental agreement, all the obliga-
tions and duties of the Company pursuant to this Agree-
ment; and (iii) the provisions of Section 3.1(a) shall be
of no effect following the first occurrence of any Flip-over
Transaction or Event. The provisions of this Sec-
tion 3.2 shall apply to successive Flip-over Transactions
or Events.
(b) Prior to the close of business on the Expiration Date,
unless the Rights will be redeemed pursuant to Section
5.1 hereof in connection therewith, the Company shall not
enter into any agreement with respect to, consummate or
permit to occur any Flip-over Transaction or Event if at
the time thereof there are any rights, warrants or secu-
rities outstanding or any other arrangements, agreements
or instruments which would eliminate or otherwise dimin-
ish in any material respect the benefits intended to be
afforded by this Rights Agreement to the holders of
Rights (other than an Acquiring Person or Adverse Person
or an Affiliate or Associate thereof) upon consummation
of such transaction.
(c) Notwithstanding anything in this Agreement to the con-
trary, Section 3.2 shall not be applicable to a trans-
action described in subparagraphs (i) and (ii) of the
<PAGE>
definition of Flip-over Transaction or Event if (i) such
transaction is consummated with a Person or Persons (or a
wholly owned subsidiary of any such Person or Persons)
who acquired shares of Common Stock pursuant to a tender
offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Sec-
tion 3.1(a)(i) relating to offers for all outstanding
shares, (ii) the price per share of Common Stock offered
in such transaction is not less than the price per share
of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such tender
offer or exchange offer and (iii) the form of consider-
ation being offered to the remaining holders of shares of
Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such tender
offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 3.2(c), all
Rights hereunder shall expire.
Article IV - The Rights Agent
4.1 General. (a) The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company agrees to
<PAGE>
pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with
the acceptance and administration of this
Agreement, including the costs and expenses of defending
against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered
or omitted by it in connection with its administration of
this Agreement in reliance upon any certificate for
securities purchasable upon exercise of Rights, Rights
Certificate, certificate for other securities of the
Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed,
<PAGE>
executed and, where necessary, verified or acknowledged,
by the proper person or persons.
4.2 Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent
or any successor Rights Agent may be merged or with which
it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or
any successor Rights Agent is a party, or any corporation
succeeding to the shareholder services business of the
Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of
Section 4.4 hereof. In case at the time such successor
Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been countersigned
but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights
Certificates have not been countersigned, any successor
<PAGE>
Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such
cases such Rights Certificates will have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is
changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so counter-
signed; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in
its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
4.3 Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
<PAGE>
(a) The Rights Agent may consult with legal counsel (which
may be counsel for the Company), and the opinion of such
counsel will be full and complete authorization and
protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that
any fact or matter be proved or established by
the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by a person believed by the Rights
Agent to be the Chairman of the Board, the President or
any Vice President and by the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights
Agent for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance
upon such certificate.
<PAGE>
(c) The Rights Agent will be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of
any of the statements of fact or recitals contained in
this Agreement or in the certificates for securities
purchasable upon exercise of Rights or the Rights Cer-
tificates (except its countersignature thereof) or be re-
quired to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Company only.
(e) The Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due authorization,
execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any certificate
for securities purchasable upon exercise of Rights or
Rights Certificate (except its countersignature thereof);
nor will it be responsible for any breach by the Company
of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor will it be responsible
for any change in the exercisability of the Rights; nor
will it be responsible for any adjustment required under
the provisions of Section 2.4, 3.1 or 3.2 hereof or
<PAGE>
responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with
respect to the exercise of Rights after receipt of the
certificate contemplated by Section 2.4 describing any
such adjustment); nor will it by any act hereunder be
deemed to make any representation or warranty as to the
authorization or reservation of any securities purchas-
able upon exercise of any Rights or as to whether any
securities purchasable upon exercise of Rights will, when
issued, be duly and validly authorized, executed, issued
and delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, ac-
knowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other
acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of
its duties hereunder from any person believed by the
Rights Agent to be the Chairman of the Board, the Presi-
<PAGE>
dent or any Vice President or the Secretary or any Assis-
tant Secretary or the Treasurer or any Assistant Treasur-
er of the Company, and to apply to such persons for
advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered
by it in good faith in accordance with instructions of
any such person.
(h) The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in
Common Stock, Rights, or other securities of the Company
or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and
freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company
or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or
<PAGE>
misconduct, provided reasonable care was exercised in the
selection and continued employment thereof.
4.4 Change of Rights Agent. The Rights Agent may resign and
be discharged from its duties under this Agreement upon
90 days' notice (or such lesser notice as is acceptable
to the Company) in writing mailed to the Company and to
each transfer agent of Common Stock by registered or
certified mail, and to the holders of the Rights by
first-class mail (at the expense of the Company). The
Company may remove the Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent and to each transfer
agent of the Common Stock by registered or certified
mail, and to the holders of the Rights by first-class
mail. If the Rights Agent should resign or be removed or
otherwise become incapable of acting, the Company will
appoint a successor to the Rights Agent. If the Company
fails to make such appointment within a period of 30 days
after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of any
Rights (which holder shall, with such notice, submit such
holder's Rights Certificate for inspection by the Company),
<PAGE>
then the holder of any Rights may apply to any
court of competent jurisdiction for the appointment of a
new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws
of the United States or any State, in good standing,
having an office in the State of New York or the State of
Minnesota, which is authorized under such laws to exercise
the powers of the Rights Agent contemplated by this
Agreement and is subject to supervision or examination by
federal or state authority and which has at the time of
its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000. After appointment, the
successor Rights Agent will be vested with the same
powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act
or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property
at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of
any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and
each transfer agent of the Common Stock, and mail a
notice thereof in writing to the holders of the Rights.
<PAGE>
Failure to give any notice provided for in this Section
4.4, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
Article V - Miscellaneous
5.1 Redemption. (a) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of
(i) the close of business on the 10th day following the
Stock Acquisition Date and (ii) the Expiration Date,
redeem all but not less than all the then-outstanding
Rights at the Redemption Price; provided, however, if the
Board of Directors of the Company authorizes redemption
of the Rights in either of the circumstances set forth in
clauses (i) and (ii) below, then there must be Continuing
Directors then in office and such authorization shall
require the concurrence of a majority of such Continuing
Directors: (i) such authorization occurs on or after the
time a Person becomes an Acquiring Person, or (ii) such
authorization occurs on or after the date of a change
(resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement
of such solicitation if any Person who is a participant
<PAGE>
in such solicitation has stated (or, if upon the com-
mencement of such solicitation, a majority of the Board
of Directors of the Company has determined in good faith)
that such Person (or any of its Affiliates or Associates)
intends to take, or may consider taking, any action which
would result in such Person becoming an Acquiring Person
or which would cause the occurrence of a Triggering Event
unless, concurrent with such solicitation, such Person
(or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D-1
(or any successor form) filed with the Securities and
Exchange Commission for all outstanding shares of Common
Stock not beneficially owned by such Person (or by its
Affiliates or Associates). The Board of Directors may
not redeem any Rights following a determination pursuant
to Section 3.1(a)(ii) that any Person is an Adverse Per-
son. Notwithstanding anything contained in this Agree-
ment to the contrary, the Rights shall not be exercisable
after the first occurrence of a Triggering Event until
such time as the Company's right of redemption set forth
in the first sentence of this Section 5.1(a) has expired.
The Company may, at its option, pay the Redemption Price
in cash, shares of Common Stock (based on the Market
<PAGE>
Price of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evi-
dence of which shall have been filed with the Rights
Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate,
and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right
so held. Promptly after the action of the Board of
Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the
Rights Agent and the holders of the then-outstanding
Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry
books of the Rights Agent or, prior to the Separation
Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemp-
tion will state the method by which the payment of the
Redemption Price will be made.
<PAGE>
5.2 Expiration. The Rights and this Agreement shall expire
on the close of business on the Expiration Date, and no
Person shall have any rights pursuant to this Agreement
or any Right after the close of business on the Expira-
tion Date, except, if the Rights are exchanged or re-
deemed, as provided in Section 3.1(c) or 5.1 hereof.
5.3 Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue
new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any
adjustment or change in the number or kind or class of
shares of stock purchasable upon exercise of Rights made
in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of
shares of Common Stock following the Separation Date and
prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock
so issued or sold pursuant to the exercise of stock op-
tions or under any employee plan or arrangement, granted
or awarded as of the Separation Date, or upon the redemption,
exercise, conversion or exchange of the Company's
<PAGE>
Series B Convertible Preferred Stock or any other securi-
ties hereinafter issued by the Company, and (b) may, in
any other case, if deemed necessary or appropriate by the
Board of Directors of the Company, issue Rights Certifi-
cates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if,
and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant
risk of material adverse tax consequences to the Company
or the Person to whom such Rights Certificate would be
issued and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance
thereof.
5.4 Supplements and Amendments. Prior to the Separation
Date and subject to the penultimate sentence of this
Section 5.4, the Company may and the Rights Agent shall,
if the Company so directs, supplement or amend any provi-
sion of this Agreement without the approval of any hold-
ers of certificates representing shares of Common Stock.
From and after the Separation Date and subject to the
penultimate sentence of this Section 5.4, the Company may
and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval
<PAGE>
of any holders of Rights Certificates in order (i) to
cure any ambiguity, (ii) to correct or supplement any
provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder (which
lengthening or shortening, following the first occurrence
of an event set forth in clauses (i) and (ii) of the
first proviso to Section 5.1(a), shall be effective only
if there are Continuing Directors and shall require the
concurrence of a majority of such Continuing Directors)
or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the inter-
ests of the holders of Rights Certificates (other than an
Acquiring Person or Adverse Person or an Affiliate or
Associate of an Acquiring Person or Adverse Person);
provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then
redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than any Acquiring Person or
<PAGE>
Adverse Person and their Affiliates and Associates).
Notwithstanding anything in this Agreement to the con-
trary, no provision which provides for action by Continu-
ing Directors (including this sentence) may be amended
without the concurrence of a majority of Continuing
Directors after the first occurrence of an event set
forth in clauses (i) and (ii) of the first proviso of
Section 5.1(a). Upon the delivery of a certificate from
an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance
with the terms of this Section 5.4, the Rights Agent
shall execute such supplement or amendment. Notwith-
standing anything contained in this Agreement to the
contrary (except Section 2.4(b)), no supplement or amend-
ment shall be made which changes the Redemption Price,
the Expiration Date or the Exercise Price. Prior to the
Separation Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the
holders of Common Stock.
5.5 Rights of Action. Subject to the terms of this
Agreeement (including Section 3.1(b)), rights of action in re-
spect of this Agreement, other than rights of action
vested solely in the Rights Agent, are vested in the
respective holders of the Rights; and any holder of any
<PAGE>
Rights, without the consent of the Rights Agent or of the
holder of any other Rights, may, on such holder's own
behalf and for such holder's own benefit and the benefit
of other holders of Rights, enforce, and may institute
and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, such
holder's right to exercise such holder's Rights in the
manner provided in such holder's Rights Certificate and
in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is spe-
cifically acknowledged that the holders of Rights would
not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against
actual or threatened violations of, the obligations of
any Person subject to this Agreement.
5.6 Holder of Rights Not Deemed a Shareholder. No holder,
as such, of any Rights shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of
shares or any other securities which may at any time be
issuable on the exercise of such Rights, nor shall any-
thing contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights, as
such, any of the rights of a shareholder of the Company
<PAGE>
or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 5.7
hereof), or to receive dividends or subscription rights,
or otherwise, until such Rights shall have been exercised
or exchanged in accordance with the provisions hereof.
5.7 Notice of Proposed Actions. In case the Company shall
propose after the Separation Date and prior to the Expi-
ration Date (i) to effect or permit occurrence of any
Flip-over Transaction or Event, or (ii) to effect the
liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each
holder of a Right, in accordance with Section 5.8 hereof,
a notice of such proposed action, which shall specify the
date on which such Flip-over Transaction or Event, liqui-
dation, dissolution, or winding up is to take place, and
such notice shall be so given at least 20 Business Days
prior to the date of the taking of such proposed action.
5.8 Notices. Notices or demands authorized or required by
this Agreement to be given or made by the Rights Agent or
<PAGE>
by the holder of any Rights to or on the Company shall be
sufficiently given or made when delivered or when sent by
first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights
Agent) as follows:
The St. Paul Companies, Inc.
385 Washington Street
St. Paul, Minnesota 55102
Attention: Corporate Secretary
Notices or demands authorized or required by this Agree-
ment to be given or made by the Company or by the holder
of any Rights to or on the Rights Agent shall be suffi-
ciently given or made when delivered or when sent by
first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as
follows:
First Chicago Trust Company of New York
30 West Broadway
11th Floor
New York, New York 10007
Attention: Tenders and Exchanges
Administration
Notices or demands authorized or required by this Agree-
ment to be given or made by the Company or the Rights
Agent to or on the holder of any Rights shall be suffi-
ciently given or made when delivered or when sent by
first-class mail, postage prepaid, addressed to such
holder at the address of such holder as it appears upon
<PAGE>
the registry books of the Rights Agent or, prior to the
Separation Date, on the registry books of the transfer
agent for the Common Stock. Any notice which is mailed
in the manner herein provided shall be deemed given,
whether or not the holder receives the notice.
5.9 Costs of Enforcement. The Company agrees that if the
Company or any other Person the securities of which are
purchasable upon exercise of Rights fails to fulfill any
of its obligations pursuant to this Agreement, then the
Company or such Person will reimburse the holder of any
Rights for the costs and expenses (including legal fees)
incurred by such holder in actions to enforce such
holder's rights pursuant to any Rights or this Agreement.
5.10 Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the
Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
5.11 Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the
Company, the Rights Agent and the holders of the Rights
any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and
<PAGE>
exclusive benefit of the Company, the Rights Agent and
the holders of the Rights.
5.12 Descriptive Headings. Descriptive headings appear
herein for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
5.13 Governing Law. This Agreement and each Right issued
hereunder shall be deemed to be a contract made under the
laws of the State of Minnesota and for all purposes shall
be governed by and construed in accordance with the laws
of such state applicable to contracts to be made and
performed entirely within such state, except for Article
IV hereof, which shall be governed by the laws of the
State of New York.
5.14 Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one
and the same instrument.
5.15 Severability. If any term or provision hereof or the
application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such
term or provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or
<PAGE>
unenforceability without invalidating or rendering unen-
forceable the remaining terms and provisions hereof or
the application of such term or provision to circumstanc-
es other than those as to which it is held invalid or
unenforceable.
5.16 Suspension of Exercisability. To the extent that the
Company determines in good faith that some action need be
taken pursuant to this Agreement to comply with federal
or state securities laws, the Company may suspend the ex-
ercisability of the Rights for a period of up to 90 days
following the date of the occurrence of the Separation
Date in order to take such action or comply with such
laws. In the event of any such suspension, the Company
shall issue as promptly as practicable a public announcement
stating that the exercisability of the Rights has
been temporarily suspended. Notice thereof pursuant to
Section 5.8 shall not be required.
5.17 Fractional Shares. If the Company elects not to issue
certificates representing fractional shares upon exercise
or redemption of Rights, the Company shall, in lieu
thereof, in the sole discretion of the Board, either (a)
evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that
<PAGE>
such agreement shall provide that each holder of a depos-
itary receipt shall have all of the rights, privileges
and preferences to which he would be entitled as a bene-
ficial owner of such fractional share, or (b) pay to the
registered holder of such Rights the same fraction of the
Market Price of one share of the stock issuable upon such
exercise on the date of exercise.
5.18 Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation
of the number of shares of Common Stock outstanding at
any particular time, including for purposes of determin-
ing the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence
of Rule 13d-3(d)(1)(i) of the General Rules and Regula-
tions under the Securities Exchange Act of 1934. The
Board of Directors of the Company (with, where specifi-
cally provided for herein, the concurrence of the Contin-
uing Directors) shall have the exclusive power and au-
thority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board
(with, where specifically provided for herein, the con-
currence of the Continuing Directors) or to the Company,
<PAGE>
or as may be necessary or advisable in the administration
of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed neces-
sary or advisable for the administration of this Agree-
ment (including a determination to redeem or not redeem
the Rights or to amend this Agreement). All such ac-
tions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omis-
sions with respect to the foregoing) which are done or
made by the Board (with, where specifically provided for
herein, the concurrence of the Continuing Directors) in
good faith shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights
and all other parties and (y) not subject the Board or
the Continuing Directors to any liability to the holders
of the Rights.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the date
first above written.
Attest: THE ST. PAUL COMPANIES, INC.
/s/ Bruce A. Backberg By /s/ Patrick A. Thiele
-------------------------- --------------------------
Name: Patrick A. Thiele
Title: Executive Vice President
and Chief Financial
Officer
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By /s/ Joanne Gorostiola
-------------------------- ---------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
dated as of December 4, 1989
as amended as of March 9, 1990
and as amended and restated as of
August 1, 1995
between
THE ST. PAUL COMPANIES, INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
as Rights Agent
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
Table of Contents
Page
Article I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. . . . . . . . 2
Article II
THE RIGHTS
Section 2.1 Summary of Rights. . . . . . . . . 15
Section 2.2 Legend on Common Stock
Certificates . . . . . . . . . . 15
Section 2.3 Separation and Exercise. . . . . . 16
Section 2.4 Exercise Price, Number of Rights . 21
Section 2.5 Date on Which Exercise Is
Effective. . . . . . . . . . . . 24
Section 2.6 Execution, Authentication,
Delivery and Dating of Rights
Certificates . . . . . . . . . . 25
Section 2.7 Registration, Registration of
Transfer and Exchange. . . . . . 26
Section 2.8 Mutilated, Destroyed, Lost and
Stolen Rights Certificates . . . 28
Section 2.9 Persons Deemed Owners. . . . . . . 31
Section 2.10 Delivery and Cancellation of
Certificates . . . . . . . . . . 31
Section 2.11 Agreement of Rights Holders. . . . 31
Article III
CERTAIN TRANSACTIONS
Section 3.1 Flip-in. . . . . . . . . . . . . . 33
Section 3.2 Flip-over. . . . . . . . . . . . . 42
Article IV
THE RIGHTS AGENT
Section 4.1 General. . . . . . . . . . . . . . 45
Section 4.2 Merger or Consolidation or
Change of Name of Rights Agent . 47
Section 4.3 Duties of Rights Agent . . . . . . 48
Section 4.4 Change of Rights Agent . . . . . . 53
<PAGE>
Article V
MISCELLANEOUS Page
Section 5.1 Redemption . . . . . . . . . . . . 55
Section 5.2 Expiration . . . . . . . . . . . . 58
Section 5.3 Issuance of New Rights
Certificates . . . . . . . . . . 58
Section 5.4 Supplements and Amendments . . . . 59
Section 5.5 Rights of Action . . . . . . . . . 61
Section 5.6 Holder of Rights Not Deemed
a Shareholder. . . . . . . . . . 62
Section 5.7 Notice of Proposed Actions . . . . 63
Section 5.8 Notices. . . . . . . . . . . . . . 63
Section 5.9 Costs of Enforcement . . . . . . . 65
Section 5.10 Successors . . . . . . . . . . . . 65
Section 5.11 Benefits of This Agreement . . . . 65
Section 5.12 Descriptive Headings . . . . . . . 66
Section 5.13 Governing Law. . . . . . . . . . . 66
Section 5.14 Counterparts . . . . . . . . . . . 66
Section 5.15 Severability . . . . . . . . . . . 66
Section 5.16 Suspension of Exercisability . . . 67
Section 5.17 Fractional Shares. . . . . . . . . 67
Section 5.18 Determinations and Actions by the
Board of Directors, etc. . . . . 68
EXHIBITS
Exhibit A Letter to Shareholders and
Summary of Terms (Not Amended)
Exhibit B Form of Rights Certificate
Exhibit C Form of Statement with Respect
to Preferred Stock (Not Amended)
<PAGE>
EXHIBIT A
(Not Amended)
TO OUR SHAREHOLDERS:
On Dec. 4, your Board of Directors adopted a Shareholder Protection Rights
Plan. This letter briefly describes the Rights Plan and your Board's reasons
for adopting it. I have also enclosed additional, summary information.
The Rights Plan was adopted to enable your Board to protect your rights against
unsolicited and unfair or coercive attempts to acquire control of your
company. These might take the form of a partial or two-tier tender offer,
an offer for your shares at less than a full and fair price, a "market sweep"
or other takeover tactics which your Board believes are not in your best
interests.
This plan was not designed or adopted to deal with any specific known efforts
to gain control of your company. The plan will not interfere with any merger
or other business combination approved by your Board as being in the best
interest of shareholders and other stakeholders. The plan also does not weaken
your company's financial strength, interfere with our business plans or dilute
your investment. Also, the issuance of rights is not taxable to the company
or to you.
No rights certificates will be issued since they presently trade with your
common stock, and you need not take any action at this time with respect to
this rights distribution.
Over 1,000 other corporations have adopted shareholder rights plans. Your
Board of Directors believes you are entitled to similar protection.
A complete copy of the Rights Agreement may be obtained without charge by
writing to your company at 385 Washington St., St. Paul, MN 55102, Attention:
Corporate Secretary.
Sincerely,
Robert J. Haugh
Chairman
<PAGE>
Exhibit A, cont'd
THE ST. PAUL COMPANIES, INC.
SUMMARY OF SHAREHOLDER PROTECTION RIGHTS PLAN
Distribution and
Transfer of Rights;
Right Certificates: The Board has declared a dividend of one
Right for each share of Common Stock
outstanding. Prior to the Separation
Date referred to below, the Rights would
be evidenced by and trade with the Com-
mon Stock and will not be exercisable.
After the Separation Date the Company
will mail Rights Certificates to share-
holders and the Rights would become
transferable apart from the Common
Stock.
Separation Date: Rights would separate from the Common
Stock and become exercisable following
the earlier of (i) the tenth day (or
such earlier or later date, not beyond
the thirtieth day, as the Board may de-
cide) after any person becomes the bene-
ficial owner (a broadly defined term) of
15% or more of the Common Stock (and
thereby becomes an "Acquiring Person"),
or (ii) the tenth day (or such later
date as the Board may decide) after any
person commences a tender or exchange
offer that would result in such person
becoming the beneficial owner of 15% or
more of the Common Stock.
Exercise of Rights: After the Separation Date, each Right
would entitle the holder to purchase,
for the Exercise Price, one
one-thousandth (1/1000) of a share of
Preferred Stock designed so that each
one one-thousandth of a share has eco-
nomic and voting terms similar to those
of one share of Common Stock (e.g., each
full share of Preferred Stock would have
1000 votes).
<PAGE>
"Flip-over" Trigger: After any person becomes an Acquiring
Person, the Company may not (i) consoli-
date or merge with the Acquiring Person,
(ii) sell 50% or more of its assets or
earning power to one or more persons in
one or a series of transactions within a
period of two years or (iii) engage in
certain specified self-dealing transac-
tions with the Acquiring Person, unless
proper provision is made so that each
Right would thereafter become a right to
buy, at the Exercise Price, that number
of shares of capital stock with the
greatest voting power of the Acquiring
Person having a market value of twice
the Exercise Price.
Redemption: The Rights may be redeemed by the Board
at any time until ten days (or such ear-
lier or later date, not beyond the 30th
day, as may be fixed by the Board) after
any person becomes the beneficial owner
of 15% or more of the Common Stock, at a
Redemption Price of $0.01 per Right;
provided, however, that if following the
expiration of this redemption period but
prior to the occurrence of any Flip-over
trigger such Acquiring Person's stake in
the Company is reduced below 10%, the
right of redemption is revived.
Power to Amend: The Board may amend the Plan in any re-
spect without the consent of the holders
of Rights until the Separation Date.
Thereafter, the Board may amend the Plan
in any respect not materially adverse to
Rights holders generally, except that
the Board may not reduce the Redemption
Price, accelerate the Final Expiration
Date or reduce the number of shares of
Preferred Stock issuable upon exercise
of a Right.
Expiration: The Rights will expire ten years from
the date of their issuance unless pre-
viously redeemed.
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. W- Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY
EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR ADVERSE PERSONS OR
AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES
OF ANY OF THE FOREGOING WILL BE VOID.
Rights Certificate
THE ST. PAUL COMPANIES, INC.
This certifies that , or regis-
tered assigns, is the registered holder of the number of
Rights set forth above, each of which entitles the regis-
tered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Protection Rights Agreement,
dated as of December 4, 1989 (as such may be amended from
time to time, the "Rights Agreement"), between The St. Paul
Companies, Inc., a Minnesota corporation (the "Company"),
and First Chicago Trust Company of New York, a New York
corporation, as Rights Agent (the "Rights Agent", which term
shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after
the Separation Date (as such term is defined in the Rights
Agreement) and prior to the close of business on Decem-
ber 19, 1999 (or, if the Separation Date occurs subsequent
<PAGE>
to December 19, 1996 but prior to December 19, 1999, the
third anniversary of the Separation Date), at the principal
office of the Rights Agent, one two-thousandth (1/2000) of a
fully paid share (adjusted from 1/1000 of a share for the
effect the Company's two-for-one stock split on May 17,
1994) of Preferred Stock, without par value (the "Preferred
Stock"), of the Company (subject to adjustment as provided
in the Rights Agreement), at the Exercise Price referred to
below, upon presentation and surrender of this Rights Cer-
tificate with the Form of Election to Exercise duly executed
at the principal office of the Rights Agent in New York.
The Exercise Price shall initially be $92.50 per Right (as
adjusted from the original Exercise Price of $185.00 to
reflect the Company's two-for-one stock split on May 17,
1994) and shall be subject to further adjustment in certain
events as provided in the Rights Agreement.
In certain circumstances described in the Rights
Agreement, the Rights evidenced hereby may entitle the reg-
istered holder thereof to purchase securities of an entity
other than the Company or securities or assets of the Compa-
ny other than Preferred Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the
terms, provisions and conditions of the Rights Agreement,
which terms, provisions and conditions are hereby incorpo-
rated herein by reference and made a part hereof and to
<PAGE>
which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obliga-
tions, duties and immunities hereunder of the Rights Agent,
the Company and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the principal
office of the Company and are available without cost upon
written request.
This Rights Certificate, with or without other
Rights Certificates, upon surrender at the office of the
Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of
like tenor evidencing an aggregate number of Rights equal to
the aggregate number of Rights evidenced by the Rights
Certificate or Rights Certificates surrendered. If this
Rights Certificate shall be exercised in part, the regis-
tered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement,
each Right evidenced by this Certificate may be (a) redeemed
by the Company under certain circumstances at its option at
a redemption price of $.005 per Right (as adjusted from the
original redemption price of $.01 to reflect the Company's
two-for-one stock split on May 17, 1994) or (b) exchanged by
the Company under certain circumstances, at its option, for
one share of Common Stock per Right (or, in certain cases,
<PAGE>
other securities or assets of the Company), subject to
further adjustment in certain events as provided in the
Rights Agreement.
No holder of this Rights Certificate, as such,
shall be entitled to vote or receive dividends or be deemed
for any purpose the holder of any securities which may at
any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be con-
strued to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or with-
hold consent to any corporate action, or to receive notice
of meetings or other actions affecting shareholders (except
as provided in the Rights Agreement), or to receive divi-
dends or subscription rights, or otherwise, until the Rights
evidenced by this Rights Certificate shall have been exer-
cised or exchanged as provided in the Rights Agreement.
This Rights Certificate shall not be valid or
obligatory for any purpose until it shall have been counter-
signed by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper
officers of the Company and its corporate seal. Dated as of
, 19 .
[SEAL]
ATTEST: THE ST. PAUL COMPANIES, INC.
By
-------------------------- --------------------------
Corporate Secretary Chairman and Chief
Executive Officer
Countersigned:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By
---------------------------
Authorized Officer
Date:
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby
sells, assigns and transfers unto
(Please print name
and address of transferee)
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within
Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: , 19
Signature Guaranteed: ------------------------
Signature
(Signature must correspond
to name as written upon the
face of this Rights Certifi-
cate in every particular,
without alteration or en-
largement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of
the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office
or correspondent in the United States.
(To be completed if true)
The undersigned hereby represents, for the benefit of all
holders of Rights and shares of Common Stock, that the
Rights evidenced by this Rights Certificate are not, and, to
the knowledge of the undersigned, have never been, Benefi-
<PAGE>
cially Owned by an Acquiring Person or an Adverse Person or
an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement).
Signature
NOTICE
In the event the certification set forth above is
not completed in connection with a purported assignment, the
Company will deem the Beneficial Owner of the Rights evi-
denced by the enclosed Rights Certificate to be an Acquiring
Person or an Adverse Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement)
or a transferee of any of the foregoing and accordingly will
deem the Rights evidenced by such Rights Certificate to be
void and not transferable or exercisable.
<PAGE>
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise the Rights Certificate.)
The undersigned hereby irrevocably elects to
exercise whole Rights represented
by the attached Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of such Rights
and requests that certificates for such shares be issued in
the name of:
Address:
Social Security or Other Taxpayer
Identification Number:
If such number of Rights shall not be all the Rights evi-
denced by this Rights Certificate, a new Rights Certificate
for the balance of such Rights shall be registered in the
name of and delivered to:
Address
Social Security or Other Taxpayer
Identification Number:
Dated: , 19
Signature Guaranteed: ---------------------------
Signature
(Signature must correspond
to name as written upon the
face of this Rights Certifi-
cate in every particular,
without alteration or en-
largement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of
the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office
or correspondent in the United States.
<PAGE>
(To be completed if true)
The undersigned hereby represents, for the benefit
of all holders of Rights and shares of Common Stock, that
the Rights evidenced by the attached Rights Certificate are
not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Ad-
verse Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).
Signature
NOTICE
In the event the certification set forth above is
not completed in connection with a purported exercise, the
Company will deem the Beneficial Owner of the Rights evi-
denced by the attached Rights Certificate to be an Acquiring
Person or an Adverse Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement)
or a transferee of any of the foregoing and accordingly will
deem the Rights evidenced by such Rights Certificate to be
void and not transferable or exercisable.<PAGE>
<PAGE>
Exhibit C
(Not Amended)
STATEMENT OF THE ST. PAUL COMPANIES, INC.
WITH RESPECT TO
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Pursuant To Section 302A.401, Subd. 3(b)
of Minnesota Statutes
The undersigned officers of The St. Paul Compa-
nies, Inc. (the "Corporation"), being duly authorized by the
Board of Directors of the Corporation, do hereby certify
that the following resolution was duly adopted by the Board
of Directors of the Corporation on December 4, 1989 pursuant
to Minnesota Statutes, Section 302A.401, Subd. 3(a):
RESOLVED, that there is hereby established, out of
the five million undesignated shares of the Corporation,
none of which has previously been authorized for issuance by
the Board of Directors, a series of Preferred Stock of the
Corporation designated as stated below and having the rela-
tive rights and preferences that are set forth below (the
"Series"):
Section 1. Designation and Amount. The Series
shall be designated as "Series A Junior Participating Pre-
ferred Stock" (the "Series A Preferred Stock"). The number
of shares constituting the Series shall initially be fifty
thousand, which number may from time to time be increased or
<PAGE>
decreased (but not below the number then outstanding) by the
Board of Directors.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any
series of undesignated shares hereinafter created ranking
prior and superior to the Series A Preferred Stock, the
holders of Series A Preferred Stock shall be entitled to re-
ceive, when, as and if declared by the Board of Directors,
dividends payable in cash or in kind (other than dividends
payable in shares of Common Stock, or a subdivision of the
outstanding shares of Common Stock, by reclassification or
otherwise) on the same day as each dividend is paid on the
Corporation's voting common stock (respectively, a "Dividend
Payment Date" and the "Common Stock"), commencing on the
first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in
an amount per share (rounded to the nearest cent), subject
to adjustment as provided herein from time to time, equal to
1000 times the aggregate per share amount of all dividends
payable in cash and 1000 times the aggregate per share
amount of all dividends payable in kind (other than divi-
dends payable in shares of Common Stock, or a subdivision of
the outstanding shares of Common Stock, by reclassification
or otherwise) or other distributions declared on the Common
Stock since the immediately preceding Dividend Payment Date,
or, with respect to the first Dividend Payment Date, since
<PAGE>
the first issuance of a share or fraction of a share of Se-
ries A Preferred Stock. In the event the Corporation shall
at any time (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the
amount to which holders of Series A Preferred Stock are
thereafter entitled under the preceding sentence shall be
adjusted by multiplying the amount immediately prior to such
event by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) above simultaneously with the declaration of
any dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided
that, in the event regular dividends on the Common Stock are
suspended, dividends on the Series A Preferred Stock shall
likewise be suspended until dividends on the Common Stock
are resumed.
(C) The Board of Directors may fix a record date
for the determination of holders of Series A Preferred Stock
entitled to receive payment of a dividend or distribution
<PAGE>
declared thereon, which record date shall be the same day as
the record date fixed for the payment of the simultaneous
dividend or distribution on the Common Stock that, pursuant
to paragraph (A) above, requires the payment of the dividend
or distribution on the Series A Preferred Stock.
Section 3. Voting Rights. The holders of Series
A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment here-
inafter set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to 1000 votes on all mat-
ters submitted to a vote of the shareholders of the Corpora-
tion. In the event the Corporation shall at any time (i)
declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the number of votes
per share to which holders of Series A Preferred Stock are
thereafter entitled shall be adjusted by multiplying the
number of votes per share immediately prior to such event by
a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided by law, the
holders of Series A Preferred Stock and the holders of
<PAGE>
Common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
Section 4. Reacquired Shares. Any shares or
fractional shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatso-
ever shall be retired and cancelled promptly after the ac-
quisition thereof. All such shares shall upon their cancel-
lation become authorized but unissued undesignated shares
and may be reissued as part of a new series of shares to be
created by the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
Section 5. Liquidation, Dissolution or Winding
Up. On any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the hold-
ers of Common Stock or other stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the
holders of Series A Preferred Stock shall have received,
subject to the restrictions set forth in Article III of the
Corporation's Restated Articles of Incorporation, an aggre-
gate amount per share equal to 1000 times the aggregate
amount to be distributed per share to holders of Common
Stock or (2) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except dis-
tributions made ratably on the Series A Preferred Stock and
<PAGE>
all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) com-
bine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders
of Series A Preferred Stock are entitled under the proviso
in clause (1) of the preceding sentence shall be adjusted by
multiplying the amount in effect immediately after such
event by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
Section 6. Consolidation, Merger, etc. In case
the Corporation shall enter into any consolidation, merger,
combination, exchange or other transaction in which the
shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property,
then in any such case the outstanding Series A Preferred
Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1000 times the
aggregate amount of stock, securities, cash and/or any other
<PAGE>
property (payable in kind), as the case may be, into which
or for which, and in the same proportion as, each share of
Common Stock is changed or exchanged. In the event the Cor-
poration shall at any time (i) declare any dividend on Com-
mon Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstand-
ing Common Stock into a smaller number of shares, then in
each such case the amount to which the holders of Series A
Preferred Stock are thereafter entitled as set forth in the
preceding sentence, shall be adjusted by multiplying the
amount in effect immediately prior to such event by a frac-
tion the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 7. No Redemption. The Series A Preferred
Stock shall not be redeemable.
Section 8. Ranking. The Series A Preferred Stock
shall rank junior to all other series of the Corporation's
undesignated shares hereinafter created as to the payment of
dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
Section 9. Fractional Shares. Series A Preferred
Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's frac-
tional shares, to exercise voting rights, receive dividends,
<PAGE>
participate in distributions and to have the benefit of all
other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have signed this Statement
this day of , 19 .
President
Corporate Secretary
<PAGE>
Exhibit 11
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1995 1994 1995 1994
----- ----- ----- -----
EARNINGS:
Primary:
Net income, as reported $112,967 127,762 223,563 192,199
PSOP preferred dividends declared
(net of taxes) (2,139) (2,105) (4,285) (4,214)
-------- -------- -------- --------
Net income, as adjusted $110,828 125,657 219,278 187,985
======== ======== ======== ========
Fully diluted:
Net income, as reported $112,967 127,762 223,563 192,199
Additional PSOP expense (net
of taxes) due to assumed
conversion of preferred stock (871) (947) (1,745) (1,897)
Dividend on monthly income
preferred
securities (net of taxes) 1,009 - 1,009 -
-------- -------- -------- --------
Net income, as adjusted $113,105 126,815 222,827 190,302
======== ======== ======== ========
SHARES:
Primary:
Weighted average number of common
shares outstanding, per
consolidated financial
statements 84,414 84,026 84,340 84,273
Additional dilutive effect of
outstanding stock options (based
on treasury stock method using
average market price) 948 535 937 515
-------- -------- -------- --------
Weighted average, as adjusted 85,362 84,561 85,277 84,788
======== ======== ======== ========
Fully diluted:
Weighted average number of common
shares outstanding, per
consolidated financial
statements 84,414 84,026 84,340 84,273
Additional dilutive effect of:
Convertible PSOP preferred stock 4,034 4,079 4,040 4,084
Monthly income preferred securities 1,774 - 892 -
Outstanding stock options
(based on treasury stock
method using market price at
end of period) 935 573 959 578
-------- -------- -------- --------
Weighted average, as adjusted 91,157 88,678 90,231 88,935
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Primary $1.30 1.49 2.57 2.22
Fully diluted $1.24 1.43 2.47 2.14
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Exhibit 12
Computation of Ratios
(In thousands, except ratios)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
----- ----- ----- -----
EARNINGS:
Income before income taxes $143,254 159,194 291,400 241,197
Add: fixed charges 19,291 15,392 36,736 32,870
------- ------- ------- -------
Income, as adjusted $162,545 174,586 328,136 274,067
======= ======= ======= =======
FIXED CHARGES:
Interest costs $13,740 10,358 25,357 20,212
Rental expense (1) 5,551 5,034 11,379 12,658
------- ------- ------- -------
Total fixed charges $19,291 15,392 36,736 32,870
======= ======= ======= =======
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Fixed charges $19,291 15,392 36,736 32,870
PSOP preferred stock dividends 4,538 4,591 9,092 9,194
Dividends on monthly income
preferred securities 1,553 - 1,553 -
------- ------- ------- -------
Total fixed charges and preferred
stock dividends $25,382 19,983 47,381 42,064
======= ======= ======= =======
Ratio of earnings to fixed charges 8.43 11.34 8.93 8.34
======= ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends 6.40 8.74 6.93 6.52
======= ======= ======= =======
(1) Interest portion deemed implicit in total rent expense.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 9,621,174
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 662,461
<MORTGAGE> 0
<REAL-ESTATE> 617,867
<TOTAL-INVEST> 12,345,327
<CASH> 37,271
<RECOVER-REINSURE> 138,733
<DEFERRED-ACQUISITION> 337,825
<TOTAL-ASSETS> 18,534,775
<POLICY-LOSSES> 9,693,382
<UNEARNED-PREMIUMS> 2,169,679
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 586,512
<COMMON> 454,406
0
7,656
<OTHER-SE> 2,845,916
<TOTAL-LIABILITY-AND-EQUITY> 18,534,775
1,937,897
<INVESTMENT-INCOME> 376,565
<INVESTMENT-GAINS> 12,324
<OTHER-INCOME> 271,401
<BENEFITS> 1,403,829
<UNDERWRITING-AMORTIZATION> 426,922
<UNDERWRITING-OTHER> 476,036
<INCOME-PRETAX> 291,400
<INCOME-TAX> 67,837
<INCOME-CONTINUING> 223,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,563
<EPS-PRIMARY> 2.57
<EPS-DILUTED> 2.47
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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