<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1995
REGISTRATION NO. 33-58491
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
<TABLE>
<S> <C>
THE ST. PAUL COMPANIES, INC. ST. PAUL CAPITAL L.L.C.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
</TABLE>
------------------
<TABLE>
<S> <C>
MINNESOTA DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
41-0518860 41-1806290
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
</TABLE>
----------------
PATRICK A. THIELE
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE ST. PAUL COMPANIES, INC.
385 WASHINGTON STREET
ST. PAUL, MN 55102
(612) 221-7911
(Name, address, including zip code, and telephone number, including area code,
of registrants' principal executive offices and agent for service)
------------------
COPIES TO:
<TABLE>
<S> <C>
ANDREW I. DOUGLASS DONALD R. CRAWSHAW
Senior Vice President and General Counsel Sullivan & Cromwell
The St. Paul Companies, Inc. 125 Broad Street
385 Washington Street New York, NY 10004
St. Paul, MN 55102 (212) 558-4000
(612) 221-7911
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1)(2) PER SECURITY(4) PRICE(4) FEE(6)
<S> <C> <C> <C> <C>
St Paul Capital L.L.C. Convertible Preferred
Securities (2); The St. Paul Companies, Inc. Series
C Convertible Preferred Stock (1)(5); The St. Paul
Companies, Inc. Depositary Shares (1)(5); The St.
Paul Companies, Inc. Common Stock (1)(5); The St.
Paul Companies, Inc. Stock Purchase Rights (1)(5);
The St. Paul Companies, Inc. Convertible
Subordinated Debentures (3)(5); The St. Paul
Companies, Inc. Guarantee with respect to St. Paul
Capital L.L.C. Convertible Preferred Securities
(5)................................................ $207,000,000 $50 $207,000,000 $71,380
<FN>
(1) There are being registered hereunder such presently indeterminate number of
shares of The St. Paul Companies, Inc. Common Stock into which the St. Paul
Capital L.L.C. Convertible Preferred Securities or The St. Paul Companies,
Inc. Series C Convertible Preferred Stock, as the case may be, may be
converted or exchanged (through The St. Paul Companies, Inc. Convertible
Subordinated Debentures).
(2) Includes $27,000,000 of St. Paul Capital L.L.C. Convertible Preferred
Securities which may be sold pursuant to an over-allotment option granted
to the Underwriters.
</TABLE>
(FOOTNOTES CONTINUED ON NEXT PAGE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(3) The St. Paul Companies, Inc. Convertible Subordinated Debentures will be
Issued by The St. Paul Companies, Inc. to evidence the investment by St.
Paul Capital L.L.C. in The St. Paul Companies, Inc. Convertible Subordinated
Debentures of substantially all of the proceeds from (i) the offer and sale
of the St. Paul Capital L.L.C. Convertible Preferred Securities and (ii)
other capital contributions to St. Paul Capital L.L.C.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(5) No separate consideration will be received for The St. Paul Companies, Inc.
Guarantee, The St. Paul Companies, Inc. Convertible Subordinated Debentures,
The St. Paul Companies, Inc. Series C Convertible Preferred Stock, The St.
Paul Companies, Inc. Depositary Shares, The St. Paul Companies, Inc. Common
Stock or The St. Paul Companies, Inc. Stock Purchase Rights.
(6) Of this amount, $60,345 has been previously paid.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 9, 1995
3,600,000 PREFERRED SECURITIES
[LOGO] ST. PAUL CAPITAL L.L.C.
% CONVERTIBLE MONTHLY INCOME PREFERRED SECURITIES
(CONVERTIBLE MIPS-SM-*)
(LIQUIDATION PREFERENCE $50 PER SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO
COMMON STOCK OF,
THE ST. PAUL COMPANIES, INC.
---------
The % convertible monthly income preferred securities (the "Preferred
Securities") representing preferred limited liability company interests offered
hereby are being issued by St. Paul Capital L.L.C. ("St. Paul Capital"), a
Delaware limited liability company. All of the common limited liability company
interests of St. Paul Capital (the "Common Securities") are owned directly or
indirectly by The St. Paul Companies, Inc., a Minnesota corporation ("The St.
Paul" or the "Company"). St. Paul Capital was formed solely for the purpose of
issuing securities and investing the proceeds from the issuance thereof in debt
securities of The St. Paul. The proceeds from the offering of the Preferred
Securities will be used by St. Paul Capital to purchase from The St. Paul its
% Convertible Subordinated Debentures due 2025 (the "Convertible Subordinated
Debentures") having the terms described herein.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions from St. Paul Capital at an annual rate of % of the
liquidation preference of $50 per Preferred Security, accruing from the date of
original issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing , 1995 ("dividends"). See "Description
of Securities Offered -- Preferred Securities -- Dividends". The preferred
limited liability company interests represented by the Preferred Securities will
have a preference with respect to cash distributions and amounts payable on
liquidation over the Common Securities owned directly or indirectly by The St.
Paul.
(CONTINUED ON NEXT PAGE)
------------------
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN MATERIAL RISKS
TO BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE
PREFERRED SECURITIES AND THE CONVERTIBLE SUBORDINATED DEBENTURES MAY BE DEFERRED
AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING ST. PAUL CAPITAL
OFFERING PRICE COMMISSION (1) (2)(3)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Preferred Security.......................... $ 50.00 (2) $ 50.00
Total(4)........................................ $180,000,000 (2) $180,000,000
<FN>
- --------------------------
(1) St. Paul Capital and The St. Paul have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used by St. Paul Capital to purchase
convertible subordinated debentures of The St. Paul, the Underwriting
Agreement provides that The St. Paul will pay to the Underwriters, as
compensation ("Underwriters' Compensation"), $ per Preferred Security (or
$ in the aggregate). See "Underwriting".
(3) Expenses of the offering which are payable by The St. Paul are estimated to
be $410,000.
(4) St. Paul Capital and The St. Paul have granted the Underwriters an option
for 30 days to purchase up to an additional 540,000 Preferred Securities at
the initial public offering price per Preferred Security solely to cover
over-allotments. The St. Paul will pay to the Underwriters, as
Underwriters' Compensation, $ per Preferred Security purchased pursuant
to this option. If such option is exercised in full, the total initial
public offering price, underwriting commission and proceeds to St. Paul
Capital will be $207,000,000, $ , and $207,000,000, respectively. See
"Underwriting".
</TABLE>
----------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company on or about
, 1995.
- --------------------------
* MIPS is a service mark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO. J.P. MORGAN SECURITIES INC.
---------
The date of this Prospectus is , 1995.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
In the event of the liquidation of St. Paul Capital, holders of the
Preferred Securities will be entitled to receive for each Preferred Security a
liquidation preference of $50 plus accumulated and unpaid dividends to the date
of payment, subject to certain limitations. See "Description of Securities
Offered -- Preferred Securities -- Liquidation Rights".
Each Preferred Security is convertible in the manner described herein at the
option of the holder, at any time prior to the Conversion Expiration Date (as
hereinafter defined), into shares of Common Stock, without par value, of The St.
Paul ("St. Paul Common Stock") at the rate of shares of St. Paul Common
Stock for each Preferred Security (equivalent to a conversion price of $ per
share of St. Paul Common Stock), subject to adjustment in certain circumstances.
Whenever The St. Paul issues shares of St. Paul Common Stock upon conversion of
Preferred Securities, The St. Paul will issue, together with each share of St.
Paul Common Stock, under the circumstances described herein, one Stock Purchase
Right (as defined herein) entitling the holder thereof, under certain
circumstances, to purchase shares of Series A Junior Participating Preferred
Stock, without par value, of The St. Paul. See "Description of Securities
Offered -- Preferred Securities -- Conversion Rights" and "Description of St.
Paul Capital Stock". The last reported sale price of St. Paul Common Stock,
which is listed under the symbol "SPC" on the New York Stock Exchange ("NYSE"),
on May 8, 1995 was $48 7/8 per share. See "Market Prices of St. Paul Common
Stock". On and after , St. Paul Capital may, at its option,
cause the conversion rights of holders of the Preferred Securities to expire.
St. Paul Capital may exercise this option only if for 20 trading days within any
period of 30 consecutive trading days, including the last trading day of such
period, the Current Market Price (as defined herein) of St. Paul Common Stock
exceeds 120% of the conversion price of the Preferred Securities, subject to
adjustment in certain circumstances. In order to exercise its conversion
expiration option, St. Paul Capital must issue a press release announcing the
date upon which conversion rights will expire (the "Conversion Expiration
Date"), prior to the opening of business on the second trading day after a
period in which the condition in the preceding sentence has been met, but in no
event prior to . The Conversion Expiration Date shall be a date
not less than 30 and not more than 60 days following the date of the press
release described above. See "Description of Securities Offered -- Preferred
Securities -- Conversion Rights".
The Preferred Securities are also subject to exchange in the manner
described herein, in whole but not in part, into depositary shares (the
"Depositary Shares"), each representing ownership of 1/100th of a share of
Series C Cumulative Convertible Preferred Stock, without par value (liquidation
preference $5000 per share), of The St. Paul ("St. Paul Series C Convertible
Preferred Stock"), deposited with the Depositary (as defined herein) upon a vote
of the holders of a majority of the aggregate liquidation preference of all
outstanding Preferred Securities following the failure of holders of Preferred
Securities to receive dividends in full for 15 consecutive months (including any
such failure caused by the deferral of interest payments on the Convertible
Subordinated Debentures). Each Depositary Share will entitle the holder thereof
to all proportional rights and preferences of the St. Paul Series C Convertible
Preferred Stock (including dividend, voting, conversion and liquidation rights
and preferences). The St. Paul Series C Convertible Preferred Stock will have
dividend and conversion features substantially similar to those of the Preferred
Securities (adjusted proportionately per Depositary Share) but will not be
subject to mandatory redemption. See "Description of Securities Offered --
Preferred Securities -- Optional Exchange for Depositary Shares", "--
Description of St. Paul Series C Convertible Preferred Stock" and "--
Description of Depositary Shares".
In the event that, at any time after the Conversion Expiration Date, less
than 5% of the Preferred Securities remain outstanding, such Preferred
Securities shall be redeemable at the option of St. Paul Capital, in whole but
not in part, at a redemption price equal to the liquidation preference for such
Preferred Securities plus accumulated and unpaid dividends (whether or not
earned or declared). The Preferred Securities have no maturity date, although
they are subject to mandatory redemption upon the
2
<PAGE>
repayment at maturity or as a result of acceleration of the Convertible
Subordinated Debentures and St. Paul Capital is subject to dissolution in the
event of a Special Event (as defined herein), as described below. See
"Description of Securities Offered -- Preferred Securities -- Redemption".
Under certain circumstances following the occurrence of a Special Event, The
St. Paul may cause St. Paul Capital to be dissolved and cause the Convertible
Subordinated Debentures to be distributed to the holders of the Preferred
Securities. If Convertible Subordinated Debentures are so distributed, The St.
Paul will use its best efforts to have such Convertible Subordinated Debentures
listed on the same exchange on which the Preferred Securities are then listed.
See "Description of Securities Offered -- Preferred Securities -- Special Event
Distribution" and "-- Description of the Convertible Subordinated Debentures".
The St. Paul will irrevocably and unconditionally guarantee, on a
subordinated basis and to the extent set forth herein, the payment of dividends
by St. Paul Capital on the Preferred Securities (but only if and to the extent
declared from funds of St. Paul Capital legally available therefor), the
redemption price (including all accumulated and unpaid dividends) payable with
respect to the Preferred Securities and payments on liquidation with respect to
the Preferred Securities (but only to the extent of the assets of St. Paul
Capital available for distribution to holders of the Preferred Securities) (the
"Guarantee"). The Guarantee will be unsecured, will be subordinate to all other
liabilities of The St. Paul and will rank PARI PASSU (I.E., on a parity) with
the most senior preferred or preference stock now or hereafter issued by The St.
Paul. Given such subordination, if The St. Paul is unable to make timely
payments on the Convertible Subordinated Debentures, there is a substantial
likelihood that it would also be unable to make timely payments on the
Guarantee. See "Description of Securities Offered -- Description of the
Guarantee".
St. Paul Capital's ability to pay amounts due on the Preferred Securities is
solely dependent upon The St. Paul's ability to make payments on the Convertible
Subordinated Debentures. Interest payment periods on the Convertible
Subordinated Debentures are monthly but may be extended by The St. Paul for up
to 60 months (a "deferral of interest payments"), in which event monthly
dividend payments on the Preferred Securities by St. Paul Capital would be
deferred (but would continue to compound monthly). Prior to the end of any such
deferral of interest payments, The St. Paul may further defer interest payments,
provided that all such deferrals may not exceed 60 months in the aggregate, and
provided further that no such deferral may extend the stated maturity date of
the Convertible Subordinated Debentures. After The St. Paul has paid all accrued
and unpaid interest (including compound interest) following a deferral of
interest payments, it may again defer interest payments for up to 60 months,
subject to the preceding sentence. At the end of such deferral of interest
payments, The St. Paul is required to pay all accrued and unpaid interest
(including compound interest) and upon such repayment St. Paul Capital would be
able to pay all accumulated and unpaid dividends on the Preferred Securities
(including Additional Dividends, as defined herein). If The St. Paul does not
make interest payments on the Convertible Subordinated Debentures, St. Paul
Capital would not be able to declare or pay dividends on the Preferred
Securities. The Guarantee is a full and unconditional guarantee from the time of
its issuance, but does not apply to any payment of dividends unless and until
such dividends are declared. The failure of holders of the Preferred Securities
to receive dividends in full for 15 consecutive months (including any such
failure caused by a deferral of interest payments on the Convertible
Subordinated Debentures) would trigger the right of such holders to obtain
Depositary Shares representing St. Paul Series C Convertible Preferred Stock in
the manner described herein. See "Description of Securities Offered -- Preferred
Securities -- Dividends -- Description of the Guarantee" and "-- Description of
the Convertible Subordinated Debentures".
The Convertible Subordinated Debentures are subordinate in right of payment
to all Senior Indebtedness (as defined under "Description of Securities Offered
- -- Description of the Convertible Subordinated Debentures -- Subordination") of
The St. Paul. As of March 31, 1995, The St. Paul had approximately $628 million
of indebtedness constituting Senior Indebtedness and no indebtedness or other
obligations that would rank equally with the Convertible Subordinated
Debentures. The Convertible Subordinated Debentures will not be guaranteed by
St. Paul Capital Holdings, Inc.
3
<PAGE>
The Preferred Securities have been approved for listing on the NYSE, subject
to notice of issuance, under the symbol "SPC pfM".
The Preferred Securities will be represented by a global certificate or
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for the global certificate or
certificates. See "Description of Securities Offered -- Preferred Securities --
Book-Entry-Only Issuance -- The Depository Trust Company".
--------------
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE FOR THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY AND ST. PAUL COMMON STOCK AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NYSE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
4
<PAGE>
AVAILABLE INFORMATION
The St. Paul is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by The St. Paul may be inspected and copied at the
public reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Seven World Trade Center, 7th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained upon written request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, such material may also be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
The St. Paul and St. Paul Capital have filed with the Commission a
registration statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement.
No separate financial statements of St. Paul Capital have been included
herein. The St. Paul and St. Paul Capital do not consider that such financial
statements would be material to holders of Preferred Securities as St. Paul
Capital is a newly organized special purpose entity, has no operating history
and no independent operations and is not engaged in, and does not propose to
engage in, any activity other than as described under "St. Paul Capital".
Further, The St. Paul believes that financial statements of St. Paul Capital are
not material to the holders of the Preferred Securities as the Preferred
Securities have been structured to provide a guarantee by The St. Paul of the
Preferred Securities such that the holders of the Preferred Securities with
respect to the payment of dividends and amounts upon liquidation, dissolution
and winding-up are at least in the same position VIS-A-VIS the assets of The St.
Paul as a preferred stockholder of The St. Paul. See "St. Paul Capital" and
"Description of Securities Offered -- Preferred Securities", "-- Description of
the Guarantee" and "-- Description of the Convertible Subordinated Debentures".
The St. Paul beneficially owns directly or indirectly all of the Common
Securities of St. Paul Capital. The preferred limited liability company
interests represented by the Preferred Securities will have a preference with
respect to cash distributions and amounts payable on liquidation over the Common
Securities owned directly or indirectly by The St. Paul.
Each holder of Preferred Securities will be furnished annually with The St.
Paul's Annual Report to Shareholders, containing audited consolidated financial
statements of The St. Paul, as soon as such report is available after the end of
The St. Paul's fiscal year.
5
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference:
1. The St. Paul's Annual Report on Form 10-K for the year ended
December 31, 1994.
2. The St. Paul's Current Report on Form 8-K, dated January 24, 1995.
3. The description of the Preferred Securities contained in St. Paul
Capital's Registration Statement on Form 8-A, dated April 21, 1995.
4. The descriptions of the St. Paul Common Stock and Stock Purchase
Rights contained in The St. Paul's Registration Statements on Form 8-A, each
dated October 17, 1991.
All documents filed by The St. Paul with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering described herein shall hereby be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The St. Paul will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference into this
Prospectus, other than exhibits to such information (unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to The St. Paul Companies, Inc., 385 Washington Street, St. Paul,
Minnesota 55102, Attention: Bruce A. Backberg, Vice President and Corporate
Secretary, telephone (612) 221-7911.
6
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO)
APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS
OTHERWISE SPECIFIED, REFERENCES HEREIN TO THE "COMPANY" OR "THE ST. PAUL" REFER
TO THE ST. PAUL COMPANIES, INC. AND ITS CONSOLIDATED SUBSIDIARIES. PROSPECTIVE
INVESTORS SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS.
THE ST. PAUL COMPANIES, INC.
The St. Paul is a management company principally engaged, through its
subsidiaries, in three industry segments: property-liability insurance
underwriting (primarily through its wholly-owned subsidiary, St. Paul Fire and
Marine Insurance Company), insurance brokerage (primarily through its brokerage
subsidiary, Minet) and investment banking-asset management (through its 77%
stake in The John Nuveen Company). As a management company, The St. Paul
oversees the operations of its subsidiaries and provides them with capital,
management and administrative services. According to "Fortune" magazine's most
recent rankings, in terms of total assets, The St. Paul was the 25th largest
diversified financial company in the United States at December 31, 1993. At
March 23, 1995, The St. Paul and its subsidiaries employed approximately 12,900
persons.
The St. Paul's primary business is insurance underwriting, which accounted
for 88% of consolidated revenues in 1994. Insurance brokerage and investment
banking-asset management operations accounted for 7% and 5% of consolidated
revenues, respectively, in 1994.
The Company's principal executive offices are located at 385 Washington
Street, St. Paul, Minnesota 55102, and its telephone number is (612) 221-7911.
ST. PAUL CAPITAL L.L.C.
St. Paul Capital is a limited liability company formed under the laws of
Delaware and is managed by The St. Paul and The St. Paul's wholly-owned
subsidiary St. Paul Capital Holdings, Inc. ("St. Paul Holdings" and,
collectively with The St. Paul, the "Managing Members"). The Managing Members
own all of the Common Securities of St. Paul Capital. The Common Securities are
nontransferable and are and will be beneficially owned directly or indirectly by
the Company. The Managing Members are the sole members of St. Paul Capital and
are also the only managers of St. Paul Capital. St. Paul Capital's principal
executive offices are located at 385 Washington Street, St. Paul, Minnesota
55102, telephone: (612) 221-7911. The principal executive offices of the
Managing Members are located at 385 Washington Street, St. Paul, Minnesota
55102, telephone: (612) 221-7911.
Pursuant to St. Paul Capital's Amended and Restated Limited Liability
Company Agreement (the "L.L.C. Agreement"), the Managing Members have unlimited
liability for the debts, obligations and liabilities of St. Paul Capital in the
same manner as a general partner of a Delaware limited partnership (which does
not include obligations to holders of Preferred Securities in their capacity as
such). The holders of Preferred Securities will not be generally liable for the
debts, obligations or liabilities of St. Paul Capital solely by reason of being
a member of St. Paul Capital (subject to their obligation to repay any funds
wrongfully distributed to them).
St. Paul Capital exists exclusively for the purposes of issuing its
Preferred Securities and Common Securities and investing the proceeds thereof,
together with substantially all the capital contributed by the Managing Members
in respect of the Common Securities, in the Convertible Subordinated Debentures,
and may engage in no other activities now or in the future. The payment by St.
Paul Capital of dividends due on the Preferred Securities is solely dependent on
its receipt of interest payments on the Convertible Subordinated Debentures. To
the extent that aggregate interest payments on the Convertible Subordinated
Debentures exceed aggregate dividends on the Preferred Securities and such
dividends have been paid in full, St. Paul Capital may at times have excess
funds, which shall be distributed to the Company.
7
<PAGE>
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN MATERIAL RISKS
TO BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE
PREFERRED SECURITIES AND THE CONVERTIBLE SUBORDINATED DEBENTURES MAY BE DEFERRED
AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
[GRAPHIC]
1. ST. PAUL CAPITAL. The issuer of the Preferred Securities is a special
purpose Delaware limited liability company formed by The St. Paul and its
wholly-owned subsidiary St. Paul Holdings for the exclusive purposes of issuing
the Preferred Securities (which will constitute all of St. Paul Capital's
preferred limited liability company interests) and investing the proceeds
thereof, together with substantially all the capital contributed by the Managing
Members in respect of the Common Securities, in the Convertible Subordinated
Debentures. The Managing Members will own 100% of the Common Securities of St.
Paul Capital. St. Paul Capital will be taxed as a partnership for federal income
tax purposes.
2. PREFERRED SECURITIES. The Preferred Securities issued by St. Paul Capital
are preferred limited liability company interests that are convertible into St.
Paul Common Stock. Distributions on Preferred Securities are not eligible for
the dividends received deduction for federal income tax purposes.
3. PREFERRED SECURITIES PROCEEDS INVESTED IN CONVERTIBLE SUBORDINATED
DEBENTURES OF THE ST. PAUL. Proceeds of Preferred Securities will be used by St.
Paul Capital to purchase Convertible Subordinated Debentures of The St. Paul
having a maturity of 30 years from date of issue and the same economic terms as
the Preferred Securities. The St. Paul may elect to defer interest payments on
the Convertible Subordinated Debentures for up to 60 months, but only if The St.
Paul neither declares nor pays any dividends on its capital stock during such
deferral period. If The St. Paul defers interest payments on the Convertible
Subordinated Debentures, St. Paul Capital would be unable to pay dividends on
the Preferred Securities. The Convertible Subordinated Debentures are not
guaranteed by St. Paul Holdings.
8
<PAGE>
4. REPAYMENT OF CONVERTIBLE SUBORDINATED DEBENTURES. The St. Paul repays the
Convertible Subordinated Debentures in cash or the Convertible Subordinated
Debentures are converted into St. Paul Common Stock.
5. OWNERSHIP OF COMMON SECURITIES AND GUARANTEE. The Managing Members own
100% of the Common Securities of St. Paul Capital. The St. Paul guarantees, on
an unsecured and subordinated basis, (a) the payment of dividends (but only if
and to the extent declared from funds legally available therefor) on the
Preferred Securities, (b) the payment of the redemption price payable with
respect to the Preferred Securities (but only to the extent that funds of St.
Paul Capital are legally available therefor) and (c) payments on liquidation
with respect to the Preferred Securities (but only to the extent that assets of
St. Paul Capital are available for distribution to holders of Preferred
Securities).
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 3,600,000 of St. Paul Capital's % Convertible Monthly
Income Preferred Securities, liquidation preference of
$50 per security. Additionally, St. Paul Capital and The
St. Paul have granted the Underwriters an option for 30
days to purchase up to an additional 540,000 Preferred
Securities at the initial public offering price solely
to cover over-allotments, if any.
Dividends......................... Dividends on the Preferred Securities will be cumulative
from the date of original issuance of the Preferred
Securities and will be payable at the annual rate of %
of the liquidation preference of $50 per Preferred
Security. Dividends will be paid monthly in arrears on
the last day of each calendar month, commencing ,
1995. The proceeds from the offering of the Preferred
Securities will be invested in the Convertible Subordi-
nated Debentures. Interest payment periods on the
Convertible Subordinated Debentures are monthly but may
be extended from time to time by The St. Paul for up to
60 months, in which event St. Paul Capital would be
unable to make monthly dividend payments on the
Preferred Securities during the period of any such
extension. During such period, interest on the
Convertible Subordinated Debentures will compound
monthly and Additional Dividends (as defined below) will
continue to accumulate on the Preferred Securities.
Selection of such an extended interest payment period is
referred to herein as a "deferral of interest payments".
"Additional Dividends", as used herein, means amounts
payable upon any dividend arrearages on the Preferred
Securities in order to provide, in effect, monthly
compounding on such dividend arrearages. See "Dividend
Deferral Provisions" below. The failure of holders of
the Preferred Securities to receive dividends in full
(including arrearages) for 15 consecutive months would
trigger the right of such holders to obtain depositary
shares (the "Depositary Shares"), each representing
1/100th of a share of Series C Cumulative Convertible
Preferred Stock, without par value, of The St. Paul
(liquidation preference $5000 per share) ("St. Paul
Series C Convertible Preferred Stock"), upon the
affirmative vote or written consent of the holders of a
majority of
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
the aggregate liquidation preference of the outstanding
Preferred Securities, as described below under "Optional
Exchange for Depositary Shares". See "Investment
Considerations -- Option to Defer Payment of Dividends,"
"Investment Considerations -- Tax Consequences of
Deferral of Interest Payments on Convertible
Subordinated Debentures," "Description of Securities
Offered -- Description of the Convertible Subordinated
Debentures -- Option to Defer Interest Payments" and
"Description of Securities Offered -- Preferred
Securities -- Optional Exchange for Depositary Shares".
Dividend Deferral Provisions...... The St. Paul has the right, at any time and from time to
time, to defer interest payments on the Convertible
Subordinated Debentures. Monthly dividends on the
Preferred Securities would be deferred by St. Paul
Capital (but would continue to accrue Additional
Dividends) during any such deferral of interest pay-
ments. The St. Paul will have the right during any such
deferral of interest payments to make partial payments
of interest and at the end of such periods may pay all
interest then accrued and unpaid (together with compound
interest). Upon a partial payment of interest by The St.
Paul, St. Paul Capital may pay partial PRO RATA
dividends to holders of Preferred Securities, and upon
the payment of all accrued and unpaid interest on the
Convertible Subordinated Debentures, may pay in full all
accumulated and unpaid dividends (including Additional
Dividends). Prior to the end of such deferral of
interest payments, The St. Paul may further defer
interest payments, provided that all such deferrals may
not exceed 60 months in the aggregate nor extend beyond
the stated maturity of the Convertible Subordinated
Debentures. After The St. Paul has paid all accrued and
unpaid interest (including compound interest) following
a deferral of interest payments, it may again defer
interest payments for up to 60 months, subject to the
preceding sentence. St. Paul Capital will give written
notice of The St. Paul's deferral of interest payments
to the holders of Preferred Securities no later than the
last date on which it would be required to notify the
NYSE of the record or payment date of the related
dividend, which is currently 10 days prior to such
record or payment date. See "Investment Considerations
-- Option to Defer Payment of Dividends," "Description
of Securities Offered -- Preferred Securities --
Dividends" and "Description of Securities Offered --
Description of the Convertible Subordinated Debentures
-- Option to Defer Interest Payments". Should a deferral
of interest payments occur, St. Paul Capital, except in
very limited circumstances, will continue to accrue
income for United States income tax purposes, which will
be allocated to holders of Preferred Securities in
advance of any corresponding cash distribution. See
"Investment Considerations -- Tax Consequences of
Deferral of Interest Payments on Convertible
Subordinated Debentures" and "Certain Federal Income Tax
Considerations -- Potential Deferral of Interest
Payment".
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Liquidation Preference............ $50 per Preferred Security, plus an amount equal to any
accumulated and unpaid dividends (whether or not earned
or declared).
Conversion into St. Paul Common
Stock............................ Each Preferred Security is convertible in the manner
described below at the option of the holder, at any time
prior to the Conversion Expiration Date (as defined
below), into shares of St. Paul Common Stock, without
par value (the "St. Paul Common Stock"), at the rate of
shares of St. Paul Common Stock for each Preferred
Security (equivalent to a conversion price of $ per
share of St. Paul Common Stock). Such conversion price
will be subject to adjustment in certain circumstances,
including the payment or distribution by The St. Paul of
certain types of dividends, distributions or other
payments to holders of St. Paul Common Stock;
subdivisions and combinations of St. Paul Common Stock;
and certain payments in respect of tender or exchange
offers for St. Paul Common Stock. Such conversion price
will also be subject to adjustment in the event that The
St. Paul is a party to certain transactions (including,
without limitation, certain mergers, consolidations,
sales of all or substantially all of the assets of The
St. Paul, recapitalizations or reclassifications of St.
Paul Common Stock or any compulsory share exchange) as a
result of which shares of St. Paul Common Stock are
converted into the right ro receive securities, cash or
other property. See "Description of Securities Offered
-- Preferred Securities -- Conversion Rights --
Conversion Price Adjustments -- General" and " --
Conversion Price Adjustments -- Merger, Consolidation or
Sale of Assets of The St. Paul".
A holder of a Preferred Security wishing to exercise its
conversion right shall surrender such Preferred
Security, together with an irrevocable conversion
notice, to the Conversion Agent (as defined herein)
acting on behalf of the holders of Preferred Securities,
which shall exchange the Preferred Security for a
portion of the Convertible Subordinated Debentures held
by St. Paul Capital and immediately convert such
Convertible Subordinated Debentures and any accrued and
unpaid interest thereon into St. Paul Common Stock. A
holder of Preferred Securities should not recognize gain
or loss upon the exchange through the Conversion Agent
of Preferred Securities for a proportionate share of the
Convertible Subordinated Debentures held by St. Paul
Capital. Except to the extent attributable to accrued
but unpaid interest on the Convertible Subordinated
Debentures, a holder should not recognize gain or loss
upon the exchange through the Conversion Agent of
Convertible Subordinated Debentures for St. Paul Common
Stock. See "Certain Federal Income Tax Considerations --
Exchange of Preferred Securities for St. Paul Stock". On
and after , and provided that St. Paul
Capital is current in the payment of dividends on the
Preferred Securities, St. Paul Capital may, at its
option, cause the conversion rights of holders of the
Preferred Securities to expire. St. Paul Capital may
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
exercise this option only if for 20 trading days within
any period of 30 consecutive trading days, including the
last trading day of such period, the Current Market
Price (as herein defined) of St. Paul Common Stock
exceeds 120% of the conversion price of the Preferred
Securities, subject to adjustment in certain
circumstances. In order to exercise its conversion
expiration option, St. Paul Capital must issue a press
release for publication on the Dow Jones News Service
announcing the Conversion Expiration Date prior to the
opening of business on the second trading day after a
period in which the condition in the preceding sentence
has been met, but in no event prior to . The
press release shall announce the Conversion Expiration
Date and provide the current conversion price and
Current Market Price of the Preferred Securities, in
each case as of the close of business on the trading day
next preceding the date of the press release. Written
notice containing the same information set forth in the
press release will be sent by first-class mail to each
holder of Preferred Securities not more than four
business days after issuance of the press release. The
Conversion Expiration Date shall be a date not less than
30 and not more than 60 days following the date of such
press release or, if St. Paul Capital has not exercised
its conversion expiration option, the earlier of the
date of an Exchange Election referred to below under
"Optional Exchange for Depositary Shares" or two
business days prior to the scheduled date for the
mandatory redemption of the Preferred Securities. See
"Description of Securities Offered -- Preferred Securi-
ties -- Conversion Rights".
Whenever The St. Paul issues shares of Common Stock upon
conversion of Preferred Securities, The St. Paul will
issue, together with each such share of Common Stock,
one Stock Purchase Right (as defined herein) entitling
the holder thereof, under certain circumstances, to
purchase Series A Preferred Stock of The St. Paul (or
other securities in lieu thereof) pursuant to the
Shareholder Protection Rights Agreement, dated as of
December 4, 1989, as amended (the "Rights Agreement"),
between The St. Paul and First Chicago Trust Company of
New York, as Rights Agent. The Stock Purchase Rights
will expire on December 19, 1999, subject to extension
to December 18, 2002 under certain circumstances or
earlier redemption by The St. Paul.
Redemption........................ If at any time following the Conversion Expiration Date,
less than 5% of the Preferred Securities remain
outstanding, such Preferred Securities shall be
redeemable at the option of St. Paul Capital, as a whole
but not in part, at a redemption price of $50 per
Preferred Security together with accumulated and unpaid
dividends (whether or not earned or declared) (the
"Redemption Price"). The Preferred Securities have no
maturity date, although they are subject to mandatory
redemption upon the repayment at maturity (on
, 2025) or as a result of acceleration of
the Convertible Subordinated Debentures. See
"Description of Securities Offered -- Description of
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
the Convertible Subordinated Debentures -- Events of De-
fault". The Preferred Securities are not otherwise
redeemable for any reason, including in the event that
St. Paul Capital should become subject to federal or
state taxation. To the extent that such taxation or
other events cause St. Paul Capital to have insufficient
funds to pay full dividends on the Preferred Securities,
the holders will have available to them the exchange
option described below. Upon the occurrence of certain
Tax Events (as defined herein) St. Paul Capital may be
dissolved and the Convertible Subordinated Debentures
distributed to holders of the Preferred Securities. See
"-- Special Event Distribution".
Special Event Distribution........ Upon the occurrence of a Tax Event (as defined herein),
the Managing Members may, and upon the occurrence of an
Investment Company Event (as defined herein) the
Managing Members shall, dissolve St. Paul Capital and,
after satisfaction of liabilities to creditors of St.
Paul Capital as required by applicable law, cause the
Convertible Subordinated Debentures to be distributed to
the holders of the Preferred Securities in connection
with the liquidation of St. Paul Capital. In the case of
a Special Event that is a Tax Event (as defined herein),
however, the Managing Members may elect not to dissolve
St. Paul Capital and to cause the Preferred Securities
to remain outstanding. See "Description of Securities
Offered -- Preferred Securities -- Special Event
Distribution" and "-- Description of the Convertible
Subordinated Debentures".
Optional Exchange for Depositary
Shares........................... Upon the failure of holders of the Preferred Securities
to receive, for 15 consecutive months, the full amount
of dividend payments (including any arrearages and
including any such failure caused by a deferral of
interest payments on the Convertible Subordinated
Debentures) the holders of a majority of the aggregate
liquidation preference of Preferred Securities then out-
standing, voting as a class at a special meeting of
members called for such purpose or by written consent,
may, at their option, direct the Conversion Agent to
exchange all (but not less than all) of the Preferred
Securities for Convertible Subordinated Debentures held
by St. Paul Capital, and to immediately exchange the
Convertible Subordinated Debentures and any accrued and
unpaid interest thereon on behalf of such holders for
Depositary Shares, each representing a 1/100th interest
in a
share of St. Paul Series C Convertible Preferred Stock
at the Exchange Price (as defined under "Description of
Securities Offered -- Preferred Securities --
Dividends"). Each Depositary Share will entitle the
holder thereof to a proportionate share in all rights
and preferences of the St. Paul Series C Convertible
Preferred Stock (including dividend, voting, conversion
and liquidation rights and preferences). The St. Paul
Series C Convertible Preferred Stock will have dividend,
conversion and other terms substantially similar to the
terms of the Preferred Securities (adjusted
proportionately per Depositary Share), except
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
that, among other things, the holders of St. Paul Series
C Convertible Preferred Stock will have the right to
elect two additional directors of The St. Paul whenever
dividends on the St. Paul Series C Convertible Preferred
Stock are in arrears for 18 months (including for this
purpose any arrearage with respect to the Preferred
Securities) and the St. Paul Series C Convertible
Preferred Stock will not be subject to mandatory
redemption. A holder of Preferred Securities should not
recognize gain or loss upon the exchange through the
Conversion Agent of Preferred Securities for a
proportionate share of the Convertible Subordinated
Debentures held by St. Paul Capital. Except to the
extent attributable to accrued but unpaid interest on
the Convertible Subordinated Debentures, a holder should
not recognize gain or loss upon the exchange through the
Conversion Agent of Convertible Subordinated Debentures
for Depository Shares. See "Certain Federal Income Tax
Considerations -- Exchange of Preferred Securities for
St. Paul Stock". If the Preferred Securities are
exchanged for Depositary Shares, The St. Paul will use
its best efforts to have the Depositary Shares listed on
the NYSE or any other exchange on which the Preferred
Securities may then be listed. See "Description of
Securities Offered -- Description of St. Paul Series C
Convertible Preferred Stock" and "Description of
Securities Offered -- Description of Depositary Shares"
for a description of the principal terms of the St. Paul
Series C Convertible Preferred Stock and the Depositary
Shares, respectively.
Guarantee......................... Pursuant to a Guarantee Agreement (the "Guarantee"), The
St. Paul will irrevocably and unconditionally agree, on
a subordinated basis, to guarantee the payment in full
of (a) the dividends (including any Additional Dividends
thereon) payable by St. Paul Capital on the Preferred
Securities, if and to the extent declared from funds of
St. Paul Capital legally available therefor, (b) the
redemption price (including all accumulated and unpaid
dividends) of the Preferred Securities, to the extent
funds of St. Paul Capital are legally available
therefor, and (c) payments on liquidation with respect
to the Preferred Securities, to the extent the assets of
St. Paul Capital are available for distribution to
holders of the Preferred Securities. A holder of
Preferred Securities may enforce The St. Paul's
obligations under the Guarantee directly against The St.
Paul, and The St. Paul waives any right to require that
an action be brought against St. Paul Capital or any
other person before proceeding against The St. Paul. The
Guarantee will be unsecured and will be subordinated to
all liabilities of The St. Paul and will rank PARI PASSU
(I.E., on a parity) with the most senior preferred
shares hereafter issued by The St. Paul and PARI PASSU
with any guarantee now or hereafter entered into by The
St. Paul in respect of any preferred or preference stock
of any affiliate of The St. Paul. On the bankruptcy,
liquidation or winding-up of The St. Paul, its
obligations under the Guarantee will rank junior to all
its other liabilities and, therefore, funds may not be
available for payment under the Guarantee. See
"Investment Considerations --
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Subordinate Obligations Under Guarantee and Convertible
Subordinated Debentures," "Investment Considerations --
Dependence on Subordinated Debenture Payments" and
"Description of Securities Offered -- Description of the
Guarantee".
Voting Rights..................... Generally, holders of the Preferred Securities will not
have any voting rights. However, upon an Event of
Default under the Convertible Subordinated Debentures
(as described under "Description of Securities Offered
-- Description of the Convertible Subordinated
Debentures -- Events of Default"), a failure by St. Paul
Capital to pay dividends in full (including any
arrearages) on the Preferred Securities for 15
consecutive months (including any such failure caused by
a deferral by The St. Paul of interest payments on the
Convertible Subordinated Debentures) or a default by The
St. Paul under the Guarantee, the holders of the
Preferred Securities will be entitled to appoint and
authorize a special trustee (the "Special Trustee") to
enforce St. Paul Capital's rights under the Convertible
Subordinated Debentures, enforce The St. Paul's
obligations under the Guarantee and, to the extent
permitted by law, declare and pay dividends on the
Preferred Securities to the extent funds are legally
available therefor. The St. Paul has agreed to execute
and deliver such documents as may be necessary or
appropriate for the Special Trustee to enforce such
rights and obligations. In addition, if for any reason
(including a deferral by The St. Paul of interest
payments on the Convertible Subordinated Debentures)
holders of Preferred Securities fail to receive, for 15
consecutive months, the full amount of dividend payments
(including any arrearages), the holders of the Preferred
Securities will be entitled to call a special meeting of
members for the purpose of deciding whether to exchange
all Preferred Securities then outstanding for Depositary
Shares, as described above under "Optional Exchange for
Depositary Shares". See "Description of Securities
Offered -- Preferred Securities -- Dividends".
Use of Proceeds................... The proceeds to be received by St. Paul Capital from the
sale of the Preferred Securities will be invested in the
Convertible Subordinated Debentures of The St. Paul,
which, after paying the expenses associated with this
Offering, will use such funds for general corporate
purposes, which may include possible acquisitions and
the reduction of short-term indebtedness. Pending such
use, the net proceeds may be temporarily invested in
short-term debt obligations. See "Use of Proceeds".
Convertible Subordinated
Debentures....................... The Convertible Subordinated Debentures will have a
maturity of 30 years and will bear interest at the rate
of % per annum, payable monthly in arrears. The St.
Paul has the right to select an interest payment period
or periods longer than one month (during which period or
periods interest will compound monthly), provided that
any such deferral of interest payments will not
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
exceed 60 months and provided further that a deferral of
interest payments may not extend the stated maturity of
the Convertible Subordinated Debentures. Accordingly,
dividend payments on the Preferred Securities may not be
deferred beyond the stated maturity of the Convertible
Subordinated Debentures. If The St. Paul defers interest
payments longer than one month, it will be prohibited
from paying dividends on any of its capital stock and
making certain other restricted payments until monthly
interest payments are resumed and all accumulated and
unpaid interest (including any interest payable to
effect monthly compounding) on the Convertible
Subordinated Debentures is brought current. The St. Paul
will have the right to make partial payments of such
interest during a deferral of interest payments. The
failure by The St. Paul to make interest payments during
a deferral of interest payments would not constitute a
default or an event of default under The St. Paul's
currently outstanding indebtedness. The Convertible
Subordinated Debentures are convertible into shares of
St. Paul Common Stock at the option of the holders
thereof and are exchangeable for Depositary Shares
representing St. Paul Series C Convertible Preferred
Stock as described above under "Optional Exchange for
Depositary Shares". St. Paul Capital will covenant not
to convert Convertible Subordinated Debentures except
pursuant to a notice of conversion delivered to the
Conversion Agent by a holder of Preferred Securities.
The payment of the principal and interest on the
Convertible Subordinated Debentures will be subordinate
in right of payment to all Senior Indebtedness (as
defined under "Description of Securities Offered --
Description of the Convertible Subordinated Debentures
-- Subordination") of The St. Paul. As of March 31,
1995, The St. Paul had $628 million of indebtedness
constituting Senior Indebtedness and no indebtedness or
other obligations that would rank equally with the
Convertible Subordinated Debentures. See "Investment
Considerations -- Subordinate Obligations Under
Guarantee and Convertible Subordinated Debentures" and
"Investment Considerations -- Dependence on Subordinated
Debenture Payments". The Convertible Subordinated
Debentures will not be guaranteed by St. Paul Holdings.
While the Preferred Securities are outstanding, St. Paul
Capital will not have the ability to amend the Indenture
(as defined below) or the terms of the Convertible
Subordinated Debentures in a way that adversely affects
the holders of the Preferred Securities, or to waive an
event of default under the Indenture without the consent
of holders of 66 2/3% in aggregate liquidation
preference of the Preferred Securities then outstanding.
See "Description of Securities Offered -- Description of
the Convertible Subordinated Debentures -- Modification
of Indenture".
</TABLE>
16
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The selected data presented below under the captions "Income Statement Data"
and "Balance Sheet Data" for, and as of the end of, each of the years in the
five-year period ended December 31, 1994, are derived from the consolidated
financial statements of the Company, which consolidated financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The consolidated financial statements as of December 31, 1994 and
1993, and for each of the years in the three-year period ended December 31, 1994
and 1993, and for each of the years in the three-year period ended December 31,
1994, and the report thereon, are incorporated by reference elsewhere in this
prospectus. The information presented below under the caption "Underwriting
Operations" is unaudited. The financial data for the three months ended March
31, 1995 and 1994, respectively, have been derived from the Company's unaudited
financial statements, which, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the results of operations and financial position for the periods
and as of the dates presented. The results of operations for the three months
ended March 31, 1995 may not be indicative of results for the entire fiscal
year. The table should be read in conjunction with "Overview of Results" and the
consolidated financial statements and the notes thereto incorporated by
reference in this Prospectus. Numbers of shares and per share figures reflect a
two-for-one stock split in June 1994.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums earned......................... $ 946,070 $ 845,402 $ 3,412,081 $ 3,178,338 $ 3,143,246 $ 3,146,238 $ 2,893,959
Net investment income................... 186,389 168,408 694,594 661,106 666,374 675,604 669,989
Insurance brokerage fees and
commissions............................ 67,061 66,450 303,152 283,680 280,836 284,702 256,354
Investment banking-asset management..... 53,616 53,598 211,789 241,730 218,825 175,610 126,607
Realized gains(1)....................... 2,977 21,783 41,974 58,254 155,735 38,008 9,864
Other................................... 11,346 8,134 37,695 37,064 33,676 31,538 48,464
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues...................... 1,267,459 1,163,775 4,701,285 4,460,172 4,498,692 4,351,700 4,005,237
----------- ----------- ----------- ----------- ----------- ----------- -----------
Insurance losses and loss adjustment
expenses............................... 680,439 667,688 2,461,698 2,303,738 2,690,046 2,365,569 2,119,776
Policy acquisition, operating and
administrative expenses(2)............. 427,296 404,269 1,636,428 1,593,063 1,998,156 1,422,511 1,352,034
Interest expense........................ 11,578 9,815 39,581 40,765 35,553 35,559 29,522
Income tax expense...................... 37,550 17,566 120,750 94,997 7,458 122,999 112,635
Cumulative net benefit of accounting
changes, net of taxes.................. 0 0 0 0 76,483 0 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................... $ 110,596 $ 64,437 $ 442,828 $ 427,609 $ (156,038) $ 405,062 $ 391,270
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Fully diluted net income (loss) per
common share........................... $1.23 $0.71 $4.93 $4.73 $(1.94) $4.50 $4.16
Cash dividends declared per common
share.................................. $0.40 $0.375 $1.50 $1.40 $1.36 $1.30 $1.20
BALANCE SHEET DATA:
Total assets............................ $17,651,999 $16,741,009 $17,495,820 $17,149,196 $15,392,054 $14,744,717 $13,907,293
Total debt.............................. 628,178 584,737 622,624 639,729 566,717 486,779 473,829
Change in unrealized appreciation of
investments, net of taxes(3)........... 185,960 (311,937) (574,896) 525,175 (23,815) 55,093 (67,558)
Common shareholders' equity............. 3,008,801 2,690,833 2,732,934 3,005,128 2,202,499 2,532,841 2,196,371
Book value per common share............. 35.67 32.02 32.46 35.47 26.18 29.78 26.00
Number of common shares outstanding..... 84,341,306 84,041,142 84,202,417 84,714,676 84,118,554 85,042,484 84,468,058
UNDERWRITING OPERATIONS:
GAAP underwriting result................ $ (15,452) $ (83,057) $ (113,008) $ (150,255) $ (566,886) $ (163,782) $ (120,730)
Statutory combined ratio:(4)............
Loss and loss expense ratio........... 71.9 79.0 72.1 72.5 85.6 75.2 73.2
Underwriting expense ratio............ 30.4 31.2 30.2 32.0 32.2 29.4 30.0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined ratio........................ 102.3 110.2 102.3 104.5 117.8 104.6 103.2
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined ratio including policyholders'
dividends.............................. 102.4 110.2 102.3 104.7 118.2 105.0 104.2
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<FN>
- ----------------------------------------
(1) 1992 realized gains include $98 million from the sale of a minority
interest in The John Nuveen Company.
(2) 1992 operating and administrative expenses include a $365 million
write-down of the goodwill associated with the Company's investment in
Minet.
(3) The change for 1993 includes an increase of $502 million due to the
adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
(4) The combined ratio is not derived from the audited consolidated financial
statements.
</TABLE>
17
<PAGE>
INVESTMENT CONSIDERATIONS
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS:
SUBORDINATE OBLIGATIONS UNDER GUARANTEE AND CONVERTIBLE SUBORDINATED DEBENTURES
The St. Paul's obligations under the Convertible Subordinated Debentures are
subordinate and junior in right of payment to all Senior Indebtedness of The St.
Paul. The St. Paul's obligations under the Guarantee are subordinate to all
liabilities of The St. Paul and will rank PARI PASSU (I.E., on a parity) with
the most senior preferred shares hereafter issued by The St. Paul and PARI PASSU
with any guarantee now or hereafter entered into by The St. Paul in respect of
any preferred or preference stock of any affiliate of The St. Paul. There are no
terms of the Preferred Securities, the Convertible Subordinated Debentures or
the Guarantee that limit The St. Paul's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Convertible
Subordinated Debentures and the Guarantee, or the ability of its subsidiaries to
incur additional indebtedness.
The Guarantee is a full and unconditional guarantee of payment to the
holders of the Preferred Securities of accumulated and unpaid monthly dividends
declared by St. Paul Capital from funds legally available therefor, amounts
payable on redemption out of funds legally available therefor, and the amounts
available for distribution to holders of Preferred Securities on liquidation of
St. Paul Capital. In each case, payments on the Preferred Securities are covered
by the Guarantee only to the extent that St. Paul Capital has funds on hand
legally available therefor and such payments do not otherwise violate applicable
law. If The St. Paul were to default on its obligation to pay interest or
amounts payable on redemption or maturity of the Convertible Subordinated
Debentures, St. Paul Capital would lack legally available funds for the payment
of dividends or amounts payable on redemption of the Preferred Securities, and
in such event holders of the Preferred Securities would not be able to rely upon
the Guarantee for payment of such amounts. On the bankruptcy, liquidation or
winding-up of The St. Paul, its obligations under the Guarantee would rank
junior to all of its liabilities and, therefore, funds might not be available in
such circumstances for payment pursuant to the Guarantee. The Convertible
Subordinated Debentures are not guaranteed by St. Paul Holdings. See
"Description of Securities Offered -- Description of the Guarantee" and
"Description of Securities Offered -- Description of the Convertible
Subordinated Debentures -- Subordination".
DEPENDENCE ON CONVERTIBLE SUBORDINATED DEBENTURE PAYMENTS
St. Paul Capital's ability to pay amounts due on the Preferred Securities is
solely dependent upon The St. Paul's ability to make payments on the Convertible
Subordinated Debentures as and when required. Since The St. Paul is also the
Guarantor of the Preferred Securities, in the event that St. Paul Capital were
unable to make payments on the Preferred Securities as and when required, there
is a substantial likelihood that The St. Paul would be unable to make payments
on the Guarantee as and when required.
OPTION TO DEFER PAYMENT OF DIVIDENDS
The St. Paul has the right to extend interest payment periods on the
Convertible Subordinated Debentures for up to 60 months, and, as a consequence,
monthly dividends on the Preferred Securities would be deferred (but Additional
Dividends will continue to accumulate monthly) by St. Paul Capital during any
such deferral of interest payments. In the event that The St. Paul exercises
this right, neither The St. Paul nor any direct or indirect majority-owned
subsidiary of The St. Paul (excluding The John Nuveen Company ("Nuveen") and
Nuveen's consolidated subsidiaries) shall declare or pay any dividend on, or
redeem, purchase, otherwise acquire or make a liquidation payment with respect
to, any of its common or preferred stock or make any guarantee payment with
respect to the foregoing (other than payments under the Guarantee or dividend or
guarantee payments to The St. Paul from a direct or indirect majority-owned
subsidiary), during any such deferral period and until all dividend arrearages
have been paid in full. No deferral of interest payments may extend the stated
maturity of the Convertible Subordinated Debentures. See "Description of
Securities Offered -- Description of the Convertible Subordinated Debentures --
Option to Defer Interest Payments".
18
<PAGE>
TAX CONSEQUENCES OF DEFERRAL OF INTEREST PAYMENTS ON CONVERTIBLE SUBORDINATED
DEBENTURES
Should a deferral of interest payments occur, St. Paul Capital, except in
very limited circumstances, will continue to accrue income for United States
federal income tax purposes which will be allocated to holders of record of
Preferred Securities in advance of any corresponding cash distribution. As a
result, such holders will include such interest in gross income for United
States federal income tax purposes in advance of the receipt of cash and will
not receive the cash related to such income if such a holder disposes of its
Preferred Securities prior to the record date for payment of dividends. See
"Certain Federal Income Tax Considerations -- Potential Deferral of Interest
Payment".
TAX CONSEQUENCES OF AN EXCHANGE FOR DEPOSITARY SHARES
In the event that a deferral of interest payments or the failure to pay
interest continues for more than 15 months, the holders of a majority of the
aggregate liquidation preference of the Preferred Securities then outstanding
may cause the exchange of all of the Preferred Securities for Depositary Shares
representing interests in St. Paul Series C Convertible Preferred Stock at the
Exchange Price. For a discussion of the taxation of such an exchange to holders,
including the possibility that holders who exchange their Preferred Securities
for Depositary Shares will be subject to additional income tax to the extent
accrued but unpaid interest on the Convertible Subordinated Debentures is
converted into accumulated and unpaid dividends on the St. Paul Series C
Convertible Preferred Stock represented by Depositary Shares received in
exchange for the Preferred Securities, see "Certain Federal Income Tax
Considerations -- Exchange of Preferred Securities for St. Paul Stock".
EXPIRATION OF CONVERSION RIGHTS
On and after , St. Paul Capital may, subject to certain
conditions, at its option, cause the conversion rights of holders of Preferred
Securities to expire, provided that St. Paul Capital is current in the payment
of dividends on the Preferred Securities and the Current Market Price (as
defined herein) of St. Paul Common Stock exceeds 120% of the conversion price of
the Preferred Securities for a specified period. See "Description of Securities
Offered -- Preferred Securities -- Expiration of Conversion Rights".
UNCERTAINTY OF DEDUCTIBILITY OF INTEREST ON THE CONVERTIBLE SUBORDINATED
DEBENTURES
The offering of the Preferred Securities and the issuance of the related
Convertible Subordinated Debentures is a relatively novel type of financing
transaction. The Company's ability to deduct the interest on the Convertible
Subordinated Debentures depends upon whether the Convertible Subordinated
Debentures are characterized as debt instruments for federal income tax
purposes, taking all the relevant facts and circumstances into account. The
Company believes that the Convertible Subordinated Debentures are debt
instruments for federal income tax purposes and that interest on the Convertible
Subordinated Debentures will, therefore, be deductible by the Company. There is
no clear authority on the appropriate characterization for federal income tax
purposes of instruments such as the Convertible Subordinated Debentures when
they are issued in connection with an offering of securities such as the
Preferred Securities. If the interest on the Convertible Subordinated Debentures
is not deductible by the Company, the Company would have significant additional
income tax liabilities. Nondeductability of such interest would constitute a Tax
Event. Upon the occurrence of a Tax Event, the Managing Members may cause St.
Paul Capital to be dissolved and cause the Convertible Subordinated Debentures
to be distributed to the holders of the Preferred Securities in connection with
the liquidation of St. Paul Capital. See "Description of Securities Offered --
Preferred Securities -- Special Event Distribution" and "-- Description of the
Convertible Subordinated Debentures".
19
<PAGE>
USE OF PROCEEDS
St. Paul Capital will invest the proceeds from the Offering in the
Convertible Subordinated Debentures. The St. Paul, after payment of the
Underwriters' Compensation and other expenses of the Offering, will use the net
proceeds of $180,000,000 ($207,000,000 if the Underwriters' over-allotment
option is exercised in full) from the sale of the Convertible Subordinated
Debentures to St. Paul Capital for general corporate purposes, which may include
possible acquisitions and the reduction of short-term indebtedness. Pending such
use, the net proceeds may be temporarily invested in short-term debt
obligations. As of March 31, 1995, The St. Paul had no short-term indebtedness
outstanding.
RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1995 1994 1994 1993 1992(1) 1991 1990
----- ----- ----- ----- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..... 9.49 5.69 9.99 8.96 -- 9.06 9.26
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................. 7.53 4.51 7.73 6.99 -- 7.06 7.19
<FN>
- ------------------------
(1) The 1992 loss was inadequate to cover "fixed charges" by $229.6 million,
and "combined fixed charges and preferred stock dividends" by $248.0
million.
</TABLE>
Earnings consist of income before income taxes plus fixed charges, net of
capitalized interest. 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.
20
<PAGE>
CAPITALIZATION
The following table sets forth the debt and capitalization of The St. Paul
at March 31, 1995, and as adjusted to reflect the consummation of the offering
made hereby, assuming no exercise of the Underwriters' over-allotment option.
The table should be read in conjunction with the consolidated financial
statements of The St. Paul incorporated by reference herein. See "Use of
Proceeds," "Selected Financial and Operating Data," and "Description of
Securities Offered -- Preferred Securities".
<TABLE>
<CAPTION>
MARCH 31, 1995
------------------------
ACTUAL AS ADJUSTED
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial paper................................................. $ 284,119 $ 284,119
Medium-term notes................................................ 204,434 204,434
9 3/8% notes..................................................... 99,974 99,974
Guaranteed ESOP debt............................................. 33,334 33,334
Pound sterling loan notes........................................ 6,317 6,317
---------- ------------
Total debt................................................... 628,178 628,178
---------- ------------
Company-obligated minority interest in St. Paul Capital (holding
$180 million principal amount Convertible Subordinated
Debentures)..................................................... -- 180,000
Preferred Stock:
Series B convertible preferred stock, 1,450,000 shares
authorized; 1,012,496 shares issued and outstanding............. 145,709 145,709
Guaranteed obligation -- PSOP.................................... (137,589) (137,589)
---------- ------------
Net convertible preferred stock.............................. 8,120 8,120
---------- ------------
Common shareholders' equity:
Common stock, without par value, 240,000,000 shares authorized;
84,202,417 shares issued and outstanding........................ 449,863 449,863
Retained earnings................................................ 2,436,682 2,436,682
Guaranteed obligation -- ESOP.................................... (40,627) (40,627)
Unrealized appreciation of investments........................... 199,908 199,908
Unrealized loss on foreign currency translation.................. (37,025) (37,025)
---------- ------------
Total common shareholders' equity............................ 3,008,801 3,008,801
---------- ------------
Total capitalization......................................... $3,645,099 $3,825,099
---------- ------------
---------- ------------
</TABLE>
21
<PAGE>
MARKET PRICES OF ST. PAUL COMMON STOCK
St. Paul Common Stock is traded on the NYSE under the symbol "SPC". At May
1, 1995, there were 7,647 holders of record of St. Paul Common Stock and
84,373,672 shares outstanding. The following table sets forth the high and low
sale prices for St. Paul Common Stock, as reported by the NYSE, for the periods
indicated. All amounts presented reflect the effect of a two-for-one stock split
in 1994.
<TABLE>
<CAPTION>
CASH
DIVIDEND
CALENDAR YEAR HIGH LOW DECLARED
- --------------------------------------------------------------- ------- ------- -----------
<S> <C> <C> <C>
1993:
1st Quarter.................................................. $41 5/8 $37 3/4 $ .35
2nd Quarter.................................................. 41 7/16 39 1/4 .35
3rd Quarter.................................................. 46 11/16 40 5/16 .35
4th Quarter.................................................. 48 1/2 43 1/4 .35
1994:
1st Quarter.................................................. $44 3/8 $38 13/16 $ .375
2nd Quarter.................................................. 41 11/16 37 7/8 .375
3rd Quarter.................................................. 44 1/2 39 1/2 .375
4th Quarter.................................................. 45 1/8 40 .375
1995:
1st Quarter.................................................. $51 $43 1/2 $ .40
2nd Quarter (through May 1).................................. 51 7/8 47 3/4 --
</TABLE>
Cash dividends paid in 1993 and 1994 were $1.39 per share and $1.48 per
share, respectively. For the price of the St. Paul Common Stock as of a recent
date, see the cover page of this Prospectus.
THE ST. PAUL'S DIVIDEND POLICY
The St. Paul paid a cash dividend of $.40 per share for the first quarter of
1995 and has declared a cash dividend of $.40 per share for the second quarter
of 1995. The St. Paul paid a cash dividend of $.375 per share in respect of each
quarter of 1994. All amounts have been adjusted to reflect a two-for-one stock
split in 1994. The levels of future payments will be determined by The St.
Paul's Board of Directors based on such considerations as the level of earnings
from operations, capital requirements and the financial condition and prospects
of The St. Paul. The St. Paul and its majority-owned subsidiaries would also be
prohibited from paying dividends on St. Paul Common Stock at any time during a
deferral of interest payments with respect to the Convertible Subordinated
Debentures, when there is an Event of Default (as defined under "Description of
Securities Offered -- Description of the Convertible Subordinated Debentures --
Events of Default") under the Convertible Subordinated Debentures or when The
St. Paul has failed to make a payment required under the Guarantee. See
"Description of Securities Offered -- Description of the Guarantee -- Certain
Covenants of The St. Paul".
22
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected data presented below under the captions "Income Statement Data"
and "Balance Sheet Data" for, and as of the end of, each of the years in the
five-year period ended December 31, 1994, are derived from the consolidated
financial statements of the Company, which consolidated financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The consolidated financial statements as of December 31, 1994 and
1993, and for each of the years in the three-year period ended December 31,
1994, and the report thereon, are incorporated by reference elsewhere in this
prospectus. The information presented below under the caption "Underwriting
Operations" is unaudited. The financial data for the three months ended March
31, 1995 and 1994, respectively, have been derived from the Company's unaudited
financial statements, which, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the results of operations and financial position for the periods
and as of the dates presented. The results of operations for the three months
ended March 31, 1995 may not be indicative of results for the entire fiscal
year. The table should be read in conjunction with "Overview of Results" and the
consolidated financial statements and the notes thereto incorporated by
reference in this Prospectus. Numbers of shares and per share figures reflect a
two-for-one stock split in June 1994.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums earned......................... $ 946,070 $ 845,402 $ 3,412,081 $ 3,178,338 $ 3,143,246 $ 3,146,238 $ 2,893,959
Net investment income................... 186,389 168,408 694,594 661,106 666,374 675,604 669,989
Insurance brokerage fees and
commissions............................ 67,061 66,450 303,152 283,680 280,836 284,702 256,354
Investment banking-asset management..... 53,616 53,598 211,789 241,730 218,825 175,610 126,607
Realized gains(1)....................... 2,977 21,783 41,974 58,254 155,735 38,008 9,864
Other................................... 11,346 8,134 37,695 37,064 33,676 31,538 48,464
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues...................... 1,267,459 1,163,775 4,701,285 4,460,172 4,498,692 4,351,700 4,005,237
----------- ----------- ----------- ----------- ----------- ----------- -----------
Insurance losses and loss adjustment
expenses............................... 680,439 667,688 2,461,698 2,303,738 2,690,046 2,365,569 2,119,776
Policy acquisition, operating and
administrative expenses(2)............. 427,296 404,269 1,636,428 1,593,063 1,998,156 1,422,511 1,352,034
Interest expense........................ 11,578 9,815 39,581 40,765 35,553 35,559 29,522
Income tax expense...................... 37,550 17,566 120,750 94,997 7,458 122,999 112,635
Cumulative net benefit of accounting
changes, net of taxes.................. 0 0 0 0 76,483 0 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................... $ 110,596 $ 64,437 $ 442,828 $ 427,609 $ (156,038) $ 405,062 $ 391,270
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Fully diluted net income (loss) per
common share........................... $1.23 $0.71 $4.93 $4.73 $(1.94) $4.50 $4.16
Cash dividends declared per common
share.................................. $0.40 $0.375 $1.50 $1.40 $1.36 $1.30 $1.20
BALANCE SHEET DATA:
Total assets............................ $17,651,999 $16,741,009 $17,495,820 $17,149,196 $15,392,054 $14,744,717 $13,907,293
Total debt.............................. 628,178 584,737 622,624 639,729 566,717 486,779 473,829
Change in unrealized appreciation of
investments, net of taxes(3)........... 185,960 (311,937) (574,896) 525,175 (23,815) 55,093 (67,558)
Common shareholders' equity............. 3,008,801 2,690,833 2,732,934 3,005,128 2,202,499 2,532,841 2,196,371
Book value per common share............. 35.67 32.02 32.46 35.47 26.18 29.78 26.00
Number of common shares outstanding..... 84,341,306 84,041,142 84,202,417 84,714,676 84,118,554 85,042,484 84,468,058
UNDERWRITING OPERATIONS:
GAAP underwriting result................ $ (15,452) $ (83,057) $ (113,008) $ (150,255) $ (566,886) $ (163,782) $ (120,730)
Statutory combined ratio:(4)............
Loss and loss expense ratio........... 71.9 79.0 72.1 72.5 85.6 75.2 73.2
Underwriting expense ratio............ 30.4 31.2 30.2 32.0 32.2 29.4 30.0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined ratio........................ 102.3 110.2 102.3 104.5 117.8 104.6 103.2
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined ratio including policyholders'
dividends.............................. 102.4 110.2 102.3 104.7 118.2 105.0 104.2
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<FN>
- ------------------------------
(1) 1992 realized gains include $98 million from the sale of a minority
interest in The John Nuveen Company.
(2) 1992 operating and administrative expenses include a $365 million
write-down of the goodwill associated with the Company's investment in
Minet.
(3) The change for 1993 includes an increase of $502 million due to the
adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
(4) The combined ratio is not derived from the audited consolidated financial
statements.
</TABLE>
23
<PAGE>
OVERVIEW OF RESULTS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
The Company's consolidated net income for the first three months of 1995 was
$110.6 million compared with net income of $64.4 million in the first quarter of
1994. The improvement over 1994 occurred in the Company's underwriting segment
and was largely the result of a $73.6 million decline in pretax catastrophe
losses. The Company's insurance brokerage results deteriorated compared with the
first quarter of 1994, while investment banking-asset management earnings
improved slightly over those in the same period of 1994.
The Company's operating earnings, which exclude after-tax realized gains,
were $108.5 million, or $1.20 per share, in the first quarter of 1995, compared
with operating earnings of $49.6 million, or $.55 per share, in the first three
months of 1994.
Consolidated revenues of $1.3 billion for the first quarter of 1995
increased 9% over 1994 first quarter revenues of $1.2 billion. An increase in
insurance premiums earned was the primary factor in the growth over 1994.
Insurance brokerage and investment banking-asset management revenues in the
first quarter of 1995 were essentially level with those in the same period of
1994.
The St. Paul's consolidated assets at March 31, 1995 totaled $17.7 billion,
and common shareholders' equity was $3.0 billion. The comparable totals at
December 31, 1994 were $17.5 billion and $2.7 billion, respectively. The
increase in shareholders' equity resulted from the Company's first quarter
earnings and a $161.4 million increase (net of taxes) in the unrealized
appreciation of the Company's fixed maturities portfolio since the end of 1994.
UNDERWRITING
Consolidated written premiums of $916.4 million in the first quarter of 1995
were 14% higher than first quarter 1994 premiums of $804.6 million. Premium
volume in the Company's Reinsurance underwriting operation was nearly double the
comparable 1994 total, primarily due to favorable market conditions, additions
of business resulting from the Company's October 1994 acquisition of a book of
property-liability reinsurance business from a subsidiary of CIGNA Corporation
and a change in estimated premiums in the first quarter of 1994 made in the
ordinary course of business. Commercial written premiums grew 21% over the first
quarter of 1994, driven by new business in several classes of commercial
coverages. Medical Services written premiums declined 18% from the first quarter
of 1994 due primarily to a change in policy terms from six months to one year
for much of the physicians and surgeons segment of the business.
The consolidated GAAP underwriting loss of $15.5 million in the first
quarter of 1995 was a significant improvement over the first quarter 1994 loss
of $83.1 million. Pretax catastrophe losses in the first quarter of 1995 were
$16.1 million, compared with catastrophe losses of $89.7 million in the first
quarter of 1994, which were driven by an earthquake in California and winter
storms on the East Coast.
Pretax earnings in the underwriting segment totaled $160.2 million in the
first quarter of 1995, compared with $88.5 million in the first three months of
1994, reflecting the improved underwriting results and a $13.9 million increase
in investment income. Total fixed maturity investments in the underwriting
segment have increased by nearly $390 million in the last twelve months. The
average yield on taxable fixed maturities purchased in the first quarter of 1995
was 8.5%, compared with 6.4% in the first quarter of 1994. Taxable fixed
maturities have constituted the majority of the Company's investment pruchases
for the last several years.
INSURANCE BROKERAGE
Minet incurred a pretax loss of $14.6 million in the first quarter of 1995,
compared with a pretax loss of $9.0 million in the first quarter of 1994.
Minet's brokerage fees and commissions in the first quarter were level with the
same period in 1994; however, total expenses increased $7.5 million in 1995.
Salary and related expenses increased $4.9 million, a 9% increase over the level
in the first quarter of 1994,
24
<PAGE>
primarily due to Minet's ongoing effort to develop new business opportunities
through the expansion of its specialty broker staff. Minet's first quarter
revenues are generally lower than revenues in the remaining three quarters of
the year due to the timing of account renewals.
INVESTMENT BANKING-ASSET MANAGEMENT
The St. Paul's 77% portion of The John Nuveen Company's first quarter pretax
earnings was $19.4 million, compared with $17.3 million in the first quarter of
1994. Asset management fees declined slightly compared with the first quarter of
1994, but underwriting and distribution revenues increased by $5.1 million due
to inventory positioning profits resulting from more favorable market conditions
in 1995. Total assets under management of $31.2 billion at March 31, 1995 were
virtually level with the same time in 1994. However, managed assets grew by $1.5
billion since year-end 1994, primarily due to an increase in the underlying
value of fund investments.
YEARS ENDED DECEMBER 31, 1994 AND 1993
In 1994, a year marked by highly competitive market conditions in the
property-liability insurance industry, the Company achieved its best
underwriting result since 1988 and recorded its second consecutive year of
record earnings. The primary contributor to pretax earnings in 1994 was the
underwriting segment, where fundamental improvements in underwriting performance
offset catastrophe losses that were the third-worst in the Company's history.
The St. Paul's insurance brokerage operation, Minet continued to make progress
in realigning its business structure, while a difficult market environment
resulted in a decline in the earnings for Nuveen after its record results in the
prior year.
Net income of $443 million in 1994 was the highest annual total in the
Company's history, surpassing 1993's previous record of $428 million. Net income
in 1993 included an income tax benefit of $15 million, or $0.17 per share,
resulting from the impact of an increase in the statutory federal tax rate on
The St. Paul's deferred tax asset.
The Company's operating earnings, which exclude after-tax realized
investment gains, were $414 million in 1994, compared with earnings of $387
million in 1993 and a loss of $334 million in 1992.
Consolidated revenues increased 5% in 1994 to $4.7 billion from $4.5 billion
in 1993, as increases in premiums earned, net investment income and insurance
brokerage fees and commissions more than offset declines in investment
banking-asset management revenues and realized gains.
The St. Paul's consolidated assets totaled $17.5 billion at the end of 1994,
compared with total assets of $17.1 billion at year-end 1993. A $1.2 billion
underlying increase in total assets was partially offset by an $848 million
decline in unrealized appreciation on the Company's fixed maturity portfolio,
due to rising interest rates in 1994. The St. Paul adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of December 31, 1993, and began
recording its fixed maturity portfolio at estimated market value on the balance
sheet. At that time, with interest rates at a 20-year low, the market value of
that portfolio exceeded its amortized cost by $763 million. The year-end 1994
market value was $85 million below amortized cost. The adoption of SFAS No. 115
had no effect on net income.
UNDERWRITING
Consolidated written premiums of $3.6 billion in 1994 grew 14% over 1993
premiums of $3.2 billion. Premium growth was centered in The St. Paul's Personal
& Business Insurance operation, which included the results of Economy Fire &
Casualty Company ("Economy"), acquired in August 1993, for a full twelve months,
and in the Reinsurance operation, as a result of price increases, higher
retentions and new business.
25
<PAGE>
The following table sets forth The St. Paul's consolidated GAAP underwriting
results and combined ratios for the years ended December 31, 1994, 1993 and
1992, respectively, and the quarters ended March 31, 1995 and 1994,
respectively, and illustrates fundamental underwriting performance after
factoring out the impact of catastrophes in each such period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------- -------------------------------
1995 1994 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Actual:
GAAP underwriting results....................... $ (15) $ (83) $ (113) $ (150) $ (567)
Combined ratio.................................. 102.3 110.2 102.3 104.5 117.8
Adjustment:
Catastrophe losses.............................. $ (16) $ (90) $ (105) $ (62) $ (305)
Impact on combined ratio........................ 1.7 10.6 3.1 1.9 9.7
--------- --------- --------- --------- ---------
Excluding catastrophe losses:
GAAP underwriting loss.......................... $ 1 $ 7 $ (8) $ (88) $ (262)
Combined ratio.................................. 100.6 99.6 99.2 102.6 108.1
--------- --------- --------- --------- ---------
</TABLE>
In 1994, an earthquake in California, winter ice storms and summer hail
storms resulted in increased catastrophe losses over 1993, a year in which major
catastrophes were relatively few. Hurricane Andrew was the most significant
catastrophe in 1992, severely impacting results in the underwriting segment.
The St. Paul's Reinsurance and Specialized Commercial operations have been
the primary contributors to the improvement in noncatastrophe underwriting
performance since 1992. In both operations, The St. Paul has undertaken a
variety of pricing and underwriting actions designed to reduce the volatility of
underwriting results and further improve the quality of the book of business.
The Company's successful efforts to restrain expense growth throughout the
underwriting segment have also played a major role in improved underwriting
results. The St. Paul's underwriting expense ratio improved 1.8 points in 1994
to 30.2 from 32.0 in 1993, due to improved organizational efficiency and the
acquisition of Economy. The Company continued to restructure its principal
insurance underwriting subsidiary St. Paul Fire and Marine Insurance Company in
1994, an effort that began in 1993 with the goal of creating a more efficient
and customer-focused organization by streamlining the processes through which
The St. Paul acquires business and provides service to customers. In 1993, the
Company recorded restructuring charges of $21 million, primarily consisting of
severance and relocation expenses. The St. Paul incurred no additional
restructuring charges in 1994.
Pretax earnings in the underwriting segment of $561 million increased 11%
over 1993 pretax income of $507 million, reflecting improved underwriting
results and increased investment income. Pretax investment income totaled $675
million in 1994, compared with $646 million and $642 million in 1993 and 1992,
respectively. The increase in 1994 reflected the inclusion of Economy for a full
year. For several years prior to 1994, investment income levels were stagnant
due to a sustained period of falling interest rates.
26
<PAGE>
The following table summarizes written premiums, underwriting results and
combined ratios for each of The St. Paul's underwriting operations for the last
three years and for the first quarters of 1995 and 1994. Figures are on GAAP
basis, except for combined ratios, which are not derived from the GAAP financial
statements. Several reclassifications have been made to the 1993 and 1992
information to conform to the 1994 presentation.
<TABLE>
<CAPTION>
UNDERWRITING RESULTS BY OPERATION
THREE MONTHS YEAR ENDED
% OF 1994 ENDED MARCH 31, DECEMBER 31,
WRITTEN ------------------------ -------------------------------
PREMIUMS 1995(1) 1994(1) 1994 1993 1992
-------------- ----------- ----------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Specialized Commercial
Written premiums................. 30% $ 284 $ 263 $ 1,086 $ 1,000 $ 1,058
Underwriting result.............. $ (20) $ (34) $ (89) $ (116) $ (244)
Combined ratio................... 106.7 110.4 107.1 111.9 123.2
----------- ----------- --------- --------- ---------
Personal & Business Insurance
Written premiums................. 21% $ 151 $ 144 $ 747 $ 486 $ 350
Underwriting result.............. $ (7) $ (11) $ (35) $ (29) $ (63)
Combined ratio................... 104.5 107.5 104.6 105.8 117.7
----------- ----------- --------- --------- ---------
Medical Services
Written premiums................. 19% $ 136 $ 165 $ 690 $ 710 $ 712
Underwriting result.............. $ 26 $ 34 $ 118 $ 133 $ 152
Combined ratio................... 85.2 80.5 80.3 80.0 78.6
----------- ----------- --------- --------- ---------
Commercial
Written premiums................. 11% $ 146 $ 121 $ 418 $ 380 $ 499
Underwriting result.............. $ (4) $ (34) $ (54) $ (58) $ (123)
Combined ratio................... 102.6 128.1 112.6 115.4 123.9
----------- ----------- --------- --------- ---------
Total Fire and Marine
Written premiums............... 81% $ 717 $ 693 $ 2,941 $ 2,576 $ 2,619
Underwriting result............ $ (5) $ (45) $ (60) $ (70) $ (278)
Combined ratio................. 101.1 105.6 101.0 102.6 110.5
----------- ----------- --------- --------- ---------
Reinsurance
Written premiums................. 14% $ 156 $ 81 $ 513 $ 431 $ 343
Underwriting result.............. $ (5) $ (29) $ (22) $ (18) $ (241)
Combined ratio................... 104.5 134.3 105.1 103.1 166.3
----------- ----------- --------- --------- ---------
International
Written premiums................. 5% $ 43 $ 31 $ 169 $ 172 $ 180
Underwriting result.............. $ (5) $ (9) $ (31) $ (62) $ (48)
Combined ratio................... 113.5 128.9 117.6 135.9 132.1
----------- ----------- --------- --------- ---------
Total
Written premiums............... 100% $ 916 $ 805 $ 3,623 $ 3,179 $ 3,142
Underwriting result............ $ (15) $ (83) $ (113) $ (150) $ (567)
Combined ratio:
Loss and loss expense
ratio....................... 71.9 79.0 72.1 72.5 85.6
Underwriting expense ratio... 30.4 31.2 30.2 32.0 32.2
----------- ----------- --------- --------- ---------
Combined ratio............... 102.3 110.2 102.3 104.5 117.8
----------- ----------- --------- --------- ---------
Combined ratio including
policyholders' dividends...... 102.4 110.2 102.3 104.7 118.2
----------- ----------- --------- --------- ---------
</TABLE>
- ------------------------
(1) During the first quarter of 1995, the commercial underwriting operations of
Personal & Business Insurance ($27 million in written premiums) were
transferred to Commercial. This included the commercial package line of
business and commercial business written by Economy Fire & Casualty. First
quarter 1994 was reclassified to reflect this new presentation. However, the
annual information for the years 1994, 1993 and 1992 has not been
reclassified to reflect this change.
27
<PAGE>
INSURANCE BROKERAGE
The St. Paul's insurance brokerage subsidiary, Minet, provides insurance and
reinsurance broking and risk advisory services for major corporations and large
professional organizations worldwide. In recent years, Minet's operating results
have been negatively impacted by excess capacity in worldwide insurance markets
and the increasing trend away from commissions and toward fees as a basis of
determining prices for services performed. Minet's pretax loss of $10 million in
1994 represented a slight improvement over 1993 losses of $13 million. Brokerage
fees and commissions increased 7% to $316 million in 1994, reflecting growth in
Minet's reinsurance and wholesale brokerage operations and additional revenues
contributed by several newly acquired specialty brokerage firms. Expenses
increased in 1994 as a result of the expansion of retail specialty broking
teams.
INVESTMENT BANKING-ASSET MANAGEMENT
Nuveen, in which The St. Paul held a 77% interest at December 31, 1994
comprises The St. Paul's investment banking-asset management segment. Nuveen
markets tax-exempt open-end and closed-end (exchange-traded) managed fund shares
and provides investment advice to and administers the business affairs of its
family of managed funds. Nuveen also underwrites and trades municipal bonds and
tax-exempt unit investment trusts ("UITs") and provides pricing and surveillance
services to its UITs. Rising interest rates, declining municipal new issue
volume and increased investor uncertainty resulting from the increase in
interest rates caused Nuveen's total revenues to decline 10% in 1994 to $220
million from $246 million in 1993. Revenues in 1992 were $221 million.
Investment advisory fees earned on managed assets increased slightly over 1993.
Distribution revenues fell by $23 million, or 70%, from 1993 due to the decline
in the value of municipal bonds and interests in UITs held for future sale and
the decline in new investment product sales in 1994. The increase in 1993
revenues resulted primarily from growth in asset management fees. Total assets
under management fell to $29.7 billion at the end of 1994, compared with $32.7
billion at the end of 1993 and $27.3 billion at the end of 1992.
Nuveen's pretax earnings in 1994 of $95 million were the third highest in
its history. Earnings in 1993 and 1992 were $112 million and $98 million,
respectively. The St. Paul's consolidated results include Nuveen's earnings to
the extent of the Company's ownership percentage. The St. Paul's portion of
Nuveen's earnings in each of those years was $72 million, $83 million and $82
million, respectively.
28
<PAGE>
BUSINESS
GENERAL DESCRIPTION
The St. Paul is incorporated as a general business corporation under the
laws of the State of Minnesota. The St. Paul Companies, Inc. and its
subsidiaries comprise one of the oldest insurance organizations in the United
States, dating back to 1853. The St. Paul is a management company principally
engaged, through its subsidiaries, in three industry segments:
property-liability insurance underwriting (primarily through St. Paul Fire and
Marine Insurance Company), insurance brokerage (primarily through The St. Paul's
brokerage subsidiary, Minet) and investment banking-asset management (through
the Company's 77 percent stake in Nuveen). As a management company, The St. Paul
oversees the operations of its subsidiaries and provides them with capital,
management and administrative services. According to "Fortune" magazine's most
recent rankings, in terms of total assets, The St. Paul was the 25th largest
diversified financial company in the United States at December 31, 1993. At
March 23, 1995, The St. Paul and its subsidiaries employed approximately 12,900
persons.
The St. Paul's primary business is insurance underwriting, which accounted
for 88% of consolidated revenues in 1994. Insurance brokerage and investment
banking-asset management operations accounted for 7% and 5% of consolidated
revenues, respectively, in 1994. The St. Paul conducts its business in highly
competitive markets and The St. Paul's results can be affected by many factors,
including seasonal trends in premium volume and the size, number and timing of
catastrophe losses. As a result, net income, operating earnings and consolidated
revenues can vary significantly from period to period and interim results may
not necessarily be representative of the full year results of operations.
The St. Paul depends primarily on dividends from its subsidiaries to pay
dividends to its shareholders, service its debt and pay expenses. Various state
laws and regulations limit the amount of dividends The St. Paul may receive from
St. Paul Fire and Marine Insurance Company. In 1995, approximately $312 million
will be available for dividends free from such restrictions. During 1994, The
St. Paul received cash dividends of approximately $201 million from St. Paul
Fire and Marine Insurance Company.
The following table lists the sources of The St. Paul's consolidated
revenues for each of the last three years:
<TABLE>
<CAPTION>
PERCENTAGE OF
CONSOLIDATED REVENUES
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
INSURANCE UNDERWRITING OPERATIONS:
Fire and Marine:
Specialized Commercial......................................... 21.6% 22.7% 23.4%
Personal & Business............................................ 15.7 10.9 7.6
Medical Services............................................... 13.6 15.4 16.0
Commercial..................................................... 8.1 9.4 12.0
----- ----- -----
Total Fire and Marine........................................ 59.0 58.4 59.0
REINSURANCE.................................................... 10.3 8.9 8.0
INTERNATIONAL.................................................. 3.3 4.0 2.9
Net Investment Income.......................................... 14.4 14.5 14.3
Realized Investment Gains...................................... 0.7 1.1 1.3
Other.......................................................... 0.6 0.7 0.5
----- ----- -----
Total Insurance Underwriting................................. 88.3 87.6 86.0
INSURANCE BROKERAGE.............................................. 7.4 7.2 7.3
INVESTMENT BANKING -- ASSET MANAGEMENT........................... 4.7 5.5 4.9
Parent Company and Eliminations.................................. (0.4) (0.3) 1.8
----- ----- -----
Total........................................................ 100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
29
<PAGE>
INSURANCE UNDERWRITING OPERATIONS
The St. Paul's insurance underwriting business is conducted through three
principal operations. The St. Paul conducts its U.S. direct insurance
underwriting operations under the name St. Paul Fire and Marine ("Fire and
Marine"). Fire and Marine underwrites property and liability insurance and
provides insurance-related products and services to commercial, professional and
individual customers throughout the United States. The St. Paul's reinsurance
business operates under the name St. Paul Re, which underwrites reinsurance for
North American and international insurance companies. The St. Paul's
International Underwriting division offers primary property- liability insurance
coverages in the United Kingdom and in other selected international markets,
primarily Canada and Western Europe.
The primary sources of the underwriting operations' revenues are premiums
earned from insurance and reinsurance policies and income earned from the
investment portfolio. According to the most recent industry statistics published
in "Best's Review" with respect to property-liability insurers doing business in
the United States, The St. Paul's underwriting operations ranked 15th on the
basis of 1993 written premiums. The insurance underwriting business is generally
characterized by mature markets, numerous market participants, and intense price
and other competition. These industry factors, which are expected to continue,
make it difficult for the Company to achieve premium growth.
SPECIALIZED COMMERCIAL
This is the largest of Fire and Marine's operations, based on written
premiums, and includes a number of individual underwriting operations organized
according to market segments or along product lines. Specialized Commercial, in
general, provides coverage for damage to the customer's property (fire, inland
marine and auto), liability for bodily injury or damage to the property of
others (general liability, auto liability and excess), workers' compensation
insurance, and various professional liability coverages. Operations serving
particular market segments consist of the following: Construction, Technology,
Financial Services, National Accounts (large businesses), and Public Sector
Services (government entities). The following operations are organized along
specific product lines: The Surety operation underwrites surety bonds, primarily
for construction contractors, which guarantee that third parties will be
indemnified against the nonperformance of contractual obligations. Based on
estimated 1994 premium data, Fire and Marine's surety operation is the
second-largest underwriter of surety bonds in the United States. The Ocean
Marine operation provides a variety of property and liability insurance related
to ocean and inland waterways traffic, including cargo and hull property
protection. The Professional Liability operation markets errors and omissions
coverage for lawyers, insurance agents and other nonmedical professionals,
including directors and officers. The Surplus Lines operation underwrites
products liability insurance, umbrella and excess liability coverages, property
insurance for high-risk classes of business, and coverages for unique, sometimes
one-of-a-kind risks. The Special Property operation provides property insurance
programs for large commercial accounts.
Specialized Commercial also includes the results of Fire and Marine's
participation in insurance pools and associations, which provide specialized
underwriting skills and risk management services for the classes of business
that they underwrite. These pools and associations serve to increase the
underwriting capacity of the participating companies for insurance policies
where the concentration of risk is so high or the amount so large that a single
company could not prudently accept the entire risk.
Management's strategies for 1995 vary among specialty areas, based on
expected market conditions. In Ocean Marine, Surplus Lines, and Public Sector
Services, The St. Paul expects moderate growth as a result of current favorable
market conditions. In the Financial Services, Professional Liability and
Technology sectors, efforts will focus on developing new products that offer
innovative coverages and superior service, while in the Construction, Surety and
National Accounts sectors, The St. Paul's objective will be to deliver
high-quality loss control and claim service and innovative coverage options to
customers; the Company does not expect significant growth in these areas.
PERSONAL & BUSINESS INSURANCE
This operation provides property and liability insurance coverages for
individuals and small-business owners. For individuals, a variety of monoline
and package policies are offered to protect personal
30
<PAGE>
property such as homes, automobiles and boats, as well as to provide coverage
for personal liability. For small-business owners, Personal & Business Insurance
markets general commercial property and liability coverages for offices,
retailers and family restaurants. Economy, a personal insurance underwriter, is
included in this operation and is in the process of being fully integrated into
Fire and Marine's existing personal insurance operations. The personal and small
commercial market environment is becoming increasingly competitive, making
significant premium growth unlikely. Consequently, management's focus in 1995
will be on improving operating efficiency, including further integrating Economy
with The St. Paul's other personal lines operations, while maintaining high
customer satisfaction. The Company intends to lower its expense ratio in this
sector as a result of reduced headcount and improved operating efficiencies.
MEDICAL SERVICES
Medical Services underwrites professional liability, property and general
liability insurance for the health care industry delivery system. Fire and
Marine is the largest medical liability insurer in the United States, with
premium volume representing approximately 12% of the United States market in
1993 based on premium data published in "Best's Review". While Medical Services
premium volume declined slightly in 1994, underwriting profit exceeded $100
million for the fifth consecutive year. The Company has identified objectives in
several areas: increasing physicians and surgeons professional liability market
share in states where Medical Services has either not offered this coverage or
has not focused on developing significant market share; continued expansion in
the long-term care industry; and opportunities arising from the consolidations,
mergers and acquisitions that mark the current evolving health care delivery
system. Premium volume in 1995 is expected to be comparable to that in 1994, and
The St. Paul expects Medical Services to continue to make a strong profit
contribution in 1995.
COMMERCIAL
Fire and Marine's Commercial underwriting operation offers property and
liability insurance to midsize commercial enterprises. Coverages marketed
include package, general liability, umbrella and excess liability, commercial
auto and fire, inland marine and workers' compensation. Commercial premiums
increased approximately 10% in 1994, and the underwriting loss declined slightly
from 1993. Commercial will continue to pursue new business while seeking to
maintain its underwriting discipline. After the recent restructuring of this
operation, the Company's objective is to maintain a favorable loss ratio and to
reduce the expense ratio, thereby improving results in this line. Due to market
conditions, The St. Paul does not anticipate significant premium growth in the
Commercial line.
REINSURANCE
St. Paul Re underwrites reinsurance in both domestic and international
insurance markets (referred to as "assumed reinsurance"). Reinsurance is an
agreement between insurance companies to transfer risks. According to data
published by the Reinsurance Association of America, St. Paul Re ranked as the
eighth largest U.S. reinsurance underwriter based on written premium volume for
the first nine months of 1994. The Company expects additional premium growth as
a result of its agreement in late 1994 to purchase the book of international
property-liability reinsurance from a reinsurance underwriting subsidiary of the
CIGNA Corporation. Management intends to achieve growth without sacrificing
pricing adequacy by targeting certain specific initiatives. A significant
contributor to premium growth in 1995 will be accounts taken on as a result of
the purchase of the international book of business from CIGNA. The opportunity
for new and renewal accounts offered by this book fits well with St. Paul Re's
strategy to expand the scope and characteristics of its international business.
INTERNATIONAL UNDERWRITING
The International Underwriting operation includes primary insurance written
outside the United States, mainly the United Kingdom, Canada, Spain and the
Republic of Ireland. It also includes insurance written for foreign operations
of multinational corporations based in the United States, and insurance written
to cover exposures in the United States for foreign-based companies. This
operation offers a range of commercial and personal lines products and services
tailored to meet the unique needs of customers located outside the United
States. The Company's plan includes expanding by product line
31
<PAGE>
and geographically, especially in Europe. In Canada, International will pursue
several specialty niche markets. In the United Kingdom, new business initiatives
will focus on specific customer groups in both the commercial and personal
market sectors. The reduction of underwriting losses for mature operations is an
objective, along with new product introduction. Significant premium growth is
not anticipated in 1995.
PRINCIPAL MARKETS AND METHODS OF DISTRIBUTION
Fire and Marine's business is produced primarily through approximately 6,300
independent insurance agencies and national insurance brokers. Fire and Marine
maintains 12 regional offices in major cities throughout the United States and
90 additional service offices in the United States to respond to the needs of
agents, brokers and policyholders.
INSURANCE BROKERAGE OPERATIONS
The St. Paul's insurance brokerage segment, Minet, provides insurance and
reinsurance broking and risk advisory services for major corporations and large
professional organizations worldwide. According to the most recent rankings in
terms of total 1993 revenues by "Business Insurance," Minet is the tenth largest
international insurance brokerage organization in the world. Based in London,
Minet has 131 offices throughout North America, Europe, Africa, Asia and
Australia.
Minet operates through six business units, each focusing on distinct client
groups. GLOBAL PROFESSIONAL SERVICES provides insurance brokerage services to
the world's largest accounting firms, as well as law firms, law societies and
insurance companies. INTERNATIONAL RETAIL serves clients in Asia, Africa,
Australia and Europe. Retail brokers act on behalf of organizations such as
corporations and partnerships by providing risk management services and
procuring insurance coverages. INTERNATIONAL BROKING, through its wholesale
broking operations, provides access to Lloyd's of London and other markets for
the purpose of assembling underwriting capacity for specialized insurance
programs for clients throughout the world. Wholesale brokers act on behalf of
retail brokers by procuring specialty insurance coverages. Minet's NORTH
AMERICAN operations include retail brokerage and advisory services for
professional clients and major industrial and service corporations. This
business unit includes Minet's U.S. wholesale brokerage network, Swett &
Crawford, which, according to the most recent rankings in terms of total 1993
revenues by "Business Insurance", is the largest wholesale insurance broker in
the United States. REINSURANCE provides facultative and treaty intermediary
services to insurance companies throughout the world. MINET RISK SERVICES
provides consulting and actuarial services to clients worldwide, and also
provides management services to captive insurance companies.
Minet in recent years has expanded the scope of its specialty brokerage
operations by acquiring several small, specialized brokers throughout the world
to complement its existing worldwide client base and market network. The focus
will remain on developing new business opportunities in specialty market niches
where Minet has the expertise to offer value-added services. Minet will continue
to form new specialty broker teams and selectively pursue acquisitions that
complement existing operations. Expense containment initiatives will remain a
vital component of the Company's efforts toward achieving profitability. The
intense competition that has characterized the insurance brokerage industry for
many years will make it difficult for Minet to increase revenues in 1995.
INVESTMENT BANKING -- ASSET MANAGEMENT OPERATIONS
Nuveen is The St. Paul's investment banking-asset management subsidiary. The
St. Paul and St. Paul Fire and Marine Insurance Company currently hold a
combined 77% interest in Nuveen after selling a minority interest by means of an
initial public offering in 1992. Through John Nuveen & Co. Incorporated, a
wholly-owned subsidiary, Nuveen markets tax-exempt, open-end and closed-end
(exchange-traded) managed funds. Nuveen also underwrites and trades municipal
bonds and tax-exempt UITs. Nuveen markets its funds and UITs to individuals
through registered representatives associated with unaffiliated national and
regional broker-dealers and other financial organizations. Through its Municipal
Finance Department, the firm also serves state and local governments and their
authorities by financing community projects through both negotiated and
competitive financings.
32
<PAGE>
Nuveen Advisory Corp., a wholly-owned subsidiary of John Nuveen & Co.
Incorporated, is investment adviser to the Nuveen-sponsored open-end mutual
funds and exchange-traded funds. Nuveen Institutional Advisory Corp., also a
wholly-owned subsidiary, is investment adviser to other Nuveen-sponsored
exchange-traded funds and also provides investment management services to trust
funds established by public utilities for the decommissioning of nuclear power
plants.
As the leading sponsor of tax-free UITs, Nuveen currently sponsors trusts
with assets of $16.8 billion in 50 different national, state and insured
portfolios. Nuveen also manages 21 tax-free, open-end mutual funds and money
market funds with net assets of approximately $6 billion in national, state,
insured and money market portfolios. In addition, Nuveen manages 70
exchange-traded funds with approximately $24 billion in net assets, which are
traded on national stock exchanges. Nuveen has its principal office in Chicago
and maintains regional sales offices in other cities across the United States.
Nuveen is a recognized market leader in municipal investing. The Company
expects that assets under management will begin to grow again as the volatility
in the municipal market subsides. Material growth is not expected to occur until
such time as Nuveen begins to offer successful new investment products once
again.
INVESTMENTS
Investments are an integral part of The St. Paul's insurance business. The
following table shows the composition and carrying value of The St. Paul's
investment portfolio for the last three years, followed by more information
about each of the major investment classes.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities(1)..................................... $ 8,829 $ 9,148 $ 7,722
Equities................................................ 531 549 494
Real estate............................................. 528 489 435
Venture capital......................................... 330 298 231
Short-term investments.................................. 898 725 639
Other investments....................................... 47 47 56
--------- --------- ---------
Total investments................................... $ 11,163 $ 11,256 $ 9,577
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------
(1) The carrying values for 1994 and 1993 represent market value. The amortized
costs for 1994 and 1993 were $8.9 billion and $8.4 billion, respectively.
The carrying value for 1992 is stated at amortized cost.
</TABLE>
FIXED MATURITIES
Fixed maturities constituted 79% of The St. Paul's investment portfolio at
December 31, 1994. The St. Paul determines the mix of its investment in taxable
and tax-exempt securities based on its current and projected tax position and
the relationship between taxable and tax-exempt investment yields. As of
December 31, 1994, taxable bonds accounted for 55% of total fixed maturities, up
from 51% in 1993. Fixed maturity purchases in 1994 were predominantly
intermediate-term, investment-grade taxable securities. Beginning December 31,
1993, the fixed maturities portfolio was carried on The St. Paul's balance sheet
at estimated market value, with unrealized appreciation and depreciation (net of
taxes) recorded in common shareholders' equity. At December 31, 1994, the pretax
unrealized depreciation on the portfolio totaled $85 million.
33
<PAGE>
The fixed maturities portfolio is managed conservatively to provide
reasonable return while limiting exposure to risks. Approximately 95% of the
fixed maturities portfolio is rated at investment grade levels (I.E., BBB or
better). Nonrated securities comprise the remainder of the portfolio. Most of
these are nonrated municipal bonds which, in management's view, would be
considered of investment-grade quality if rated.
EQUITIES
Equity holdings comprised 5% of The St. Paul's investments at December 31,
1994, and consist of a diversified portfolio of common stocks, which are held
with the primary objective of achieving capital appreciation. This portfolio
provided $21 million of realized investment gains and $13 million of dividend
income in 1994, and its carrying value at December 31, 1994 included $30 million
of unrealized appreciation.
REAL ESTATE
The St. Paul's real estate holdings, which comprised 5% of total investments
at December 31, 1994, consist primarily of a diversified portfolio of commercial
office and warehouse buildings distributed throughout the United States. This
portfolio produced $28 million of pretax investment income in 1994. The St. Paul
does not invest in real estate mortgages.
VENTURE CAPITAL
Securities of small to medium-size companies spanning a variety of
industries comprised The St. Paul's investments in venture capital, which
accounted for 3% of total investments at December 31, 1994. These investments
are in the form of limited partnership interests or direct equity investments,
and their carrying value at December 31, 1994 included $69 million of unrealized
appreciation.
OTHER INVESTMENTS
The St. Paul's portfolio also includes short-term securities and other
miscellaneous investments, which in the aggregate comprised 8% of total
investments at December 31, 1994.
LOSS RESERVES
Loss reserves are The St. Paul's largest liability. Reserves are established
on an undiscounted basis and reflect the Company's estimates of the total losses
and loss adjustment expenses it will ultimately have to pay under insurance and
reinsurance policies. These include losses that have been incurred but not yet
settled, and losses that have been incurred but not yet reported.
Reserve estimates reflect such variables as past loss experience, social
trends in damage awards, changes in judicial interpretation of legal liability
and policy coverages, and inflation. The St. Paul takes into account not only
monetary increases in the cost of what it insures, but also changes in societal
factors that influence jury verdicts and case law and, in turn, claim costs.
Due to the nature of many insurance coverages offered, which involve claims
that may not be settled
for many years after they are incurred, subjective judgments as to the Company's
ultimate exposure to losses are an integral and necessary component of the loss
reserving process. Reserves are continually reviewed, using a variety of
statistical and actuarial techniques to analyze current claim costs, frequency
and severity data, and prevailing economic, social and legal factors. Previously
established reserves are adjusted as loss experience develops and new
information becomes available. These adjustments are reflected in the financial
results for the periods in which they were made. Management believes that the
reserves currently established for losses and Loss Adjustment Expenses ("LAE")
are adequate to cover their eventual costs.
34
<PAGE>
The following table presents a reconciliation of beginning and ending loss
reserves for 1994, 1993 and 1992.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Loss and LAE reserves at beginning of year, as
reported............................................... $ 9,185 $ 8,813 $ 8,246
Less reinsurance recoverables on unpaid losses at
beginning of year...................................... (1,545) (1,606) (1,558)
--------- --------- ---------
Net loss and LAE reserves at beginning of year........ 7,640 7,207 6,688
Economy reserves at acquisition......................... -- 280 --
Provision for losses and LAE for claims incurred:
Current year.......................................... 2,790 2,527 2,941
Prior years........................................... (328) (223) (251)
--------- --------- ---------
Total incurred...................................... 2,462 2,304 2,690
Losses and LAE payments for claims incurred:
Current year.......................................... (667) (580) (708)
Prior years........................................... (1,566) (1,547) (1,452)
--------- --------- ---------
Total paid.......................................... (2,233) (2,127) (2,160)
Unrealized foreign exchange loss (gain)................. 21 (24) (11)
--------- --------- ---------
Net loss and LAE reserves at end of year............ 7,890 7,640 7,207
Plus reinsurance recoverables on unpaid losses at end of
year................................................... 1,533 1,545 1,606
--------- --------- ---------
Loss and LAE reserves at end of year, as reported... $ 9,423 $ 9,185 $ 8,813
--------- --------- ---------
--------- --------- ---------
</TABLE>
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ST. PAUL CAPITAL
St. Paul Capital is a limited liability company formed under the laws of
Delaware and is managed by The St. Paul and The St. Paul's wholly-owned
subsidiary St. Paul Holdings. The Managing Members own all of the Common
Securities of St. Paul Capital. The Common Securities are nontransferable and
are and will be beneficially owned directly or indirectly by the Company. The
Managing Members are the sole members of St. Paul Capital and are also the only
managers of St. Paul Capital. St. Paul Capital's principal executive offices are
located at 385 Washington Street, St. Paul, Minnesota 55102, telephone: (612)
221-7911. The principal executive offices of the Managing Members are located at
385 Washington Street, St. Paul, Minnesota 55102, telephone: (612) 221-7911.
Pursuant to the L.L.C. Agreement, the members of St. Paul Capital that own
Common Securities have unlimited liability for the debts, obligations and
liabilities of St. Paul Capital in the same manner as a general partner of a
Delaware limited partnership (which do not include obligations to holders of
Preferred Securities in their capacity as such). The holders of Preferred
Securities will not be generally liable for the debts, obligations or
liabilities of St. Paul Capital solely by reason of being a member of St. Paul
Capital. (subject to their obligation to repay any funds wrongfully distributed
to them).
St. Paul Capital exists for the sole purpose of issuing its Preferred
Securities and investing the proceeds thereof, together with substantially all
the capital contributed by the Managing Members in respect of the Common
Securities, in the Convertible Subordinated Debentures, and may engage in no
other activities now or in the future. The payment by St. Paul Capital of
dividends due on the Preferred Securities is solely dependent on its receipt of
interest payments on the Convertible Subordinated Debentures. To the extent that
aggregate interest payments on the Convertible Subordinated Debentures exceed
aggregate dividends on the Preferred Securities and such dividends have been
paid in full, St. Paul Capital may at times have excess funds, which shall be
distributed to the Company.
DESCRIPTION OF SECURITIES OFFERED
The securities offered hereby are % Convertible Monthly Income
Preferred Securities of St. Paul Capital with a liquidation preference of $50
per security. The Preferred Securities are convertible at any time prior to the
Conversion Expiration Date, at the option of the holder and in the manner
described herein, into shares of St. Paul Common Stock at an initial conversion
rate of shares of St. Paul Common Stock for each Preferred Security
(equivalent to a conversion price of $ per share of St. Paul Common Stock),
subject to adjustment in certain circumstances. The Preferred Securities are
guaranteed, to the extent described herein, by The St. Paul as to dividends, the
Redemption Price and cash and other distributions payable on liquidation. In
certain circumstances, the holders of a majority of the aggregate liquidation
preference of the Preferred Securities then outstanding can direct the
Conversion Agent to exchange all of the Preferred Securities for all of the
Convertible Subordinated Debentures and immediately thereafter to exchange the
Convertible Subordinated Debentures and any accrued and unpaid interest thereon,
on behalf of such holders, for Depositary Shares, each representing a 1/100th
interest in a share of St. Paul Series C Convertible Preferred Stock.
The following is a description of the material terms of the Preferred
Securities; the St. Paul Series C Convertible Preferred Stock and the Depositary
Shares representing such stock for which the Preferred Securities may be
exchanged; the Guarantee pursuant to which The St. Paul will guarantee, to the
extent described therein, certain payments with respect to the Preferred
Securities; the Convertible Subordinated Debentures and the Indenture pursuant
to which the Convertible Subordinated Debentures will be issued (the
"Indenture"); and the St. Paul Common Stock into which the Preferred Securities
may be converted.
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<PAGE>
PREFERRED SECURITIES
THE FOLLOWING SUMMARY OF THE PRINCIPAL TERMS AND PROVISIONS OF THE PREFERRED
SECURITIES DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO, THE L.L.C. AGREEMENT, THE FORM OF WHICH HAS BEEN
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART.
GENERAL
All of the Common Securities of St. Paul Capital are and will be
beneficially owned directly or indirectly by The St. Paul at all times while the
Preferred Securities are outstanding. The L.L.C. Agreement authorizes and
creates the Preferred Securities, which represent preferred limited liability
company interests in St. Paul Capital. The preferred limited liability company
interests represented by the Preferred Securities will have a preference with
respect to cash distributions and amounts payable on the dissolution, winding up
or termination of St. Paul Capital over the Common Securities of St. Paul
Capital. The Preferred Securities, as preferred limited liability company
interests, do not have a par value. The L.L.C. Agreement does not permit the
issuance of other limited liability company interests without the prior approval
of holders of not less than 66 2/3% of the aggregate liquidation preference of
the Preferred Securities then outstanding.
Holders of Preferred Securities will have no preemptive rights.
St. Paul Capital is and will be managed by the Managing Members at all times
while the Preferred Securities are outstanding and the Managing Members are and
will be the sole members of St. Paul Capital which are managers of St Paul
Capital. Except in connection with the appointment of a Special Trustee (as
described below under "-- Voting Rights"), holders of the Preferred Securities
will not have the right to remove or replace the Managing Members.
DIVIDENDS
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions from St. Paul Capital, accruing from the date of original
issuance and payable monthly in arrears on the last day of each calendar month
of each year, commencing , 1995 ("dividends"). The dividends payable on
each Preferred Security will be fixed at a rate per annum of $ or %
of the liquidation preference of $50. The amount of dividends payable for any
period will be computed on the basis of twelve 30-day months and a 360-day year
and, for any period shorter than a full month, will be computed on the basis of
the actual number of days elapsed in such period. Payment of dividends is
limited to the funds held by St. Paul Capital and legally available for
distribution. See "-- Description of the Convertible Subordinated Debentures --
Interest" and "-- Description of the Guarantee -- General".
Dividends on the Preferred Securities must be declared monthly and paid on
the last day of each calendar month to the extent that St. Paul Capital has
funds legally available for the payment of such dividends and cash on hand
sufficient to make such payments. St. Paul Capital's ability to pay dividends on
the Preferred Securities is solely dependent upon The St. Paul's payment of
interest on the Convertible Subordinated Debentures in which St. Paul Capital
will invest the proceeds from the offering made hereby. If The St. Paul defers
interest payments on the Convertible Subordinated Debentures or otherwise fails
to make interest payments on the Convertible Subordinated Debentures, St. Paul
Capital would not have sufficient funds to pay dividends on the Preferred
Securities and therefore would not make such payments. The payment of dividends
(if and to the extent declared) is guaranteed by The St. Paul as and to the
extent set forth under "-- Description of the Guarantee". The Guarantee is a
full and unconditional guarantee from the time of its issuance, but does not
apply to any payment of dividends unless and until such dividends are declared.
If The St. Paul were to default on its obligation to pay interest or amounts
payable on redemption or maturity of the Convertible Subordinated Debentures,
St. Paul Capital would lack legally available funds for the payment of dividends
or amounts payable on redemption of the Preferred Securities, and in such event
holders of the Preferred Securities would not be able to rely upon the Guarantee
for payment of such amounts. See "Investment Considerations -- Subordinate
Obligations Under Guarantee and Convertible Subordinated Debentures".
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<PAGE>
The St. Paul has the right under the Indenture to defer, from time to time,
interest payments on the Convertible Subordinated Debentures for up to 60
months. Monthly dividends on the Preferred Securities would be deferred (but
Additional Dividends would continue to accumulate monthly) by St. Paul Capital
during any such deferral of interest payments. St. Paul Capital will give
written notice of The St. Paul's deferral of interest payments to the holders of
Preferred Securities no later than the last date on which it would be required
to notify the NYSE of the record or payment date of the related dividend, which
is currently 10 days prior to such record or payment date. See "Investment
Considerations -- Option to Defer Payment of Dividends," "Description of
Securities Offered -- Preferred Securities -- Additional Dividends" and "--
Description of the Convertible Subordinated Debentures -- Option to Defer
Interest Payments". Any failure by The St. Paul to make interest payments on the
Convertible Subordinated Debentures in the absence of a deferral would
constitute an Event of Default under the Indenture. The failure of holders of
Preferred Securities to receive dividends on the Preferred Securities in full
(including arrearages) for 15 consecutive months (including any such failure
caused by a deferral of interest payments on the Convertible Subordinated
Debentures) would trigger the right of holders of a majority of the aggregate
liquidation preference of the Preferred Securities then outstanding, voting as a
class at a special meeting of members called for such purpose or by written
consent, to direct the conversion and exchange agent for the Preferred
Securities (the "Conversion Agent") to exchange all of the Preferred Securities
then outstanding for Convertible Subordinated Debentures, and immediately
thereafter, to exchange such Convertible Subordinated Debentures and any accrued
and unpaid interest thereon, on behalf of the holders, for Depositary Shares,
each representing 1/100th of a share of St. Paul Series C Convertible Preferred
Stock, at the Exchange Price. "Exchange Price" means one Depositary Share for
each $50 principal amount of Convertible Subordinated Debentures (which rate of
exchange is equivalent to each of (i) one Depositary Share for each Preferred
Security, (ii) one share of St. Paul Series C Convertible Preferred Stock for
each $5,000 principal amount of Convertible Subordinated Debentures and (iii)
one share of St. Paul Series C Convertible Preferred Stock for each 100
Preferred Securities). See "-- Optional Exchange for Depositary Shares".
Dividends declared on the Preferred Securities will be payable to the
holders thereof as they appear on the books and records of St. Paul Capital on
the relevant record dates, which will be one Business Day (as defined below)
prior to the relevant payment dates. Subject to any applicable laws and
regulations and the L.L.C. Agreement, each such payment will be made as
described under "-- Book-Entry-Only Issuance -- The Depository Trust Company"
below. In the event that any date on which dividends are payable on the
Preferred Securities 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). If such
Business Day is in the next succeeding calendar year, however, the payment will
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" means any day other
than a day on which banking institutions in The City of New York are authorized
or required by law or executive order to close.
ADDITIONAL DIVIDENDS
St. Paul Capital shall be required to declare and pay additional dividends
on the Preferred Securities upon any dividend arrearages in respect of the
Preferred Securities in order to provide, in effect, monthly compounding on such
dividend arrearages at a rate of % per annum compounded monthly and such
Additional Dividends shall accumulate. The amounts payable to effect such
monthly compounding on dividend arrearages in respect of the Preferred
Securities are referred to herein as "Additional Dividends".
CERTAIN RESTRICTIONS ON ST. PAUL CAPITAL
If accumulated and unpaid dividends have not been paid in full on the
Preferred Securities, St. Paul Capital may not:
(i) pay, declare or set aside for payment, any dividends or other
distributions on any other limited liability company interests, including
the Common Securities; or
38
<PAGE>
(ii) redeem, purchase, or otherwise acquire any other limited liability
company interests, including the Common Securities;
until, in each case, such time as all accumulated and unpaid dividends on all of
the Preferred Securities, including any Additional Dividends thereon, shall have
been paid in full for all dividend periods terminating on or prior to the date
of such payment or the date of such redemption, purchase, or acquisition, as the
case may be.
If accumulated and unpaid dividends have been paid in full on the Preferred
Securities for all prior whole dividend periods, then holders of Preferred
Securities will not be entitled to receive or share in any dividends paid,
declared or set aside for payment on any other limited liability company
interest in St. Paul Capital, including the Common Securities.
St. Paul Capital may not issue any other limited liability company interests
without the approval of holders of not less than 66 2/3 in liquidation
preference of the outstanding Preferred Securities. In addition, The St. Paul
has covenanted in the Guarantee and the Indenture to maintain direct or indirect
ownership of 100% of the outstanding Common Securities of St. Paul Capital. See
"Description of the Guarantee -- Certain Covenants of The St. Paul" and
"Description of the Convertible Subordinated Debentures -- Certain Covenants of
The St. Paul". St. Paul Capital does not intend to issue Common Securities to
persons other than the Managing Members. Other than Common Securities issued or
to be issued to the Managing Members and the Preferred Securities offered
hereby, St. Paul Capital does not intend to create or issue additional limited
liability company interests.
CONVERSION RIGHTS
GENERAL. The Preferred Securities will be convertible at any time prior to
the Conversion Expiration Date, at the option of the holder thereof and in the
manner described below, into shares of St. Paul Common Stock at an initial
conversion rate of shares of St. Paul Common Stock for each Preferred
Security (equivalent to a conversion price of $ per share of St. Paul
Common Stock), subject to adjustment as described below under "-- Conversion
Price Adjustments". The Preferred Securities will not be convertible by or at
the option of The St. Paul or St. Paul Capital. Whenever The St. Paul issues
shares of St. Paul Common Stock upon conversion of Preferred Securities, The St.
Paul will issue, together with each such share of St. Paul Common Stock, one
Stock Purchase Right, whether or not such Stock Purchase Rights shall be
exercisable at such time, but only if such Stock Purchase Rights are issued and
outstanding and held by other holders of St. Paul Common Stock (or are evidenced
by outstanding share certificates representing Common Stock) at such time and
have not expired or been redeemed. The Stock Purchase Rights will expire on
December 19, 1999, subject to extension to December 18, 2002 under certain
circumstances or earlier redemption by The St. Paul. The Rights Agreement
provides that, until the Stock Purchase Rights become exercisable pursuant to
the terms of the Rights Agreement, the Stock Purchase Rights will be transferred
with and only with the St. Paul Common Stock. Until the time the Stock Purchase
Rights become exercisable -- at which time the separate certificates
representing the Stock Purchase Rights will be mailed to holders of record of
the St. Paul Common Stock -- the Stock Purchase Rights will be evidenced by the
certificates representing the related shares of St. Paul Common Stock.
A holder of a Preferred Security wishing to exercise its conversion right
shall surrender such Preferred Security, together with an irrevocable conversion
notice, to the Conversion Agent which shall, on behalf of such holder, exchange
the Preferred Security for a portion of the Convertible Subordinated Debentures
held by St. Paul Capital and immediately convert such Convertible Subordinated
Debentures and any accrued and unpaid interest thereon into St. Paul Common
Stock. The St. Paul's delivery upon conversion of the fixed number of shares of
St. Paul Common Stock into which the Convertible Subordinated Debentures are
convertible (together with the cash payment, if any, in lieu of fractional
shares) shall be deemed to be the payment in full of the principal amount at
maturity of the portion of Convertible Subordinated Debentures so converted and
any unpaid interest accrued on such Convertible Subordinated Debentures at the
time of such conversion. For a discussion of the taxation of such an exchange to
holders, including the possibility that holders who exchange their Preferred
Securities for
39
<PAGE>
St. Paul Common Stock may be subject to additional income tax to the extent
accrued but unpaid interest on the Convertible Subordinated Debentures is
converted into accumulated and unpaid dividends on the St. Paul Common Stock
received upon conversion of the Preferred Securities, see "Certain Federal
Income Tax Considerations -- Exchange of Preferred Securities for St. Paul
Stock". Holders may obtain copies of the required form of the conversion notice
from the Conversion Agent. Conversion rights will terminate at the close of
business on the Conversion Expiration Date.
Holders of Preferred Securities on a dividend payment record date will be
entitled to receive the dividend payable on such securities on the corresponding
dividend payment date notwithstanding the conversion of such Preferred
Securities on or after such dividend payment record date and on or prior to such
dividend payment date. Except as provided in the immediately preceding sentence,
St. Paul Capital will make no payment or allowance for accumulated and unpaid
dividends, whether or not in arrears, on converted Preferred Securities. The St.
Paul will make no payment or allowance for dividends on the shares of St. Paul
Common Stock issued upon such conversion. Each conversion will be deemed to have
been effected immediately prior to the close of business on the day on which
notice was received by St. Paul Capital.
No fractional shares of St. Paul Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid in cash.
EXPIRATION OF CONVERSION RIGHTS. On and after and provided St.
Paul Capital is current in the payment of dividends on the Preferred Securities,
including any Additional Dividends thereon, St. Paul Capital may, at its option,
cause the conversion rights of holders of Preferred Securities to expire. St.
Paul Capital may exercise this option only if for 20 trading days within any
period of 30 consecutive trading days, including the last trading day of such
period, the Current Market Price of St. Paul Common Stock exceeds 120% of the
conversion price of the Preferred Securities, subject to adjustment in certain
circumstances. In order to exercise its conversion expiration option, St. Paul
Capital must issue a press release for publication on the Dow Jones News Service
announcing the Conversion Expiration Date prior to the opening of business on
the second trading day after a period in which the condition in the preceding
sentence has been met, but in no event prior to . The press release
shall announce the Conversion Expiration Date and provide the current conversion
price and Current Market Price of St. Paul Common Stock, in each case as of the
close of business on the trading day next preceding the date of the press
release.
Written notice of the expiration of Conversion Rights containing the same
information set forth in the press release will be sent by first-class mail to
the holders of the Preferred Securities not more than four Business Days after
St. Paul Capital issues the press release. The Conversion Expiration Date will
be a date selected by St. Paul Capital not less than 30 nor more than 60 days
after the date on which St. Paul Capital issues the press release announcing its
intention to terminate conversion rights of Preferred Security holders. In the
event that St. Paul Capital does not exercise its conversion expiration option,
the Conversion Expiration Date with respect to the Preferred Securities will be
the earlier of the date of an Exchange Election referred to below under "--
Optional Exchange for Depositary Shares," and two Business Days preceding the
date set for mandatory redemption of the Preferred Securities.
The term "Current Market Price" of St. Paul Common Stock for any day means
the last reported sale 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 NYSE Consolidated
Transaction Tape, or, if the St. Paul Common Stock is not listed or admitted to
trading on the NYSE on such day, on the principal national securities exchange
on which the St. Paul Common Stock is listed or admitted to trading, if the St.
Paul 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 St. Paul Common Stock is not quoted or admitted to trading on such quotation
system, on the principal quotation system on which the St. Paul 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 St. Paul Common Stock in the
over-the-counter market on the
40
<PAGE>
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 NYSE member firm selected from time to time by the
Board of Directors of The St. Paul for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the Board of Directors.
CONVERSION PRICE ADJUSTMENTS -- GENERAL. The conversion price will be
subject to adjustment in certain events including, without duplication: (i) the
payment of dividends (and other distributions) payable exclusively in St. Paul
Common Stock on any class of capital stock of The St. Paul; (ii) the issuance to
all holders of St. Paul Common Stock of rights or warrants entitling holders of
such rights or warrants to subscribe for or purchase St. Paul Common Stock at
less than the Current Market Price; (iii) subdivisions and combinations of St.
Paul Common Stock; (iv) the payment of dividends (and other distributions) to
all holders of St. Paul Common Stock consisting of evidences of indebtedness of
The St. Paul, securities or capital stock, cash, or assets (including
securities, but excluding those rights, warrants, dividends, and distributions
referred to in clause (iii) and dividends and distributions paid exclusively in
cash); (v) the payment of dividends (and other distributions) on St. Paul Common
Stock paid exclusively in cash, excluding (A) cash dividends that do not exceed
the per share amount of the immediately preceding regular cash dividend (as
adjusted to reflect any of the events referred to in clauses (i) through (vi) of
this sentence), and (B) cash dividends if the annualized per share amount
thereof does not exceed 15% of the last sale price of St. Paul Common Stock, as
reported on the NYSE Consolidated Transaction Tape, on the trading day
immediately preceding the date of declaration of such dividend; and (vi) payment
in respect of a tender or exchange offer (other than an odd-lot offer) by The
St. Paul or any subsidiary of The St. Paul for St. Paul Common Stock in excess
of 10% of the Current Market Price of St. Paul Common Stock on the trading day
next succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer.
The St. Paul from time to time may reduce the conversion price by any amount
selected by The St. Paul for any period of at least 20 days, in which case The
St. Paul shall give at least 15 days' notice of such reduction. The St. Paul
may, at its option, make such reductions in the conversion price, in addition to
those set forth above, as the Board of Directors deems advisable to avoid or
diminish any income tax to holders of St. Paul Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations -- Adjustment of Conversion Price".
No adjustment of the conversion price will be made upon the issuance of any
shares of St. Paul Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of The St.
Paul and the investment of additional optional amounts in shares of St. Paul
Common Stock under any such plan, or the issuance of any shares of St. Paul
Common Stock or options or rights to purchase such shares pursuant to any
present or future employee benefit plan or program of The St. Paul or pursuant
to any option, warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the Preferred Securities were first
designated. There shall also be no adjustment of the conversion price in case of
the issuance of any St. Paul Common Stock (or securities convertible into or
exchangeable for St. Paul Common Stock), except as specifically described above.
If any action would require adjustment of the conversion price pursuant to more
than one of the anti-dilution provisions, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that results in the highest
absolute value to holders of the Preferred Securities. No adjustment in the
conversion price will be required unless such adjustment would require an
increase or decrease of at least 1% of the conversion price, but any adjustment
that would otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment.
CONVERSION PRICE ADJUSTMENTS -- MERGER, CONSOLIDATION OR SALE OF ASSETS OF
THE ST. PAUL. In the event that The St. Paul is a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the assets of The St. Paul, recapitalization or
reclassification of St. Paul Common Stock or any compulsory share exchange (each
of the foregoing being referred to as a "Transaction")), in each case, as a
result of which shares of St. Paul Common Stock shall be converted into the
right (i) in the case of any Transaction other than a Transaction involving a
Common Stock
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<PAGE>
Fundamental Change (as defined below), to receive securities, cash or other
property, each Preferred Security shall thereafter be convertible into the kind
and amount of securities, cash and other property receivable upon the
consummation of such Transaction by a holder of that number of shares of St.
Paul Common Stock into which a Preferred Security was convertible immediately
prior to such Transaction, or (ii) in the case of a Transaction involving a
Common Stock Fundamental Change, to receive common stock of the kind received by
holders of St. Paul Common Stock (but in each case after giving effect to any
adjustment discussed below relating to a Fundamental Change if such Transaction
constitutes a Fundamental Change). The holders of Preferred Securities will have
no voting rights with respect to any Transaction described in this section.
In the event of a Fundamental Change (as defined below), 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 Preferred Security shall be convertible solely into common stock of the
kind received by holders of St. Paul Common Stock as a result of such Common
Stock Fundamental Change.
In the event of a Fundamental Change, the conversion price will be adjusted
immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined below),
the conversion price of the Preferred Security will 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
adjustments, and (B) the result obtained by multiplying the greater of the
Applicable Price (as defined below) or the then applicable Reference Market
Price (as defined below) by a fraction of which the numerator will be
$ and the denominator will be an amount per Preferred Security
determined by the Managing Members in their sole discretion, after
consultation with an investment banking firm, to be the equivalent of the
hypothetical redemption price that would have been applicable if the
Preferred Securities had been redeemable during such period; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Securities in effect immediately prior to such Common
Stock Fundamental Change, but after giving effect to any other prior
adjustments, will thereupon be adjusted by multiplying such conversion price
by a fraction of which the numerator will be the Purchaser Stock Price (as
defined below) and the denominator will be the Applicable Price; provided,
however, that in the event of a Common Stock Fundamental Change in which (A)
100% of the value of the consideration received by a holder of St. Paul
Common Stock is common stock of the successor, acquiror, or other third
party (and cash, if any, is paid only with respect to any fractional
interests in such common stock resulting from such Common Stock Fundamental
Change) and (B) all of the St. Paul Common Stock will 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 Preferred Securities in effect immediately prior to
such Common Stock Fundamental Change will thereupon be adjusted by
multiplying such conversion price by a fraction of which the numerator will
be one and the denominator will be the number of shares of common stock of
the successor, acquiror, or other third party received by a holder of one
share of St. Paul Common Stock as a result of such Common Stock Fundamental
Change.
In the absence of the provisions of the L.L.C. Agreement which provide for
an adjustment to the conversion price in the event of a Fundamental Change, in
the case of a Transaction each Preferred Security would become convertible into
the securities, cash, or property receivable by a holder of the number of shares
of St. Paul Common Stock into which such Preferred Security was convertible
immediately prior to such Transaction. This change could substantially lessen or
eliminate the value of the conversion privilege associated with the Preferred
Securities. For example, if The St. Paul were acquired in a cash merger, each
Preferred Security would become convertible solely into cash and would no longer
be convertible into securities whose value would vary depending on the future
prospects of The St. Paul and other factors.
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<PAGE>
The foregoing conversion price adjustments are designed, in transactions
involving a Fundamental Change where all or substantially all the St. Paul
Common Stock is converted into securities, cash, or property and not more than
50% of the value received by the holders of St. Paul Common Stock consists of
stock listed or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the National Market System of the National
Association of Securities Dealers, Inc. (E.G., a Non-Stock Fundamental Change,
as defined below), to increase the securities, cash, or property into which each
Preferred Security is convertible.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of St. Paul Common Stock (measured as described in the
definition of Applicable Price below) is lower than the then applicable
conversion price of a Preferred Security but greater than or equal to the
"Reference Market Price" (initially $ , but subject to adjustment in
certain events as described below), the conversion price will be adjusted as
described above with the effect that each Preferred Security will be convertible
into securities, cash or property of the same type received by the holders of
St. Paul Common Stock in the transaction but in an amount per Preferred Security
determined by The St. Paul in its sole discretion, after consultation with an
investment banking firm, to be the equivalent of the hypothetical redemption
price that would have been applicable if the Preferred Securities had been
redeemable during such period.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of St. Paul Common Stock (measured as described in the
definition of Applicable Price) is lower than both the Applicable Conversion
Price of a Preferred Security and the Reference Market Price, the conversion
price will be adjusted as described above but calculated as though such initial
value had been the Reference Market Price.
In a transaction involving a Fundamental Change where all or substantially
all the St. Paul Common Stock is converted into securities, cash, or property
and more than 50% of the value received by the holders of St. Paul Common Stock
consists of listed or National Market System traded common stock (E.G., a Common
Stock Fundamental Change, as defined below), the foregoing adjustments are
designed to provide in effect that (a) where St. Paul Common Stock is converted
partly into such common stock and partly into other securities, cash, or
property, each Preferred Security will be convertible solely into a number of
shares of such common stock determined so that the initial value of such shares
(measured as described in the definition of "Purchaser Stock Price" below)
equals the value of the shares of St. Paul Common Stock into which such
Preferred Security was convertible immediately before the transaction (measured
as aforesaid) and (b) where St. Paul Common Stock is converted solely into such
common stock, each Preferred Security will be convertible into the same number
of shares of such common stock receivable by a holder of the number of shares of
St. Paul Common Stock into which such Preferred Security was convertible
immediately before such transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock Fundamental
Change in which the holders of the St. Paul Common Stock receive only cash, the
amount of cash received by the holder of one share of St. Paul Common Stock and
(ii) in the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the Closing Prices for the St. Paul Common
Stock during the ten trading days prior to and including the record date for the
determination of the holders of St. Paul Common Stock entitled to receive such
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 St. Paul Common Stock shall
have the right to receive such securities, cash, or other property (such record
date or distribution date being hereinafter referred to as the "Entitlement
Date"), in each case as adjusted in good faith by The St. Paul to appropriately
reflect any of the events referred to in clauses (i) through (vi) of the first
paragraph under "-- Conversion Price Adjustments -- General".
The term "Closing Price" means on any day the reported last sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on the NYSE Consolidated Transaction
Tape or, if the stock is not listed or admitted to trading on such
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Exchange, on the principal national securities exchange on which such stock is
listed or admitted to trading or if not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices as
furnished by any NYSE member firm, selected by the Managing Members for that
purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of The St. Paul) of the consideration received by holders of St. Paul
Common Stock consists of common stock that for each of the ten consecutive
trading days prior to the Entitlement Date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the 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 St. Paul continues to
exist after the occurrence of such Fundamental Change and the outstanding
Preferred Securities continue to exist as outstanding Preferred Securities or
(ii) not later than the occurrence of such Fundamental Change, the outstanding
Preferred Securities are converted into or exchanged for shares of convertible
preferred stock of an entity succeeding to the business of The St. Paul, 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 Preferred Securities.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the St. Paul 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, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the conversion price of the
Preferred Securities, such Fundamental Change shall be deemed to have occurred
when substantially all of the St. Paul Common Stock has been 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 weighed average per share consideration that a holder of St. Paul Common
Stock could have received in connection with such transactions or events as a
result of which more than 50% of the St. Paul Common Stock was so exchanged.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
The St. Paul to appropriately reflect any of the events referred to in clauses
(i) through (vi) of the first paragraph under "-- Conversion Price Adjustments
- -- General".
The term "Reference Market Price" shall initially mean $ (which is an
amount equal to 66 2/3% of the reported last sale price for the St. Paul Common
Stock on the NYSE Consolidated Transaction Tape on , 1995), 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 conversion price after
giving effect to any such adjustment shall always be the same as the ratio of $
to the initial conversion price of the Preferred Securities.
OPTIONAL EXCHANGE FOR DEPOSITARY SHARES
Upon the occurrence of an Exchange Event (as defined below), the holders of
a majority of the aggregate liquidation preference of Preferred Securities then
outstanding, voting as a class at a special meeting of members called for such
purpose or by written consent, may, at their option, direct the Conversion Agent
to exchange all (but not less than all) of the Preferred Securities for
Convertible Subordinated Debentures and to immediately exchange such Convertible
Subordinated Debentures
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and any accrued and unpaid interest thereon, on behalf of such holders, for
Depositary Shares, each representing ownership of a 1/100th of a share of St.
Paul Series C Convertible Preferred Stock at the Exchange Price. If the
Preferred Securities are exchanged for Depositary Shares, the L.L.C. Agreement
provides that The St. Paul will use its best efforts to have the Depositary
Shares listed on the NYSE or other exchange on which the Preferred Securities
may then be listed.
Each Depositary Share will entitle the holder thereof to all proportional
rights and preferences of the St. Paul Series C Convertible Preferred Stock
(including dividend, voting, conversion, redemption and liquidation rights and
preferences). The St. Paul Series C Convertible Preferred Stock issued upon any
such exchange will have terms substantially similar to the terms of the
Preferred Securities (adjusted proportionately per Depositary Share), except
that, among other things, the holders of St. Paul Series C Convertible Preferred
Stock will have the right to elect two additional directors of The St. Paul
whenever dividends on the St. Paul Series C Convertible Preferred Stock are in
arrears for 18 months (including for this purpose any arrearage with respect to
the Preferred Securities) and will not be subject to mandatory redemption. See
"-- Description of St. Paul Series C Convertible Preferred Stock" and "--
Description of Depositary Shares". The terms of the St. Paul Series C
Convertible Preferred Stock provide that all accumulated and unpaid dividends
(including any Additional Dividends) on the Preferred Securities that are not
paid at the time of making an Exchange Election shall be treated as accumulated
and unpaid dividends on the St. Paul Series C Convertible Preferred Stock. See
"-- Description of St. Paul Series C Convertible Preferred Stock". For a
discussion of the taxation of such an exchange to holders, including the
possibility that holders who exchange their Preferred Securities for Depositary
Shares representing St. Paul Series C Convertible Preferred Stock may be subject
to additional income tax to the extent accrued but unpaid interest on the
Convertible Subordinated Debentures is converted into accumulated and unpaid
dividends on the St. Paul Series C Convertible Preferred Stock represented by
the Depositary Shares received in exchange for the Preferred Securities, see
"Certain Federal Income Tax Considerations -- Exchange of Preferred Securities
for St. Paul Stock".
The failure of holders of Preferred Securities to receive, for 15
consecutive months, the full amount of dividend payments (including arrearages)
on the Preferred Securities, including any such failure caused by a deferral of
interest payments on the Convertible Subordinated Debentures, will constitute an
"Exchange Event". As soon as practicable, but in no event later than 30 days
after the occurrence of an Exchange Event, the Managing Members will, upon not
less than 15 days' written notice by first-class mail to the holders of
Preferred Securities, convene a meeting of such holders (an "Exchange Election
Meeting") for the purpose of acting on the matter of whether to cause the
Conversion Agent to exchange all Preferred Securities then outstanding for
Depositary Shares representing St. Paul Series C Convertible Preferred Stock in
the manner described above. If the Managing Members fail to convene such
Exchange Election Meeting within such 30-day period, the holders of at least 10%
of the outstanding Preferred Securities will be entitled to convene such
Exchange Election Meeting. Upon the affirmative vote of the holders of Preferred
Securities representing not less than a majority of the aggregate liquidation
preference of the Preferred Securities then outstanding at an Exchange Election
Meeting or, in the absence of such meeting, upon receipt by St. Paul Capital of
written consents signed by the holders of a majority of the aggregate
liquidation preference of the outstanding Preferred Securities, an election to
exchange all outstanding Preferred Securities on the basis described above (an
"Exchange Election") will be deemed to have been made.
Holders of Preferred Securities, by purchasing such Preferred Securities,
will be deemed to have agreed to be bound by these optional exchange provisions
in regard to the exchange of such Preferred Securities for Depositary Shares
representing St. Paul Series C Convertible Preferred Stock on the terms
described above.
REDEMPTION
If at any time following the Conversion Expiration Date, less than 5% of the
Preferred Securities offered hereby remain outstanding, such Preferred
Securities shall be redeemable at the option of St. Paul Capital, in whole but
not in part, from time to time, upon not fewer than 30 nor more than 60 days'
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prior notice, at a redemption price of $50 per Preferred Security together with
accumulated and unpaid dividends (whether or not earned or declared), including
any Additional Dividends (the "Redemption Price").
Upon repayment by The St. Paul of the Convertible Subordinated Debentures,
including as a result of the acceleration of the Convertible Subordinated
Debentures upon the occurrence of an "Event of Default" described under "--
Description of the Convertible Subordinated Debentures -- Events of Default",
the Preferred Securities shall be subject to mandatory redemption, in whole but
not in part, by St. Paul Capital and the proceeds from such repayment will be
applied to redeem the Preferred Securities at the Redemption Price. In the case
of such acceleration, the Preferred Securities will only be redeemed when
repayment of the Convertible Subordinated Debentures has actually been received
by St. Paul Capital. The Preferred Securities are not otherwise redeemable for
any reason, including in the event that St. Paul Capital should become subject
to federal or state taxation. To the extent that such taxation or other events
cause St. Paul Capital to have insufficient funds to pay full dividends on the
Preferred Securities, the holders will have available to them the exchange
option described above. Upon the occurrence of certain Tax Events (as defined
herein), however, St. Paul Capital may be dissolved and the Convertible
Subordinated Debentures distributed to holders of Preferred Securities. See "--
Special Event Dissolution".
SPECIAL EVENT DISTRIBUTION
If a Tax Event (as defined below) shall occur and be continuing, the
Managing Members may, and if an Investment Company Event (as defined below, and
collectively with a Tax Event, "Special Events") shall occur and be continuing,
the Managing Members shall, dissolve St. Paul Capital and, after satisfaction of
liabilities to creditors of St. Paul Capital as required by applicable law,
cause the Convertible Subordinated Debentures to be distributed to the holders
of the Preferred Securities in liquidation of St. Paul Capital, in the manner
described below, provided that The St. Paul has reasonably determined that
holders will not recognize gain or loss for United States federal income tax
purposes as a result of such distribution. In the case of a Tax Event, however,
the Managing Members may elect not to dissolve St. Paul Capital and to cause the
Preferred Securities to remain outstanding.
"Tax Event" means that the Managing Members shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to or change (including any
announced prospective change) in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after
such date) or (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
generally accepted position on the date of issuance of the Preferred Securities,
which amendment or change is effective or such interpretation or pronouncement
is announced on or after the date of issuance of the Preferred Securities, there
is a substantial risk that (i) St. Paul Capital is taxable as a corporation for
United States federal income tax purposes or is otherwise subject to United
States federal income tax with respect to interest received on the Convertible
Subordinated Debentures, (ii) interest payable by The St. Paul to St. Paul
Capital on the Convertible Subordinated Debentures will not be deductible for
United States federal income tax purposes or (iii) St. Paul Capital is subject
to more than a DE MINIMIS amount of other taxes, duties or other governmental
charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in official interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that St. Paul Capital is or
will be considered an "investment company" which is required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 1940 Act Law becomes effective on or after the date of issuance of the
Preferred Securities; provided, that no Investment Company Event shall be deemed
to have occurred if the Managing Members obtain a written opinion of nationally
recognized independent counsel experienced in practice under the 1940 Act to the
effect that The St. Paul or St. Paul
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Capital has taken reasonable measures, in its discretion, to avoid such Change
in 1940 Act Law so that in the opinion of such counsel, notwithstanding such
Change in 1940 Act Law, St. Paul Capital is not required to be registered as an
"investment company" within the meaning of the 1940 Act.
Following the dissolution of St. Paul Capital in connection with a Special
Event and the satisfaction of liabilities to creditors of St. Paul Capital as
required by applicable law, St. Paul Capital will, on a date fixed by the
Managing Members within 90 days following the occurrence of such Special Event,
distribute to each holder of Preferred Securities, in respect of each Preferred
Security, Convertible Subordinated Debentures having a principal amount equal to
$50. In addition, all accumulated and unpaid dividends (including Additional
Dividends) on the Preferred Securities that are not paid at the time of such
dissolution shall be treated as accrued and unpaid interest on the Convertible
Subordinated Debentures. The Indenture does not provide for the modification of
the terms of the Convertible Subordinated Debentures in connection with a
Special Event. After the date of such distribution, (i) the Preferred Securities
will no longer be deemed to be outstanding, (ii) the holders of Preferred
Securities shall cease to be members of St. Paul Capital; (iii) DTC or its
nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Convertible
Subordinated Debentures to be delivered upon such distribution and (iv) any
certificates representing Preferred Securities not held by DTC or its nominee
will be deemed to represent Convertible Subordinated Debentures having a
principal amount equal to the aggregate of the stated liquidation preference of,
and the accumulated and unpaid dividends on, such Preferred Securities until
such certificates are presented to The St. Paul or its agent for transfer or
reissuance. The Indenture provides that if Convertible Subordinated Debentures
are so distributed, The St. Paul will use its best efforts to have such
Convertible Subordinated Debentures listed on the NYSE or other exchange on
which the Preferred Securities may then be listed.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution, or
winding-up of St. Paul Capital, the holders of Preferred Securities at the time
outstanding will be entitled to receive a liquidation preference of $50 per
Preferred Security plus all accumulated and unpaid dividends (whether or not
earned or declared), including any Additional Dividends thereon, to the date of
payment (the "Liquidation Distribution") out of the assets of St. Paul Capital
legally available for distribution to members prior to any distribution by St.
Paul Capital on its other limited liability company interests, including the
Common Securities.
If, upon any liquidation of St. Paul Capital, the holders of Preferred
Securities are paid in full the aggregate Liquidation Distribution to which they
are entitled, then such holders will not be entitled to receive or share in any
other assets of St. Paul Capital thereafter available for distribution to any
other holders of limited liability company interests in St. Paul Capital,
including the Common Securities.
Pursuant to the L.L.C. Agreement, St. Paul Capital shall be dissolved and
its affairs shall be wound up upon the earliest to occur of: (i) the expiration
of the period fixed for the life of St. Paul Capital; (ii) the bankruptcy,
retirement, resignation, expulsion, dissolution, winding up or liquidation of
either Managing Member; (iii) the election of the Managing Members, with the
approval of the holders of 66 2/3% of the Preferred Securities; (iv) the entry
of a judicial decree of dissolution; (v) the election of the Managing Members in
connection with a Special Event; (vi) the redemption of all outstanding
Preferred Securities; or (vii) upon the written consent of all members of St.
Paul Capital.
MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE ST. PAUL AND ST. PAUL CAPITAL
The St. Paul may not merge or consolidate with or into another entity or
permit another entity to merge or consolidate with or into it, and may not be
replaced by, or convey, transfer or lease all or substantially all of its
properties and assets to another entity unless (i) at the time of such
transaction, no Event of Default (as defined in the Indenture) shall have
occurred and be continuing, or would occur as a result of such transaction, (ii)
the survivor of such merger or consolidation or the entity to which The St.
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Paul's assets are sold, transferred or leased is an entity organized under the
laws of the United States or any state thereof, such entity (if other than The
St. Paul) becomes a party of the L.L.C. Agreement and becomes a Managing Member,
assumes all of The St. Paul's obligations under the L.L.C. Agreement, and such
entity has a net worth equal to at least 10% of the total capital contributions
to St. Paul Capital, (iii) prior to such transaction, The St. Paul obtains an
opinion of nationally recognized independent counsel experienced in such matters
to the effect that St. Paul Capital will continue to be classified as a
partnership for federal income tax purposes after such transaction and (iv) in
the case of any sale, transfer or lease of all or substantially all of the The
St. Paul's assets that includes St. Paul's interest in St. Paul Capital, The St.
Paul has obtained the consent to the transaction of holders of not less than
66 2/3% of the aggregate liquidation preference of the Preferred Securities then
outstanding.
St. Paul Capital may not consolidate, merge with or into, or be replaced by,
or convey, transfer or lease its properties and assets substantially as an
entirety to any entity, except as described below. St. Paul Capital may, (i) in
order to avoid federal income tax or 1940 Act consequences adverse to The St.
Paul or St. Paul Capital or to the holders of the Preferred Securities, without
the consent of the holders of the Preferred Securities, or (ii) with the prior
approval of holders of not less than 66 2/3 of the Preferred Securities then
outstanding, consolidate, merge with or into, or be replaced by a limited
liability company, limited partnership or trust organized as such under the laws
of any state of the United States of America; PROVIDED, that (i) such successor
entity either (x) expressly assumes all of the obligations of St. Paul Capital
under the Preferred Securities or (y) substitutes for the Preferred Securities
other securities having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities rank, with
respect to participation in the profits or assets of the successor entity, at
least as high as the Preferred Securities rank with respect to participation in
the profits or assets of St. Paul Capital, (ii) The St. Paul expressly
acknowledges such successor entity as the holder of the Convertible Subordinated
Debentures, (iii) such merger, consolidation, or replacement does not cause the
Preferred Securities (or any Successor Securities) to be delisted by any
national securities exchange or other organization on which the Preferred
Securities are then listed, (iv) such merger, consolidation or replacement does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation or replacement does not adversely affect the powers,
preferences and other special rights of the holders of the Preferred Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (vi) prior
to such merger, consolidation or replacement The St. Paul has received an
opinion of nationally recognized independent counsel to St. Paul Capital
experienced in such matters to the effect that (w) such transaction will not
cause The St. Paul, St. Paul Capital or such successor entity to become an
"investment company" required to be registered under the 1940 Act, (x) holders
of the Preferred Securities will not recognize any gain or loss for federal
income tax purposes as a result of such transaction, (y) such successor entity
will not be treated as an association taxable as a corporation for federal
income tax purposes and (z) such transaction will not adversely affect the
limited liability of holders of the Preferred Securities.
VOTING RIGHTS
Except as provided below and under "-- Description of the Guarantee --
Amendments and Assignment," "-- Description of the Convertible Subordinated
Debentures -- Modification of the Indenture" and as otherwise required by law
and provided by the L.L.C. Agreement, the holders of the Preferred Securities
will have no voting rights.
If (i) St. Paul Capital fails to pay dividends in full (including any
arrearages) on the Preferred Securities for 15 consecutive months (including any
such failure caused by a determination by The St. Paul to defer interest
payments on the Convertible Subordinated Debentures as described under "--
Description of the Convertible Subordinated Debentures -- Option to Defer
Interest Payments"); (ii) an Event of Default (as defined under "-- Description
of the Convertible Subordinated Debentures -- Events of Default") occurs and is
continuing with respect to the Convertible Subordinated Debentures; or (iii) The
St. Paul is in default under any of its payment obligations under the Guarantee
(as described
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under "-- Description of the Guarantee"), then the holders of the Preferred
Securities will be entitled to appoint and authorize a Special Trustee to
enforce St. Paul Capital's rights under the Convertible Subordinated Debentures,
enforce the rights of the holders of Preferred Securities under the Guarantee
and, to the extent permitted by law, declare and pay dividends on the Preferred
Securities. For purposes of determining whether St. Paul Capital has failed to
pay dividends in full for 15 consecutive months, dividends shall be deemed to
remain in arrears, notwithstanding any partial payments in respect thereof,
until all accumulated and unpaid dividends have been or contemporaneously are
paid. Not later than 30 days after such right to appoint a Special Trustee
arises and upon not less than 15 days' written notice by first-class mail to the
holders of Preferred Securities, the Managing Members will convene a meeting to
elect a Special Trustee. If the Managing Members fail to convene such meeting
within such 30-day period, the holders of 10% of the aggregate liquidation
preference of the Preferred Securities then outstanding will be entitled to
convene such meeting. In the event that, at any such meeting, holders of less
than a majority in aggregate liquidation preference of Preferred Securities
entitled to vote for the appointment of a Special Trustee vote for such
appointment, no Special Trustee shall be appointed. Any Special Trustee so
appointed shall vacate office immediately if St. Paul Capital (or The St. Paul
pursuant to the Guarantee) shall have paid in full all accumulated and unpaid
dividends (and any Additional Dividends) on the Preferred Securities or such
Event of Default or default, as the case may be, shall have been cured.
Notwithstanding the appointment of any such Special Trustee, The St. Paul will
retain all rights as obligor under the Convertible Subordinated Debentures,
including the right to defer interest payments as provided under "-- Description
of the Convertible Subordinated Debentures -- Option to Defer Interest
Payments", and any such deferral would not constitute a default under the
Indenture or enable a holder of Preferred Securities to require the payment of a
dividend that has not theretofore been declared.
In furtherance of the foregoing, and without limiting the powers of any
Special Trustee so appointed and for the avoidance of any doubt concerning the
powers of the Special Trustee, any Special Trustee, in its own name, in the name
of St. Paul Capital, in the name of any holder of Preferred Securities or
otherwise, may institute or cause to be instituted a proceeding, including,
without limitation, any suit in equity, an action at law or other judicial or
administrative proceeding, to enforce St. Paul Capital's or any holder's rights
directly against The St. Paul to the same extent as St. Paul Capital or any
holder and on behalf of St. Paul Capital or any holder, and may prosecute such
proceeding to judgment or final decree, and enforce the same against The St.
Paul and collect, out of the property, wherever situated, of The St. Paul the
monies adjudged or decreed to be payable in the manner provided by law.
If any proposed amendment to the L.L.C. Agreement provides for, or the
Managing Members otherwise propose to effect, (x) any action that would
materially adversely affect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the L.L.C. Agreement or
otherwise (including, without limitation, the authorization or issuance of any
additional limited liability company interests in St. Paul Capital), or (y) the
dissolution, winding-up or termination of St. Paul Capital (other than in
connection with the exchange of Depositary Shares representing St. Paul Series C
Convertible Preferred Stock for Preferred Securities upon the occurrence of an
Exchange Event or as described under "-- Merger, Consolidation or Sale of Assets
of St. Paul Capital"), then the holders of outstanding Preferred Securities will
be entitled to vote on such amendment or action of the Managing Members (but not
on any other amendment or action), and such amendment or action shall not be
effective except with the approval of the holders of at least 66 2/3% or more of
the aggregate liquidation preference of the Preferred Securities then
outstanding; PROVIDED, HOWEVER, that no such approval shall be required if the
dissolution, winding-up or termination of St. Paul Capital is proposed or
initiated pursuant to the L.L.C. Agreement.
The rights attached to the Preferred Securities will be deemed to be
materially adversely affected by the creation or issue of, and a vote of the
holders of Preferred Securities will be required for the creation or issue of,
any limited liability company interests in St. Paul Capital other than the
interests represented by the Preferred Securities and the interests of the
Managing Members.
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So long as any Convertible Subordinated Debentures are held by St. Paul
Capital, the Managing Members shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Special Trustee or
exercising any trust or power conferred on the Special Trustee with respect to
the Convertible Subordinated Debentures, (ii) waive any past default, which is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Subordinated Debentures
shall be due and payable, (iv) consent to any amendment, modification or
termination of the Convertible Subordinated Debentures or of the Indenture
without, in each case, obtaining the prior approval of the holders of at least
66 2/3% or more of the aggregate liquidation preference of the Preferred
Securities then outstanding, PROVIDED, HOWEVER, that where a consent under the
Indenture would require the consent of each holder affected thereby, no such
consent shall be given by the Managing Members without the prior consent of each
holder of the Preferred Securities. The Managing Members shall not revoke any
action previously authorized or approved by a vote of holders of Preferred
Securities, without the approval of holders of Preferred Securities representing
66 2/3% or more of the aggregate liquidation preference of the Preferred
Securities then outstanding. The Managing Members shall notify all holders of
Preferred Securities of any notice of default received from the Trustee with
respect to the Convertible Subordinated Debentures.
Any required approval of holders of Preferred Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. St. Paul Capital will cause a notice of any meeting at which holders of
Preferred Securities are entitled to vote, or of any matter upon which action by
written consent of such holders is to be taken, to be mailed to each holder of
record of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any matter on which such holders are entitled
to vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the Preferred Securities. The
information in this section concerning DTC and DTC's book-entry system is based
upon information obtained from DTC. The Preferred Securities will be issued only
as fully-registered securities registered in the name of Cede & Co. (as nominee
for DTC). One or more fully-registered global Preferred Security certificates
will be issued, representing in the aggregate the total number of Preferred
Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). Access to
the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants").
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Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
a Preferred Security (a "Beneficial Owner") is in turn to be recorded on the
Direct or Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in Preferred Securities are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Preferred Securities, except upon a resignation of DTC,
upon the occurrence of an Event of Default under the Convertible Subordinated
Debentures or upon a decision by St. Paul Capital to discontinue the book-entry
system for the Preferred Securities.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices with respect to the Preferred Securities shall be sent to
Cede & Co.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to St. Paul Capital as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Preferred Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Dividend payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, St. Paul Capital or The St. Paul, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of dividends to DTC is the responsibility of St. Paul Capital,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
St. Paul Capital. Under such circumstances, in the event that a successor
securities depositary is not obtained, certificates representing the Preferred
Securities will be printed and delivered. If an Event of Default occurs under
the Convertible Subordinated Debentures or if St. Paul Capital decides to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary), certificates representing the Preferred Securities will
be printed and delivered.
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TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The Chase Manhattan Bank (National Association) will act as Transfer Agent,
Registrar and Paying, Conversion and Exchange Agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be affected without
charge by or on behalf of St. Paul Capital, but upon payment (with the giving of
such indemnity as St. Paul Capital may require) in respect of any tax or other
government charges which may be imposed in relation to it.
DESCRIPTION OF ST. PAUL SERIES C CONVERTIBLE PREFERRED STOCK
AS DESCRIBED UNDER "-- PREFERRED SECURITIES -- OPTIONAL EXCHANGE FOR
DEPOSITARY SHARES" ABOVE, THE PREFERRED SECURITIES MAY BE EXCHANGED IN CERTAIN
CIRCUMSTANCES (FOLLOWING A PRIOR EXCHANGE FOR CONVERTIBLE SUBORDINATED
DEBENTURES HELD BY ST. PAUL CAPITAL) FOR DEPOSITARY SHARES REPRESENTING ST. PAUL
SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK, WITHOUT PAR VALUE (LIQUIDATION
PREFERENCE $5000 PER SHARE). THE FOLLOWING DESCRIPTION OF THE PRINCIPAL TERMS OF
THE ST. PAUL SERIES C CONVERTIBLE PREFERRED STOCK DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ST. PAUL'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED (THE "RESTATED ARTICLES"),
AND THE CERTIFICATE OF DESIGNATION OF THE ST. PAUL SERIES C CONVERTIBLE
PREFERRED STOCK (THE "CERTIFICATE OF DESIGNATION"), FORMS OF WHICH HAVE BEEN
FILED AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART.
The Board of Directors of The St. Paul has designated, and The St. Paul will
keep available, 30,000 shares (34,500 shares if the Underwriters' over-allotment
option is exercised in full) of St. Paul Series C Convertible Preferred Stock
for issuance upon exchange of the Preferred Securities for Depositary Shares,
each representing 1/100th of a share of St. Paul Series C Convertible Preferred
Stock (as described under "-- Preferred Securities -- Optional Exchange for
Depositary Shares" above). At the time the Preferred Securities are issued, all
corporate action required in connection with the issuance of the St. Paul Series
C Convertible Preferred Stock and the deposit thereof with the Depositary (as
hereinafter defined) upon the making of an Exchange Election will have been
taken. The L.L.C. Agreement provides that The St. Paul shall use its best
efforts to have the Depositary Shares listed on the NYSE or any other exchange
on which the Preferred Securities may be listed.
The terms of the St. Paul Series C Convertible Preferred Stock -- including
as to dividends, conversion and liquidation preference -- are substantially
similar to those of the Preferred Securities (adjusted proportionately per
Depositary Share) with the following principal exceptions:
(a) Accumulated and unpaid dividends (including any Additional Dividends
thereon) on the Preferred Securities, if any, at the time of the making of
an Exchange Election will become accumulated and unpaid dividends on the St.
Paul Series C Convertible Preferred Stock;
(b) If dividends are not paid on the St. Paul Series C Convertible
Preferred Stock for 18 monthly dividend periods (including for this purpose
any arrearage with respect to the Preferred Securities), the number of
directors of The St. Paul shall be increased by two persons and the holders
of the St. Paul Series C Convertible Preferred Stock will be entitled to
elect the persons to fill such positions; and
(c) Dividends on the St. Paul Series C Convertible Preferred Stock are
not subject to a deferral option, however, such dividends need not be
declared even if The St. Paul has funds legally available therefor and cash
on hand sufficient to pay dividends. In the event that The St. Paul fails to
declare dividends on the St. Paul Series C Convertible Preferred Stock, no
dividends would be payable on any other securities of The St. Paul ranking
PARI PASSU (I.E., on a parity) with or junior to the St. Paul Series C
Convertible Preferred Stock.
If at any time following the Conversion Expiration Date, less than 5% of the
shares of St. Paul Series C Convertible Preferred Stock issued following an
Exchange Election remain outstanding, such shares of St. Paul Series C
Convertible Preferred Stock shall be redeemable, from time to time, in whole but
not in part, at the option of The St. Paul at a redemption price of $5000 per
share (equivalent to a redemption price of $50 per Depositary Share) together
with accumulated and unpaid dividends (whether or not earned or declared).
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The St. Paul Series C Convertible Preferred Stock will rank senior to the
St. Paul Common Stock and the Series A Preferred Stock of The St. Paul with
respect to the payment of dividends and amounts upon liquidation, dissolution
and winding-up. The St. Paul Series C Convertible Preferred Stock will rank PARI
PASSU (I.E., on a parity) with the Series B Preferred Stock of The St. Paul with
respect to the payment of dividends and amounts upon liquidation, dissolution or
winding-up. In the event dividends are not paid in full on either the Series B
Preferred Stock or the St. Paul Series C Convertible Preferred Stock, the
holders of the Series B Preferred Stock and the St. Paul Series C Convertible
Preferred Stock will share ratably with respect to any dividend payment in
proportion to the respective amounts of the accumulated and unpaid dividends due
on such series of preferred stock. See "Description of St. Paul Capital Stock --
Preferred Shares".
In the event of a voluntary or involuntary bankruptcy, liquidation,
dissolution or winding-up of The St. Paul, the holders of St. Paul Series C
Convertible Preferred Stock are entitled to receive out of the net assets of The
St. Paul, but before any distribution is made on any class of securities ranking
junior to the St. Paul Series C Convertible Preferred Stock, $5000 per share
(equivalent to $50 per Depositary Share) in cash plus accumulated and unpaid
dividends (whether or not earned or declared) to the date of final distribution
to such holders. After payment of the full amount of the liquidation
distribution to which they are entitled, the holders of shares of St. Paul
Series C Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of The St. Paul. In the event that
the assets available for distribution are insufficient to pay in full the
liquidation preference to the holders of the St. Paul Series C Convertible
Preferred Stock and any preferred stock ranking on a parity with the St. Paul
Series C Convertible Preferred Stock, the holders of such series of preferred
stock will share in the remaining assets of the St. Paul, based on the
proportion of their liquidation preference to the entire amount of unpaid
liquidation preference.
So long as the Convertible Subordinated Debentures are exchangeable for the
Depositary Shares representing the St. Paul Series C Convertible Preferred
Stock, The St. Paul may not authorize or issue any other preferred stock ranking
senior to the St. Paul Series C Convertible Preferred Stock without the approval
of the holders of not less than 66 2/3% of the aggregate liquidation preference
of the Preferred Securities then outstanding. However, no such vote shall be
required for the issuance by The St. Paul of additional preferred stock ranking
PARI PASSU or junior to the St. Paul Series C Convertible Preferred Stock as to
the payment of dividends and amounts upon liquidation, dissolution and
winding-up.
DESCRIPTION OF DEPOSITARY SHARES
THE FOLLOWING SUMMARY OF THE TERMS OF THE DEPOSIT AGREEMENT (AS DEFINED
BELOW), DEPOSITARY SHARES AND DEPOSITARY RECEIPTS (AS DEFINED BELOW), DOES NOT
PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, THE
PROVISIONS OF THE DEPOSIT AGREEMENT, THE FORM OF WHICH HAS BEEN FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
The St. Paul will cause to be issued receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent 1/100th of a share of St. Paul
Series C Convertible Preferred Stock. The shares of St. Paul Series C
Convertible Preferred Stock represented by Depositary Shares will be deposited
under a Deposit Agreement (the "Deposit Agreement") among The St. Paul and The
Chase Manhattan Bank (National Association) (the "Depositary") for the benefit
of the holders from time to time of the Depositary Receipts. Subject to the
terms of the Deposit Agreement, each owner of a Depositary Share will be
entitled, in proportion to the applicable fraction of a share of St. Paul Series
C Convertible Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the St. Paul Series C Convertible Preferred Stock
represented thereby (including dividend, voting, conversion and liquidation
rights and preferences). The proportionate liquidation preference of each
Depositary Share will be $50 plus accumulated and unpaid dividends to the date
of payment, subject to certain limitations. The L.L.C. Agreement provides that
The St. Paul shall use its best efforts to have the Depositary Shares listed on
the NYSE or any other exchange on which the Preferred Securities may be listed.
GENERAL
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement. Upon an Exchange Election by the holders of a
majority in aggregate liquidation preference
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of the Preferred Securities and immediately following (i) the exchange by the
Conversion Agent of all (but not less than all) outstanding Preferred Securities
for Convertible Subordinated Debentures, (ii) the issuance of the St. Paul
Series C Convertible Preferred Stock and (iii) the delivery of such St. Paul
Series C Convertible Preferred Stock to the Depositary, The St. Paul will cause
the Depositary to issue, on behalf of The St. Paul, the Depositary Shares to the
Conversion Agent, for the account of the holders, in exchange for such
Convertible Subordinated Debentures. Following an Exchange Election, copies of
the forms of Deposit Agreement and Depositary Receipt may be obtained from The
St. Paul or the Depositary, upon request, at the principal office of the
Depositary at which at any particular time its depositary business may be
administered (the "Depositary's Office"), which as of the date hereof is
4 Chase MetroTech Center, Brooklyn, New York 11245, Attention: Corporate Trust
Administration.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all dividends or other cash distributions
received in respect of the St. Paul Series C Convertible Preferred Stock to the
record holders of Depositary Shares in such amounts of such dividend or
distribution as are applicable to the number of such Depositary Shares owned by
such holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the Depositary.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto in such amounts, as nearly as practicable, of such property
(including securities) received by it as are applicable to the number of such
Depositary Shares owned by such holders, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Depositary, unless The St. Paul determines that it
is not feasible to make such distribution, in which case The St. Paul may sell
such property and distribute the net proceeds from such sale to such holders.
WITHDRAWAL OF ST. PAUL SERIES C CONVERTIBLE PREFERRED STOCK
Upon surrender of Depositary Receipts representing at least 100 Depositary
Shares at the Depositary's Office, a holder is entitled to delivery at such
office, to or upon his order, of the number of whole shares of the St. Paul
Series C Convertible Preferred Stock and any money or other property represented
by such Depositary Shares. Holders of Depositary Shares will be entitled to
receive whole shares of the St. Paul Series C Convertible Preferred Stock on the
basis of one share of St. Paul Series C Convertible Preferred Stock for each 100
Depositary Shares, but holders of such whole shares of St. Paul Series C
Convertible Preferred Stock will not thereafter be entitled to receive
Depositary Shares therefor. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of whole shares of St. Paul Series C Convertible
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares. The L.L.C. Agreement provides that The St. Paul shall use its
best efforts to have the Depositary Shares listed on the NYSE or any other
exchange on which the Preferred Securities may be listed. The St. Paul is not,
however, obligated to cause the St. Paul Series C Convertible Preferred Stock to
be listed on any stock exchange.
VOTING THE ST. PAUL SERIES C CONVERTIBLE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the St. Paul
Series C Convertible Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to St. Paul Series C Convertible Preferred
Stock. Each record holder of such Depositary Shares on the record date (which
will be the same date as the record date for the St. Paul Series C Convertible
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of St. Paul Series C Convertible
Preferred Stock (or fraction thereof) represented by such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the amount
of St. Paul Series C Convertible Preferred Stock (or fractions thereof)
represented by such Depositary Shares in accordance with such instructions, and
The St. Paul will agree to take all reasonable action that may be deemed
necessary by the Depositary in
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order to enable the Depositary to do so. The Depositary will abstain from voting
shares of St. Paul Series C Convertible Preferred Stock to the extent it does
not receive specific instructions from the holders of Depositary Shares
representing those shares of St. Paul Series C Convertible Preferred Stock.
CONVERSION OF ST. PAUL SERIES C CONVERTIBLE PREFERRED STOCK
The Depositary Receipts may be surrendered by holders thereof, at the
holders' option, at any time and from time to time, to the Depositary at the
Depositary's Office or at such other office or to such agents as the Depositary
may designate for such purpose with written instructions to the Depositary to
instruct The St. Paul to cause conversion of the whole or fractional shares of
St. Paul Series C Convertible Preferred Stock represented by the Depositary
Shares evidenced by such Receipts into whole shares of St. Paul Common Stock,
and The St. Paul has agreed that upon receipt of such instructions and any
amounts payable in respect thereof, it will cause the delivery of (i) a
certificate or certificates evidencing the number of whole shares of St. Paul
Common Stock into which the St. Paul Series C Convertible Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipt or
Receipts have been converted, and (ii) any money or other property to which the
holder is entitled. If the Depositary Shares represented by a Depositary Receipt
are to be converted in part only, a new Depositary Receipt or Receipts will be
issued for any Depositary Shares not to be converted.
On and after , and provided that The St. Paul is current in the
payment of dividends on the St. Paul Series C Convertible Preferred Stock, The
St. Paul may, at its option, cause the conversion rights of holders of
Depositary Shares representing St. Paul Series C Convertible Preferred Stock to
expire. The St. Paul may exercise this option only if for 20 trading days within
any period of 30 consecutive trading days, including the last trading day of
such period, the Current Market Price of St. Paul Common Stock exceeds 120% of
the conversion price of the Depositary Shares, subject to adjustment in certain
circumstances. In order to exercise its conversion expiration option, The St.
Paul must issue a press release announcing the Conversion Expiration Date and
give notice by first-class mail to holders of Depositary Shares in the manner
provided for holders of Preferred Securities under "-- Description of Preferred
Securities -- Expiration of Conversion Rights". The Conversion Expiration Date
will be a date selected by The St. Paul which is not less than 30 and not more
than 60 days after the date on which The St. Paul issues the press release
announcing its intention to terminate conversion rights of holders of Depositary
Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between The St. Paul and the Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least
66 2/3% of the Depositary Shares then outstanding. Each holder of a Depositary
Share at the time any amendment becomes effective will be deemed to have
consented and agreed to such amendment.
The Deposit Agreement may be terminated by The St. Paul or by the Depositary
if (i) all outstanding Depositary Shares have been redeemed, (ii) there has been
a final distribution in respect of the St. Paul Series C Convertible Preferred
Stock in connection with any liquidation, dissolution or winding up of The St.
Paul and such distribution has been distributed to the holders of Depositary
Receipts or (iii) each share of St. Paul Series C Convertible Preferred Stock
shall have been converted into shares of St. Paul Common Stock.
CHARGES OF DEPOSITARY
The St. Paul will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Depositary arrangements, the initial
deposit of the St. Paul Series C Convertible Preferred Stock, the redemption of
shares of St. Paul Series C Convertible Preferred Stock and the issuance of
shares of St. Paul Common Stock upon conversion. The St. Paul will pay the fees
and reasonable expenses of the Depositary in connection with the performance of
its duties under the Deposit Agreement. Holders of Depositary Receipts will pay
any other transfer or other taxes and
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governmental charges. If, at the request of a holder of Depositary Receipts, the
Depositary incurs charges or other expenses for which it is not otherwise liable
under the Deposit Agreement, such holder will be liable for such charges and
expenses.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to The St. Paul notice
of its election to do so, and The St. Paul may at any time remove the
Depositary, any such resignation or removal to take effect upon the appointment
of a successor Depositary, which successor Depositary must be appointed within
60 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50 million. In the event The
St. Paul fails to appoint such successor Depositary within such sixty (60) day
period, the Depositary may petition any court of competent jurisdiction for the
appointment of a successor Depositary.
MISCELLANEOUS
The Depositary will, with the approval of The St. Paul, appoint a Registrar
for registration of the Depositary Receipts or Depositary Shares in accordance
with any requirements of any applicable stock exchange in which the Receipts or
the Depositary Shares are listed. The Registrar will maintain books at the
Depositary's Office for the registration and registration of transfer of
Depositary Receipts or at such other place as is approved by The St. Paul and of
which the holders of Depositary Receipts are given reasonable notice.
The St. Paul will deliver to the Depositary and the Depositary will forward
to holders of Depositary Shares all notices and reports required by law, the
rules of any national securities exchange upon which the St. Paul Series C
Convertible Preferred Stock, the Depositary Shares or the Depositary Receipts
are listed or by The St. Paul's Amended and Restated Articles of Incorporation
(including the Certificate of Designation) or Bylaws to be furnished by The St.
Paul to holders of St. Paul Series C Convertible Preferred Stock.
Neither the Depositary nor The St. Paul will be liable if either is by law
or certain other circumstances beyond its control prevented from or delayed in
performing its obligations under the Deposit Agreement. Neither the Depositary
nor any agent of the Depositary nor The St. Paul assumes any obligation or will
be subject to any liability under the Deposit Agreement to holders of Depositary
Receipts other than to use its best judgment and act in good faith in the
performance of such duties as are specifically set forth in the Deposit
Agreement. Neither The St. Paul nor the Depositary will be obligated to appear
in, prosecute or defend any legal proceeding in respect of any Depositary Shares
or any St. Paul Series C Convertible Preferred Stock unless satisfactory
indemnity is furnished. The St. Paul and the Depositary may rely on advice of
counsel or accountants, or information provided by persons presenting St. Paul
Series C Convertible Preferred Stock for deposit, holders of Depositary Shares
or other persons believed to be authorized or competent and on documents
believed to be genuine.
DESCRIPTION OF THE GUARANTEE
THE FOLLOWING IS A DESCRIPTION OF THE PRINCIPAL TERMS AND PROVISIONS OF THE
GUARANTEE AGREEMENT (THE "GUARANTEE"), WHICH WILL BE EXECUTED AND DELIVERED BY
THE ST. PAUL FOR THE BENEFIT OF THE HOLDERS FROM TIME TO TIME OF THE PREFERRED
SECURITIES. THE FOLLOWING DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH AGREEMENT, THE FORM OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
GENERAL
Pursuant to the Guarantee, The St. Paul will irrevocably and unconditionally
agree, on a subordinated basis and to the extent set forth therein, to pay in
full to the holders of the Preferred Securities, the Guarantee Payments (as
defined below) (except to the extent previously paid by St. Paul Capital), as
and when due, regardless of any defense, right of set-off or counterclaim that
St. Paul Capital may have or assert. The following payments, to the extent not
paid by St. Paul Capital, are the "Guarantee Payments": (a) any accumulated and
unpaid dividends (including any Additional Dividends thereon) that have been
theretofore declared on the Preferred Securities from funds legally available
therefor; (b) the Redemption Price payable with respect to Preferred Securities
called for redemption by St. Paul Capital
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out of funds legally available therefor; and (c) upon a liquidation of St. Paul
Capital, the lesser of (i) the Liquidation Distribution and (ii) the amount of
assets of St. Paul Capital available for distribution to holders of Preferred
Securities in liquidation of St. Paul Capital. The St. Paul's obligation to make
a Guarantee Payment may be satisfied by The St. Paul's direct payment of the
required amounts to the holders of Preferred Securities or by The St. Paul's
causing St. Paul Capital to pay such amounts to such holders.
If The St. Paul fails to make interest payments on the Convertible
Subordinated Debentures purchased by St. Paul Capital, St. Paul Capital will
have insufficient funds to pay dividends on the Preferred Securities. The
Guarantee does not cover payment of dividends when St. Paul Capital does not
have sufficient funds to pay such dividends.
Because the Guarantee is a full and unconditional guarantee of payment and
not of collection, holders of the Preferred Securities may proceed directly
against The St. Paul as guarantor, rather than having to proceed against St.
Paul Capital before attempting to collect from The St. Paul. A holder of
Preferred Securities may enforce such obligations directly against The St. Paul,
and under the Guarantee The St. Paul will waive any right or remedy to require
that any action be brought against St. Paul Capital or any other person or
entity before proceeding against The St. Paul. Such obligations will not be
discharged except by payment of the Guarantee Payments in full.
CERTAIN COVENANTS OF THE ST. PAUL
Under the Guarantee, The St. Paul will covenant and agree that, so long as
any Preferred Securities remain outstanding, neither The St. Paul nor any direct
or indirect majority owned subsidiary of The St. Paul (excluding Nuveen and its
consolidated subsidiaries) shall declare or pay any dividend or distribution on,
or redeem, purchase or otherwise acquire or make a liquidation payment with
respect to, any of its capital stock (other than as a result of a
reclassification of capital stock or the exchange or conversion of one class or
series of capital stock for another class or series of capital stock) or make
any guarantee payments with respect to the foregoing (other than payments under
the Guarantee or dividends or guarantee payments to The St. Paul by a direct or
indirect majority owned subsidiary), if at such time The St. Paul has exercised
its option to defer interest payments on the Convertible Subordinated Debentures
and such deferral is continuing, The St. Paul is in default with respect to its
payment or other obligations under the Guarantee or there shall have occurred
any event that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default under the Convertible Subordinated Debentures.
The St. Paul will covenant to take all actions necessary to ensure the
compliance of its subsidiaries with the above covenant.
The St. Paul will also covenant that, so long as Preferred Securities remain
outstanding, it will (i) not cause or permit any Common Securities of St. Paul
Capital to be transferred, (ii) maintain direct or indirect 100% ownership of
all outstanding securities of St. Paul Capital other than (x) the Preferred
Securities and (y) any other securities issued by St. Paul Capital (other than
the Common Securities) so long as the issuance thereof to persons other than The
St. Paul or any of its subsidiaries would not cause St. Paul Capital to become
an "investment company" required to be registered under the Investment Company
Act of 1940, as amended, (iii) cause at least 21% of the total value of St. Paul
Capital and at least 21% of all interests in the capital, income, gain, loss,
deduction and credit of St. Paul Capital to be represented by Common Securities,
(iv) not voluntarily dissolve, wind up or liquidate St. Paul Capital (other than
in connection with the exchange of all outstanding Preferred Securities for
Depositary Shares in the manner described under "-- Preferred Securities --
Optional Exchange for Depositary Shares") or either of the Managing Members, (v)
cause The St. Paul and St. Paul Holdings to remain the Managing Members of St.
Paul Capital and timely perform all of their respective duties as Managing
Members of St. Paul Capital (including the duty to declare and pay dividends on
the Preferred Securities as described under " -- Preferred Securities --
Dividends") and (vi) use reasonable efforts to cause St. Paul Capital to remain
a limited liability company and otherwise continue to be treated as a
partnership for U.S. federal income tax purposes; PROVIDED that The St. Paul may
permit St. Paul Capital to consolidate or merge with
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or into or convey, transfer or lease its properties and assets substantially as
an entirety to another entity upon the terms and subject to the conditions set
forth under " -- Preferred Securities -- Merger, Consolidation or Sale of Assets
of St. Paul Capital" above.
As a part of the Guarantee, The St. Paul will agree that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for St. Paul Common Stock or Depositary Shares
representing St. Paul Series C Convertible Preferred Stock, as described in "--
Preferred Securities -- Conversion Rights," and "-- Optional Exchange for
Depositary Shares".
SUBORDINATION
The St. Paul's obligations under the Guarantee to make Guarantee Payments
will constitute an unsecured obligation of The St. Paul that will rank (i)
subordinate and junior in right of payment to all liabilities of The St. Paul
and the Convertible Subordinated Debentures, and (ii) PARI PASSU (I.E., on a
parity) with the most senior preferred shares now or hereafter issued by The St.
Paul and with any guarantee now or hereafter entered into by The St. Paul in
respect of any preferred or preference stock of any affiliate of The St. Paul
and (iii) senior to St. Paul Common Stock and any other class or series of
capital stock issued by The St. Paul or any of its affiliates which by its
express terms ranks junior in the payment of dividends and amounts on
liquidation, dissolution, and winding-up to the Preferred Securities ("Junior
Stock"). On the bankruptcy, liquidation or winding-up of The St. Paul, its
obligations under the Guarantee will rank junior to all its other liabilities
and, therefore, funds may not be available for payment under the Guarantee. As
of March 31, 1995, The St. Paul had approximately $628 million of indebtedness
or other obligations constituting Senior Indebtedness and no indebtedness that
would rank equally with the Guarantee.
AMENDMENTS AND ASSIGNMENT
The terms of the Guarantee may be amended only with the prior approval of
the holders of not less than 66 2/3% of the aggregate liquidation preference of
the Preferred Securities then outstanding. The manner of obtaining any such
approval of holders of the Preferred Securities will be as set forth in "--
Preferred Securities -- Voting Rights". All provisions contained in the
Guarantee will bind the successors, assigns, receivers, trustees and
representatives of The St. Paul and will inure to the benefit of the holders of
the Preferred Securities. Except in connection with any merger or consolidation
of The St. Paul with or into another entity or any sale, transfer or lease of
The St. Paul's assets to another entity complying with the provisions under "--
Consolidation, Merger or Sale of Assets" below, The St. Paul may not assign its
rights or delegate its obligations under the Guarantee without the prior
approval of the holders of not less than 66 2/3% of the aggregate liquidation
preference of the Preferred Securities then outstanding.
TERMINATION
The St. Paul's obligation to make Guarantee Payments under the Guarantee
will terminate as to each holder of Preferred Securities and be of no further
force and effect upon (a) full payment of the Redemption Price of such holder's
Preferred Securities, (b) full payment of the amounts payable to such holder
upon liquidation of St. Paul Capital, (c) the distribution of St. Paul Common
Stock to such holder in respect of the conversion of all of such holder's
Preferred Securities into St. Paul Common Stock or (d) the distribution of
Depositary Shares representing St. Paul Series C Convertible Preferred Stock to
such holder in respect of the exchange of the Convertible Subordinated
Debentures for St. Paul Series C Convertible Preferred Stock. Notwithstanding
the foregoing, The St. Paul's obligation to make Guarantee Payments will
continue to be effective or will be reinstated, as the case may be, as to a
holder if at any time such holder must restore payment of any sums paid under
the Preferred Securities or under the Guarantee for any reason whatsoever. The
St. Paul will indemnify each holder and hold it harmless from and against any
loss it may suffer in such circumstances.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The Guarantee provides that The St. Paul may merge or consolidate with or
into another entity, may permit another entity to merge or consolidate with or
into The St. Paul and may sell, transfer or lease all or substantially all of
its assets to another entity if (i) at such time no Event of Default (as defined
in the
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Indenture) shall have occurred and be continuing, or would occur as a result of
such merger, consolidation or sale, transfer or lease and (ii) the survivor of
such merger or consolidation or entity to which The St. Paul's assets are sold,
transferred or leased is an entity organized under the laws of the United States
or any state thereof, becomes a managing member of St. Paul Capital and causes a
wholly-owned subsidiary to become the only other managing member of St. Paul
Capital, assumes all of The St. Paul's obligations under the Guarantee and has a
net worth equal to at least 10% of the total contributions to St. Paul Capital.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE CONVERTIBLE SUBORDINATED DEBENTURES
THE FOLLOWING SUMMARY OF PRINCIPAL TERMS AND PROVISIONS OF THE CONVERTIBLE
SUBORDINATED DEBENTURES IN WHICH ST. PAUL CAPITAL WILL INVEST THE PROCEEDS OF
THE ISSUANCE AND SALE OF THE PREFERRED SECURITIES AND SUBSTANTIALLY ALL OF THE
CAPITAL CONTRIBUTED TO ST. PAUL CAPITAL BY THE MANAGING MEMBERS (THE "MANAGING
MEMBERS PAYMENT") DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE INDENTURE AMONG THE ST. PAUL, ST. PAUL CAPITAL AND
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), AS TRUSTEE (THE "TRUSTEE"), THE
FORM OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
WHICH THIS PROSPECTUS IS A PART. ALL OF THE CONVERTIBLE SUBORDINATED DEBENTURES
WILL BE ISSUED UNDER THE INDENTURE.
GENERAL
The Convertible Subordinated Debentures will be limited in aggregate
principal amount to the sum of the aggregate amount of the proceeds received by
St. Paul Capital from the offering made hereby and the Managing Members Payment
less 1% of such sum.
The entire principal amount of the Convertible Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest thereon,
including Additional Interest (as defined below), on the earliest of
, 2025 or the date upon which St. Paul Capital is dissolved,
wound-up, liquidated or terminated.
The Convertible Subordinated Debentures will be issued only in fully
registered form, without coupons, in denominations of $50 and any integral
multiple thereof. No service charge will be made for any registration of
transfer or exchange of Convertible Subordinated Debentures, but The St. Paul
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Convertible Subordinated Debentures will not be guaranteed by St. Paul
Holdings.
INTEREST
The Convertible Subordinated Debentures will bear interest at the rate of
% per annum from the original date of issuance, payable monthly in arrears on
the last day of each calendar month of each year (each an "Interest Payment
Date"), commencing , 1995. Interest will compound monthly and will
accrue at the annual rate of % on any interest installment not paid when due.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly interest period, will be computed on the basis of the actual number
of days elapsed in such period. In the event that any date on which interest is
payable on the Convertible Subordinated Debentures is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay). If such Business Day is in the next succeeding
calendar year, however, 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.
OPTION TO DEFER INTEREST PAYMENTS
The St. Paul shall have the right at any time and from time to time during
the term of the Convertible Subordinated Debentures to defer interest payments
for up to 60 months during which period interest will continue to accrue and
compound monthly (provided that a deferral of interest payments may not
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extend the stated maturity of the Convertible Subordinated Debentures) and
during which The St. Paul shall have the right to make partial payments of
interest or at the end of which period The St. Paul must pay all interest then
accrued and unpaid (together with Additional Interest); PROVIDED THAT, during
any such deferral of interest payments neither The St. Paul nor any direct or
indirect majority-owned subsidiary of The St. Paul (excluding Nuveen and
Nuveen's consolidated subsidiaries) shall declare or pay any dividend on, or
redeem, purchase, acquire for value or make a liquidation payment with respect
to, any of its capital stock (other than as a result of a reclassification of
such capital stock or the exchange or conversion of one class or service of
capital stock for another class or series of capital stock) or make any
guarantee payments with respect to the foregoing (other than payments under the
Guarantee or dividend or guarantee payments to The St. Paul from a direct or
indirect majority-owned subsidiary). Prior to the termination of any such
deferral of interest payments, The St. Paul may further defer interest payments,
provided that such deferral of interest payments together with any extensions
thereof may not exceed 60 months, nor may such extended interest payment period
extend the maturity of the Convertible Subordinated Debentures. After The St.
Paul has paid all accrued and unpaid interest (including Additional Interest)
following any extended interest payment period, it may again extend interest
payment periods for up to 60 months, subject to the preceding sentence. The
failure by The St. Paul to make interest payments during a deferral of interest
payments would not constitute a default or an event of default under The St.
Paul's currently outstanding indebtedness. The St. Paul shall give St. Paul
Capital, as holder of the Convertible Subordinated Debentures, and the Trustee
notice of its deferral of interest payments no later than the last date on which
St. Paul Capital would be required to notify the NYSE of the record or payment
date of the related dividend, which currently is 10 days prior to such record or
payment date. St. Paul Capital shall give written notice of The St. Paul's
deferral of interest payments to the holders of the Preferred Securities.
ADDITIONAL INTEREST
The St. Paul shall be required to pay any interest upon interest that has
not been paid on the Convertible Subordinated Debentures monthly. Accordingly,
in such circumstance, The St. Paul will pay interest upon interest in order to
provide for monthly compounding on the Convertible Subordinated Debentures (the
amounts of interest payable to effect monthly compounding on the Convertible
Subordinated Debentures being referred to herein as "Additional Interest").
MANDATORY REDEMPTION
If St. Paul Capital redeems Preferred Securities in accordance with the
terms thereof, The St. Paul will redeem Convertible Subordinated Debentures in a
principal amount equal to the aggregate stated liquidation preference of the
Preferred Securities so redeemed, together with any accrued and unpaid interest
thereon, including Additional Interest, if any. Any payment pursuant to this
provision shall be made prior to 12:00 noon, New York City time, on the date of
such redemption or at such other time on such earlier date as the parties
thereto shall agree. The Convertible Subordinated Debentures are not entitled to
the benefit of any sinking fund or, except as set forth above, any other
provision for mandatory prepayment.
SUBORDINATION
The Indenture provides that the Convertible Subordinated Debentures are
subordinate and junior in right of payment to all Senior Indebtedness (as
defined below) of The St. Paul.
Upon any payment or distribution of assets of the Company to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities or any bankruptcy,
insolvency or similar proceedings of the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full of all amounts due on
or to become due on or in respect of all Senior Indebtedness, before the holders
of the Convertible Subordinated Debentures are entitled to receive any payment
(including any payment to holders of the Convertible Subordinated Debentures
made in respect of any other debt subordinated to the Convertible Subordinated
Debentures) on account of the principal of or interest on the Convertible
Subordinated Debentures or on account of any purchase, redemption or other
acquisition of the Convertible Subordinated Debentures by the Company.
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The Company may not make any payments on the account of the Convertible
Subordinated Debentures or account of the purchase or redemption or other
acquisition of the Convertible Subordinated Debentures, if there has occurred
and is continuing a default in the payment of the principal of (or premium, if
any) or interest on any Senior Indebtedness (a "Senior Payment Default"). In
addition, if any default (other than a Senior Payment Default), or any event
which after notice or lapse of time (or both) would become a default, with
respect to certain Senior Indebtedness, permitting after notice or lapse of time
(or both) the holders thereof (or a trustee or agent on behalf of the holders
thereof) to accelerate the maturity thereof has occurred and is continuing (a
"Senior Nonmonetary Default"), and the Company and the Trustee have received
written notice thereof from the holder of such certain Senior Indebtedness, then
the Company may not make any payments on the account of the Convertible
Subordinated Debentures or account of the purchase or redemption or other
acquisition of the Convertible Subordinated Debentures, for a period (a
"blockage period") commencing on the date the Company and the Trustee receive
such written notice and ending on the earlier of (i) 179 days after such date
and (ii) the date, if any, on which the Senior Indebtedness to which such
default relates is discharged or such default is waived in writing or otherwise
cured or ceases to exist and any acceleration of certain Senior Indebtedness to
which such Senior Nonmonetary Default relates is rescinded or annulled.
In any event, not more than one blockage period may be commenced during any
period of 360 consecutive days, and there must be a period of at least 181
consecutive days in each period of 360 consecutive days when no blockage period
is in effect. Following the commencement of a blockage period, the holders of
such certain Senior Indebtedness will be precluded from commencing a subsequent
blockage period until the conditions set forth in the preceding sentence are
satisfied. No Senior Nonmonetary Default that existed or was continuing on the
date of commencement of any blockage period with respect to such certain Senior
Indebtedness initiating such blockage period will be, or can be, made the basis
for the commencement of a subsequent blockage period, unless such default has
been cured for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of any proceeding of the type
described in the preceding paragraph involving The St. Paul, creditors of The
St. Paul who are holders of Senior Indebtedness and general unsecured creditors
of The St. Paul may recover more, ratably, than the holder or holders of the
Convertible Subordinated Debentures.
The term "Senior Indebtedness" is defined to mean the principal of, premium,
if any, interest on, and any other payment due pursuant to any of the following,
whether Incurred (as defined in the Indenture) on or prior to the date of
execution of the Indenture or thereafter Incurred:
(a) all obligations of The St. Paul for money borrowed;
(b) all obligations of The St. Paul evidenced by notes, debentures,
bonds or other securities, including obligations Incurred in connection with
the acquisition of property, assets or businesses;
(c) all capital lease obligations of The St. Paul;
(d) all reimbursement obligations of The St. Paul with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of The St. Paul;
(e) all obligations of The St. Paul issued or assumed as the deferred
purchase price of property or services, including all obligations under
master lease transactions pursuant to which The St. Paul or any of its
subsidiaries have agreed to be treated as owner of the subject property for
federal income tax purposes (but excluding trade accounts payable, accrued
liabilities resulting from the sale of extended service plans, or accrued
liabilities arising in the ordinary course of business);
(f) all payment obligations of The St. Paul under interest rate swap or
similar agreements or foreign currency hedge, exchange or similar agreements
at the time of determination, including any such obligations Incurred by The
St. Paul solely to act as a hedge against increases in interest rates that
may occur under the terms of other outstanding variable or floating rate
Indebtedness (as defined in the Indenture) of The St. Paul;
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(g) all obligations of the type referred to in clauses (a) through (f)
above of another person and all dividends of another person, the payment of
which, in either case, The St. Paul has assumed or guaranteed, or for which
The St. Paul is responsible or liable, directly or indirectly, jointly or
severally, as obligor, guarantor or otherwise;
(h) all compensation payable by The St. Paul to the Trustee; and
(i) all amendments, modifications, renewals, extensions, refinancings,
replacements and refundings by The St. Paul of any such Indebtedness
referred to in clauses (a) through (h) above (and of any such amended,
modified, renewed, extended, refinanced, refunded or replaced indebtedness
or obligations);
PROVIDED, HOWEVER, that the following shall not constitute Senior Indebtedness:
(a) any Indebtedness owed to a subsidiary of The St. Paul (other than Nuveen and
its consolidated subsidiaries), (b) any Indebtedness which by the terms of the
instrument creating or evidencing the same expressly provides that such
Indebtedness is not superior in right of payment to the Convertible Subordinated
Debentures or (c) any Indebtedness Incurred in violation of the Indenture. Such
Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
As of March 31, 1995, Senior Indebtedness of The St. Paul aggregated
approximately $628 million. The Indenture does not limit The St. Paul's ability
to incur Senior Indebtedness.
CERTAIN COVENANTS OF THE ST. PAUL
The St. Paul will also covenant in the Indenture that neither it nor any
direct or indirect majority-owned subsidiary of The St. Paul (excluding Nuveen
and Nuveen's consolidated subsidiaries) will declare or pay any dividend on, or
redeem, purchase, acquire for value or make a liquidation payment with respect
to, any of its capital stock (other than as a result of a reclassification of
capital stock on the exchange or conversion of one class or series of capital
stock for another class or series of capital stock) or make any guarantee
payments with respect to the foregoing (other than payments under the Guarantee
or dividends or guarantee payments to The St. Paul from a majority-owned
subsidiary) if at such time (i) there shall have occurred any event that, with
the giving of notice or the lapse of time or both would constitute an Event of
Default (as defined below) under the Convertible Subordinated Debentures, (ii)
The St. Paul shall be in default with respect to its payment or other
obligations under the Guarantee or (iii) The St. Paul shall have given notice of
its selection of an extended interest payment period as provided in the
Convertible Subordinated Debentures and such deferral of interest payments or
any extension thereof shall be continuing. The St. Paul will also covenant for
the benefit of the holders of the Convertible Subordinated Debentures that, so
long as the Preferred Securities remain outstanding, it will (i) not cause or
permit any Common Securities of St. Paul Capital to be transferred, (ii)
maintain direct or indirect ownership of all outstanding securities of St. Paul
Capital other than (x) the Preferred Securities and (y) any other securities
issued by St. Paul Capital (other than the Common Securities) so long as the
issuance thereof to persons other than The St. Paul or any of its subsidiaries
would not cause St. Paul Capital to become an "investment company" required to
be registered under the Investment Company Act of 1940, as amended, (iii) cause
at least 21% of the total value of St. Paul Capital and at least 21% of all
interests in the capital, income, gain, loss, deduction and credit of St. Paul
Capital to be represented by Common Securities, (iv) not voluntarily dissolve,
wind-up or liquidate St. Paul Capital (other than in connection with the
exchange of all outstanding Preferred Securities for Depositary Shares in the
manner described under "-- Preferred Securities -- Optional Exchange for
Depositary Shares") or either of the Managing Members, (v) cause The St. Paul
and St. Paul Holdings to remain the Managing Members of St. Paul Capital and to
timely perform all of their respective duties as Managing Members of St. Paul
Capital (including the duty to declare and pay dividends on the Preferred
Securities as described under "-- Preferred Securities -- Dividends"), (vi) use
reasonable efforts to cause St. Paul Capital to remain a limited liability
company and otherwise continue to be treated as a partnership for U.S. federal
income tax purposes; PROVIDED that The St. Paul may permit St. Paul Capital to
consolidate or merge with or into or convey, transfer or lease its properties
and assets substantially as an entirety to another entity upon the terms and
subject to the conditions set forth under "-- Preferred Securities --
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Merger, Consolidations or Sale of Assets of St. Paul Capital" above, and (vii)
to deliver Depositary Shares representing shares of St. Paul Series C
Convertible Preferred Stock or St. Paul Common Stock upon an election by the
holders of the Preferred Securities to exchange or convert the Convertible
Subordinated Debentures.
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) failure to pay any principal of the Convertible Subordinated
Debentures when due;
(b) failure to pay any interest on the Convertible Subordinated
Debentures, including any Additional Interest, when due and such failure
continues for a period of 10 days; provided that a valid extension of the
interest payment period by The St. Paul shall not constitute a default in
the payment of interest for this purpose;
(c) failure by The St. Paul to deliver shares of St. Paul Series C
Convertible Preferred Stock or St. Paul Common Stock upon an election by
holders of Preferred Securities to exchange or convert such Preferred
Securities;
(d) failure by The St. Paul to perform in any material respect any other
covenant in the Indenture for the benefit of the holders of Convertible
Subordinated Debentures continued for a period of 60 days (or, in the case
of the covenants described under "-- Certain Covenants of The St. Paul," 10
days) after written notice to The St. Paul from any holder of Convertible
Subordinated Debentures or Preferred Securities;
(e) the dissolution, winding-up, liquidation or termination of St. Paul
Capital (except in the event of a Special Event); or
(f) certain events of bankruptcy, insolvency or liquidation of The St.
Paul;
then either the Trustee or the holders of at least 25% in aggregate principal
amount of the Convertible Subordinated Debentures then outstanding will have the
right to declare the principal of and the interest on the Convertible
Subordinated Debentures (including any Additional Interest) and any other
amounts payable under the Convertible Subordinated Debentures to be forthwith
due and payable and to enforce the holders' other rights as creditors with
respect to the Convertible Subordinated Debentures; PROVIDED, HOWEVER, that if
upon an Event of Default, the Trustee or the holders of at least 25% in
aggregate principal amount of the Convertible Subordinated Debentures then
outstanding fail to declare the payment of all amounts on the Convertible
Subordinated Debentures to be immediately due and payable, the holders of at
least 25% in aggregate liquidation preference of Preferred Securities then
outstanding shall have such right; PROVIDED, FURTHER, HOWEVER, that after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Convertible
Subordinated Debentures, or the holders of the Preferred Securities if they
accelerated such payment, may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "-- Modification of the
Indenture". St. Paul Capital is the initial holder of the Convertible
Subordinated Debentures. However, while the Preferred Securities are
outstanding, St. Paul Capital has agreed not to waive an Event of Default under
the Indenture without the consent of holders of 66 2/3% in aggregate liquidation
preference of the Preferred Securities then outstanding. Additionally, under the
terms of the Preferred Securities, the holders of outstanding Preferred
Securities will have the rights described above under "-- Preferred Securities
- -- Voting Rights", including the right to appoint a Special Trustee, which
Special Trustee shall be authorized to exercise the right of St. Paul Capital,
as the holder of at least 25% aggregate principal amount of the Convertible
Subordinated Debentures, to accelerate the principal amount of the Convertible
Subordinated Debentures and accrued interest (including any Additional Interest)
thereon and to enforce the
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other rights of Holders of the Convertible Subordinated Debentures as creditors
under the Convertible Subordinated Debentures. A default under any other
indebtedness of The St. Paul or St. Paul Capital would not constitute an Event
of Default under the Convertible Subordinated Debentures.
Subject to the provision of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any holders of Convertible Subordinated
Debentures, unless such holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the Trustee,
the holders of a majority in aggregate principal amount of the Convertible
Subordinated Debentures then outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee.
No holder of any Subordinated Debenture will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or trustee, or for any remedy thereunder, unless such holder shall have
previously given to the Trustee written notice of a continuing Event of Default
and, if St. Paul Capital is not the sole holder of Convertible Subordinated
Debentures, unless also the holders of at least 25% in aggregate principal
amount of the Convertible Subordinated Debentures then outstanding shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the outstanding
Convertible Subordinated Debentures a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a holder of a Subordinated
Debenture for enforcement of payment of the principal of or interest on such
Subordinated Debenture on or after the respective due dates expressed in such
Subordinated Debenture or of the right to convert such Subordinated Debenture in
accordance with the Indenture.
The St. Paul will be required to furnish to the Trustee annually a statement
as to the performance by The St. Paul of certain of its obligations under the
Indenture and as to any default of such performance.
CONVERSION OF THE CONVERTIBLE SUBORDINATED DEBENTURES
The Convertible Subordinated Debentures and any accrued interest thereon
will be convertible into St. Paul Common Stock at the option of the holders of
the Convertible Subordinated Debentures at any time on or before the close of
business on the maturity date thereof at the initial conversion price set forth
on the cover page of this Prospectus subject to the conversion price adjustments
described under "-- Preferred Securities -- Conversion Rights". St. Paul Capital
will covenant not to convert Convertible Subordinated Debentures except pursuant
to a notice of conversion delivered to the Conversion Agent by a holder of
Preferred Securities. Upon surrender of Preferred Securities to the Conversion
Agent for conversion, St. Paul Capital will distribute $50 principal amount of
the Convertible Subordinated Debentures to the Conversion Agent on behalf of the
holder of every Preferred Security so converted, whereupon the Conversion Agent
will convert such Convertible Subordinated Debentures and any accrued interest
thereon to St. Paul Common Stock on behalf of such holder. The St. Paul's
delivery to the holders of the Convertible Subordinated Debentures (through the
Conversion Agent) of the fixed number of shares of St. Paul Common Stock into
which the Convertible Subordinated Debentures are convertible (together with the
cash payment, if any, in lieu of fractional shares) will be deemed to satisfy
The St. Paul's obligation to pay the principal amount of the Convertible
Subordinated Debentures, and the accrued and unpaid interest attributable to the
period from the last date to which interest has been paid or duly provided for.
EXCHANGE OF THE CONVERTIBLE SUBORDINATED DEBENTURES
The Convertible Subordinated Debentures and any accrued interest thereon
will be exchangeable for Depository Shares representing St. Paul Series C
Convertible Preferred Stock upon an Exchange Event on or before the close of
business on the maturity date thereof at the rate of 1/100th of a share of St.
Paul Series C Convertible Preferred Stock for each $50 principal amount of the
Convertible Subordinated Debentures (equivalent to an exchange rate of one
Depositary Share for each $50 principal of
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amount of the Convertible Subordinated Debentures). Accumulated and unpaid
dividends (including Additional Dividends) on the Preferred Securities will be
treated as accumulated and unpaid dividends on the St. Paul Series C Convertible
Preferred Stock.
MODIFICATION OF THE INDENTURE
The Indenture may be amended by The St. Paul, St. Paul Capital and the
Trustee with the consent of the holders of 66 2/3% in aggregate principal amount
of the outstanding Convertible Subordinated Debentures PROVIDED, that no such
modification or amendment may, without the consent of the holder of each
outstanding Subordinated Debenture affected thereby, (a) change the Maturity of
the principal of, or any installment of interest on, any Subordinated Debenture,
(b) reduce the principal amount of, or interest on, any Subordinated Debenture,
(c) change the place or currency of payment of principal of, or interest on, any
Subordinated Debenture, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Subordinated Debenture, (e)
adversely affect the right to convert or exchange Convertible Subordinated
Debentures, (f) modify the subordination provisions in a manner adverse to the
holders of the Convertible Subordinated Debentures, (g) reduce the above-stated
percentage of outstanding Convertible Subordinated Debentures necessary to
modify or amend the Indenture or (h) reduce the percentage of aggregate
principal amount of outstanding Convertible Subordinated Debentures necessary
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults; and PROVIDED FURTHER that, so long as any of the Preferred
Securities remain outstanding, no such amendment may be made that adversely
affects the holders of Preferred Securities, and no termination of the Indenture
may occur, and no Event of Default or compliance with any covenant under the
Indenture may be waived by the holders of the Convertible Subordinated
Debentures, without the prior consent of the holders of at least 66 2/3% of the
aggregate liquidation preference of the Preferred Securities then outstanding
unless and until the Convertible Subordinated Debentures and all accrued and
unpaid interest thereon have been paid in full.
GOVERNING LAW
The Indenture and the Convertible Subordinated Debentures will be governed
by, and construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee
should it become a creditor of The St. Paul, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Convertible Subordinated
Debentures, it must eliminate such conflict or resign.
The St. Paul and St. Paul Capital have agreed in the Indenture to indemnify
and hold harmless the Trustee against any losses or damages it may suffer as
Trustee.
The Chase Manhattan Bank (National Association), the Trustee under the
Indenture, also serves as the trustee under an indenture with The St. Paul dated
as of March 31, 1990 and has from time to time engaged in lending and other
transactions with, or performed services for, The St. Paul in the ordinary
course of business.
65
<PAGE>
DESCRIPTION OF ST. PAUL CAPITAL STOCK
The following descriptions of the Common Stock and undesignated shares of
the Company are stated in general terms and are in all respects subject to, and
are qualified in their entirety by, reference to the applicable provisions of
the Company's Amended and Restated Articles of Incorporation, as amended, and
Bylaws, as amended, forms of which have been incorporated by reference as
exhibits to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
The St. Paul is authorized to issue 240,000,000 shares of Common Stock,
without par value per share. Each share of Common Stock is entitled to
participate PRO RATA in distributions upon liquidation, subject to the rights of
holders of undesignated shares, and to one vote on all matters submitted to a
vote of shareholders. The holders of Common Stock may receive cash dividends as
declared by the Board of Directors out of funds legally available therefor,
subject to the rights of any holders of undesignated shares. The outstanding
shares of Common Stock are, and the shares offered hereby when issued will be,
fully paid and nonassessable. Holders of Common Stock have no preemptive or
similar equity preservation rights, and cumulative voting of shares in the
election of directors is prohibited. The holders of more than 50% of the
outstanding shares of Common Stock have the voting power to elect all directors
and, except as is discussed at "Certain St. Paul Charter and Bylaw Provisions",
to approve mergers, sales of assets and other corporate transactions.
Each holder of Common Stock is entitled to such dividends as may be declared
by the Board of Directors of the Company out of funds legally available
therefor. The St. Paul Companies, Inc. is a holding company, and its primary
source for the payment of dividends is dividends from its subsidiaries. Various
state laws and regulations limit the amount of dividends that may be paid to the
Company by its insurance subsidiaries. As of March 31, 1995, $312 million was
available for the payment of dividends to the Company free from such
restrictions.
The transfer agent and registrar for St. Paul's Common Stock is First
Chicago Trust Company of New York.
UNDESIGNATED SHARES
The Board of Directors of the Company is authorized, without further action
by the shareholders, to establish from the 5,000,000 undesignated shares
authorized by the Amended and Restated Articles of Incorporation, one or more
classes and series, to designate each such class and series, to fix the relative
rights and preferences of each such class and series and to issue such shares.
Such rights and preferences may be superior to the St. Paul Common Stock as to
dividends, distributions of assets (upon liquidation or otherwise) and voting
rights. Undesignated shares may be convertible into shares of any other series
or class of stock, including St. Paul Common Stock, of the Company, if the Board
of Directors so determines.
Pursuant to such authority, the Board of Directors has designated 34,500
undesignated shares as St. Paul Series C Convertible Preferred Stock. For a
description of the St. Paul Series C Convertible Preferred Stock, see
"Description of Securities Offered -- Description of St. Paul Series C
Convertible Preferred Stock".
STOCK PURCHASE RIGHTS, SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
Pursuant to its authority to issue undesignated shares, the Board of
Directors of the Company has also adopted resolutions authorizing 50,000 shares
of Series A Junior Participating Preferred Stock, without par value (the "Series
A Preferred Stock"), and 1,450,000 shares of Series B Convertible Preferred
Stock (the "Series B Preferred Stock").
Shares of the Series A Preferred Stock are purchasable upon the exercise of
the Stock Purchase Rights, upon the terms and conditions set forth in the Rights
Agreement. The Stock Purchase Rights will expire on December 19, 1999, subject
to extension to December 18, 2002 under certain circumstances or earlier
redemption by The St. Paul. The Rights Agreement provides that, until the Stock
Purchase Rights become exercisable pursuant to the terms of the Rights
Agreement, the Stock Purchase Rights will be transferred with and only with the
St. Paul Common Stock. Until the time the Stock Purchase
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<PAGE>
Rights become exercisable -- at which time separate certificates representing
the Stock Purchase Rights will be mailed to holders of record of the St. Paul
Common Stock -- the Stock Purchase Rights will be evidenced by the certificates
representing the related shares of St. Paul Common Stock.
Each share of Series A Preferred Stock, if and when issued, would be fully
paid and nonassessable. The holders of Series A Preferred Stock would be
entitled to 1,000 votes for each share held of record on all matters voted upon
by shareholders and would not be able to cumulate votes for the election of
directors. Subject to preferential rights, if any, of any undesignated shares,
if and when designated and issued by the Board of Directors, each outstanding
share of Series A Preferred Stock would be entitled to receive distributions and
dividends equal to 1,000 times the aggregate per share amounts declared on the
Common Stock. Upon liquidation of the Company, the holders of Series A Preferred
Stock would be entitled to receive (prior to holders of Common Stock or other
junior ranking stock) an aggregate amount per share equal to 1,000 times the
aggregate amount to be distributed per share to holders of Common Stock, subject
to a maximum of $100 per share plus accrued and unpaid dividends, if any. There
are no redemption, sinking fund, conversion or preemptive rights with respect to
the Series A Preferred Stock. All shares of Series A Preferred Stock have equal
rights and preferences.
The Series B Preferred Stock has been issued to the Savings Plus Preferred
Stock Ownership Plan Trust established by the Company. All outstanding shares of
Series B Preferred Stock are fully paid and nonassessable. Each share of
outstanding Series B Preferred Stock is entitled to the number of votes equal to
the number of shares of Common Stock into which such share of Series B Preferred
Stock could have been converted on the record date for determining the holders
of Common Stock entitled to vote on a particular matter. Currently, each share
of Series B Preferred Stock is entitled to four votes per share. Holders of
outstanding shares of Series B Preferred Stock are entitled to receive when, as
and if declared by the Board of Directors, cumulative quarterly cash dividends
at the annual rate of $11.724 per share in preference and in priority over the
Common Stock and Series A Preferred Stock. Upon liquidation, each share of
Series B Preferred Stock would have a preference of $100 per share over the
Common Stock and Series A Preferred Stock. The Series B Preferred Stock is
redeemable by the Company at the following redemption prices per share which
apply if redemption occurs during the twelve month period ending on and
including December 31 on each of the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE PER SHARE
- -------------------------------------------- ----------------------------
<S> <C>
1995........................................ $ 149.52
1996........................................ 148.22
1997........................................ 146.92
1998........................................ 145.62
1999 and thereafter......................... 144.30
</TABLE>
plus accumulated and unpaid dividends, without interest, to and excluding the
date fixed for redemption. The Series B Preferred Stock may be converted, at any
time and from time to time, at the option of the holder into the number of
shares of Common Stock of the Company determined by dividing $144.30 for each
share of Series B Preferred to be converted by the then effective conversion
price per share of Common Stock. Currently, each share of Series B Preferred
Stock is convertible into four shares of Common Stock. There are no sinking fund
provisions or preemptive rights with respect to the Series B Preferred Stock.
CERTAIN ST. PAUL CHARTER AND BYLAWS PROVISIONS
In addition to the Rights Agreement, the Company's Amended and Restated
Articles of Incorporation and Bylaws contain provisions that may discourage a
third party from seeking to acquire the Company or to commence a proxy contest
or other takeover-related action.
Article V of the Company's Amended and Restated Articles of Incorporation
requires the affirmative vote of the holders of at least two-thirds of the
voting power of all voting shares of the Company for the approval, authorization
or adoption of any plan of merger; plan of exchange; sale, lease, transfer or
other disposition of all or substantially all of the Company's property and
assets not in the usual and regular course of business; or dissolution of the
Company. The affirmative vote of at least one-half of the voting
67
<PAGE>
power of all voting shares is required for amendments to the Company's Amended
and Restated Articles of Incorporation, except for amendments to Article V, for
which the affirmative vote of at least two-thirds of all voting shares is
required.
The Company's Bylaws contain certain procedural requirements with respect to
the nomination of directors by stockholders that require, among other things,
delivery of notice by such stockholders to the corporate secretary of the
Company not later than 60 days prior to the date of the stockholders meeting at
which such nomination is to be considered, PROVIDED, HOWEVER, that in the event
that less than 70 days' notice or prior disclosure of the date of this meeting
is given or made to shareholders, notice by the shareholders to be timely must
be so received not later than the close of business on the 10th day following
the date on which such notice of the date of the meeting was mailed or such
public disclosure was made. The Bylaws do not provide that a meeting of the
Board of Directors may be called by stockholders.
The effect of these provisions may be to deter attempts either to obtain
control of the Company or to acquire a substantial amount of its stock, even if
such a proposed transaction were at a significant premium over the
then-prevailing market value of the Common Stock, or to deter attempts to remove
the Board of Directors and management of the Company, even though some or a
majority of the holders of Common Stock may believe such actions to be
beneficial.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Preferred
Securities and represents the opinion of Sullivan & Cromwell, special tax
counsel to The St. Paul and St. Paul Capital, insofar as it relates to matters
of law and legal conclusions. This section is based upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Subsequent changes may cause tax
consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion is directed only to holders of Preferred
Securities who are individual citizens or residents of the United States who
hold the Preferred Securities as capital assets, and has only limited
application to corporations, estates, trusts and non-resident aliens.
Accordingly, each prospective purchaser of Preferred Securities should consult,
and should depend on, his or her own tax advisor in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
INCOME FROM PREFERRED SECURITIES
In the opinion of Sullivan & Cromwell, St. Paul Capital will be a
partnership for federal income tax purposes. Accordingly, each holder of St.
Paul Capital Preferred Securities (a "Preferred Securityholder") will be
required to include in gross income the Preferred Securityholder's distributive
share of the net income of St. Paul Capital. Such income will generally not
exceed the dividends received on such Preferred Securities, except in limited
circumstances as described below under "Potential Deferral of Interest Payment".
No portion of such income will be eligible for the dividends received deduction.
DISPOSITION OF PREFERRED SECURITIES
Gain or loss will be recognized on a sale of Preferred Securities, including
a redemption for cash, equal to the difference between the amount realized and
the Preferred Securityholder's tax basis for the Preferred Securities sold. Gain
or loss recognized by a Preferred Securityholder on the sale or exchange of a
Preferred Security held for more than one year will generally constitute
long-term capital gain or loss. Subject to the discussion below under "--
Potential Deferral of Interest Payments", the adjusted tax basis of the
Preferred Securities sold will generally equal the amount paid for the Preferred
Securities.
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<PAGE>
RECEIPT OF CONVERTIBLE SUBORDINATED DEBENTURES UPON LIQUIDATION OF ST. PAUL
CAPITAL
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Distribution", Convertible
Subordinated Debentures may be distributed to Preferred Securityholders in
liquidation of St. Paul Capital. Under current United States federal income tax
law, such a distribution would be treated as a non-taxable exchange. Each
Preferred Securityholder would have an aggregate tax basis in the Convertible
Subordinated Debentures equal to such holder's aggregate tax basis in its
Preferred Securities. A holder's holding period in the Convertible Subordinated
Debentures so received in liquidation of St. Paul Capital would include the
period for which the Preferred Securities were held by such holder.
ST. PAUL CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
The Managing Members of St. Paul Capital will furnish each Preferred
Securityholder with a Schedule K-1 each year setting forth such Preferred
Securityholder's allocable share of income for the prior calendar year. The
Managing Members are required to furnish such Schedule K-1 as soon as
practicable following the end of the year, but in any event prior to March 31.
Any person who holds Preferred Securities as a nominee for another person is
required to furnish to St. Paul Capital (a) the name, address and taxpayer
identification number of the beneficial owner and the nominee; (b) information
as to whether the beneficial owner is (i) a person that is not a United States
person, (ii) a foreign government, an international organization or any
wholly-owned agency or instrumentality of either the foregoing or (iii) a
tax-exempt entity; (c) the amount and description of Preferred Securities held,
acquired or transferred for the beneficial owner; and (d) certain information
including the dates of acquisitions and transfers, means of acquisitions and
transfers, and acquisition cost for purchases, as well as the amount of net
proceeds from sales. Brokers and financial institutions are required to furnish
additional information, including whether they are United States persons and
certain information on Preferred Securities they acquire, hold or transfer for
their own accounts. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed by the Code for failure to report such information
to St. Paul Capital. The nominee is required to supply the beneficial owners of
the Preferred Securities with the information furnished to St. Paul Capital.
POTENTIAL DEFERRAL OF INTEREST PAYMENTS
Under the Indenture, The St. Paul has the option to defer interest payments
on the Convertible Subordinated Debentures for up to 60 months. In the event
that interest payments are deferred, St. Paul Capital will continue to accrue
income equal to the amount of the interest payment due at the end of the
deferred interest payment period, on an economic basis over the length of the
deferred interest payment period.
Accrued income will be allocated to holders of record on the Business Day
preceding the last day of each calendar month without any corresponding cash
distribution at that time. As a result, holders of record during a deferral of
interest payments will include interest in gross income in advance of the
receipt of cash, and any such holders who dispose of Preferred Securities prior
to the record date for the payment of dividends following such deferral of
interest will include interest in gross income but will not receive any cash
related thereto from St. Paul Capital. The tax basis of a Preferred Security
will be increased by the amount of any interest that is included in income
without a receipt of cash, and will be decreased again when and if such cash is
subsequently received from St. Paul Capital.
EXCHANGE OF PREFERRED SECURITIES FOR ST. PAUL STOCK
A Preferred Securityholder should not recognize gain or loss upon the
exchange, through the Conversion Agent, of Preferred Securities for a
proportionate share of the Convertible Subordinated Debentures held by St. Paul
Capital. Except to the extent attributable to accrued but unpaid interest on the
Convertible Subordinated Debentures, a Preferred Securityholder should not
recognize gain or loss upon the conversion, through the Conversion Agent, of
Convertible Subordinated Debentures for St. Paul Common Stock or Depositary
Shares representing St. Paul Series C Convertible Preferred Stock. A Preferred
Securityholder will recognize gain, however, upon the receipt of cash in lieu of
a fractional share of St. Paul Common Stock or Depositary Shares representing
St. Paul Series C Convertible Preferred Stock equal to the amount of cash
received less the Preferred Securityholder's tax basis in
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<PAGE>
such fractional share. A Preferred Securityholder's tax basis in the St. Paul
Common Stock or the Depositary Shares representing St. Paul Series C Convertible
Preferred Stock received upon exchange and conversion should generally be equal
to the Preferred Securityholder's tax basis in the Preferred Securities
delivered to the Conversion Agent for exchange (plus any accrued but unpaid
interest on the Convertible Subordinated Debentures included in the Preferred
Securityholder's income as a result of the exchange, minus the basis allocated
to any fractional share for which cash is received). A Preferred
Securityholder's holding period in the St. Paul Common Stock or the Depository
Shares representing St. Paul Series C Convertible Preferred Stock received upon
exchange and conversion should generally begin on the date the Preferred
Securityholder acquired the Preferred Securities delivered to the Conversion
Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
St. Paul Capital (and, thus, Preferred Securityholders) as having received a
constructive distribution from The St. Paul in the event the conversion ratio of
the Convertible Subordinated Debentures were adjusted if (i) as a result of such
adjustment, the proportionate interest of St. Paul Capital in the assets or
earnings and profits of The St. Paul were increased and (ii) the adjustment was
not made pursuant to a bona fide, reasonable antidilution formula. An adjustment
in the conversion ratio would not be considered made pursuant to such a formula
if the adjustment was made to compensate for certain taxable distributions with
respect to the stock into which the Convertible Subordinated Debentures are
convertible. Thus, under certain circumstances, a reduction in the conversion
price for the Convertible Subordinated Debentures is likely to be taxable to St.
Paul Capital as a dividend to the extent of the current or accumulated earnings
and profits of The St. Paul. Preferred Securityholders would be required to
include their allocable share of such constructive dividend in gross income but
would not receive any cash related thereto. In addition, the failure to fully
adjust the conversion price of the Convertible Subordinated Debentures to
reflect distributions of stock dividends with respect to the St. Paul Common
Stock may result in a taxable dividend to the holders of the St. Paul Common
Stock.
Similarly, under Section 305 of the Code, adjustments to the conversion
price of the St. Paul Series C Convertible Preferred Stock, which may occur
under certain circumstances, may result in deemed dividend income to holders of
the Depositary Shares representing St. Paul Series C Convertible Preferred Stock
if such adjustments are not made pursuant to a bona fide, reasonable
antidilution formula, and failure to make such adjustments to the conversion
price of the St. Paul Series C Convertible Preferred Stock may result in deemed
dividend income to holders of the St. Paul Common Stock.
UNITED STATES ALIEN HOLDERS
Ownership of Preferred Securities by nonresident aliens, foreign
corporations and other foreign persons raises tax considerations unique to such
persons and may have substantially adverse tax consequences to them. Therefore,
prospective investors who are foreign persons or which are foreign entities are
urged to consult with their U.S. tax advisors as to whether an investment in
Preferred Securities represents an appropriate investment in light of those
unique tax considerations and possible adverse tax consequences.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of Preferred
Securities, St. Paul Series C Convertible Preferred Stock or St. Paul Common
Stock within the United States and "backup withholding" at a rate of 31% will
apply to such payments if the United States holder fails to provide an accurate
taxpayer identification number.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, St. Paul
Capital has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co. and J.P Morgan Securities Inc.
are acting as representatives, has severally agreed to purchase from St. Paul
Capital, the respective number of Preferred Securities set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER OF PREFERRED
UNDERWRITER SECURITIES
- ------------------------------------------------------------------------ --------------------
<S> <C>
Goldman, Sachs & Co.....................................................
J.P. Morgan Securities Inc..............................................
----------
Total............................................................... 3,600,000
----------
----------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Preferred Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession of $ per Preferred Security. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used by St. Paul Capital to purchase the Convertible
Subordinated Debentures of The St. Paul, the Underwriting Agreement provides
that The St. Paul will pay as Underwriters' Compensation a commission of $
per Preferred Security.
The St. Paul and St. Paul Capital have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 540,000 additional Preferred Securities solely to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of
Preferred Securities to be purchased by each of them, as shown in the foregoing
table, bears to the Preferred Securities offered.
The St. Paul and St. Paul Capital have agreed not to offer, sell, contract
to sell, or otherwise dispose of any shares of St. Paul Common Stock, any other
capital stock of The St. Paul, any other security convertible into or
exercisable or exchangeable for St. Paul Common Stock or any such other capital
stock or debt securities substantially similar to the Convertible Subordinated
Debentures for a period of 180 days after the date of this Prospectus without
the prior written consent of the representatives, except for (a) the Preferred
Securities offered hereby, (b) St. Paul Common Stock or St. Paul Series C
Convertible Preferred Stock issued or delivered upon conversion or exchange of
the Convertible Subordinated Debentures, (c) securities issued or delivered upon
conversion, exchange or exercise of any other securities of The St. Paul
outstanding on or delivered upon conversion, exchange or exercise of any other
securities of The St. Paul outstanding on the date of this Prospectus, (d)
securities issued pursuant to The St. Paul's stock option or other benefit or
incentive plans maintained for its officers, directors or employees, or (e)
securities issued in connection with mergers, acquisitions or similar
transactions.
In compliance with Article III, Section 34 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (the "NASD"), no sales of
Preferred Securities may be made by any NASD member to a discretionary account
without the prior written approval of the transaction by the customer.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, The St. Paul and its
subsidiaries and associated companies in the ordinary course of business.
71
<PAGE>
Prior to this Offering, there has been no public market for the Preferred
Securities. The Preferred Securities have been approved for listing on the NYSE,
subject to notice of issuance, under the symbol "SPC pfM".
The St. Paul and St. Paul Capital have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
VALIDITY OF THE SECURITIES
The validity of the Preferred Securities, the Convertible Subordinated
Debentures, the Guarantee, the St. Paul Common Stock, the Stock Purchase Rights
and the St. Paul Series C Convertible Preferred Stock issuable upon conversion
or exchange of the Convertible Subordinated Debentures will be passed upon for
The St. Paul by Andrew I. Douglass, Senior Vice President and General Counsel of
The St. Paul, St. Paul, Minnesota, and for the Underwriters by Sullivan &
Cromwell, New York, New York. Sullivan & Cromwell may rely on Mr. Douglass as to
all matters of Minnesota law and each of Mr. Douglass and Sullivan & Cromwell
may rely on Richards, Layton & Finger, Wilmington, Delaware, special Delaware
counsel to The St. Paul and St. Paul Capital, as to the matters of Delaware law
relating to the validity of the Preferred Securities and certain other matters
covered by such firm's opinion. In addition, certain matters as to Minnesota law
will be passed on by Oppenheimer Wolff & Donnelly, Minneapolis, Minnesota. In
addition, certain matters as to United States taxation will be passed upon by
Sullivan & Cromwell as special tax counsel to the Company and St. Paul Capital.
At , 1995, Mr. Douglass beneficially owned shares of St. Paul Common
Stock and held options to purchase shares of St. Paul Common Stock.
Sullivan & Cromwell have from time to time rendered certain legal services to
The St. Paul.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1993, and for each of the years in the three-year period ended December 31,
1994, and the related financial statement schedules, are incorporated by
reference herein from the Company's Annual Report on Form 10-K. Such
consolidated financial statements and related financial statement schedules have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
as stated in their reports incorporated by reference herein, and have been
incorporated by reference herein in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing. The reports of KPMG
Peat Marwick LLP on the December 31, 1994, consolidated financial statements and
related financial statement schedules refer to changes in the method of
accounting for certain investments, reinsurance, income taxes and postretirement
benefits other than pensions.
72
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE FIRST
DEFINED TERM DEFINED
- -------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1940 Act................................................................................................ 46
Additional Dividends.................................................................................... 9
Additional Interest..................................................................................... 60
Applicable Price........................................................................................ 43
Beneficial Owner........................................................................................ 51
blockage period......................................................................................... 61
Business Day............................................................................................ 38
Certificate of Designation.............................................................................. 52
Change in 1940 Act Law.................................................................................. 46
Closing Price........................................................................................... 43
Code.................................................................................................... 68
Commission.............................................................................................. 5
Common Securities....................................................................................... 1
Common Stock Fundamental Change......................................................................... 44
Company................................................................................................. 1
Conversion Agent........................................................................................ 38
Conversion Expiration Date.............................................................................. 2
Convertible MIPS........................................................................................ 1
Convertible Subordinated Debentures..................................................................... 1
Current Market Price.................................................................................... 40
deferral of interest payments........................................................................... 3
Deposit Agreement....................................................................................... 53
Depositary.............................................................................................. 53
Depositary Receipts..................................................................................... 53
Depositary Shares....................................................................................... 2
Depositary's Office..................................................................................... 54
Direct Participants..................................................................................... 50
dividends............................................................................................... 1
DTC..................................................................................................... 4
Economy................................................................................................. 25
Entitlement Date........................................................................................ 43
Event of Default........................................................................................ 63
Exchange Act............................................................................................ 5
Exchange Election....................................................................................... 45
Exchange Election Meeting............................................................................... 45
Exchange Event.......................................................................................... 45
Exchange Price.......................................................................................... 38
Fire and Marine......................................................................................... 30
Fundamental Change...................................................................................... 44
Guarantee............................................................................................... 3
Guarantee Payments...................................................................................... 56
Indenture............................................................................................... 36
Indirect Participants................................................................................... 50
Interest Payment Date................................................................................... 59
Investment Company Event................................................................................ 46
LAE..................................................................................................... 34
Junior Stock............................................................................................ 58
L.L.C. Agreement........................................................................................ 7
Liquidation Distribution................................................................................ 47
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
PAGE FIRST
DEFINED TERM DEFINED
- -------------------------------------------------------------------------------------------------------- -------------
<S> <C>
Managing Members Payment................................................................................ 59
Managing Members........................................................................................ 7
NASD.................................................................................................... 71
Non-Stock Fundamental Change............................................................................ 44
Nuveen.................................................................................................. 18
NYSE.................................................................................................... 2
Participants............................................................................................ 50
Preferred Securities.................................................................................... 1
Preferred Securityholder................................................................................ 68
Purchaser Stock Price................................................................................... 44
Redemption Price........................................................................................ 12
Reference Market Price.................................................................................. 44
Registration Statement.................................................................................. 5
Restated Articles....................................................................................... 52
Rights Agreement........................................................................................ 12
Senior Indebtedness..................................................................................... 61
Senior Nonmonetary Default.............................................................................. 61
Senior Payment Default.................................................................................. 61
Series A Preferred Stock................................................................................ 66
Series B Preferred Stock................................................................................ 66
SFAS.................................................................................................... 25
Special Event........................................................................................... 45
Special Trustee......................................................................................... 15
St. Paul Capital........................................................................................ 1
St. Paul Common Stock................................................................................... 2
St. Paul Holdings....................................................................................... 7
St. Paul Series C Convertible Preferred Stock........................................................... 2
Convertible Subordinated Debentures..................................................................... 1
Stock Purchase Rights................................................................................... 39
Successor Securities.................................................................................... 46
Tax Event............................................................................................... 46
The St. Paul............................................................................................ 1
Transaction............................................................................................. 41
Trustee................................................................................................. 59
UITs.................................................................................................... 28
Underwriters' Compensation.............................................................................. 1
</TABLE>
74
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ST. PAUL AND ST. PAUL CAPITAL SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 5
Incorporation of Certain Documents by
Reference..................................... 6
Prospectus Summary............................. 7
Investment Considerations...................... 18
Use of Proceeds................................ 20
Ratio of Earnings to Fixed Charges of the
Company....................................... 20
Capitalization................................. 21
Market Prices of St. Paul Common Stock......... 22
The St. Paul's Dividend Policy................. 22
Selected Financial and Operating Data.......... 23
Overview of Results............................ 24
Business....................................... 29
St. Paul Capital............................... 36
Description of Securities Offered.............. 36
Description of St. Paul Capital Stock.......... 66
Certain St. Paul Charter and Bylaws
Provisions.................................... 67
Certain Federal Income Tax Considerations...... 68
Underwriting................................... 71
Validity of the Securities..................... 72
Experts........................................ 72
Index of Defined Terms......................... 73
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
3,600,000 PREFERRED SECURITIES
ST. PAUL CAPITAL L.L.C.
___% CONVERTIBLE MONTHLY INCOME
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY, AND CONVERTIBLE
INTO COMMON STOCK OF,
THE ST. PAUL COMPANIES, INC.
--------------
[LOGO]
--------------
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
REPRESENTATIVES OF THE UNDERWRITERS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following statement sets forth the estimated amounts of expenses, other
than the underwriting discount, to be borne by The St. Paul in connection with
the distribution of the securities registered hereby. The amounts set forth in
this table, except for the SEC fee, are in each case estimated.
<TABLE>
<S> <C>
SEC Registration Fee..................................................... 71,380
NASD Filing Fee.......................................................... 21,200
New York Stock Exchange Listing Fee...................................... 40,230
Printing Expenses........................................................ 65,500
Accounting Fees and Expenses............................................. 40,000
Legal Fees and Expenses.................................................. 10,000
Blue Sky Qualification Fees and Expenses................................. 20,000
Rating Agency Fees....................................................... 90,000
Trustee Fees............................................................. 50,000
Miscellaneous Expenses................................................... 1,690
---------
Total................................................................ $ 410,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The St. Paul is subject to Minnesota Statutes, Chapter 302A. Minnesota
Statutes, Section 302A.521, provides that a corporation shall indemnify any
person made or threatened to be made a party to a proceeding by reason of the
former or present official capacity (as defined) of such person against
judgments, penalties, fines, including, without limitation, excise taxes
assessed against such person with respect to an employee benefit plan,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan; (2) acted in good faith; (3) received no
improper personal benefit and Section 302A.255 (with respect to director
conflicts of interest), if applicable, has been satisfied; (4) in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and (5) reasonably believed that the conduct was in the best interests
of the corporation in the case of acts or omissions in such person's official
capacity for the corporation, or, in the case of acts or omissions in such
person's official capacity for other affiliated organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation.
The Bylaws of The St. Paul provide that, subject to the limitations of the
next sentence, it will indemnify and make permitted advances to a person made or
threatened to be made a party to a proceeding by reason of his former or present
official capacity against judgments, penalties, fines (including without
limitation excise taxes assessed against the person with respect to an employee
benefit plan), settlements and reasonable expenses (including without limitation
attorneys' fees and disbursements) incurred by him in connection with the
proceeding in the manner and to the fullest extent permitted or required by
Section 302A.521. Notwithstanding the foregoing, The St. Paul will neither
indemnify nor make advances under Section 302A.521 to any person who at the time
of the occurrence or omission claimed to have given rise to the matter which is
the subject to the proceeding only had an agency relationship to The St. Paul
and was not at that time an officer, director or employee thereof unless such
person and The St. Paul were at that time parties to a written contract for
indemnification or advances with respect to such matter or unless the board
specifically authorizes such indemnification or advances.
The St. Paul has directors' and officers' liability insurance policies, with
coverage of up to $105 million, subject to various deductibles and exclusions
from coverage.
II-1
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of The
St. Paul and St. Paul Capital pursuant to the foregoing provisions or otherwise,
The St. Paul and St. Paul Capital have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
The St. Paul or St. Paul Capital of expenses incurred or paid by a director,
officer or controlling person of The St. Paul or St. Paul Capital in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, The St. Paul and St. Paul Capital will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ----------- ------------------------------------------------------------------------------------- ----------------
<C> <S> <C>
1 Form of Underwriting Agreement. Filed herewith
2.1 Certificate of Formation of St. Paul Capital L.L.C. *
2.2 Form of Amended and Restated Limited Liability Company Agreement of St. Paul Capital
L.L.C. Filed herewith
3.1 Amended and Restated Articles of Incorporation of The St. Paul Companies, Inc., as
amended. (1)
3.2 Bylaws of The St. Paul Companies, Inc., as amended. (1)
3.3 Form of Certificate of Designation with respect to St. Paul Series C Convertible
Preferred Stock. *
4.1 Form of St. Paul Capital Preferred Securities Certificate (included in Exhibit 2.2). *
4.2 Form of St. Paul Series C Convertible Preferred Stock Certificate. *
4.3 Form of Indenture. *
4.4 Form of Subordinated Debenture (included in Exhibit 4.3). *
4.5 Form of Guarantee Agreement. *
4.6 Form of Deposit Agreement with respect to St. Paul Series C Cumulative Preferred
Stock. *
4.7 Form of Depositary Receipt (included in Exhibit 4.6). *
4.8 Form of St. Paul Common Stock Certificate. (2)
5.1 Opinion of Andrew I. Douglass, including consent. *
5.2 Opinion of Richards, Layton & Finger, including consent. *
8 Opinion of Sullivan & Cromwell as to certain tax matters, including consent. *
12 Statement as to Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends. *
23.1 Consent of KPMG Peat Marwick LLP. Filed herewith
23.2 Consent of Andrew I. Douglass (included in Exhibit 5.1). *
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ----------- ------------------------------------------------------------------------------------- ----------------
<C> <S> <C>
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2). *
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8). *
24 Powers of Attorney. *
25 Form of T-1 Statement of Eligibility and Qualification under the Trust Indenture Act *
of 1939 of The Chase Manhattan Bank (National Association).
27 Financial Data Schedule. (3)
<FN>
- ------------------------
* Previously filed.
(1) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Quarterly Report on Form 10-Q of The St. Paul for
the quarter ended March 31, 1994 and is incorporated herein by reference.
(2) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Annual Report on Form 10-K of The St. Paul for the
year ended December 31, 1992 and is incorporated herein by reference.
(3) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Annual Report on Form 10-K of The St. Paul for the
year ended December 31, 1994 and is incorporated herein by reference.
</TABLE>
ITEM 17. UNDERTAKINGS.
1. The St. Paul and St. Paul Capital hereby undertake:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of this Registration Statement (or the most recent post-effective
amendment thereto) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement, and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement
PROVIDED, HOWEVER, that (i) and (ii) above do not apply if the information
required to be included in a post-effective amendment thereby is contained
in periodic reports filed with or furnished to the Commission by The St.
Paul pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof; and
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The St. Paul and St. Paul Capital hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of The
St. Paul's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-3
<PAGE>
3. See Item 15 for The St. Paul's and St. Paul Capital's undertaking with
respect to indemnification.
4. The St. Paul and St. Paul Capital hereby undertake that:
(a) For purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in the
form of prospectus filed by The St. Paul and St. Paul Capital pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of the registration statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The St. Paul
Companies, Inc. and The St. Paul Capital L.L.C. certify that they have
reasonable grounds to believe that they meet all of the requirements for filing
on Form S-3 and have duly caused this amendment to this Registration Statement
to be signed on their behalf by the undersigned, thereunto duly authorized, in
the City of Saint Paul, State of Minnesota, on the 9th day of May, 1995.
THE ST. PAUL COMPANIES, INC.
By /s/ BRUCE A. BACKBERG
--------------------------------------
Bruce A. Backberg
VICE PRESIDENT AND CORPORATE
SECRETARY
ST. PAUL CAPITAL L.L.C.
By: The St. Paul Companies, Inc.,
as Managing Member
By /s/ BRUCE A. BACKBERG
--------------------------------------
Bruce A. Backberg
VICE PRESIDENT AND CORPORATE
SECRETARY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following directors and officers
of The St. Paul Companies, Inc. in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
/s/ DOUGLAS W. LEATHERDALE Chairman, President and Chief Executive
------------------------------------------- Officer (principal executive officer) May 9, 1995
Douglas W. Leatherdale and Director
/s/ PATRICK A. THIELE Executive Vice President and Chief
------------------------------------------- Financial Officer (principal financial May 9, 1995
Patrick A. Thiele officer) and Director
/s/ HOWARD E. DALTON Senior Vice President and Chief
------------------------------------------- Accounting Officer (principal accounting May 9, 1995
Howard E. Dalton officer)
*
------------------------------------------- Director May 9, 1995
Michael R. Bonsignore
*
------------------------------------------- Director May 9, 1995
John H. Dasburg
*
------------------------------------------- Director May 9, 1995
W. John Driscoll
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
*
------------------------------------------- Director May 9, 1995
Pierson M. Grieve
*
------------------------------------------- Director May 9, 1995
Ronald James
*
------------------------------------------- Director May 9, 1995
William H. Kling
*
------------------------------------------- Director May 9, 1995
Bruce K. MacLaury
*
------------------------------------------- Director May 9, 1995
Ian A. Martin
*
------------------------------------------- Director May 9, 1995
Glen D. Nelson
*
------------------------------------------- Director May 9, 1995
Anita M. Pampusch
*
------------------------------------------- Director May 9, 1995
Gordon M. Sprenger
* By: /s/BRUCE A. BACKBERG
Bruce A. Backberg, May 9, 1995
as Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ----------- ------------------------------------------------------------------------------------- ----------------
<C> <S> <C>
1 Form of Underwriting Agreement. Filed herewith
2.1 Certificate of Formation of St. Paul Capital L.L.C. *
2.2 Form of Amended and Restated Limited Liability Company Agreement of St. Paul Capital
L.L.C. Filed herewith
3.1 Amended and Restated Articles of Incorporation of The St. Paul Companies, Inc., as
amended. (1)
3.2 Bylaws of The St. Paul Companies, Inc., as amended. (1)
3.3 Form of Certificate of Designation with respect to St. Paul Series C Convertible
Preferred Stock. *
4.1 Form of St. Paul Capital Preferred Securities Certificate (included in Exhibit 2.2). *
4.2 Form of St. Paul Series C Convertible Preferred Stock Certificate. *
4.3 Form of Indenture. *
4.4 Form of Subordinated Debenture (included in Exhibit 4.3). *
4.5 Form of Guarantee Agreement. *
4.6 Form of Deposit Agreement with respect to St. Paul Series C Cumulative Preferred
Stock. *
4.7 Form of Depositary Receipt (included in Exhibit 4.6). *
4.8 Form of St. Paul Common Stock Certificate. (2)
5.1 Opinion of Andrew I. Douglass, including consent. *
5.2 Opinion of Richards, Layton & Finger, including consent. *
8 Opinion of Sullivan & Cromwell as to certain tax matters, including consent. *
12 Statement as to Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends. *
23.1 Consent of KPMG Peat Marwick LLP. Filed herewith
23.2 Consent of Andrew I. Douglass (included in Exhibit 5.1). *
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2). *
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8). *
24 Powers of Attorney. *
25 Form of T-1 Statement of Eligibility and Qualification under the Trust Indenture Act *
of 1939 of The Chase Manhattan Bank (National Association).
27 Financial Data Schedule. (3)
<FN>
- ------------------------
* Previously filed.
(1) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Quarterly Report on Form 10-Q of The St. Paul for
the quarter ended March 31, 1994 and is incorporated herein by reference.
(2) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Annual Report on Form 10-K of The St. Paul for the
year ended December 31, 1992 and is incorporated herein by reference.
(3) Exhibit so marked was filed with the Securities and Exchange Commission
as an exhibit to the Annual Report on Form 10-K of The St. Paul for the
year ended December 31, 1994 and is incorporated herein by reference.
</TABLE>
<PAGE>
EXHIBIT 1
ST. PAUL CAPITAL L.L.C.
-% CONVERTIBLE MONTHLY INCOME PREFERRED SECURITIES
(LIQUIDATION PREFERENCE $50 PER SECURITY)
GUARANTEED BY
THE ST. PAUL COMPANIES, INC.
_____________________
UNDERWRITING AGREEMENT
----------------------
-, 1995
Goldman, Sachs & Co.,
J.P. Morgan Securities Inc.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
St. Paul Capital L.L.C., a limited liability company formed under the laws
of Delaware (the "Company"), and The St. Paul Companies, Inc., a Minnesota
corporation, as guarantor and provider of certain backup obligations (the
"Guarantor"), propose, subject to the terms and conditions stated herein, that
the Company issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of - (the "Firm Shares") of the Company's -%
Convertible Monthly Income Preferred Securities (liquidation preference $50 per
security) representing preferred limited liability company interests in the
Company (the "Preferred Securities") and, at the election of the Underwriters,
up to - additional Preferred Securities (the "Optional Shares") (the Firm Shares
and the Optional Shares that the Underwriters elect to purchase pursuant to
Section 2 hereof being hereinafter referred to collectively as the "Shares").
The Preferred Securities are guaranteed as to the payment of dividends, if, as
and when declared, and as to payments on liquidation or redemption (the
Preferred Securities and the Guarantee (as defined below) being referred to
collectively as the "Securities") by the Guarantor pursuant to and to the extent
set forth in a Guarantee Agreement, to be dated as of -, 1995 (the "Guarantee").
The Preferred Securities are exchangeable, under certain circumstances, for -%
Convertible Subordinated Debentures of the Guarantor (the "Subordinated
Debentures") entitled to the benefits of an indenture, to be dated as of -, 1995
(in the form filed as an exhibit to the Registration Statement referred to
below, the "Indenture"), among the Company, the Guarantor and The Chase
Manhattan Bank (National Association), as trustee (the "Trustee"), which
Subordinated Debentures will be convertible into shares of Common Stock, without
par value (the "Guarantor Common Stock"), of the Guarantor or exchangeable for
depositary shares (the "Depositary Shares"), each representing a one hundredth
(1/100th) interest in a share of Series C Cumulative Convertible Preferred
Stock, without par value (liquidation preference $5000 per share)
(the "Guarantor Preferred Stock"), of the Guarantor. The Guarantor Preferred
Stock shall be deposited by the Guarantor, immediately following its issuance,
with The Chase
<PAGE>
Manhattan Bank (National Association), as depositary (in such capacity, the
"Depositary"), against delivery of Depositary Shares evidenced by depositary
receipts (the "Depositary Receipts") to be issued by the Depositary under a
Deposit Agreement, to be dated as of -, 1995 (the "Deposit Agreement"), among
the Guarantor, the Depositary and the holders from time to time of the
Depositary Receipts issued thereunder. Unless the context otherwise requires,
references herein to the "Depositary Shares" shall include the Depositary
Receipts evidencing such Depositary Shares.
The Company is managed by the Guarantor and St. Paul Capital Holdings,
Inc., a Delaware corporation ("St. Paul Holdings"), in their capacity as the
members (the "Managing Members") of the Company that hold all of the common
limited liability company interests (the "Common Securities") of the Company.
1. Each of the Company and the Guarantor, jointly and severally,
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-58491) in
respect of the Shares, the Guarantee, the Subordinated Debentures, the
Guarantor Common Stock, the Guarantor Preferred Stock and the Depositary
Shares (collectively, the "Registered Securities") has been filed with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), and delivered to you; such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto but
including all documents incorporated by reference in the prospectus
contained therein, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; no other document with
respect to such registration statement or document incorporated by
reference therein has heretofore been filed, or transmitted for filing,
with the Commission; and no stop order suspending the effectiveness of such
registration statement has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act being hereinafter referred to as a "Preliminary
Prospectus"; the various parts of such registration statement, including
all exhibits thereto and including (i) the information contained in the
form of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by virtue
of Rule 430A under the Act to be part of the registration statement at the
time it was declared effective and (ii) the documents incorporated by
reference in the prospectus contained in the registration statement at the
time such part of the registration statement became effective, each as
amended at the time such part of the registration statement became
effective, being hereinafter collectively referred to as the "Registration
Statement"; such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, being hereinafter referred to as the
"Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to
2
<PAGE>
any Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and incorporated by reference
in such Preliminary Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Guarantor filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the
Registration Statement);
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company or the Guarantor by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company or the
Guarantor by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects, to the requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto, and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact
3
<PAGE>
required to be stated therein or necessary to make the statements therein
not misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company or the
Guarantor by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(e) Neither the Company, the Guarantor nor any of the Guarantor's
subsidiaries has sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
direct loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, which is material
to the Company or the Guarantor and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Guarantor and its subsidiaries taken as a
whole (other than changes in the capital stock resulting from the exercise
of stock options, the issuance of deferred stock awards, the issuance of
restricted shares under the Guarantor's stock option or other benefit or
incentive plans maintained for its officers, directors or employees or the
conversion of shares of the Guarantor's Series B Convertible Preferred
Stock) or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position or members' capital of the Company or the
general affairs, management, financial position, shareholders' equity or
results of operations of the Guarantor and its subsidiaries taken as a
whole, otherwise than as set forth or contemplated in the Prospectus;
(f) The Guarantor has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Minnesota,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and is duly qualified
to do business as a foreign corporation in good standing in each state or
other jurisdiction in which such qualification is required, or if in any
jurisdiction the Guarantor is not so qualified, the failure so to qualify
would not, considering all such cases in the aggregate, involve a material
risk to the business, properties, financial position or results of
operations of the Guarantor and its subsidiaries, taken as a whole; each of
the Guarantor's principal subsidiaries (hereinafter called "Principal
Subsidiaries"), namely St. Paul Fire and Marine Insurance Company and The
John Nuveen Company, has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification;
(g) The Guarantor has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Guarantor have been duly authorized and validly issued and are fully paid
and non-assessable; all of the issued shares of capital stock of St. Paul
Fire and Marine Insurance Company and approximately 77% of the issued
shares of capital stock of The John Nuveen Company have been duly
authorized and validly issued, are fully paid and
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non-assessable and are owned directly or indirectly by the Guarantor, free
and clear of all liens, encumbrances, equities or claims;
(h) St. Paul Holdings has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; all of the issued shares of capital stock of St. Paul Holdings
have been duly authorized and validly issued, are fully paid and non-
assessable and are owned directly or indirectly by the Guarantor, free and
clear of all liens, encumbrances, equities or claims; St. Paul Holdings has
conducted and will conduct no business other than in its capacity as a
Managing Member; St. Paul Holdings will not be a party to or bound by any
agreement or instrument other than the Amended and Restated Limited
Liability Company Agreement, to be dated as of -, 1995, of the Company (in
the form filed as an exhibit to the Registration Statement, the "L.L.C.
Agreement"); St. Paul Holdings has no liabilities or obligations other than
as described in the Prospectus; and St. Paul Holdings is not a party to or
subject to any action, suit or proceeding of any nature;
(i) The Company has been duly formed and is validly existing as a
limited liability company in good standing under the laws of the State of
Delaware; all of the issued Common Securities of the Company have been duly
authorized and validly issued; the Company has conducted and will conduct
no business other than the transactions contemplated by this Agreement and
described in the Prospectus; the Company is not a party to or bound by any
agreement or instrument other than the L.L.C. Agreement, this Agreement and
the Indenture; the Company has no liabilities or obligations other than
those arising out of the transactions contemplated by this Agreement and
described in the Prospectus; and the Company is not a party to or subject
to any action, suit or proceeding of any nature;
(j) The Shares have been duly authorized by the Managing Members and,
when issued and delivered against payment therefor as provided herein, will
be validly issued, fully paid and non-assessable preferred limited
liability company interests in the Company, as to which the members of the
Company who hold such Shares (the "Preferred Securityholders"), in their
capacity as members of the Company, will have no liability solely by reason
of being Preferred Securityholders in excess of their obligations to make
payments provided for in Sections 8.4 and 8.5 of the L.L.C. Agreement
and their share of the Company's assets and undistributed profits (subject
to the obligation of such a holder to repay any funds wrongfully
distributed to it), PROVIDED that a Preferred Securityholders may also be
obligated to provide payment and/or indemnity in connection with the
registration of transfers of Preferred Securities; when so issued and
delivered, the Shares will have the rights set forth in the L.L.C.
Agreement, the terms of the Shares will be valid and binding on the
Company and the Shares will conform to the descriptions thereof contained
in the Prospectus; when so issued and delivered, the Shares will be
convertible through a conversion agent acting on behalf of the holders of
the Preferred Securities (the "Conversion Agent") into shares of Guarantor
Common Stock and exchangeable through the Conversion Agent for Depositary
Shares representing Guarantor Preferred Stock, such conversion and
exchange effected in each case through an exchange through the Conversion
Agent of Preferred Securities for all or a portion of the Subordinated
Debentures theretofore held by the Company and the
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immediate conversion or exchange thereof by the Conversion Agent into
Guarantor Common Stock or Depositary Shares, as the case may be, all in
accordance with the L.L.C. Agreement, the Indenture and the Deposit
Agreement; the shares of Guarantor Common Stock initially issuable upon
conversion of the Subordinated Debentures and the shares of Guarantor
Preferred Stock initially issuable upon exchange of the Subordinated
Debentures have been duly authorized and reserved for issuance and, when
issued and delivered in accordance with the terms of the Subordinated
Debentures, will be duly and validly issued, fully paid and non-assessable
and will conform to the descriptions thereof contained in the Prospectus;
the deposit of the Guarantor Preferred Stock with the Depositary upon
issuance thereof has been duly authorized and when the Depositary Receipts
are issued in accordance with the provisions of the Deposit Agreement, such
Depositary Receipts will entitle the holders thereof to the rights
specified in such Depositary Receipts and in the Deposit Agreement (subject
in the case of the Deposit Agreement, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles) and the Depositary Shares will conform to
the description thereof in the Prospectus; the terms of the Guarantor
Preferred Stock are valid and binding on the Guarantor; and the holders of
outstanding capital stock of the Guarantor are not entitled to preemptive
or other rights afforded by the Guarantor to subscribe for the shares of
Guarantor Common Stock or the shares of Guarantor Preferred Stock issuable
upon conversion or exchange of the Shares;
(k) The Guarantee, the Deposit Agreement and the Indenture
(collectively, the "Guarantor Agreements") have each been duly authorized
by the Guarantor and when validly executed and delivered by the Guarantor
and, in the case of the Indenture, by the Company and the Trustee, and in
the case of the Deposit Agreement, by the Depositary, will constitute
legal, valid and binding obligations of the Guarantor, enforceable in
accordance with their respective terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; the L.L.C. Agreement has been duly
authorized, executed and delivered by the Managing Members and constitutes
a valid and legally binding agreement of the Managing Members, enforceable
against the Managing Members by the Preferred Securityholders in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Subordinated Debentures are entitled to the benefits
provided by the Indenture; the Indenture has been duly qualified under the
Trust Indenture Act; and the Guarantor Agreements and the L.L.C. Agreement
conform to the descriptions thereof in the Prospectus;
(l) The Indenture has been duly authorized by the Company and, when
validly executed and delivered by the Company, the Guarantor and the
Trustee, will constitute a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
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reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(m) The issue and sale of the Shares by the Company, the purchase of
the Subordinated Debentures by the Company, the exchange by the Company of
Subordinated Debentures held by it for Preferred Securities in connection
with the conversion or exchange of the Preferred Securities for Guarantor
Common Stock or Guarantor Preferred Stock, the compliance by the Company
with all of the provisions of this Agreement, the execution, delivery and
performance by the Company of the Indenture and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which any of the property or
assets of the Company is subject, nor will such actions result in any
violation of the provisions of the Certificate of Formation of the Company
or the L.L.C. Agreement or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Shares by the Company, the purchase of the Subordinated Debentures by the
Company, the exchange by the Company of Subordinated Debentures held by it
for Preferred Securities in connection with the conversion or exchange of
such Preferred Securities for Guarantor Common Stock or Guarantor Preferred
Stock or the consummation by the Company of the other transactions
contemplated by this Agreement, except the registration under the Act of
the Registered Securities, qualification of the Indenture under the Trust
Indenture Act, registration of the Shares under the Exchange Act, the
listing of the Shares on the New York Stock Exchange (the "Exchange") and
such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities, insurance or Blue Sky laws in
connection with the purchase of the Shares and the distribution of the
Shares by the Underwriters;
(n) The issue and sale of the Shares by the Company, the issuance by
Guarantor of the Guarantee, the issuance and sale by Guarantor of the
Subordinated Debentures, the exchange by the Company of Subordinated
Debentures held by it for Preferred Securities in connection with the
conversion or exchange of the Preferred Securities for Guarantor Common
Stock or Guarantor Preferred Stock, the issuance by Guarantor of the shares
of Guarantor Common Stock issuable upon conversion of the Subordinated
Debentures, the issuance by the Guarantor of the Guarantor Preferred Stock
issuable upon exchange of the Subordinated Debentures and the deposit
thereof with the Depositary, the compliance by the Company and the
Guarantor with all of the provisions of this Agreement, the execution,
delivery and performance by the Guarantor of the Guarantor Agreements and
the L.L.C. Agreement, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Guarantor or any of its subsidiaries
is a party or by which the Guarantor or any of its subsidiaries is bound or
to which any of the
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<PAGE>
property or assets of the Guarantor or any of its subsidiaries is subject,
nor will such actions result in any violation of the provisions of the
Amended and Restated Articles of Incorporation or Bylaws of the Guarantor
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Guarantor or any
of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issuance of the
Guarantee, the issuance and sale of the Subordinated Debentures, the
issuance of the shares of Guarantor Common Stock issuable upon conversion
of the Subordinated Debentures and the issuance of the shares of Guarantor
Preferred Stock issuable upon exchange of the Subordinated Debentures or
the consummation by the Guarantor of the transactions contemplated by this
Agreement or the Indenture or the Guarantee, except the registration under
the Act of the Registered Securities, qualification of the Indenture under
the Trust Indenture Act, registration of the shares under the Exchange Act,
the listing of the Shares on the Exchange and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities, insurance or Blue Sky laws in connection with the
purchase of the Shares and distribution of the Shares by the Underwriters;
(o) None of the Company, the Guarantor nor any of the Guarantor's
subsidiaries is in violation of its organizational documents or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties is or may be bound;
(p) The statements set forth in the Prospectus under the captions
"Description of Securities Offered" and "Description of St. Paul Capital
Stock", insofar as they purport to constitute a summary of the terms of the
securities therein described, and, subject to the limitations set forth
therein, under the caption "Certain Federal Income Tax Considerations",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(q) Other than as set forth in the Prospectus, and other than
litigation (none of which is reasonably likely to be material) incidental
to the kinds of business conducted by the Guarantor and its subsidiaries,
there are no legal or governmental proceedings pending to which the
Guarantor or any of its subsidiaries is a party or of which any property of
the Guarantor or any of its subsidiaries is the subject which, if
determined adversely to the Guarantor or any of its subsidiaries, would
individually or in the aggregate (after giving effect to any applicable
insurance, reinsurance or reserves therefor) have a material adverse effect
on the consolidated financial position, shareholders' equity or results of
operations of the Guarantor and its subsidiaries, taken as a whole; and, to
the best of the Guarantor's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
(r) Neither the Company nor the Guarantor is and, after giving effect
to the offering and sale of the Shares, neither the Company nor the
Guarantor will be, an
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<PAGE>
"investment company" or an entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act");
(s) None of the Company, the Guarantor or any of their affiliates
does business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes;
(t) KPMG Peat Marwick LLP, which has certified certain financial
statements of the Company and the Guarantor, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder; and
(u) Neither the Company nor the Guarantor has taken nor will it take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company or the Guarantor
to facilitate the sale or resale of any of the Securities.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per security of $-, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per security set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to - Optional Shares, at the purchase price per security set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
As compensation to the Underwriters for their commitments hereunder, and in
view of the fact that the proceeds of the sale of the Shares will be used by the
Company to purchase the Subordinated Debentures of the Guarantor, the Guarantor
hereby agrees to pay
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at each Time of Delivery (as defined in Section 4 hereof) to Goldman, Sachs &
Co., for the accounts of the several Underwriters, an amount equal to $- per
security for the Shares to be delivered hereunder at such Time of Delivery.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder shall be
delivered by or on behalf of the Company to Goldman, Sachs & Co., through the
facilities of The Depository Trust Company ("DTC"), for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the purchase
price therefor by certified or official bank check or checks, payable to the
order of the Company in New York Clearing House (next day) funds. The Company
will cause the certificates representing the Shares to be made available for
checking and packaging at least twenty-four hours prior to the Time of Delivery
(as defined below) with respect thereto at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on
- -, 1995, or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York time, on the date specified by Goldman, Sachs & Co. in the written notice
given by Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Shares, or such other time and date as Goldman, Sachs & Co. and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery", such time and date for
delivery of the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
At each Time of Delivery, the Guarantor will pay, or cause to be paid, the
commission payable at such Time of Delivery to the Underwriters under Section 2
hereof by certified or official bank check or checks, payable to the order of
Goldman, Sachs & Co. in New York Clearing House (next day) funds.
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(i) hereof, and the check or checks specified in
subsection (a) above, will be delivered at the offices of Sullivan & Cromwell,
125 Broad Street, New York, New York 10004 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of Delivery.
A meeting will be held at the Closing Location at 1:00 p.m., New York time, on
the New York Business Day next preceding such Time of Delivery, at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the purposes of
this Section 4, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in The City of New York are generally authorized or obligated by law or
executive order to close.
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5. Each of the Company and the Guarantor, jointly and severally, agrees
with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or the
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; in the case of the Guarantor, to file
promptly all reports and any definitive proxy or information statements
required to be filed by the Guarantor with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Registered Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Registered Securities for offering and
sale under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection
therewith neither the Company nor the Guarantor shall be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with
the offering or sale of the Registered Securities and if at such time any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary during such
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period to amend or supplement the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus in order to
comply with the Act, the Exchange Act or the Trust Indenture Act, to notify
you and upon your request to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Registered Securities at any time nine months or more after the
time of issue of the Prospectus, upon your request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
d) In the case of the Guarantor, to make generally available to its
securityholders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act), an earnings statement of the
Guarantor and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations thereunder
(including, at the option of the Guarantor, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date which is 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any preferred limited liability company interests in the Company, any
shares of Guarantor Common Stock, any other shares of capital stock of the
Guarantor, any other security convertible into or exercisable or
exchangeable for Guarantor Common Stock or any capital stock or debt
securities substantially similar to the Subordinated Debentures or any
other securities substantially similar to the Shares, other than the
Shares, shares of Guarantor Common Stock, Guarantor Preferred Stock or
Depositary Shares issued or delivered upon conversion or exchange of the
Subordinated Debentures, securities issued or delivered upon conversion,
exchange, or exercise of any other securities of the Guarantor outstanding
on the date of the Prospectus, securities issued pursuant to the
Guarantor's stock option or other benefit or incentive plans maintained for
its officers, directors or employees, securities issued by the Guarantor
in connection with mergers, acquisitions or similar transactions, or Common
Securities issued to the Managing Members in connection with the sale of
the Optional Shares in order to maintain the Managing Members' 21% interest
in the total capital of the Company, without your prior written consent;
(f) To furnish to the Preferred Securityholders all other reports or
communications (financial or other) furnished to holders of Guarantor
Common Stock and, as soon as practicable after the end of each fiscal year,
an annual report (including a balance sheet and statements of income,
shareholders' equity and cash flows of the Guarantor and its consolidated
subsidiaries certified by independent public accountants);
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(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to holders of Guarantor
Common Stock, and to deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of the Company or the Guarantor is listed except reports filed
pursuant to Section 16(b) of the Exchange Act; and (ii) such additional
information concerning the business and financial condition of the Company
or the Guarantor as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Company and the Guarantor and the Guarantor's subsidiaries
are consolidated in reports furnished to its securityholders generally or
to the Commission);
(h) In the case of the Guarantor, to issue the Guarantee concurrently
with the issue and sale of the Shares as contemplated herein;
(i) To use the net proceeds received by it from the sale of the
Shares and the Subordinated Debentures pursuant to this Agreement in the
manner specified in the Prospectus under the caption "Use of Proceeds"; and
(j) To reserve and keep available at all times, free of preemptive
rights, shares of Guarantor Common Stock and Guarantor Preferred Stock for
the purpose of enabling the Guarantor to satisfy any obligations to issue
shares of Guarantor Common Stock or Guarantor Preferred Stock upon
conversion or exchange of the Subordinated Debentures.
6. The Guarantor covenants and agrees with the several Underwriters that
it will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's and the Guarantor's counsel and accountants in
connection with the registration of the Registered Securities under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
any amendments, supplements and exhibits thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Deposit
Agreement, the Indenture, the L.L.C. Agreement, the Guarantee, the Registered
Securities, the Certificate of Designations relating to the Guarantor Preferred
Stock, the Blue Sky Memorandum, closing documents (including any compilations
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Securities and the Subordinated Debentures; (iii) all
expenses in connection with the qualification of the Registered Securities for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) any fees charged by securities rating services for rating the Preferred
Securities; (v) all fees and expenses in connection with listing any of the
Registered Securities on the Exchange and the cost of registering the Shares
under Section 12 of the Exchange Act; (vi) the filing fees incident to, and the
fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (vii) the cost of qualifying the
Shares, the Guarantor Common Stock and the Guarantor Preferred Stock with
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DTC; (viii) the cost of preparing certificates for the Shares, the Guarantor
Common Stock and the Depositary Shares; (ix) the cost and charges of any
transfer agent or registrar; (x) the cost and charges of the Depositary;
(xi) the costs and charges of the Conversion Agent; (xii) the fees and expenses
of the Trustee and any agent of the Trustee and the fees and disbursements of
counsel for the Trustee in connection with the Indenture and the Subordinated
Debentures; and (xiii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section and Sections 8 and 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and the Guarantor herein are, at and as of such Time of Delivery,
true and correct, the condition that the Company and the Guarantor shall have
performed all of their respective obligations hereunder theretofore to be
performed and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with
Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Guarantor and St. Paul Holdings
and the formation of the Company; the validity of the Registered Securities
being delivered at such Time of Delivery; the Registration Statement and
the Prospectus and other related matters as you may reasonably request; and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters; PROVIDED, that
in respect of certain matters of Delaware law, such counsel shall be
entitled to rely upon an opinion or opinions of Richards, Layton & Finger,
Wilmington, Delaware;
(c) Andrew I. Douglass, Senior Vice President and General Counsel of
the Guarantor, shall have furnished to you his written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Guarantor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Minnesota, with power and authority (corporate and other) to own
its properties and conduct its business as described in the
Prospectus;
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(ii) The Guarantor has an authorized share capital as set forth
in the Prospectus;
(iii) The Guarantor is duly qualified to do business as a
foreign corporation in good standing in each state or other
jurisdiction in which, in the opinion of such counsel, such
qualification is required, or if in any jurisdiction the Guarantor
is not so qualified, the failure so to qualify would not, considering
all such cases in the aggregate, involve a material risk to the
business, properties, financial position or results of operations of
the Guarantor and its subsidiaries, taken as a whole; (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel, and, as to matters of fact, upon
certificates of officers of the Guarantor, provided that such counsel
shall state that he believes that both you and he are justified in
relying upon such opinions and certificates);
(iv) Each of the Principal Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; all of the issued
shares of capital stock of St. Paul Fire and Marine Insurance Company
and approximately 77% of the issued shares of capital stock of The
John Nuveen Company have been duly authorized and validly issued, are
fully paid and non-assessable, and are owned directly or indirectly by
the Guarantor, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Guarantor or the
Principal Subsidiaries, provided that such counsel shall state that he
believes that both you and he are justified in relying upon such
opinions and certificates);
(v) St. Paul Holdings has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware; all of the issued shares of capital stock of St. Paul
Holdings have been duly authorized and validly issued, are fully paid
and non-assessable and are owned directly or indirectly by the
Guarantor, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to rely in respect of such
opinions upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Guarantor or St. Paul
Holdings, provided that such counsel shall state that he believes that
both you and he are justified in relying on such opinions and
certificates); St. Paul Holdings is not a party to or bound by any
agreement or instrument other than the L.L.C. Agreement; and, to the
best of such counsel's knowledge, there are no legal or governmental
proceedings to which St. Paul Holdings is a party or of which any
property of St. Paul Holdings is the subject, and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) The Company has been duly formed and is validly existing
in good standing as a limited liability company under the laws of the
State of Delaware; the Common Securities of the Company issued to the
Guarantor and to St. Paul Holdings have been duly authorized and
validly issued
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(such counsel being entitled to rely in respect of such opinions upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Guarantor or the Company, provided
that such counsel shall state that he believes that both you and he
are justified in relying upon such opinions and certificates); the
Company is not a party to or bound by any agreement or instrument
other than the L.L.C. Agreement, this Agreement and the Indenture; and
to the best of such counsel's knowledge, there are no legal or
governmental proceedings to which the Company is a party or of which
any property of the Company is the subject and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vii) The Shares have been duly authorized and, when issued
and delivered against payment therefor as provided herein, will be
validly issued, fully paid and non-assessable preferred limited
liability company interests in the Company, as to which the
Preferred Securityholders will have no liability solely by reason of
being Preferred Securityholders; in excess of their obligations to
make payments provided for in Sections 8.4 and 8.5 of the L.L.C.
Agreement and their share of the Company's assets and undistributed
profits (subject to the obligation of a Preferred Securityholder to
repay any funds wrongfully distributed to it), PROVIDED that a
Preferred Securityholder may also be obligated to provide payment
and/or indemnity in connection with the registration of transfers of
Preferred Securities; when so issued and delivered, the Shares will
have the rights set forth in the L.L.C. Agreement, the terms of the
Shares will be valid and binding on the Company, and the Shares will
conform to the descriptions thereof contained in the Prospectus; when
so issued and delivered, the Shares will be convertible through the
Conversion Agent into shares of Guarantor Common Stock and
exchangeable through the Conversion Agent for Depositary Shares
representing shares of Guarantor Preferred Stock, such conversion and
exchange effected in each case through an initial exchange through
the Conversion Agent of Preferred Securities for all or a portion of
the Subordinated Debentures theretofore held by the Company and the
immediate conversion or exchange thereof by the Conversion Agent
into Guarantor Common Stock or Depositary Shares, as the case may be,
all in accordance with the L.L.C. Agreement, the Indenture and the
Deposit Agreement; the shares of Guarantor Common Stock initially
issuable upon conversion of the Subordinated Debentures and the
shares of Guarantor Preferred Stock initially issuable upon exchange
of the Subordinated Debentures have been duly authorized and
reserved for issuance and, when issued and delivered in accordance
with the terms of the Indenture, will be duly and validly issued,
fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus; the deposit of the Guarantor
Preferred Stock with the Depositary upon issuance thereof has been
duly authorized and when the Depositary Receipts are issued
in accordance with the provisions of the Deposit Agreement such
Depositary Receipts will entitle the holders thereof to the rights
specified in such Depositary Receipts and in the Deposit Agreement
(subject in the case of the Deposit Agreement, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general
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applicability relating to or affecting creditors' rights and to
general equity principles) and the Depositary Shares will conform to
the description thereof in the Prospectus; the terms of the Guarantor
Preferred Stock are valid and binding on the Guarantor; and the
holders of outstanding capital stock of the Guarantor are not entitled
to preemptive or other rights afforded by the Guarantor to subscribe
for the shares of Guarantor Common Stock or the shares of Guarantor
Preferred Stock issuable upon conversion or exchange of the Shares;
(viii) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending to which the Guarantor or
any of its subsidiaries is a party or of which any property of the
Guarantor or any of its subsidiaries is the subject, other than as set
forth in the Prospectus and other than litigation or proceedings (none
of which is reasonably likely to be material) incident to the kinds of
business conducted by the Guarantor and its subsidiaries, which, if
determined adversely to the Guarantor or any of its subsidiaries,
would individually or in the aggregate (after giving effect to any
applicable insurance, reinsurance or reserves therefor) have a
material adverse effect on the consolidated financial position,
shareholders' equity or results of operations of the Guarantor and its
subsidiaries, taken as a whole; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(ix) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Guarantor;
(x) The L.L.C. Agreement has been duly authorized, executed and
delivered by the Managing Members and constitutes a valid and legally
binding agreement of the Managing Members, enforceable against the
Managing Members by the Preferred Securityholders in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles; and the L.L.C. Agreement conforms to the
description thereof in the Prospectus;
(xi) The Guarantor Agreements have been duly authorized,
executed and delivered by the Guarantor and constitute legal, valid
and binding obligations of the Guarantor, enforceable in accordance
with their respective terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; the
Subordinated Debentures are entitled to the benefits provided by the
Indenture; the Indenture has been duly qualified under the Trust
Indenture Act; and the Guarantor Agreements conform to the
descriptions thereof in the Prospectus;
(xii) The Indenture has been duly authorized, validly executed
and delivered by the Company and constitutes a legal, valid and
binding obligation of the
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Company, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xiii) The issue and sale by the Company of the Shares being
delivered at such Time of Delivery, the compliance by the Company with
all of the provisions of this Agreement, the purchase by the Company
of the Subordinated Debentures, the exchange by the Company of
Subordinated Debentures held by it for Preferred Securities in
connection with the conversion or exchange of the Preferred Securities
for Guarantor Common Stock or Guarantor Preferred Stock, the
execution, delivery and performance by the Company of the Indenture
and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Company pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which any of the property or
assets of the Company is subject, nor will such actions result in
any violation of the provisions of the Certificate of Formation of
the Company or the L.L.C. Agreement or any statute or any order,
rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
properties;
(xiv) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares by the Company,
the purchase by the Company of the Subordinated Debentures, the
exchange by the Company of Subordinated Debentures held by it for
Preferred Securities in connection with the conversion or exchange of
the Preferred Securities for Guarantor Common Stock or Guarantor
Preferred Stock, or the consummation by the Company of the
transactions contemplated herein and therein, except the registration
under the Act of the Registered Securities, qualification of the
Indenture under the Trust Indenture Act, registration of the Shares
under the Exchange Act and listing of the Shares on the Exchange, each
of which has been made or obtained, and such consents, approvals,
authorizations, registrations or qualifications as have been obtained
or may be required under state securities, insurance or Blue Sky laws
in connection with the purchase of the Shares and the distribution of
the Shares by the Underwriters;
(xv) The issue and sale of the Shares by the Company, the
issuance by the Guarantor of the Guarantee, the issuance by the
Guarantor of the Subordinated Debentures, the exchange by the Company
of Subordinated Debentures held by it for Preferred Securities in
connection with the conversion or exchange of the Preferred Securities
for Guarantor Common Stock or Guarantor Preferred Stock, the issuance
by the Guarantor of the shares of Guarantor Common Stock issuable upon
conversion of the Subordinated Debentures, the issuance
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<PAGE>
of the shares of Guarantor Preferred Stock issuable upon exchange of
the Subordinated Debentures by the Guarantor and the deposit thereof
with the Depositary, the compliance by the Guarantor with all of the
provisions of this Agreement, the execution, delivery and performance
by the Guarantor of the Guarantor Agreements and the L.L.C. Agreement
and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Guarantor or any
of its subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, loan agreement or other indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Guarantor or any of its subsidiaries is a party
or by which the Guarantor or any of its subsidiaries is bound or to
which any of the property or assets of the Guarantor or any of its
subsidiaries is subject, nor will such actions result in any violation
of the provisions of the Amended and Restated Articles of
Incorporation or Bylaws of the Guarantor or any statute or any order,
rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Guarantor or any of its
subsidiaries or any of their properties;
(xvi) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue of the Guarantee, the issuance and sale
of the Subordinated Debentures, the issuance of the shares of
Guarantor Common Stock issuable upon conversion of the Subordinated
Debentures or the issuance of the Guarantor Preferred Stock issuable
upon exchange of the Subordinated Debentures or the consummation by
the Guarantor of the transactions contemplated herein and therein,
except the registration under the Act of the Registered Securities,
qualification of the Indenture under the Trust Indenture Act,
registration of the Shares under the Exchange Act and listing of the
Shares on the Exchange, each of which has been made or obtained, and
such consents, approvals, authorizations, registrations or
qualifications as have been obtained or may be required under state
securities, insurance or Blue Sky laws in connection with the purchase
of the Shares and the distribution of the Shares by the Underwriters;
(xvii) The statements set forth in the Prospectus under the
captions "Description of Securities Offered" and "Description of
St. Paul Capital Stock" insofar as they constitute summaries of the
terms of securities therein described are accurate, correct and
fairly present the information set forth therein;
(xviii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by the
Company or the Guarantor prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no
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opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and such counsel has no reason to believe that any of such
documents, when such documents became effective or were so filed, as
the case may be, contained, in the case of a registration statement
which became effective under the Act, an untrue statement of a
material fact, or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or contained, in the case of other documents which were
filed under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading;
(xix) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company or the
Guarantor prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the Trust Indenture Act and the
rules and regulations thereunder; such counsel has no reason to
believe that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company or the Guarantor
prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of
its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company or the Guarantor
prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express
no opinion) contains an untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and such counsel does not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or incorporated by
reference or described as required; and
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(xx) Neither the Company nor the Guarantor is an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act;
PROVIDED, that in respect of certain matters of Delaware law, such counsel
shall be entitled to rely upon an opinion or opinions of Richards, Layton &
Finger, Wilmington, Delaware; and PROVIDED, FURTHER, that in lieu of the
delivery of the opinion set forth in paragraph (iv) of this Section 7(c) as
to The John Nuveen Company, such counsel may cause James J. Wesolowski,
General Counsel to The John Nuveen Company, to deliver an opinion as to
such matters, dated such Time of Delivery, in form and substance
satisfactory to you;
(d) Oppenheimer Wolff & Donnelly, special Minnesota counsel to the
Guarantor, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that all of the issued shares of capital stock of the Guarantor have been
duly authorized and validly issued and are fully paid and non-assessable.
(e) Sullivan & Cromwell, special tax counsel to the
Company and the Guarantor, shall have furnished at each Time of Delivery
their opinion confirming their opinion as to tax matters set forth under
"Certain Federal Income Tax Considerations" in the Prospectus.
(f) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, KPMG Peat
Marwick LLP shall have furnished to you a letter, dated the date of
delivery thereof, in form and substance satisfactory to you, to the effect
set forth in Annex I hereto;
(g) The Guarantor Agreements and the Certificate of Designations with
respect to the Guarantor Preferred Stock shall have been executed and
delivered and, in the case of such Certificate of Designations, executed
and filed, in each case in a form reasonably acceptable to you;
(h) (i) Neither the Company, the Guarantor nor any of the Principal
Subsidiaries shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any direct loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Guarantor and its subsidiaries taken as a whole
(other than any change in the capital stock resulting from the exercise of
stock options, the issuance of restricted shares under the Guarantor's
stock option or other benefit or incentive plans maintained for its
officers, directors or employees or the conversion of shares of the
Guarantor's Series B Convertible Preferred Stock) or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position or members' capital of the Company
or the general affairs, management, consolidated financial position,
shareholders' equity or results of operations of the Guarantor and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i)
or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering of the
Shares or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) any downgrading in the rating accorded the Guarantor's
debt securities by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Act, (ii) a public announcement by any such
organization referred to in clause (i) that it has under surveillance or
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review, with possible negative implications, its rating of any of the
Guarantor's debt securities, (iii) a suspension or material limitation in
trading in securities generally on the Exchange, (iv) a general moratorium
on commercial banking activities in New York declared by either Federal or
New York State authorities, or (v) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (v) in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(j) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on the Exchange; and
(k) The Company and the Guarantor shall have furnished or caused to
be furnished to you at such Time of Delivery certificates of officers of
the Company and the Guarantor satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Guarantor herein at
and as of such Time of Delivery, as to the performance by the Company and
the Guarantor of all of their obligations hereunder to be performed at or
prior to such Time of Delivery, as to the matters set forth in subsections
(a) and (h) of this Section and as to such other matters as you may
reasonably request.
8. (a) The Company and the Guarantor, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; PROVIDED, HOWEVER, that neither
the Company nor the Guarantor shall be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through Goldman,
Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Guarantor against any losses, claims, damages or liabilities to which the
Company and the Guarantor may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact
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required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or the Guarantor by such Underwriter
through Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company or the Guarantor, as the case may be, for any legal or other expenses
reasonably incurred by the Company or the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against such indemnifying
party under such subsection, notify such indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantor on the one hand and the Underwriters on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Guarantor on the one hand
23
<PAGE>
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Guarantor on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Guarantor bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantor on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Guarantor and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (d) were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantor under this Section 8
shall be in addition to any liability which the Company and the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and the Guarantor (including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the Company
or the Guarantor), and to each person, if any, who controls the Company or the
Guarantor within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Guarantor shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
24
<PAGE>
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company and the
Guarantor that you have so arranged for the purchase of such Shares, or the
Company or the Guarantor notifies you that it has so arranged for the purchase
of such Shares, you or the Company and the Guarantor shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company and the Guarantor agree to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Guarantor as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Company and the Guarantor shall have the right to require each non-defaulting
Underwriter to purchase the number of shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Guarantor as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Company and
the Guarantor shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Company and the Guarantor to sell the Optional Shares) shall thereupon
terminate, without liability on the part of any non-defaulting Underwriter, the
Company or the Guarantor, except for the expenses to be borne by the Company and
the Guarantor and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the Guarantor and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or the Guarantor, or any officer or director or
controlling person of the Company or the Guarantor, and shall survive delivery
of and payment for the Shares.
25
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Guarantor shall then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other
reason, any Shares are not delivered by or on behalf of the Company as provided
herein, the Company or the Guarantor will reimburse the Underwriters through you
for all out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Shares not so delivered,
but neither the Company nor the Guarantor shall then be under any further
liability to any Underwriter in respect of the Shares not so delivered except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company or the Guarantor shall be delivered or sent by
mail to the address of the Guarantor set forth in the Registration Statement,
Attention: James L. Boudreau; PROVIDED, HOWEVER, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company and the Guarantor by you upon request.
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, the Guarantor and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company, the
Guarantor and each person who controls the Company, the Guarantor or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
26
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters, the Company and
the Guarantor. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
ST. PAUL CAPITAL L.L.C.
By: The St. Paul Companies, Inc.,
as Managing Member
By:______________________________
Name:
Title:
THE ST. PAUL COMPANIES, INC.
By:______________________________
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES, INC.
By:____________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
27
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
<S> <C> <C> <C>
Goldman, Sachs & Co. . . . . . . .
J.P. Morgan Securities Inc.
--------------- -----------------
Total. . . . . . . . . . . . .
</TABLE>
28
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, KPMG Peat Marwick
LLP shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Guarantor and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited by them and included or
incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the interim consolidated condensed balance
sheets and statements of income of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have
been furnished to the Agents;
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Guarantor for the five most recent fiscal years included in the Prospectus
and included or incorporated by reference in Item 6 of the Guarantor's most
recently filed Annual Report on Form 10-K agrees with the corresponding
amounts (after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included or
incorporated by reference in the Guarantor's Annual Reports on Form 10-K
for such fiscal years;
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Guarantor and certain of its subsidiaries,
inspection of the minute books of the Guarantor and certain of its
subsidiaries since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, inquiries of
officials of the Guarantor who are responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated condensed balance sheets and
related unaudited consolidated condensed statements of income, common
shareholders' equity and cash flows included or incorporated by
reference in the Guarantor's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements
of the Exchange Act as it applies to Form 10-Q and the related
published rules and regulations thereunder or are not in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with the basis for the audited consolidated
statements of income, consolidated balance sheets, consolidated
statements of common shareholders'
<PAGE>
equity and consolidated statements of cash flows included or
incorporated by reference in the Guarantor's most recently filed
Annual Report on Form 10-K or the Registration Statement;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Guarantor's Annual Report on Form 10-K for the most recent fiscal
year;
(C) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(D) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock of the Guarantor (other than any change in the capital
stock resulting from the exercise of stock options, the issuance of
restricted shares under the Guarantor's stock option or other benefit
or incentive plans maintained for its officers, directors or employees
or the conversion of shares of the Guarantor's Series B Convertible
Preferred Stock, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference in the
Prospectus) or any increase in the consolidated short-term borrowings,
or long-term debt of the Guarantor and its subsidiaries or any other
items specified by the Underwriters, or any decreases in any items
specified by the Underwriters, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter;
(E) at the date of the latest available incomplete unaudited
consolidated condensed balance sheet of the Guarantor and subsidiaries
other than Minet Group, St. Paul (UK) Ltd. and subsidiaries
owned or managed by Minet Holdings PLC or St. Paul (UK) Ltd. (the
"Excluded Subsidiaries") there were any decreases in total invested
assets, total assets or total net assets or other items reasonably
specified by the Underwriters, or any increases in any items
reasonably specified by the Underwriters, in each case as compared
with the amounts reflected in the incomplete unaudited consolidated
condensed balance sheet at the date of the latest financial statements
included or incorporated by reference in the Prospectus, except in
each case for increases or decreases
2
<PAGE>
which the Prospectus discloses have occurred or may occur or which are
described in such letter; or
(F) for the period from the date of the latest income statement
included or incorporated by reference in the Prospectus to the date of
the latest available incomplete unaudited consolidated condensed
income statement of the Guarantor and subsidiaries other than the
Excluded Subsidiaries there were any decreases in total revenues,
operating earnings from continuing operations, net income or earnings
per share or other items reasonably specified by the Underwriters, or
any increases in any items reasonably specified by the Underwriters,
in each case as compared with the incomplete unaudited consolidated
condensed income statement of the Guarantor and subsidiaries other
than the Excluded Subsidiaries for the comparable period of the
preceding year and with any other period of corresponding length
reasonably specified by the Underwriters, except in each case for
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Underwriters which are derived from the general accounting records of the
Guarantor and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference), or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Underwriters or
in documents incorporated by reference in the Prospectus specified by the
Underwriters, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Guarantor and its
subsidiaries and have found them to be in agreement.
3
<PAGE>
EXHIBIT 2.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ST. PAUL CAPITAL L.L.C.
Dated as of * , 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions............................................. 1
Section 1.2 Headings................................................ 11
ARTICLE II
CONTINUATION AND TERM; ADMISSION OF MEMBERS
Section 2.1 Continuation............................................ 11
Section 2.2 Name.................................................... 11
Section 2.3 Term.................................................... 11
Section 2.4 Registered Agent and Office............................. 11
Section 2.5 Principal Place of Business............................. 11
Section 2.6 Admission of Preferred Members.......................... 12
Section 2.7 Qualification in Other Jurisdictions.................... 12
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purposes................................................ 13
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1 Form of Contribution.................................... 13
Section 4.2 Contributions by the Common Members..................... 13
Section 4.3 Contributions with Respect to the Preferred Members..... 13
Section 4.4 Allocation of Profits and Losses........................ 14
Section 4.5 Allocation of Distributions............................. 14
Section 4.6 Withholding............................................. 14
-i-
<PAGE>
Section 4.7 Interests as Personal Property.......................... 14
ARTICLE V
MEMBERS
Section 5.1 Powers of Members....................................... 15
Section 5.2 Partition............................................... 15
Section 5.3 Resignation............................................. 15
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company............................... 15
Section 6.2 Limits on Managing Members' Powers...................... 18
Section 6.3 Reliance by Third Parties............................... 19
Section 6.4 No Management by Any Preferred Members.................. 19
Section 6.5 Business Transactions of a Managing Member
with the Company................................... 20
Section 6.6 Actions by Managing Members............................. 20
Section 6.7 Outside Businesses.......................................20
ARTICLE VII
THE SPECIAL TRUSTEE
Section 7.1 Appointment of Special Trustee.......................... 20
Section 7.2 Powers of Special Trustee............................... 22
ARTICLE VIII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 8.1 Common Securities and Preferred Securities.............. 23
Section 8.2 General Provisions Regarding Preferred
Securities......................................... 23
Section 8.3 Preferred Securities.................................... 24
-ii-
<PAGE>
Section 8.4 Conversion Rights of Preferred Securities............... 30
Section 8.5 Optional Exchange for Depositary Shares
Representing St. Paul Preferred Stock.............. 35
ARTICLE IX
VOTING AND MEETINGS
Section 9.1 Voting Rights of Preferred Members ..................... 38
Section 9.2 Voting Rights of Holders of
Common Securities.................................. 38
Section 9.3 Meetings of the Members................................. 39
ARTICLE X
DIVIDENDS
Section 10.1 Dividends.............................................. 40
Section 10.2 Limitations on Distributions........................... 40
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 Books and Records; Accounts............................ 41
Section 11.2 Financial Statements................................... 41
Section 11.3 Limitation on Access to Records........................ 41
Section 11.4 Accounting Method...................................... 41
Section 11.5 Annual Audit........................................... 41
ARTICLE XII
TAX MATTERS
Section 12.1 Company Tax Returns.................................... 42
Section 12.2 Tax Reports............................................ 42
Section 12.3 Taxation as a Partnership.............................. 42
Section 12.4 Taxation of Partners................................... 42
-iii-
<PAGE>
ARTICLE XIII
EXPENSES
Section 13.1 Expenses............................................... 43
ARTICLE XIV
LIABILITY
Section 14.1 Liability of Common Members............................ 44
Section 14.2 Liability of Preferred Members......................... 44
ARTICLE XV
TRANSFERS OF INTERESTS BY MEMBERS
Section 15.1 Right of Assignee to Become a Preferred
Member............................................ 45
Section 15.2 Events of Cessation of Membership...................... 45
Section 15.3 Persons Deemed Preferred Members....................... 45
Section 15.4 Transfer of Interests.................................. 45
Section 15.5 Transfer of Preferred Certificates..................... 46
Section 15.6 Book-Entry Interests................................... 46
Section 15.7 Notices to Clearing Agency............................. 47
Section 15.8 Definitive Preferred Certificates...................... 47
ARTICLE XVI
MERGERS, CONSOLIDATIONS AND SALES
Section 16.1 St. Paul............................................... 48
Section 16.2 The Company............................................ 48
-iv-
<PAGE>
ARTICLE XVII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 17.1 No Dissolution......................................... 49
Section 17.2 Events Causing Dissolution............................. 50
Section 17.3 Notice of Dissolution.................................. 51
Section 17.4 Liquidation............................................ 51
Section 17.5 Certain Restrictions on Liquidation
Payments........................................... 51
Section 17.6 Termination............................................ 52
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Amendments............................................. 52
Section 18.2 Amendment of Certificate............................... 52
Section 18.3 Successors; Counterparts............................... 52
Section 18.4 Law; Severability...................................... 52
Section 18.5 Filings................................................ 53
Section 18.6 Power of Attorney...................................... 53
Section 18.7 Exculpation............................................ 54
Section 18.8 Indemnification........................................ 54
Section 18.9 Additional Documents................................... 54
Section 18.10 Notices................................................ 54
ANNEX A -- Form of Preferred Certificate
Evidencing Preferred Securities...................... A-1
ANNEX B -- Form of Notice of Conversion........................... B-1
ANNEX C -- Form of Notice of Exchange............................. C-1
-v-
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ST. PAUL CAPITAL L.L.C.
This Amended and Restated Limited Liability Company Agreement of St.
Paul Capital L.L.C. (the "Company") is made as of * , 1995, among The St. Paul
Companies, Inc., a Minnesota corporation ("St. Paul"), and St. Paul Capital
Holdings, Inc., a Delaware corporation ("St. Paul Holdings"), as initial Members
(as defined below) of the Company, and the Persons (as defined below) who become
members of the Company in accordance with the provisions hereof.
WHEREAS, St. Paul and St. Paul Holdings have heretofore formed a
limited liability company pursuant to the Delaware Limited Liability Company
Act, 6 DEL.C. Section 18-101, ET SEQ., as amended from time to time (the
"Delaware Act"), by filing a Certificate of Formation of the Company with the
office of the Secretary of State of the State of Delaware on April 4, 1995, and
entering into a Limited Liability Company Agreement of the Company dated as of
April 4, 1995 (the "Original Limited Liability Company Agreement"); and
WHEREAS, the Members desire to continue the Company as a limited
liability company under the Delaware Act and to amend and restate the Original
Limited Liability Company Agreement in its entirety.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby amend and
restate the Original Limited Liability Company Agreement in its entirety and
agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.1 DEFINITIONS. Unless the context otherwise requires,
the terms defined in this Article I shall, for the purposes of this Agreement,
have the meanings herein specified.
<PAGE>
"ADDITIONAL DIVIDENDS" means Dividends that shall accumulate on
any Dividend arrearages in respect of the Preferred Securities at the rate of
*% per annum compounded monthly.
"ADDITIONAL INTEREST" means interest that shall accrue on any
interest on the Subordinated Debentures that is not paid monthly and that shall
accrue at the rate of * % per annum compounded monthly.
"AFFILIATE" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding with power to vote
10% or more of the outstanding voting securities or other ownership interests of
the specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person and (f) if
the specified Person is an officer, director, general partner or employee, any
other entity for which the specified Person acts in any such capacity.
"AGREEMENT" means this Amended and Restated Limited Liability
Company Agreement of the Company, as amended, modified, supplemented or restated
from time to time in accordance with its terms.
"BOOK-ENTRY INTEREST" means a beneficial interest in the Preferred
Certificates, ownership of which shall be recorded and transfers of which shall
be made through the book-entry system of a Clearing Agency as described in
Section 15.4 of this Agreement.
"BUSINESS DAY" means any day other than a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to close.
"CERTIFICATE" means the Certificate of Formation of the Company
and any and all amendments thereto and restatements thereof filed on behalf of
the Company with the office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act.
-2-
<PAGE>
"CLEARING AGENCY" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Preferred Securities and in whose name (or nominee's name) shall be
registered one or more global Preferred Certificates and which shall undertake
to effect book-entry transfers and pledges of the Preferred Securities.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of interests in securities
deposited with the Clearing Agency.
"CLOSING DATE" means each "Time of Delivery" under the
Underwriting Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended or any
corresponding federal tax statute enacted after the date of this Agreement. A
reference to a specific section (Section) of the Code refers not only to such
section but also to any corresponding provision of any federal tax statute
enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"COMMON MEMBER" means a Member that owns one or more Common
Securities.
"COMMON SECURITIES" means the Interests in the Company which
represent common limited liability company interests in the Company and are
described in this Agreement.
"COMPANY" has the meaning specified in the Preamble of this
Agreement.
"CONVERSION AGENT" has the meaning specified in Section 8.4(c) of
this Agreement.
"CONVERSION DATE" has the meaning specified in Section 8.4(b) of
this Agreement.
"CONVERSION EXPIRATION DATE" has the meaning specified in Section
8.4(d)(ii) of this Agreement.
-3-
<PAGE>
"CONVERSION PRICE" has the meaning specified in Section 8.4(a) of
this Agreement.
"COVERED PERSON" means each Managing Member, any Affiliate of such
Managing Member or any officers, directors, shareholders, partners, employees,
representatives or agents of such Managing Member or its Affiliates, or any
employee or agent of the Company or its Affiliates.
"CURRENT MARKET PRICE" of St. Paul Common Stock for any day means
the last reported sale 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 St. Paul Common Stock is not listed or
admitted to trading on the New York Stock Exchange on such day, on the principal
national securities exchange on which the St. Paul Common Stock is listed or
admitted to trading, if the St. Paul 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 St. Paul Common Stock is not quoted or
admitted to trading on such quotation system, on the principal quotation system
on which the St. Paul 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 St. Paul 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 St. Paul for that purpose or, if not
so available in such manner, as otherwise determined in good faith by the Board
of Directors.
"DEFINITIVE PREFERRED CERTIFICATES" has the meaning specified in
Section 15.6 of this Agreement.
"DELAWARE ACT" has the meaning specified in the first Recital of
this Agreement.
"DEPOSIT AGREEMENT" means the Deposit Agreement dated as of * ,
1995 among St. Paul, the Depositary, and the holders from time to time of the
Depositary Receipts.
"DEPOSITARY" means The Chase Manhattan Bank (National Association),
and its successors and assigns.
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"DEPOSITARY RECEIPT" means one of the deposit receipts, issued by
the Depositary under the Deposit Agreement, each representing any number of
whole Depositary Shares.
"DEPOSITARY SHARES" means the depositary shares, each representing
a 1/*th interest in a share of St. Paul Preferred Stock deposited with the
Depositary pursuant to the Deposit Agreement.
"DIVIDEND PAYMENT DATE" has the meaning specified in Section
8.3(b)(ii) of this Agreement.
"DIVIDENDS" means the cumulative cash distributions from the
Company with respect to the Interests represented by the Preferred Securities,
accruing from the first Closing Date and payable monthly in arrears on the last
day of each calendar month of each year, commencing * , 1995.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE DATE" has the meaning specified in Section 8.5(e) of
this Agreement.
"EXCHANGE ELECTION" has the meaning specified in Section 8.5(c) of
this Agreement.
"EXCHANGE ELECTION MEETING" has the meaning specified in Section
8.5(c) of this Agreement.
"EXCHANGE EVENT" has the meaning specified in Section 8.5(b) of
this Agreement.
"EXCHANGE PRICE" means one Depositary Share (with a proportionate
liquidation preference per share of $50) representing a 1/100th interest in a
share of St. Paul Preferred Stock (with a liquidation preference per share of
$5000) for each $50 principal amount of Subordinated Debentures (which rate of
exchange is equivalent to one Depositary Share representing St. Paul Preferred
Stock for one Preferred Security).
"FISCAL PERIOD" means each calendar month.
"FISCAL YEAR" means (i) the period commencing upon the formation
of the Company and ending on December 31,
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1995, and (ii) any subsequent twelve (12) month period commencing on January 1
and ending on December 31.
"GUARANTEE" means the Guarantee Agreement dated as of * , 1995 of
St. Paul in favor of the Preferred Members with respect to the Preferred
Securities.
"INDENTURE" means the Indenture, dated as of * , 1995, among St.
Paul, the Company and the Trustee relating to the Subordinated Debentures.
"INTEREST" means a limited liability company interest in the
Company, including the right of the holder thereof to any and all benefits to
which a Member may be entitled as provided in this Agreement, together with the
obligations of a Member to comply with all of the terms and provisions of this
Agreement.
"INVESTMENT COMPANY EVENT" means the occurrence of a change in law
or regulation or a change in official interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "CHANGE IN 1940 ACT LAW") to the effect that the Company is or
will be considered an "investment company" which is required to be registered
under the 1940 Act, which Change in 1940 Act Law becomes effective on or after
the date of issuance of the Preferred Securities; PROVIDED, HOWEVER, that no
Investment Company Event shall be deemed to have occurred if the Managing
Members obtain a written opinion of nationally recognized independent counsel to
the Company experienced in practice under the 1940 Act to the effect that
St. Paul or the Company have taken reasonable measures, in their discretion, to
avoid such Change in 1940 Act Law so that in the opinion of such counsel,
notwithstanding such Change in 1940 Act Law, the Company is not required to be
registered as an "investment company" within the meaning of the 1940 Act.
"LIQUIDATION DISTRIBUTION" has the meaning specified in Section
8.3(e) of this Agreement.
"LIQUIDATION PREFERENCE" means the stated liquidation preference
of the Preferred Securities, I.E., $50 per Preferred Security.
"LP ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 DEL C. Section 17-101, ET SEQ., as amended from time to time.
"MAJORITY (OR OTHER STATED PERCENTAGE) IN LIQUIDATION PREFERENCE"
means Preferred Member(s) who are the
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record owners of Preferred Securities whose aggregate liquidation preferences
represent more than 50% or not less than such stated percentage of the aggregate
liquidation preference of all Preferred Securities then outstanding.
"MANAGING MEMBERS" means St. Paul and St. Paul Holdings, in their
capacity as the Members which hold all of the outstanding Common Securities.
The Managing Members shall also be "managers" within the meaning of the Delaware
Act.
"MEMBER" means any Person that holds an Interest in the Company
and is admitted as a member of the Company pursuant to the provisions of this
Agreement, in its capacity as a member of the Company. For purposes of the
Delaware Act, the Common Members and the Preferred Members shall constitute
separate classes or groups of Members.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"NOTICE OF CONVERSION" has the meaning specified in Section 8.4(a)
of this Agreement.
"NOTICE OF CONVERSION EXPIRATION" has the meaning specified in
Section 8.4(d)(iii) of this Agreement.
"NOTICE OF EXCHANGE" has the meaning specified in Section 8.5(d)
of this Agreement.
"NOTICE OF REDEMPTION" has the meaning specified in Section 8.3(e)
of this Agreement.
"NYSE" means the New York Stock Exchange, Inc.
"ORIGINAL LIMITED LIABILITY COMPANY AGREEMENT" has the meaning
specified in the first Recital to this Agreement.
"PERSON" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"POWER OF ATTORNEY" means the Power of Attorney granted pursuant
to Section 18.6.
"PREFERRED CERTIFICATE" means a certificate substantially in the
form attached hereto as Annex A, evidencing the Preferred Securities held by a
Preferred Member.
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"PREFERRED MEMBER" means a Member which holds one or more
Preferred Securities.
"PREFERRED SECURITIES" means the Interests which represent
preferred limited liability company interests in the Company and are described
in this Agreement.
"PREFERRED SECURITY OWNER" means, with respect to a Book-Entry
Interest, a Person who is the beneficial owner of such Book-Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency or Clearing Agency Participant).
"PRESS RELEASE" has the meaning specified in Section 8.4(d)(ii) of
this Agreement.
"PURCHASE PRICE" for any Preferred Security means the amount paid
per Preferred Security pursuant to the Underwriting Agreement, payment of which
shall constitute the contribution to capital contemplated by Section 4.3 of this
Agreement.
"REDEMPTION PRICE" has the meaning specified in Section 8.3(d) of
this Agreement.
"RIGHTS" has the meaning specified in Section 8.4(g) of this
Agreement.
"RIGHTS AGREEMENT" means the Shareholder Protection Rights
Agreement, dated as of December 4, 1989, as heretofore amended, between St. Paul
and First Chicago Trust Company of New York, as Rights Agent, as such agreement
may from time to time hereafter be amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL EVENT" means a Tax Event or an Investment Company Act
Event.
"SPECIAL TRUSTEE" means the Person appointed (i) to enforce
Preferred Members' rights under the Guarantee, (ii) to enforce the Company's
rights against St. Paul under the Subordinated Debentures or (iii) to exercise
rights otherwise exercisable by the Managing Members to declare and pay
distributions on the Preferred Securities as provided in Article VII of this
Agreement.
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"ST. PAUL" has the meaning specified in the Preamble of this
Agreement.
"ST. PAUL COMMON STOCK" means the Common Stock, without par value,
of St. Paul, or any other class of stock resulting from successive changes
or reclassification 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 Article XII of the Indenture, shares of
St. Paul Common Stock issuable on conversion of Preferred Securities shall
include only shares of the class designated as Common Stock of St. Paul on the
first Closing Date 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 St. Paul and which are
not subject to redemption by St. Paul; 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 reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"ST. PAUL HOLDINGS" has the meaning specified in the Preamble of
this Agreement.
"ST. PAUL PREFERRED STOCK" means the Series C Cumulative
Convertible Preferred Stock, par value $ * per share, of St. Paul with a
liquidation preference of $50 per share.
"SUBORDINATED DEBENTURES" means the convertible subordinated
debentures of St. Paul issued pursuant to the Indenture and sold by St. Paul to
the Company in connection with the issuance and sale by the Company of the
Preferred Securities.
"SUCCESSOR SECURITIES" has the meaning specified in Section 16.2
of this Agreement.
"TAX EVENT" means that the Managing Members shall have obtained an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory
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determination on or after such date), or (c) any interpretation or pronouncement
that provides for a position with respect to such laws or regulations that
differs from the generally accepted position on the date of issuance of the
Preferred Securities, which amendment or change is effective or such
interpretation or pronouncement is announced on or after the date of issuance of
the Preferred Securities, there is a substantial risk that (i) the Company is
taxable as a corporation for United States Federal income tax purposes or is
otherwise subject to federal income tax with respect to interest received on the
Subordinated Debentures, (ii) interest payable to the Company on the
Subordinated Debentures will not be deductible for federal income tax purposes
or (iii) the Company is subject to more than a DE MINIMIS amount of other
taxes, duties or other governmental charges.
"TAX MATTERS PARTNER" means the Managing Member designated as such
in Section 12.1(b) of this Agreement.
"THIRD PARTY CREDITOR" has the meaning specified in Section 14.1
of this Agreement.
"TRADING DAY" means, with respect to any security listed for
trading on the New York Stock Exchange, any day on which such securities are
traded on the New York Stock Exchange.
"TRANSFER AGENT" means The Chase Manhattan Bank (National
Association), and its successors and assigns.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"TRUSTEE" means The Chase Manhattan Bank (National Association),
the trustee under the Indenture, and its successors and assigns.
"UNDERWRITERS" means the underwriters named in Schedule I to the
Underwriting Agreement.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
* , 1995, among St. Paul, the Company and the Underwriters named therein
relating to the issuance of the Preferred Securities.
"1940 ACT" means the Investment Company Act of 1940, as amended.
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Section 1.2 HEADINGS. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.
ARTICLE II
CONTINUATION AND TERM; ADMISSION OF MEMBERS
Section 2.1 CONTINUATION.
(a) The Members hereby agree to continue the Company as a limited
liability company under and pursuant to the provisions of the Delaware Act and
agree that the rights, duties and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement, St. Paul and St. Paul
Holdings shall continue to be Members and shall each be designated as a Common
Member and shall together be the owners of all of the Common Securities.
(c) Either Managing Member, as an authorized person within the
meaning of the Delaware Act, shall execute, deliver and file any and all
amendments to and restatements of the Certificate.
Section 2.2 NAME. The name of the Company heretofore formed and
continued hereby is St. Paul Capital L.L.C. The business of the Company may be
conducted upon compliance with all applicable laws under any other name
designated by the Managing Members.
Section 2.3 TERM. The term of the Company commenced on the date
the Certificate was filed in the office of the Secretary of State of the State
of Delaware and shall continue until * , unless the Company is dissolved
before such date in accordance with the provisions of this Agreement.
Section 2.4 REGISTERED AGENT AND OFFICE. The Company's
registered agent and office in Delaware shall be RL&F Service Corp., One Rodney
Square, 10th Floor, Tenth and King Streets, Wilmington, New Castle County,
Delaware 19801. At any time, the Managing Members may designate another
registered agent and/or registered office.
Section 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be at 385
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Washington Street, St. Paul, Minnesota 55102. The Managing Members may change
the location of the Company's principal place of business; PROVIDED that such
change has no material adverse effect upon any Member.
Section 2.6 ADMISSION OF PREFERRED MEMBERS.
Without execution of this Agreement, upon receipt by a Person of a
Preferred Certificate and payment for the Preferred Securities being acquired
by the Person in connection with the issuance of Preferred Securities on each
Closing Date, which shall be deemed to constitute a request by the Person
that the books and records of the Company reflect its admission as a
Preferred Member, the Person shall be admitted to the Company as a Preferred
Member, and shall be bound by this Agreement.
Section 2.7 QUALIFICATION IN OTHER JURISDICTIONS. The Managing
Members shall cause the Company to be qualified or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company conducts business and in which such qualification or registration is
required by law or deemed advisable by the Managing Members. Either Managing
Member shall execute, deliver and file any certificates (and any amendments
and/or
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restatements thereof) necessary for the Company to qualify to do business in a
jurisdiction in which the Company may wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 PURPOSES. The sole purposes of the Company are to
issue Preferred Securities and to use substantially all of the proceeds thereof
and substantially all of the proceeds from the capital contributed to the
Company by the Common Members to purchase Subordinated Debentures of St. Paul
and, except as otherwise limited herein, to enter into, make and perform all
contracts and other undertakings, and engage in all activities and transactions
as the Managing Members may reasonably deem necessary or advisable for the
carrying out of the foregoing purposes of the Company. The Company may not
conduct any other business or operations except as contemplated by the preceding
sentence. The Company shall have the power and authority to take any and all
actions necessary, appropriate, proper, advisable, incidental or convenient to
or for the furtherance of the purposes of the Company as set forth herein.
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1 FORM OF CONTRIBUTION. The contribution with respect
to a Member to the Company may, as determined by the Managing Members in their
discretion, be in cash or other legal consideration.
Section 4.2 CONTRIBUTIONS BY THE COMMON MEMBERS. The Common
Members shall make such contributions to the Company, either in connection with
the purchase of Common Securities or otherwise, so as to cause their Common
Securities to be entitled to at least 21% of each item of the capital, income,
gain, loss, deduction, or credit distributions of the Company at all times.
Section 4.3 CONTRIBUTIONS WITH RESPECT TO THE PREFERRED MEMBERS.
On each Closing Date there shall be contributed to the capital of the
Company, with respect to each Person who purchases a Preferred Security, an
amount in cash equal to the Purchase Price for such Preferred Security (such
amount being such Person's capital contribution to the Company).
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Preferred Members, in their capacity as Members of the Company, shall not be
required to make any additional contributions to the Company (except as required
by law).
Section 4.4 ALLOCATION OF PROFITS AND LOSSES. The profits and
losses of the Company (other than the allocation of profits to Preferred Members
in amounts equal to the Dividends accrued on their Preferred Securities,
including Additional Dividends payable with respect thereto) shall, subject to
the applicable terms of Article VIII, Article X and Article XII of this
Agreement, be allocated entirely to the Common Members.
Section 4.5 ALLOCATION OF DISTRIBUTIONS. The distributions of
the Company shall, subject to the applicable terms of Articles VIII, X and XVII
of this Agreement, be allocated entirely to the Common Members.
Section 4.6 WITHHOLDING. The Company shall comply with
withholding requirements under federal, state and local law and shall remit
amounts withheld to and file required forms with applicable jurisdictions. To
the extent that the Company is required to withhold and pay over any amounts to
any authority with respect to distributions or allocations to any Member, the
amount withheld shall be deemed to be a distribution in the amount of the
withholding to the Member. To the fullest extent permitted by law, in the event
of any claimed over-withholding, Members shall be limited to an action against
the applicable jurisdiction. If the amount withheld was not withheld from
actual distributions, the Company may reduce subsequent distributions by the
amount of such withholding. Each Member, by its acceptance of Interests, shall
be deemed to agree to furnish the Company with any representations and forms as
shall reasonably be requested by the Company to assist it in determining the
extent of, and in fulfilling, its withholding obligations.
Section 4.7 INTERESTS AS PERSONAL PROPERTY. Each Member hereby
agrees that its Interest shall for all purposes be personal property. A Member
has no interest in specific Company property.
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ARTICLE V
MEMBERS
Section 5.1 POWERS OF MEMBERS. The Members shall have the power
to exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement.
Section 5.2 PARTITION. Each Member waives any and all rights
that it may have to maintain an action for partition of the Company's property.
Section 5.3 RESIGNATION. The Managing Members shall have no
right to resign from the Company or assign their Common Interests. Any other
Member may only resign from the Company prior to the dissolution and winding up
of the Company upon the assignment of its entire Interest (including any
redemption, repurchase, exchange or other acquisition by the Company of such
Interest) in accordance with the provisions of this Agreement. A resigning
Member shall not be entitled to receive any distribution and shall not
otherwise be entitled to receive the fair value of its Interest except as
otherwise expressly provided for in this Agreement.
ARTICLE VI
MANAGEMENT
Section 6.1 MANAGEMENT OF THE COMPANY. (a) Except as provided
in Article VII or VIII and as otherwise provided herein, the business and
affairs of the Company shall be managed, and all actions required under this
Agreement shall be determined, solely and exclusively by the Managing Members,
which shall have all rights and powers on behalf and in the name of the Company
to perform all acts necessary and desirable to the objects and purposes of the
Company. Any action taken by the Managing Members or, upon appointment pursuant
to Section 7.1, the Special Trustee, shall constitute the act of and shall serve
to bind the Company.
(b) Without limiting the generality of the foregoing, and subject
to the provisions of Section 6.2, the Managing Members or, upon appointment
pursuant to Section 7.1, the Special Trustee, shall have all authority, rights
and powers in the management of the Company business to do any and all other
acts and things necessary, proper, convenient or advisable to effectuate the
purposes of this
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Agreement, including by way of illustration but not by way of limitation, the
following:
(i) to authorize and engage in transactions and dealings on behalf
of the Company, including transactions and dealings with any Member
(including any Managing Member) or any Affiliate of any Member (including,
without limitation, making loans to St. Paul);
(ii) to call meetings of Members or any class thereof;
(iii) to issue Interests, including Common Securities and Preferred
Securities in accordance with this Agreement;
(iv) to pay all expenses incurred in forming the Company;
(v) to purchase Subordinated Debentures from St. Paul;
(vi) to declare or otherwise determine and make Dividends, in cash or
otherwise, on Interests, in accordance with the provisions of this
Agreement and of the Delaware Act;
(vii) to establish a record date with respect to all actions to be
taken hereunder that require a record date to be established, including
with respect to allocations, Dividends and voting rights;
(viii) to establish or set aside in their discretion any reserve or
reserves for contingencies and for any other proper Company purpose;
(ix) to redeem, repurchase or exchange, on behalf of the Company,
Interests which may be so redeemed, repurchased or exchanged;
(x) to appoint (and dismiss from appointment) attorneys and agents
on behalf of the Company, and employ (and dismiss from employment) any and
all Persons providing legal, accounting or financial services to the
Company, or such other employees or agents as the Managing Members deem
necessary or desirable for the management and operation of the Company,
including, without limitation, any Member (including any Managing Member)
or any Affiliate of any Member;
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(xi) to incur and pay all expenses and obligations incident to the
operation and management of the Company, including, without limitation,
the services referred to in the preceding paragraph, taxes, interest,
travel, rent, insurance, supplies, salaries and wages of the Company's
employees and agents;
(xii) to acquire and enter into any contract of insurance necessary or
desirable for the protection or conservation of the Company and its assets
or otherwise in the interest of the Company as the Managing Members shall
determine;
(xiii) to open accounts and deposit, maintain and withdraw funds in the
name of the Company in banks, savings and loan associations, brokerage
firms or other financial institutions;
(xiv) to effect a dissolution of the Company and act as liquidating
trustee or the Person winding up the Company's affairs, all in accordance
with and subject to the provisions of this Agreement and of the Delaware
Act;
(xv) to bring and defend on behalf of the Company actions and
proceedings at law or equity before any court or governmental,
administrative or other regulatory agency, body or commission or
otherwise;
(xvi) to prepare and cause to be prepared reports, statements and
other relevant information for distribution to Members as may be required
or determined to be appropriate by the Managing Members from time to time;
(xvii) to prepare and file all necessary returns and statements and pay
all taxes, assessments and other impositions applicable to the assets of
the Company; and
(xviii) to execute all other documents or instruments, perform all
duties and powers and do all things for and on behalf of the Company in
all matters necessary or desirable or incidental to the foregoing.
(c) Subject to the provisions of Section 6.2, the expression of any
power or authority of the Managing Members and, upon appointment pursuant to
Section 7.1, the Special Trustee, shall not in any way limit or exclude any
other power or authority which is not specifically or expressly set forth in
this Agreement.
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(d) Notwithstanding any provision in this Agreement to the
contrary, without the need for the consent of any Person, the Company, and each
Managing Member on behalf of the Company, acting singly or jointly, shall have
the authority to enter into and perform the Indenture and the Underwriting
Agreement.
Section 6.2 LIMITS ON MANAGING MEMBERS' POWERS. (a) Anything in
this Agreement to the contrary notwithstanding, the Managing Members (and, upon
appointment pursuant to Section 7.1 of this Agreement, the Special Trustee)
shall not cause or permit the Company to:
(i) acquire any assets other than as expressly provided herein;
(ii) possess Company property for other than a Company purpose;
(iii) admit a Person as a Member, except as expressly provided in
this Agreement;
(iv) make any loans to St. Paul or its Affiliates, other than loans
represented by the Subordinated Debentures;
(v) perform any act that would subject any Preferred Member to
liability for the debts, obligations and liabilities of the Company in any
jurisdiction, except as expressly provided in this Agreement;
(vi) engage in any activity that is not consistent with the purposes
of the Company, as set forth in Section 3.1 of this Agreement;
(vii) without the written consent of 66 2/3% in Liquidation
Preference of the Preferred Securities, have an order for relief
entered with respect to the Company or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all
or a substantial part of the Company's property, or make any assignment
for the benefit of creditors of the Company; or
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(viii) borrow money or become liable for the borrowings of any third
party or engage in any financial or other trade or business.
(b) So long as any Subordinated Debentures are held by the Company,
the Managing Members shall not:
(i) direct the time, method and place of conducting any proceeding
for any remedy available to the Special Trustee, or exercising any trust
or power conferred on the Special Trustee with respect to the Subordinated
Debentures;
(ii) waive any past default which is waivable under the Subordinated
Debentures;
(iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures shall be due and payable; or
(iv) consent to any amendment, modification or termination of the
Subordinated Debentures or the Indenture,
without, in each case, obtaining the prior approval of the Preferred Members
holding not less than 66 2/3% in Liquidation Preference of the Preferred
Securities then outstanding; PROVIDED, HOWEVER, that where a consent under the
Subordinated Debentures would require the consent of each holder of Subordinated
Debentures affected thereby, no such consent shall be given by the Managing
Members without the prior consent of each Preferred Member. The Managing
Members shall not revoke any action previously authorized or approved by a vote
of Preferred Members, without the approval of Preferred Members holding not
less than 66 2/3% in Liquidation Preference of the Preferred Securities then
outstanding. The Managing Members shall notify all Preferred Members of any
notice of default received from the Trustee with respect to the Subordinated
Debentures.
Section 6.3 RELIANCE BY THIRD PARTIES. Persons dealing with the
Company are entitled to rely conclusively upon the power and authority of the
Managing Members herein set forth. In dealing with the Managing Members or,
upon appointment pursuant to Section 7.1 of this Agreement, the Special Trustee,
acting on behalf of the Company, no Person shall be required to inquire into the
authority of the Managing Members or, upon appointment pursuant to Section 7.1
of this Agreement, the Special Trustee to bind the Company. Persons dealing
with the Company are entitled to rely conclusively on the power and authority of
the Managing Members or, upon appointment pursuant to Section 7.1, the Special
Trustee, as set forth in this Agreement.
Section 6.4 NO MANAGEMENT BY ANY PREFERRED MEMBERS. Except as
otherwise expressly provided herein, no Preferred Member, in its capacity as a
Preferred Member, shall take part in the day-to-day management, operation or
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control of the business and affairs of the Company. The Preferred Members, in
their capacity as Preferred Members of the Company, shall not be agents of the
Company and shall not have any right, power or authority to transact any
business in the name of the Company or to act for or on behalf of or to bind the
Company.
Section 6.5 BUSINESS TRANSACTIONS OF A MANAGING MEMBER WITH THE
COMPANY. Subject to Sections 6.1 and 6.2 of this Agreement, the Managing
Members or their Affiliates may lend money to, act as surety, guarantor or
endorser for, guarantee or assume one or more obligations of, provide collateral
for, the Company and, subject to applicable law, shall have the same rights and
obligations with respect to any such matter as Persons who are not Managing
Members or Affiliates thereof.
Section 6.6 ACTIONS BY MANAGING MEMBERS. Notwithstanding any
provision to the contrary, any action that the Managing Members are authorized
to take hereunder or under the Delaware Act may be taken by the Managing
Members, acting together, or either Managing Member, acting alone, or, upon
appointment pursuant to Section 7.1 of this Agreement, by the Special Trustee.
Section 6.7 OUTSIDE BUSINESSES. Any Member or Affiliate thereof
may engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. No
Member or Affiliate thereof shall be obligated to present any particular
investment opportunity to the Company even if such opportunity is of a character
that, if presented to the Company, could be taken by the Company, and any Member
or Affiliate thereof shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment opportunity.
ARTICLE VII
THE SPECIAL TRUSTEE
Section 7.1 APPOINTMENT OF SPECIAL TRUSTEE.
(a) If:
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(i) the Company fails to pay Dividends in full on the Preferred
Securities for 15 consecutive months (other than as a result of a
determination by St. Paul to extend the interest payment period of the
Subordinated Debentures in accordance with the terms thereof);
(ii) an Event of Default under the Indenture occurs and is continuing;
or
(iii) St. Paul is in default on any of its payment obligations under the
Guarantee,
then the Preferred Members, upon the affirmative vote of at least a Majority in
Liquidation Preference of the Preferred Securities, will be entitled to appoint
and authorize a Special Trustee to enforce the Company's rights as a creditor
under the Indenture and the Subordinated Debentures, enforce the rights of the
Preferred Members under the Guarantee and, to the extent permitted by law, to
declare and pay Dividends (including Additional Dividends) on the Preferred
Securities.
(b) For purposes of determining whether the Company has failed to
pay Dividends in full for 15 consecutive months, Dividends shall be deemed to
remain in arrears, notwithstanding any partial payments in respect thereof,
until full cumulative Dividends have been or contemporaneously are declared and
paid with respect to all monthly Dividend periods terminating on or prior to the
date of payment of such full cumulative Dividends.
(c) Not later than 30 days after such right to appoint a Special
Trustee arises under paragraph (a) of this Section, and upon not less than 15
days' written notice by first-class mail to the Preferred Members, the Managing
Members will convene a meeting for election of a Special Trustee. If the
Managing Members fail to convene such meeting within such 30-day period, then
Preferred Members holding at least 10% in Liquidation Preference of the
Preferred Securities then outstanding will be entitled to convene such meeting.
Except as provided herein, the provisions of Section 9.3 of this Agreement
relating to the convening and conduct of meetings of the Members will apply with
respect to any such meeting.
(d) Any Special Trustee appointed in accordance with this Section
shall cease to be a Special Trustee immediately if the Company (or St. Paul
pursuant to the Guarantee) shall have paid in full all accumulated and unpaid
Dividends (including any Additional Dividends) on the
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Preferred Securities, in the case of clause (i) of paragraph (a) of this
Section, or such Event of Default or default, as the case may be, shall have
been cured, in the case of clause (ii) or (iii) of paragraph (a) of this
Section.
Section 7.2 POWERS OF SPECIAL TRUSTEE. (a) Upon the appointment of
a Special Trustee in accordance with Section 7.1 of this Agreement, and so long
as the appointment of the Special Trustee is effective, the Special Trustee
shall manage the business and affairs of the Company to the exclusion of the
Managing Members and shall have the powers and be subject to the limitations
set forth in Sections 6.1 and 6.2 of this Agreement, respectively.
(b) Without limiting the powers of any Special Trustee so appointed
and for the avoidance of any doubt concerning the powers of the Special Trustee,
any Special Trustee shall have the power to enforce the Company's rights under
the Indenture and shall, to the extent of legally available funds, declare and
pay Dividends (including Additional Dividends) on the Preferred Securities.
(c) Without limiting the powers of any Special Trustee so
appointed and for the avoidance of any doubt concerning the powers of the
Special Trustee, any Special Trustee, in its own name, in the name of the
Company, in the name of any Member or otherwise, may institute or cause to be
instituted a proceeding, including, without limitation, any suit in equity,
action at law or other judicial or administrative proceeding, to enforce the
Company's or any Member's rights directly against St. Paul (or any other obligor
in connection with such obligations) on behalf of the Company or any Member and
to the same extent as the Company or any Member, and may prosecute such
proceeding to judgment or final decree, and enforce the same against St. Paul
(or any other obligor in connection with such obligations) and collect, out of
the property, wherever situated, of St. Paul (or any other obligor in connection
with such obligations), the monies adjudged or decreed to be payable in the
manner provided by law. The Managing Members agree to execute and deliver such
documents as may be necessary or appropriate for the Special Trustee to exercise
such powers.
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ARTICLE VIII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 8.1 COMMON SECURITIES AND PREFERRED SECURITIES. (a) The
Interests in the Company shall be divided into two classes, Common Securities
and Preferred Securities.
(b) No holder of Common Securities or of Preferred Securities shall
be entitled as a matter of right to subscribe for or purchase, or have any
preemptive right with respect to, any part of any new or additional issue of
Preferred Securities whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of a Dividend.
(c) A Preferred Security shall be represented by the corresponding
Preferred Certificate. Common Securities shall not be evidenced by any
certificate or other written instrument, but shall only be evidenced by this
Agreement.
(d) Upon reissuance of the Preferred Securities as provided in
this Agreement, the Preferred Securities so issued shall be deemed to be
validly issued, fully paid and nonassessable.
Section 8.2 GENERAL PROVISIONS REGARDING PREFERRED SECURITIES.
(a) There is hereby authorized for issuance and sale Preferred Securities
having an aggregate liquidation preference of $50 and having the designation,
annual Dividend rate, liquidation preference, redemption terms, conversion and
exchange rights and other powers, preferences and special rights and limitations
set forth in this Article VIII. The aggregate liquidation preference of
Preferred Securities authorized hereunder shall be adjusted 31 days after the
first Closing Date to the aggregate liquidation preference of such Preferred
Securities as shall have been purchased through such date by the Underwriters.
(b) The payment of Dividends and payments of distributions by the
Company in liquidation or on redemption in respect of Preferred Securities shall
be guaranteed by St. Paul pursuant to, and to the extent provided in, the
Guarantee. In the event of an appointment of a Special Trustee pursuant to
Article VII, among other things, to enforce the Guarantee, the Special Trustee
may take possession of the Guarantee for such purpose. The Preferred Members,
by acceptance of such Preferred Securities,
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acknowledge and agree to the subordination provisions and other terms of the
Guarantee.
(c) The proceeds received by the Company from the issuance of
Preferred Securities, together with the proceeds of the capital contributed by
the Common Members pursuant to Section 4.2 of this Agreement, shall be invested
by the Company in Subordinated Debentures with (i) an aggregate principal amount
equal to such aggregate invested proceeds and (ii) an interest rate at least
equal to the Dividend rate of the Preferred Securities.
(d) The Company may not issue any other Interests without the
approval of the Preferred Members of not less than 66 2/3% in Liquidation
Preference of the outstanding Preferred Securities. All Preferred Securities
shall rank senior to all other Interests in respect of the right to receive
Dividends or other distributions and the right to receive payments out of the
assets of the Company upon voluntary or involuntary dissolution, winding-up or
termination of the Company. All Preferred Securities redeemed, purchased or
otherwise acquired by the Company (including Preferred Securities surrendered
for conversion or exchange) shall be cancelled. The Preferred Securities will
be issued in registered form only. Dividends on all Preferred Securities shall
be cumulative.
(e) Neither St. Paul nor any Affiliate of St. Paul shall have the
right to vote or give or withhold consent with respect to any Preferred Security
owned by it, directly or indirectly, and, for purposes of any matter upon which
the Preferred Members may vote or give or withhold consent as provided in this
Agreement, Preferred Securities owned by St. Paul or any Affiliate shall be
treated as if they were not outstanding.
Section 8.3 PREFERRED SECURITIES.
(a) DESIGNATION. The Preferred Securities, liquidation
preference $50 per Preferred Security, are hereby designated as " * %
CONVERTIBLE MONTHLY INCOME PREFERRED SECURITIES".
(b) DIVIDENDS. (i) Preferred Members shall be entitled to
receive, when, as and if declared by the Managing Members, cumulative Dividends
at a rate per annum of * % of the stated liquidation preference of $50 per
Preferred Security, calculated on the basis of a 360-day year consisting of 12
months of 30 days each. For any period shorter than a full monthly Dividend
period, Dividends will be computed on the basis of the actual number of
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days elapsed in such period. Dividends shall be payable in United States
dollars monthly in arrears on the last day of each calendar month of each year,
commencing * , 1995. Such Dividends will accrue and be cumulative whether or
not they have been declared and whether or not there are funds of the Company
legally available for the payment of Dividends. Dividends on the Preferred
Securities shall be cumulative from the first Closing Date. Additional
Dividends upon any Dividend arrearages shall be declared and paid in order to
provide, in effect, monthly compounding on such Dividend arrearages at a rate of
% per annum compounded monthly and such Additional Dividends shall accumulate.
In the event that any date on which Dividends are payable on the Preferred
Securities is not a Business Day, then payment of the Dividend payable on such
date will be made on the next succeeding day which 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.
(ii) Dividends on the Preferred Securities must be declared monthly
and be paid on the last day of each calendar month or such other day as
determined by Section 8.3(b) of this Agreement (each a "DIVIDEND PAYMENT
DATE") to the extent that the Company has, on such date, (x) funds legally
available for the payment of such Dividends and (y) cash on hand sufficient to
make such payments, it being understood that to the extent that funds are not
available to pay in full all accumulated and unpaid Dividends, the Company may
pay partial PRO RATA Dividends to the extent of funds legally available
therefor. Dividends will be payable to the Preferred Members as they appear on
the books and records of the Company on the relevant record dates, which will be
one Business Day prior to the related Dividend Payment Date. In the event of
any extended interest payment period with respect to the Subordinated Debentures
resulting in the deferral of the payment of Dividends on the Preferred
Securities, the Company shall give written notice by first-class mail to the
Preferred Members as to such extended interest payment period no later than the
last date on which it would be required to notify the NYSE of the record or
payment date of the related Dividend on the Preferred Securities.
(iii) The Company shall not:
(A) pay, declare or set aside for payment, any Dividends or other
distributions on any other Interests; or
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(B) redeem, purchase or otherwise acquire any other Interests;
until, in each case, such time as all accumulated and unpaid Dividends on all of
the Preferred Securities, including any Additional Dividends thereon, shall have
been paid in full for all Dividend periods terminating on or prior to the date
of such payment or the date of such redemption, purchase or acquisition, as the
case may be.
(iv) In the event of an election by a Preferred Member to convert
its Preferred Securities through the Conversion Agent into St. Paul Common Stock
pursuant to Section 8.4 of this Agreement, neither St. Paul nor the Company
shall make, or be required to make, any payment, allowance or adjustment with
respect to accumulated and unpaid Dividends on such Preferred Securities;
PROVIDED that Preferred Members at the close of business on any record date
for the payment of Dividends will be entitled to receive the Dividend payable on
their Preferred Securities on the corresponding Dividend Payment Date
notwithstanding the conversion of such Preferred Securities into St. Paul Common
Stock on or after such record date and on or prior to such Dividend Payment
Date.
(c) REDEMPTION. (i) If at any time following the Conversion
Expiration Date, less than five percent (5%) of the Preferred Securities
originally issued and sold pursuant to the Underwriting Agreement remain
outstanding, such Preferred Securities shall be redeemable, at the option of the
Company, in whole but not in part, from time to time at a redemption price
equal to the liquidation preference per Preferred Security plus accumulated
and unpaid Dividends (whether or not earned or declared) to the date fixed for
redemption, including any Additional Dividends accrued thereon (the
"REDEMPTION PRICE").
(ii) Upon repayment at maturity of the Subordinated Debentures or
as a result of acceleration of the Subordinated Debentures, the Preferred
Securities shall be redeemed, in whole but not in part, at the Redemption
Price, and the proceeds from such repayment shall be applied to redeem the
Preferred Securities at the Redemption Price. In the case of such acceleration,
the Preferred Securities shall only be redeemed when repayment of the
Subordinated Debentures has actually been received by the Company.
(d) REDEMPTION PROCEDURES. (i) Notice of any redemption (a
"NOTICE OF REDEMPTION") of the Preferred Securities to be redeemed will be
given by the Company by first-class mail to each record holder of Preferred
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Securities not fewer than 30 nor more than 60 days prior to the date fixed for
redemption thereof following the issuance of a notice of redemption of the
Subordinated Debentures by St. Paul to the Company. For purposes of the
calculation of the date of redemption and the dates on which notices are given
pursuant to this paragraph (d)(i), a Notice of Redemption shall be deemed to be
given on the day such notice is first mailed by first-class mail, postage
prepaid, to each Preferred Member. Each Notice of Redemption shall be addressed
to Preferred Member at the address of the Preferred Member appearing in the
books and records of the Company. If all of the Preferred Securities are
represented by Book-Entry Interests, Notices of Redemption shall be sent to the
Clearing Agency. No defect in the Notice of Redemption or in the mailing
thereof with respect to any Preferred Security shall affect the validity of the
redemption proceedings with respect to any other Preferred Security.
(ii) If, following a notice of redemption of all outstanding
Subordinated Debentures, the Company issues a Notice of Redemption pursuant
to Section 8.3(c)(ii) of this Agreement, then, by 12:00 noon, New York time,
on the redemption date, St. Paul will repay to the Company an aggregate
principal amount of the Subordinated Debentures which, together with accrued
and unpaid interest and any Additional Interest thereon, will be an amount
sufficient to pay the Redemption Price for all Preferred Securities then
outstanding. If all of the Preferred Securities are represented by
Book-Entry Interests, the Company shall irrevocably deposit such funds with
the Clearing Agency and give the Clearing Agency irrevocable instructions and
authority to pay the Redemption Price to the Preferred Members of Preferred
Securities and otherwise the Company may pay the Redemption Price by check.
If a Notice of Redemption shall have been issued and funds deposited as
required or a check deposited in the U.S. mails postage prepaid, then upon
the date of such deposit, the Preferred Members shall cease to be members of
the Company, and all rights of the Preferred Members who hold such Preferred
Securities so called for redemption will cease, except the right of the
Preferred Members holding such securities to receive the Redemption Price,
but without interest from and after such redemption date. In the event that
any date fixed for redemption of Preferred Securities is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of
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Preferred Securities is improperly withheld or refused and not paid either by
the Company or by St. Paul pursuant to the Guarantee, Dividends on such
Preferred Securities (including any Additional Dividends thereon) will continue
to accumulate at the then applicable rate, from the original redemption date to
the date that the Redemption Price is actually paid.
(e) LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution, winding-up or termination of the Company,
the Preferred Members holding Preferred Securities at the time outstanding will
be entitled to receive out of the assets of the Company legally available for
distribution to Members after satisfaction of liabilities to creditors of the
Company as required by the Delaware Act before any distribution of assets is
made with respect to any other Interest, an amount equal to the aggregate of the
stated liquidation preference of $50 per Preferred Security and accumulated and
unpaid Dividends (whether or not earned or declared) to the date of payment,
including any Additional Dividends accrued thereon (the "LIQUIDATION
DISTRIBUTION").
(f) VOTING RIGHTS -- CERTAIN AMENDMENTS.
(i) If any proposed amendment of this Agreement provides for, or the
Managing Members otherwise propose to effect, (x) any action that would
materially adversely affect the powers, preferences or rights of the
Preferred Securities, whether by way of amendment of this Agreement or
otherwise (including, without limitation, the authorization or issuance of
any additional Interests), or (y) the liquidation, dissolution, winding-up
or termination of the Company or (z) the commencement of any bankruptcy,
insolvency, reorganization or other similar proceeding involving the
Company, then the Preferred Members will be entitled to vote on such
amendment or action of the Managing Members (but not on any other
amendment or action) and such amendment or action shall not be effective
except with the approval of Preferred Members holding not less than
66 2/3% in Liquidation Preference of the Preferred Securities then
outstanding; PROVIDED, HOWEVER, that no such approval shall be required
if the dissolution, winding-up or termination of the Company is otherwise
effected pursuant to Section 17 of this Agreement.
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(ii) Any required approval of the Preferred Members may be given at
a separate meeting of the Preferred Members convened for such purpose or
pursuant to written consent. The Company will cause written notice of any
meeting at which the Preferred Members are entitled to vote, or of any
matter upon which action by written consent of the Preferred Members is to
be taken, to be mailed by first-class mail to each Preferred Member at
least 15 days prior to the date of such meeting or the date by which such
action is to be taken. Each such notice will include a statement setting
forth (x) the date of such meeting or the date by which such action is to
be taken, (y) a description of any matter on which the Preferred Members
are entitled to vote or upon which written consent is sought and (z)
instructions for the delivery of proxies or consents. No vote or consent
of the Preferred Members will be required for the Company to redeem and
cancel Preferred Securities in accordance with this Agreement.
(iii) The Preferred Members may not remove the Managing Members.
(g) SPECIAL EVENT DISSOLUTION. If a Tax Event shall occur and be
continuing, the Managing Members may, and if an Investment Company Event shall
occur and be continuing the Managing Members shall, dissolve the Company and,
after satisfaction of liabilities to creditors of the Company as required by the
Delaware Act, cause to be distributed to Preferred Members in liquidation of the
Company, within 90 days following the occurrence of such Special Event,
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Preference of the outstanding Preferred Securities and with accrued
interest in an amount equal to any unpaid Dividends on the Preferred Securities,
provided that the Managing Members have reasonably determined that Preferred
Members will not recognize gain or loss for United States federal income tax
purposes as a result of such distribution. In the case of a Tax Event where
Managing Members do not elect to dissolve the Company, the Preferred
Securities shall remain outstanding.
After the date fixed for any distribution of Subordinated Debentures
upon dissolution of the Company (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the Preferred Members shall cease to be members
of the Company, (iii) DTC or its nominee, as the record holder of the Preferred
Securities, will receive a registered global certificate or certificates
representing
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the Subordinated Debentures to be delivered upon such distribution and (iv) any
Preferred Certificates not held by DTC or its nominee will be deemed to
represent Subordinated Debentures having a principal amount equal to the
aggregate of the Liquidation Preference and accrued and unpaid Dividends on such
Preferred Securities until such Preferred Certificates are presented to the
Managing Members or their agents for transfer or reissuance.
Section 8.4 CONVERSION RIGHTS OF PREFERRED SECURITIES. The
Preferred Members shall have the right, at their option, at any time before the
close of business on the Conversion Expiration Date, to cause the Conversion
Agent to convert Preferred Securities, on behalf of the converting Preferred
Members, into shares of St. Paul Common Stock in the manner described herein on
and subject to the following terms and conditions:
(a) The Preferred Securities will be convertible at the office of
the Conversion Agent into fully paid and nonassessable shares of St. Paul Common
Stock, pursuant to the Preferred Member's direction to the Conversion Agent
given by means of an irrevocable notice of conversion substantially in the form
of Annex B hereto (a "NOTICE OF CONVERSION") to (i) exchange such Preferred
Securities for a portion of the Subordinated Debentures theretofore held by the
Company on the basis of one Preferred Security per $ * principal amount of
Subordinated Debentures, and (ii) immediately convert such Subordinated
Debentures and any accrued and unpaid interest thereon into fully paid and
nonassessable shares of St. Paul Common Stock, at an initial rate of * shares
of St. Paul Common Stock per $ * principal amount of Subordinated Debentures
(which is equivalent to a conversion price of $ * per share of St. Paul Common
Stock, subject to certain adjustments set forth in the Indenture (as so
adjusted, "CONVERSION PRICE")).
(b) In order to convert Preferred Securities into St. Paul Common
Stock, the Preferred Member holding such Preferred Securities shall surrender
the Preferred Securities to be converted to the Conversion Agent at the office
referred to above, together with an irrevocable Notice of Conversion (i) setting
forth the number of Preferred Securities to be converted and the name or names,
if other than the Preferred Member, in which the shares of St. Paul Common Stock
should be issued and (ii) directing the Conversion Agent to exchange such
Preferred Securities for Subordinated Debentures and immediately convert such
Subordinated Debentures, on behalf of such Preferred Member, into St. Paul
Common Stock. If the Notice of Conversion is delivered before the close of
business on the Conversion
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Expiration Date, the Conversion Agent shall notify the Company of the
Preferred Member's election to convert and the Company shall, upon receipt of
such notice, deliver to the Conversion Agent (x) the appropriate principal
amount of Subordinated Debentures for exchange in accordance with this
Section, together with (y) Preferred Securities represented by the
surrendered certificates but not directed to be converted in the Notice of
Conversion. The Conversion Agent shall thereupon, on behalf of such
Preferred Member, effect the conversion of such Subordinated Debentures into
shares of St. Paul Common Stock. Preferred Members at the close of business
on a Dividend payment record date will be entitled to receive the Dividend
payable on such securities on the corresponding Dividend Payment Date
notwithstanding the conversion of such Preferred Securities on or after such
Dividend payment record date and on or prior to such Dividend Payment Date.
Except as provided above, no payment, allowance or adjustment shall be made
by the Company or St. Paul upon any conversion on account of any accumulated
and unpaid Dividends accrued on the Preferred Securities (including any
Additional Dividends accrued thereon) surrendered for conversion, or on
account of any accumulated and unpaid Dividends on the shares of St. Paul
Common Stock issued upon such conversion. Preferred Securities shall be
deemed to have been converted immediately prior to the close of business on
the day on which a Notice of Conversion relating to such Preferred Securities
is delivered in accordance with the foregoing provision (the "CONVERSION
DATE"). The Person or Persons entitled to receive the St. Paul Common Stock
issuable upon conversion of the Subordinated Debentures shall be treated for
all purposes as the record holder or holders of such St. Paul Common Stock at
such time. No fractional shares of St. Paul Common Stock will be issued as a
result of conversion, but in lieu thereof, such fractional interest will be
paid in cash by St. Paul in accordance with Section 8.4(e) of this Agreement.
As promptly as practicable on or after the Conversion Date, St. Paul shall
issue and deliver at the office of the Conversion Agent a certificate or
certificates for the number of full shares of St. Paul Common Stock issuable
upon such conversion, together with the cash payment, if any, in lieu of any
fraction of any share to the Person or Persons entitled to receive the same,
and unless otherwise directed by the Preferred Member in the Notice of
Conversion, the Conversion Agent shall distribute such certificate or
certificates and cash payment, together with the certificate(s) representing
any unconverted Preferred Securities, to such Person or Persons.
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(c) Each Preferred Member by his acceptance of one or more
Preferred Securities appoints the Transfer Agent for the Preferred Securities
conversion agent (in such capacity, the "CONVERSION AGENT") for the purpose of
effecting the conversion of Preferred Securities in accordance with this Section
and the exchange of Preferred Securities for Depositary Shares representing St.
Paul Preferred Stock in accordance with Section 8.5 of this Agreement. In
effecting the conversion and exchange transactions described in this Section and
Section 8.5 of this Agreement, the Conversion Agent shall be acting as agent of
the Preferred Members directing it to effect such conversion or exchange
transactions. The Conversion Agent is hereby authorized (i) to effect
conversions of Preferred Securities from time to time upon receipt of Notices of
Conversion and (ii) following the occurrence of an Exchange Event, to exchange
all of the Subordinated Debentures and any accrued and unpaid interest thereon
for Depositary Shares representing St. Paul Preferred Stock in accordance with
the provisions of Section 8.5 of this Agreement.
(d) (i) On and after * , and provided that the Company has paid in
full all accumulated and unpaid Dividends on all of the Preferred Securities,
including any Additional Dividends thereon, for all Dividend periods terminating
on or prior to such date, the Company shall have the right, at its option, to
cause the conversion rights set forth in this Section to expire, BUT ONLY IF
for 20 Trading Days within any period of 30 consecutive Trading Days, including
the last Trading Day of such period, the Current Market Price of the St. Paul
Common Stock exceeds 120% of the Conversion Price in effect on such Trading Day.
(ii) In order to exercise its option to cause the conversion
rights of Preferred Members to expire, the Company must issue a press release
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 *).
The Press Release shall be issued for publication to the Dow Jones News Service
and to such other print and electronic media as the Company may select. The
Press Release shall state that the Company has elected to exercise its right to
extinguish the conversion rights of Preferred Members, specify the Conversion
Expiration Date and provide the Conversion Price of the Preferred Securities and
the Current Market Price of the St. Paul 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 Company exercises the option described in this paragraph, the
"CONVERSION EXPIRATION
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DATE" shall be a date selected by the Company which shall be not less than 30
or more than 60 days after the date on which the Company issues the Press
Release. In the event the Company does not exercise the option described in
this paragraph, the Conversion Expiration Date shall be the earlier of (a) the
date of an Exchange Election, as set forth in Section 8.5(c) of this Agreement,
and (b) two Business Days prior to the date set for the mandatory redemption of
the Preferred Securities pursuant to Section 8.3(d)(ii) of this Agreement.
(iii) In addition to issuing the Press Release, the Company
shall send notice of the expiration of conversion rights (a "NOTICE OF
CONVERSION EXPIRATION") by first-class mail to each Preferred Member of record
not more than four (4) Business Days after the Company issues the Press Release.
Such mailed Notice of Conversion Expiration shall state: (1) the Conversion
Expiration Date; (2) the Conversion Price of the Preferred Securities and the
Current Market Price of the St. Paul 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 Preferred Securities are
to be surrendered prior to the Conversion Expiration Date for certificates
representing shares of St. Paul Common Stock; and (4) such other information or
instructions as the Company deems necessary or advisable to enable a Preferred
Member to exercise its conversion right hereunder. No defect in the Notice of
Conversion Expiration or in the mailing thereof with respect to any Preferred
Security shall affect the validity of such notice with respect to any other
Preferred Security. As of the close of business on the Conversion Expiration
Date, the Preferred Securities shall no longer be convertible into St. Paul
Common Stock.
(e) No fractional shares of St. Paul Common Stock will be issued
as a result of conversion, but in lieu thereof, St. Paul shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the Current Market Price on the date on which the certificate or certificates
for such shares were duly surrendered for conversion, or, if such day is not a
Trading Day, on the next Trading Day, and the Conversion Agent in turn will make
such payment to the Preferred Member holding Preferred Securities so converted.
(f) St. Paul shall at all times reserve and keep available out of
its authorized and unissued St. Paul Common Stock, solely for issuance upon the
conversion of the Subordinated Debentures, free from any preemptive or other
similar rights, such number of shares of St. Paul Common
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Stock as shall from time to time be issuable upon the conversion of all the
Subordinated Debentures then outstanding. Any shares of St. Paul Common Stock
issued upon conversion of the Subordinated Debentures shall be duly authorized,
validly issued and fully paid and nonassessable. St. Paul shall deliver the
shares of St. Paul Common Stock upon conversion of the Subordinated Debentures
to the Conversion Agent, as agent for the Preferred Member so converting, free
and clear of all liens, charges, security interests and encumbrances, except for
United States withholding taxes. Each of St. Paul and the Company shall prepare
and shall use its best efforts to obtain and keep in force such governmental 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 St. Paul Common Stock (and all requirements to list the St. Paul Common
Stock issuable upon conversion of Subordinated Debentures that are at the time
applicable), in order to enable St. Paul to lawfully issue St. Paul Common Stock
to the Conversion Agent and the Conversion Agent to lawfully deliver the St.
Paul Common Stock to each Preferred Member upon conversion of the Preferred
Securities.
(g) Whenever St. Paul shall issue shares of St. Paul Common Stock
upon conversion of Preferred Securities as contemplated by this Section 8.4, St.
Paul shall issue, together with each such share of St. Paul Common Stock, one
right to purchase Series A Junior Participating Preferred Stock of St. Paul
(or other securities in lieu thereof) pursuant to the Rights Agreement, or any
similar rights issued to holders of St. Paul Common Stock 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 St. Paul Common Stock
(or are evidenced by outstanding share certificates representing St. Paul
Common Stock) at such time and have not expired or been redeemed.
(h) St. Paul will pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of the issue or
delivery of shares of St. Paul Common Stock to the Conversion Agent on
conversion of Subordinated Debentures and by the Conversion Agent upon
conversion of the Preferred Securities. St. Paul shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of St. Paul Common Stock
in a name other than that in which the Preferred Securities so converted were
registered, and no such issue or delivery shall be made
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unless and until the Person requesting such issue has paid to the Company the
amount of any such tax, or has established to the satisfaction of the Company
that such tax has been paid or is not payable.
(i) Nothing in Section 8.4(h) of this Agreement shall limit the
requirement of the Company to withhold taxes pursuant to Section 4.6 of this
Agreement or otherwise require the Trustee, the Managing Members or the Company
to pay any amounts on account of such withholdings.
Section 8.5 OPTIONAL EXCHANGE FOR DEPOSITARY SHARES REPRESENTING
ST. PAUL PREFERRED STOCK.
(a) Upon the occurrence of an Exchange Event, Preferred Members
holding a Majority in Liquidation Preference of the Preferred Securities then
outstanding, voting as a class or by written consent, may, at their option,
cause the Conversion Agent to (i) exchange all (but not less than all) of the
Preferred Securities then outstanding for Subordinated Debentures held by the
Company, (ii) immediately exchange such Subordinated Debentures and any accrued
and unpaid interest thereon, on behalf of the Preferred Members, for Depositary
Shares, each representing ownership of 1/100th of a share of St. Paul Preferred
Stock, at the Exchange Price and (iii) distribute such Depositary Shares to the
Preferred Members, subject to the following terms and conditions.
(b) The failure of Preferred Members to receive for 15 consecutive
months the full amount of Dividend payments (including any arrearages thereon)
on the Preferred Securities, including any such failure caused by a deferral of
interest payments on the Subordinated Debentures, shall constitute an
"EXCHANGE EVENT."
(c) As soon as practicable, but in no event later than 30 days
after the occurrence of an Exchange Event, the Managing Members will, upon not
less than 15 days' written notice by first-class mail to the Preferred Members,
convene a meeting (the "EXCHANGE ELECTION MEETING") of the Preferred Members
for the purpose of acting on the matter of whether to cause the Conversion Agent
to effect an exchange, as described above, of all of the Preferred Securities
then outstanding for Depositary Shares. If the Managing Members fail to convene
such Exchange Election Meeting within such 30-day period, Preferred Members
holding not less than 10% in Liquidation Preference of the Preferred Securities
then outstanding will be entitled to convene such Exchange Election Meeting.
Upon the affirmative vote of Preferred Members holding a Majority in Liquidation
Preference of the Preferred Securities then outstanding at an Exchange Election
Meeting or, in the absence of such meeting, upon receipt by the Company of
written consents
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signed by Preferred Members holding a Majority in Liquidation Preference of the
Preferred Securities, an election to exchange all outstanding Preferred
Securities on the basis described above (an "EXCHANGE ELECTION") will be
deemed to have been made.
Each Preferred Member, by becoming a party to this Agreement will
be deemed to have agreed to be bound by these optional exchange provisions in
regard to the exchange of Preferred Securities for Depositary Shares pursuant
to the terms described above.
(d) Upon receipt of notice substantially in the form of Annex C
hereto from such Preferred Members (the "NOTICE OF EXCHANGE"), the Conversion
Agent shall promptly deliver copies of the Notice of Exchange to the Company,
St. Paul and the Trustee.
(e) All outstanding Preferred Securities shall be deemed to have
been exchanged, immediately prior to the close of business on the date of the
Exchange Election (the "EXCHANGE DATE"), for Subordinated Debentures held by
the Company, at an exchange rate of $50 principal amount of Subordinated
Debentures for each Preferred Security, and the Company shall promptly deliver
the Subordinated Debentures deemed to have been so exchanged to the Conversion
Agent, on behalf of the Preferred Members holding exchanged Preferred
Securities. As promptly as practicable after the exchange date, St. Paul shall
issue and deposit with the Depositary, pursuant to the Deposit Agreement, a
certificate or certificates for the number of fully paid and non-assessable
shares of St. Paul Preferred Stock issuable at the rate referred to in paragraph
(f) below upon the exchange contemplated in such paragraph in return for a
Depositary Receipt or Receipts issued by the Depositary evidencing a
proportionate number of Depositary Shares in respect of the St. Paul Preferred
Stock so deposited. St. Paul shall request that the Depositary Receipts be
issued in the names of the Preferred Members designated in the Notice of
Exchange.
(f) St. Paul shall thereafter, promptly upon request by the
Conversion Agent, exchange such Subordinated Debentures and any accrued and
unpaid interest thereon for Depositary Shares, each representing a 1/100th
interest in a fully paid and nonassessable share of St. Paul Preferred Stock
and evidenced by Depositary Receipts, at the rate of one Depositary Share for
each $50 principal amount of Subordinated Debentures (which rate is equivalent
to one Depositary Share or 1/100th of a share of St. Paul Preferred Stock for
each Preferred Security). Any accumulated and
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unpaid Dividends on the Preferred Securities (including any Additional Dividends
thereon) at the time of the Exchange Election shall, from and after the time of
such exchange, be treated as accumulated and unpaid Dividends on the St. Paul
Preferred Stock issued in exchange for the Subordinated Debentures. The Person
or Persons entitled to receive the Depositary Shares representing the St. Paul
Preferred Stock issuable upon such exchange shall be treated for all purposes as
the record holder or holders of such St. Paul Preferred Stock as of the exchange
date. As promptly as practicable on or after the exchange date, St. Paul shall
deliver at the office of the Conversion Agent the Depositary Receipt or Receipts
representing the St. Paul Preferred Stock issuable upon such exchange. The
Conversion Agent shall deliver such Depositary Receipt or Receipts to the Person
or Persons entitled to receive the same.
(g) Each Depositary Share will represent a one one-hundredth
(1/100th) interest in a share of St. Paul Preferred Stock and shall be evidenced
by a Depositary Receipt. St. Paul shall at all times reserve and keep available
out of its authorized and unissued St. Paul Preferred Stock, solely for issuance
upon the exchange of Subordinated Debentures for Depositary Shares, free from
any preemptive or other similar rights, such number of shares of St. Paul
Preferred Stock as shall from time to time be issuable upon the exchange of all
the Subordinated Debentures then outstanding for Depositary Shares. Each of St.
Paul and the Company shall prepare and shall use its best efforts to obtain and
keep in force such governmental 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 St. Paul Preferred Stock in order to enable
St. Paul to lawfully issue the St. Paul Preferred Stock upon exchange of the
Subordinated Debentures and deposit such St. Paul Preferred Stock with the
Depositary under the Deposit Agreement and the Conversion Agent to lawfully
deliver Depositary Shares upon exchange of the Preferred Securities. All shares
of St. Paul Preferred Stock issued upon conversion of the Subordinated
Debentures shall be duly authorized, validly issued and fully paid and
nonassessable and the terms of the St. Paul Preferred Stock shall be valid and
binding on St. Paul. The Conversion Agent shall deliver the Depositary Shares,
evidenced by Depositary Receipts, received upon exchange of the Preferred
Securities to the exchanging Preferred Member, free and clear of all liens,
charges, security interests and encumbrances. St. Paul will use its best
efforts to have the Depositary Shares issued upon an exchange of Preferred
Securities listed for trading on the
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NYSE or such other securities exchange on which the Preferred Securities may
then be listed.
(h) St. Paul will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of St. Paul Preferred Stock to the
Conversion Agent upon exchange of the Subordinated Debentures, the delivery and
deposit of such shares to the Depositary and the delivery of the Depositary
Shares by the Conversion Agent upon exchange of the Preferred Securities. St.
Paul shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of St. Paul Preferred
Stock or Depositary Shares in a name other than that in which Preferred
Securities so exchanged were registered, and no such issue or delivery shall be
made unless and until the Person requesting such issue has paid to the Company
the amount of any such tax, or has established to the satisfaction of the
Company that such tax has been paid.
(i) Nothing in Section 8.5(h) of this Agreement shall limit the
requirement of the Company to withhold taxes pursuant to Section 4.6 of this
Agreement or otherwise require the Trustee, the Managing Members or the Company
to pay any amounts on account of such withholdings.
ARTICLE IX
VOTING AND MEETINGS
Section 9.1 VOTING RIGHTS OF PREFERRED MEMBERS. (a) Except as
shall be otherwise established herein and except as otherwise required by the
Delaware Act, the Preferred Members shall have no right or power to vote on any
question or matter or in any proceeding or to be represented at, or to receive
notice of, any meeting of Members.
(b) Notwithstanding that Members holding Preferred Securities are
entitled to vote or consent under any of the circumstances described in this
Agreement, any of the Preferred Securities that are owned by St. Paul or any
Person owned more than fifty percent by St. Paul, either directly or indirectly,
shall not be entitled to vote or consent and shall, for the purposes of such
Section 9.2 VOTING RIGHTS OF HOLDERS OF COMMON SECURITIES.
Except as otherwise provided herein, and except as otherwise provided by the
Delaware Act, all voting rights
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of the Members shall be vested exclusively in the Common Members.
Section 9.3 MEETINGS OF THE MEMBERS. (a) Meetings of the
Members of any class or of all classes of Interests may be called at any time by
the Managing Members or as provided by this Agreement. Except to the extent
otherwise provided, the following provisions shall apply to meetings of Members.
(b) Members may vote in person or by proxy at such meeting.
Whenever a vote, consent or approval of Members is permitted or required under
this Agreement, such vote, consent or approval may be given at a meeting of
Members or by written consent.
(c) Each Member may authorize any Person to act for it by proxy on
all matters in which a Member is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy
must be signed by the Member or its attorney-in-fact. Every proxy shall be
revocable at the pleasure of the Member executing it at any time before it is
voted.
(d) Each meeting of Members shall be conducted by the Managing
Members or by such other Person that the Managing Members may designate.
(e) Any required approval of Preferred Members holding Preferred
Securities may be given at a separate meeting of such Preferred Members convened
for such purpose or at a meeting of Members of the Company or pursuant to
written consent. The Managing Members will cause a notice of any meeting at
which Preferred Members holding Preferred Securities are entitled to vote
pursuant to Sections 7.1, 8.3(f) or Article XVI of this Agreement, or of any
matter upon which action may be taken by written consent of such Preferred
Members, to be mailed to each Preferred Member of record of the Preferred
Securities. Each such notice will include a statement setting forth (i) the
date of such meeting or the date by which such action is to be taken, (ii) a
description of any action proposed to be taken at such meeting on which such
Preferred Members are entitled to vote or of such matters upon which written
consent is sought
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and (iii) instructions for the delivery of proxies or consents.
(f) Subject to Section 9.3(e) of this Agreement, the Managing
Members, in their sole discretion, shall establish all other provisions relating
to meetings of Members, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Members, waiver of any such
notice, action by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE X
DIVIDENDS
Section 10.1 DIVIDENDS. (a) Subject to the terms of this
Article X, Preferred Members shall receive periodic Dividends, if any, in
accordance with Article VIII of this Agreement, as and when declared by the
Managing Members, and Common Members shall receive periodic Dividends, subject
to Article VIII of this Agreement and to the provisions of the Delaware Act, as
and when declared by the Managing Members, in their discretion.
(b) A Preferred Member shall not be entitled to receive any
Dividend with respect to any Dividend payment date (and any such Dividend shall
not be considered due and payable), irrespective of whether such Dividend has
been declared by the Managing Members, until such time as (i) the interest
payment on the related series of Subordinated Debentures for the interest
payment date corresponding to such Dividend payment date is due and payable
(after giving effect to any delay of such interest payment date resulting from a
valid extension of the related interest payment period for such Subordinated
Debentures) and (ii) the Company shall have funds legally available for the
payment of such Dividend to such Preferred Member pursuant to the terms of this
Agreement and the Delaware Act, and notwithstanding any provision of Section
18-606 of the Delaware Act to the contrary, until such time, a Preferred Member
shall not have the status of a creditor of the Company, or the remedies
available to a creditor of the Company.
Section 10.2 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding
any provision to the contrary contained in this Agreement, the Company shall not
make a distribution
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(including a Dividend) to any Member on account of its Interest if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 BOOKS AND RECORDS; ACCOUNTS. The Managing Members
shall keep or cause to be kept at the address of the Managing Members (or at
such other place as the Managing Members shall advise the other Members in
writing) true and full books and records regarding the status of the business
and financial condition of the Company.
Section 11.2 FINANCIAL STATEMENTS. The Managing Members shall,
furnish annually to each Preferred Member St. Pauls' Annual Report to
Shareholders containing audit consolidated financial statement of St. Paul,
as soon as such report is available after the end of each fiscal year of St.
Paul.
Section 11.3 LIMITATION ON ACCESS TO RECORDS. Notwithstanding
any provision of this Agreement the Managing Members may, to the maximum
extent permitted by law, keep confidential from the Preferred Members, for
such period of time as the Managing Members deem reasonable, any information
the disclosure of which the Managing Members reasonably believe to be in the
nature of trade secrets or other information the disclosure of which the
Managing Members in good faith believe is not in the best interest of the
Company or could damage the Company or its business or which the Company or
the Managing Members are required by law or by an agreement with any Person
to keep confidential.
Section 11.4 ACCOUNTING METHOD. For both financial and tax
reporting purposes and for purposes of determining profits and losses, the books
and records of the Company shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Company transactions and be
appropriate and adequate for the Company's business.
Section 11.5 ANNUAL AUDIT. As soon as practical after the end of
each Fiscal Year, but not later than 90 days after such end, the financial
statements of the Company shall be audited by a firm of independent certified
public accountants selected by the Managing Members, and
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such financial statements shall be accompanied by a report of such accountants
containing their opinion. The cost of such audits will be an expense of the
Company and paid by St. Paul.
ARTICLE XII
TAX MATTERS
Section 12.1 COMPANY TAX RETURNS. (a) The Managing Members
shall cause to be prepared and timely filed all tax returns required to be filed
for the Company. The Managing Members may, in their discretion, make or refrain
from making any federal, state or local income or other tax elections for the
Company that they deem necessary or advisable, including, without limitation,
any election under Section 754 of the Code or any successor provision.
(b) St. Paul is hereby designated as the Company's "TAX MATTERS
PARTNER" under Section 6231(a)(7) of the Code and shall have all the powers and
responsibilities of such position as provided in the Code. St. Paul is
specifically directed and authorized to take whatever steps St. Paul, in its
discretion, deems necessary or desirable to perfect such designation, including
filing any forms or documents with the Internal Revenue Service and taking such
other action as may from time to time be required under the Treasury
Regulations. Expenses incurred by the Tax Matters Partner in its capacity as
such will be borne by the Company.
Section 12.2 TAX REPORTS. The Managing Members shall, as
promptly as practicable and in any event within 90 days of the end of each
Fiscal Year, cause to be prepared and mailed to each Preferred Member of record
federal income tax Schedule K-1 and any other forms which are necessary or
advisable.
Section 12.3 TAXATION AS A PARTNERSHIP. The Members intend that
the Company shall be treated as a partnership for U.S. federal income tax
purposes.
Section 12.4 TAXATION OF PARTNERS. The Members intend to adopt a
monthly convention for allocating income and loss, such that income and loss
will be allocated to each Member as of the close of the record date for each
Fiscal Period. The Members intend that allocations of income and loss for U.S.
federal income tax purposes be consistent with the economic allocations of
income under this Agreement.
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ARTICLE XIII
EXPENSES
Section 13.1 EXPENSES. Except as otherwise provided in this
Agreement, the Company shall be responsible for all and shall pay all expenses
out of funds of the Company determined by the Managing Members to be available
for such purpose, provided that such expenses or obligations are those of the
Company or are otherwise incurred by the Managing Members in connection with
this Agreement, including, without limitation:
(a) all costs and expenses related to the business of the Company
and all routine administrative expenses of the Company, including the
maintenance of books and records of the Company, the preparation and
dispatch to the Members of checks, financial reports, tax returns and
notices required pursuant to this Agreement and the holding of any
meetings of the Members;
(b) all expenses incurred in connection with any litigation
involving the Company (including the cost of any investigation and
preparation) and the amount of any judgment or settlement paid in
connection therewith (other than expenses incurred by any Managing Member
in connection with any litigation brought by or on behalf of any Member
against such Managing Member);
(c) all expenses for indemnity or contribution payable by the
Company to any Person;
(d) all expenses incurred in connection with the collection of
amounts due to the Company from any Person;
(e) all expenses incurred in connection with the preparation of
amendments and/or restatements to this Agreement; and
(f) all expenses incurred in connection with the dissolution,
winding up or termination of the Company.
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ARTICLE XIV
LIABILITY
Section 14.1 LIABILITY OF COMMON MEMBERS. Each Common Member, by
acquiring its Interest and being admitted to the Company as a Common Member,
shall be liable to the creditors of the Company (other than to Members holding
other classes of Interests, in their capacity as Members) (hereinafter referred
to individually as a "THIRD PARTY CREDITOR," and collectively as the "THIRD
PARTY CREDITORS") to the same extent that a general partner of a limited
partnership formed under the LP Act is liable under Section 17-403(b) of the LP
Act to creditors of the limited partnership (other than the other partners in
their capacity as partners), as if the Company were a limited partnership formed
under the LP Act and the Common Members were general partners of the limited
partnership. In furtherance but not in limitation of the generality of the
foregoing, each Common Member (i) is liable for any and all debts, obligations
and other liabilities of the Company, whether arising under contract or by tort,
statute, operation of law or otherwise, enforceable directly and absolutely
against each Common Member by each Third Party Creditor and (ii) is deemed to
and does assume, as a surety and not as a guarantor, each debt, obligation or
other liability of the Company to all Third Party Creditors.
Section 14.2 LIABILITY OF PREFERRED MEMBERS. (a) Except as
otherwise provided by the Delaware Act, (i) the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company and, to
the extent set forth in Section 14.1, the Common Members and (ii) no
Preferred Member shall be obligated personally for any such debt, obligation
or liability of the Company or the Common Member solely by reason of being a
Preferred Member of the Company.
(b) A Preferred Member, in its capacity as such, shall have no
liability in excess of (i) the amount of its capital contributions, (ii) its
share of any assets and undistributed profits of the Company, (iii) any
amounts required to be paid by such Preferred Member pursuant to Section 8.4
or 8.5 of this Agreement or any payment and/or indemnity in connection with
the registration of transfers of Preferred Securities and (iv) the amount of
any distributions wrongfully distributed to it.
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ARTICLE XV
TRANSFERS OF INTERESTS BY MEMBERS
Section 15.1 RIGHT OF ASSIGNEE TO BECOME A PREFERRED MEMBER. An
assignee shall become a Preferred Member upon compliance with the provisions of
Section 15.5 of this Agreement.
Section 15.2 EVENTS OF CESSATION OF MEMBERSHIP. A Person shall
cease to be a Member upon the lawful assignment of all of its Interests
(including any redemption, conversion exchange or other repurchase by the
Company or the Managing Members) or as otherwise provided herein.
Section 15.3 PERSONS DEEMED PREFERRED MEMBERS. The Company may
treat the Person in whose name any Preferred Certificate shall be registered on
the books and records of the Company as the sole holder of such Preferred
Certificate and of the Preferred Securities represented by such Preferred
Certificate for purposes of receiving Dividends and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Preferred Certificate or in the Preferred
Securities represented by such Preferred Certificate on the part of any other
Person, whether or not the Company shall have actual or other notice thereof.
Section 15.4 TRANSFER OF INTERESTS. (a) Preferred Securities
shall be freely transferable by a Preferred Member.
(b) Except as provided in the next sentence, a Managing Member may
not assign or transfer its Interest in whole or in part unless, prior to such
assignment or transfer, such Managing Member has obtained the consent of
Preferred Members holding not less than 66 2/3% in Liquidation Preference of the
Preferred Securities. A Managing Member may assign or transfer its Interest
without such consent only (i) to a Person that is the survivor of a merger or
consolidation of the Managing Member in a transaction that meets the
requirements of Section 16.1 of this Agreement or (ii) in exchange for interests
in a Person that is the survivor in a merger or consolidation that meets the
requirements of Section 16.2 of this Agreement. "PERMITTED SUCCESSOR" shall
mean a Person that is an assignee or transferee of the Interest of the Managing
Member as permitted by this Section 15.4(b). A Permitted Successor shall
execute a counterpart to this Agreement, and, without any further action on
the part of any Person, the Permitted Successor shall be deemed admitted to
the Company as a Managing Member immediately prior to the assignment or
transfer.
(c) Except as provided above, no Interest shall be transferred, in
whole or in part, except in accordance
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with the terms and conditions set forth in this Agreement. Any transfer or
purported transfer of any Interest not made in accordance with this Agreement
shall be null and void.
Section 15.5 TRANSFER OF PREFERRED CERTIFICATES. The Managing
Members shall provide for the registration of Preferred Certificates and of
transfers of Preferred Certificates. Upon surrender for registration of
transfer of any Preferred Certificate, the Managing Members shall cause one or
more new Preferred Certificates to be issued in the name of the designated
transferee or transferees. Every Preferred Certificate surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Managing Members duly executed by the
Preferred Security Preferred Member or his or her attorney duly authorized in
writing. Each Preferred Certificate surrendered for registration of transfer
shall be canceled by the Managing Members. A transferee of a Preferred
Certificate shall be admitted to the Company as a Preferred Member and shall
be entitled to the rights and subject to the obligations of a Preferred
Member hereunder upon receipt by such transferee of a Preferred Certificate.
By acceptance of a Preferred Certificate, each transferee shall be deemed to
have requested admission as a Preferred Member and to have agreed to be bound
by this Agreement. The transferor of a Preferred Certificate, in whole, shall
cease to be a Preferred Member at the time that the transferee of such
Preferred Certificate is admitted to the Company as a Preferred Member in
accordance with this Section 15.5.
Section 15.6 BOOK-ENTRY INTERESTS. The Preferred Certificates,
on original issuance, will be issued in the form of a global Preferred
Certificate or Preferred Certificates representing the Book-Entry Interests, to
be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Company. Such Preferred Certificate or Preferred Certificates shall initially
be registered on the books and records of the Company in the name of Cede & Co.,
the nominee of DTC, and no Preferred Security Owner will receive a definitive
Preferred Certificate representing such Preferred Security Owner's interests in
such Preferred Certificate, except as provided in Section 15.8 of this
Agreement. Unless and until definitive, fully registered Preferred Certificates
(the "DEFINITIVE PREFERRED CERTIFICATES") have been issued to the Preferred
Security Owners pursuant to Section 15.8 of this Agreement:
(i) The provisions of this Section shall be in full force and
effect;
(ii) The Company, the Managing Members and any Special Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of Dividends, Redemption Price and
liquidation proceeds on the Preferred Certificates and receiving
approvals, votes or consents hereunder) as the Preferred Member and the
sole holder of the
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Preferred Certificates and shall have no obligation to the Preferred
Security Owner; and
(iii) None of the Company, the Managing Members, any Special Trustee
or any agent of the Managing Members, the Company or any Special Trustee
shall have any liability with respect to or responsibility for the records
of the Clearing Agency.
Section 15.7 NOTICES TO CLEARING AGENCY. Whenever a notice or
other communication to the Preferred Members is required under this Agreement,
unless and until Definitive Preferred Certificates shall have been issued to the
Preferred Members pursuant to Section 15.8, the Managing Members and any Special
Trustee shall give all such notices and communications specified herein to be
given to the Preferred Members to the Clearing Agency, and shall have no
obligations to the Preferred Members.
Section 15.8 DEFINITIVE PREFERRED CERTIFICATES. If (i) the
Clearing Agency elects to discontinue its services as securities depository,
(ii) the Company elects to terminate the book-entry system through the Clearing
Agency, or (iii) there is an Event of Default under the Subordinated Debentures,
then Definitive Preferred Certificates shall be prepared by the Company. Upon
surrender of the global Preferred Certificate or Preferred Certificates
representing the Book-Entry Interests by the Clearing Agency, accompanied by
registration instructions, the Managing Members shall cause Definitive Preferred
Certificates to be delivered to Preferred Members in accordance with the
instructions of the Clearing Agency. Neither the Managing Members nor the
Company shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Any Person receiving a Definitive Preferred Certificate in accordance with this
Article XV shall be admitted to the Company as a Preferred Member upon receipt
of such Definitive Preferred Certificate and shall be registered on the books
and records of the Company as a Preferred Member. The Clearing Agency shall not
cease to be a Preferred Member until at least one Person receiving a Definitive
Certificate is admitted to the Company as a Preferred Member. The Definitive
Preferred Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as may be required by any national securities
exchange on which the Preferred Securities may be listed and is reasonably
acceptable to the Managing Members, as evidenced by their execution thereof.
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ARTICLE XVI
MERGERS, CONSOLIDATIONS AND SALES
Section 16.1 ST. PAUL. St. Paul shall not merge or consolidate
with or into another Person or permit another Person to merge or consolidate
with or into it, and shall not be replaced by, or convey, transfer or lease all
or substantially all of its properties and assets to another Person (each such
event, a "TRANSACTION") unless (i) at the time of such Transaction, no Event
of Default (as defined in the Indenture) shall have occurred and be continuing,
or would occur as a result of such Transaction, (ii) the survivor of such merger
or consolidation or the Person to which St. Paul's assets are sold, transferred
or leased is a Person organized under the laws of the United States or any state
thereof, such Person (if other than St. Paul) becomes a party to this Agreement
and becomes a Managing Member, assumes all of St. Paul's obligations under this
Agreement, and such Person has a net worth equal to at least 10% of the total
capital contributions made by the Members to the Company, (iii) prior to such
Transaction, St. Paul obtains an opinion of nationally recognized independent
counsel experienced in such matters to the effect that the Company will continue
to be classified as a partnership for federal income tax purposes after such
Transaction and (iv) in the case of any sale, transfer or lease of all or
substantially all of St. Paul's assets that includes St. Paul's Interest in the
Company, St. Paul has obtained the consent of Preferred Members holding not less
than 66 2/3% in Liquidation Preference of the Preferred Securities to the
Transaction.
Section 16.2. THE COMPANY. In addition, the Company may not,
and St. Paul shall not cause or allow the Company to, enter into a
Transaction which will result in St. Paul, the Company or the Preferred
Members being considered an "investment company" required to be registered
under the 1940 Act, except as described below. The Company may, either (i)
in order to avoid 1940 Act consequences adverse to St. Paul, the Company or
the Preferred Members, without the consent of the Preferred Members, or (ii)
with the prior approval of Preferred Members holding not less than 66 2/3% in
Liquidation Preference of the Preferred Securities, merge or consolidate with
or into, or be replaced by, a limited liability company, limited partnership
or trust organized as such under the laws of any state of the United States
of America; PROVIDED, that (i) such successor Person either (x) expressly
assumes all of the obligations of the Company under the Preferred Securities
or (y) substitutes for the Preferred Securities other securities (the
"SUCCESSOR SECURITIES") so long as the Successor
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Securities rank, with respect to participation in the profits or assets of the
successor entity, at least as high as the Preferred Securities rank, with
respect to participation in the profits or assets of the Company, (ii) St. Paul
expressly acknowledges such successor entity as the holder of the Subordinated
Debentures, (iii) such Transaction does not cause the Preferred Securities (or
the Successor Securities) to be delisted (or, in the case of any Successor
Securities, to fail to be listed) by any national securities exchange or other
organization on which the Preferred Securities are then listed, (iv) such
Transaction does not cause the Preferred Securities (or any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, as that term is defined by the Securities and Exchange Commission
for purposes of Rule 436(g)(2) under the Securities Act, (v) such Transaction
does not adversely affect the powers, preferences and other special rights of
the Preferred Members or the holders of any Successor Securities in any material
respect (other than with respect to any dilution of the holders' interest in the
new entity), (vi) prior to such Transaction St. Paul has received an opinion of
nationally recognized independent counsel to the Company experienced in such
matters to the effect that (w) such Transaction will not cause St. Paul, the
Company or such successor entity to become an "investment company" required to
be registered under the 1940 Act, (x) Preferred Members will not recognize any
gain or loss for federal income tax purposes as a result of such Transaction,
(y) such successor entity will not be treated as an association taxable as a
corporation for federal income tax purposes and (z) such Transaction will not
cause the Preferred Members to be generally liable for the debts, obligations
or liabilities of the Company or such successor person.
ARTICLE XVII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 17.1 NO DISSOLUTION. The Company shall not be dissolved
by the admission of Members. Except as provided in Sections 17.2(b) and (c),
the death, insanity, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member, or the occurrence of any other event which
terminates the continued membership of a Member in the Company, shall not in
and of itself cause the Company to be dissolved and its affairs wound up.
Upon the occurrence of any such event, the business of the Company shall be
continued without dissolution.
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<PAGE>
Section 17.2 EVENTS CAUSING DISSOLUTION. The Company shall be
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events:
(a) the expiration of the term of the Company, as provided in
Section 2.3 hereof;
(b) a decree or order by a court having jurisdiction in the
premises shall have been entered adjudging either of the Managing Members
a bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of either of the
Managing Members under any applicable federal or state bankruptcy or
similar law, and such decree or order shall have continued undischarged
and unstayed for a period of 90 days; or a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, trustee, assignee, sequestrator or similar official in
bankruptcy or insolvency of either of the Managing Members or of all or
substantially all of its property, or for the winding up or liquidation of
its affairs, shall have been entered, and such decree or order shall have
continued undischarged and unstayed for a period of 90 days or either of
the Managing Members shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization, arrangement, adjustment or composition under any
applicable federal or state bankruptcy or similar law, or shall consent to
the filing of any such petition, or shall consent to the appointment of a
receiver, liquidator, trustee, assignee, sequestrator or similar official
in bankruptcy or insolvency of either of the Managing Members or of all or
substantially all of its property, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its
debts generally as they become due and its willingness to be adjudged a
bankrupt, or corporate action shall be taken by either of the Managing
Members in furtherance of any of the aforesaid purposes;
(c) upon the bankruptcy, retirement, resignation,
expulsion or dissolution of any Managing Member or the occurrence of
any other event that terminates the continued membership in the Company
of such Managing Member under the Delaware Act;
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(d) a decision made by the Managing Members (subject to the voting
rights of Preferred Members set forth in Section 8.3(f)) to dissolve the
Company;
(e) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act;
(f) at the election of the Managing Members, in the event of a
Special Event in accordance with Section 8.3(g) of this Agreement;
(g) in connection with the redemption, exchange or conversion of
all outstanding Preferred Securities; or
(h) the written consent of all Members.
Section 17.3 NOTICE OF DISSOLUTION. Upon the dissolution of the
Company, the Managing Members shall promptly notify the Preferred Members of
such dissolution.
Section 17.4 LIQUIDATION. Upon dissolution of the Company, the
Managing Members or, in the event that the dissolution is caused by an event
described in Sections 17.2(b) or (c) of this Agreement and there are no Managing
Members, a Person or Persons who may be approved by the Preferred Members
holding not less than a Majority in Liquidation Preference, as liquidating
trustees, shall immediately commence to wind up the Company's affairs;
PROVIDED, HOWEVER, that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of liabilities to
creditors so as to minimize the losses attendant upon a liquidation. The
proceeds of liquidation shall be distributed, as realized, in the manner
provided in Section 18-804 of the Delaware Act, subject to the provisions of
Section 17.5.
Section 17.5 CERTAIN RESTRICTIONS ON LIQUIDATION PAYMENTS. In
the event of any voluntary or involuntary dissolution of the Company other than
in connection with the redemption, exchange or conversion of all outstanding
Preferred Securities or the dissolution of the Company in the event of a Special
Event in accordance with Section 8.3(g) of this Agreement. Preferred Members
holding Preferred Securities at the time outstanding will be entitled to receive
out of the assets of the Company legally available for distribution to Members,
before any distribution of assets is made to Common Members, the Liquidation
Distribution. If, upon any such liquidation, the Liquidation Distributions can
be paid only in part because the Company has insufficient assets available to
pay
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in full the aggregate Liquidation Distributions, then the amounts payable
directly by the Company on the Preferred Securities shall be paid on a PRO
RATA basis.
Section 17.6 TERMINATION. The Company shall terminate when
all of the assets of the Company have been distributed in the manner provided
for in this Article XVII, and the Certificate shall have been canceled in the
manner required by the Delaware Act.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 AMENDMENTS. Except as provided by Section 8.3(f) of
this Agreement, this Agreement may be amended by a written instrument executed
by the Managing Members without the consent of any Preferred Member; PROVIDED,
HOWEVER, that no amendment shall be made, and any such purported amendment
shall be void and ineffective, to the extent the result thereof would be to
cause the Company to be treated as anything other than a partnership for
purposes of United States income taxation or require the Company to register
under the 1940 Act.
Section 18.2 AMENDMENT OF CERTIFICATE. In the event this
Agreement shall be amended pursuant to Section 18.1, the Managing Members shall
amend the Certificate to reflect such change if it deems such amendment of the
Certificate to be necessary or appropriate.
Section 18.3 SUCCESSORS; COUNTERPARTS. This Agreement (a) shall
be binding as to the executors, administrators, estates, heirs and legal
successors, or nominees or representatives, of the Members and (b) may be
executed in several counterparts with the same effect as if the parties
executing the several counterparts had all executed one counterpart.
Section 18.4 LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflict of laws thereof. In particular,
this Agreement shall be construed to the maximum extent possible to comply with
all of the terms and conditions of the Delaware Act. If, nevertheless, it shall
be determined by a court of competent jurisdiction that any provisions or
wording of this Agreement shall be invalid or unenforceable under the Delaware
Act or other applicable law, such
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<PAGE>
invalidity or unenforceability shall not invalidate the entire Agreement. In
that case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of
applicable law, and, in the event such term or provisions cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions. If it shall be determined by a court of competent jurisdiction that
any provision relating to the distributions and allocations of the Company or to
any fee payable by the Company is invalid or unenforceable, this Agreement shall
be construed or interpreted so as (a) to make it enforceable or valid and (b) to
make the distributions and allocations as closely equivalent to those set forth
in this Agreement as is permissible under applicable law.
Section 18.5 FILINGS. Following the execution and delivery of
this Agreement, the Managing Members shall promptly prepare any documents
required to be filed and recorded under the Delaware Act, and the Managing
Members shall promptly cause each such document to be filed and recorded in
accordance with the Delaware Act and, to the extent required by local law, to be
filed and recorded or notice thereof to be published in the appropriate place in
each jurisdiction in which the Company may hereafter establish a place of
business. The Managing Members shall also promptly cause to be filed, recorded
and published such statements of fictitious business name and any other notices,
certificates, statements or other instruments required by any provision of any
applicable law of the United States or any state or other jurisdiction which
governs the conduct of its business from time to time.
Section 18.6 POWER OF ATTORNEY. Each Preferred Member does
hereby constitute and appoint each Managing Member and its duly elected officers
as its true and lawful representative and attorney-in-fact, in its name, place
and stead to make, execute, sign, deliver and file (a) any amendment of the
Certificate required because of an amendment to this Agreement or in order to
effectuate any change in the membership of the Company, (b) any amendments to
this Agreement made in accordance with the terms hereof and (c) all such other
instruments, documents and certificates which may from time to time be required
by the laws of the United States of America, the State of Delaware or any other
jurisdiction, or any political subdivision or agency thereof, to effectuate,
implement and continue the valid and subsisting existence of the Company or to
dissolve the Company or for any other purpose consistent with this Agreement and
the transactions contemplated hereby.
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<PAGE>
The power of attorney granted hereby is coupled with an interest and
shall (a) survive and not be affected by the subsequent death, incapacity,
disability, dissolution, termination or bankruptcy of the Preferred Member
granting the same or the transfer of all or any portion of such Preferred
Member's Interest and (b) extend to such Preferred Member's successors, assigns
and legal representatives.
Section 18.7 EXCULPATION. (a) No Covered Person shall be liable
to the Company or any Member for any loss, damage or claim incurred by reason of
any act or omission performed or omitted by such Covered Person in good faith on
behalf of the Company and in a manner reasonably believed to be within the scope
of authority conferred on such Covered Person by this Agreement.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
Section 18.8 INDEMNIFICATION. To the fullest extent permitted by
applicable law, each Covered Person shall be entitled to indemnification from
the Company for any loss, damage or claim incurred by such Covered Person by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement; PROVIDED, HOWEVER, that any indemnity under this Section 18.8
shall be provided out of and to the extent of Company assets only, and no Member
shall have any personal liability on account thereof.
Section 18.9 ADDITIONAL DOCUMENTS. Each Preferred Member, upon
the request of the Managing Members, agrees to perform all further acts and
execute, acknowledge and deliver any documents that may be reasonably necessary
to carry out the provisions of this Agreement.
Section 18.10 NOTICES. All notices provided for in this
Agreement shall be in writing, duly signed by the
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party giving such notice, and shall be delivered, telecopied or mailed by
registered or certified mail, as follows:
(i) If given to the Company, in care of the Managing Members at the
Company's mailing address set forth below:
c/o The St. Paul Companies, Inc.
385 Washington Street
St. Paul, Minnesota 55102
Facsimile No.: (612) 221-8304
Attention: Vice President and Corporate
Secretary
(ii) If given to any Member, at the address set forth on the records
of the Company maintained by or on behalf of the Company.
Subject to Sections 8.3(d) and 8.3(f)(ii) of this Agreement, each such notice,
request or other communication shall be effective (a) if given by telecopier,
when transmitted to the number specified in such registration books and the
appropriate confirmation is received, (b) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (c) if given by any other means, when delivered at
the address specified in such registration books.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above stated.
THE ST. PAUL COMPANIES, INC.
By: __________________________
Name:
Title:
ST. PAUL CAPITAL HOLDINGS, INC.
By: __________________________
Name:
Title:
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<PAGE>
ANNEX A
[FORM OF PREFERRED CERTIFICATE]
[IF A GLOBAL Preferred Certificate ADD --]
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to St. Paul
Capital L.L.C. or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede &
Co. (or in such other name as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof,
Cede & Co., has an interest herein.]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Certificate Number Number of Preferred Securities
- --------------------------------------------------------------------------------
R-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUSIP NO.
CERTIFICATE EVIDENCING PREFERRED SECURITIES
of
ST. PAUL CAPITAL L.L.C.
* % Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security)
St. Paul Capital L.L.C., a limited liability company formed under
the laws of the State of Delaware (the "Company"), hereby certifies that _____
(the "Preferred Member") is the registered owner of _______ preferred securities
of the Company representing limited liability company interests in the Company,
which are designated the * % Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are fully paid and are nonassessable
A-1
<PAGE>
limited liability company interests in the Company, as to which the Members in
the Company who hold the Preferred Securities (the "Preferred Members"), in
their capacities as such, have no liability in excess of their obligations to
make payments provided for in the L.L.C. Agreement (as defined below) and their
share of the Company's assets and undistributed profits (subject to their
obligation to repay any funds wrongfully distributed to them), and are freely
transferable on the books and records of the Company, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The powers, preferences and special rights and
limitations of the Preferred Securities are set forth in, and this certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Limited Liability Company Agreement of the Company dated as of *, 1995, as the
same may be amended from time to time in accordance with its terms (the "L.L.C.
Agreement"), authorizing the issuance of the Preferred Securities and
determining the powers, preferences and other special rights and limitations,
regarding Dividends, voting, return of capital and otherwise, and other matters
relating to the Preferred Securities. Capitalized terms used herein but not
defined herein shall have the meaning given them in the L.L.C. Agreement. The
Preferred Member is entitled to the benefits of the Guarantee Agreement of The
St. Paul Companies, Inc., a Minnesota corporation ("St. Paul"), dated as of * ,
1995 (the "Guarantee") to the extent provided therein. The Company will furnish
a copy of the L.L.C. Agreement and the Guarantee to the Preferred Member without
charge upon written request to the Company at its principal place of business.
The Preferred Member, by accepting this certificate, is deemed to
have agreed (i) to be bound by the provisions of the L.L.C. Agreement, including
the provisions of the L.L.C. Agreement concerning the exchange of the Preferred
Securities for Depositary Shares representing fractional interests in St. Paul
Preferred Stock and (ii) that the Subordinated Debentures acquired by the
Company with the proceeds from the issuance of the Preferred Securities are
subordinated and junior in right of payment to all Senior Indebtedness of St.
Paul as and to the extent provided in the Subordinated Debentures and (iii) that
the Guarantee ranks (x) subordinate and junior in right of payment to all Senior
Indebtedness of St. Paul, and (y) PARI PASSU with the most senior preferred
or preference stock now or hereafter issued by St. Paul and with any guarantee
now or hereafter entered into by St. Paul in respect of any preferred or
preference stock of any Affiliate of St. Paul, and (z) senior to St. Paul
A-2
<PAGE>
Common Stock and any other class or series of capital stock of St. Paul or any
of its Affiliates which by its express terms ranks junior in the payment of
Dividends and amounts on dissolution, and winding-up to the
Preferred Securities, in each case, as and to the extent provided in the
Guarantee. Upon receipt of this certificate, the Preferred Member is admitted
to the Company as a Preferred Member, is bound by the L.L.C. Agreement and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, this certificate has been executed on behalf of
the Company by its duly authorized Managing Member and countersigned by a duly
authorized officer of each of The St. Paul Companies, Inc., as Guarantor, and
The Chase Manhattan Bank (National Association), as Registrar and Transfer Agent
this _____ day of _________________, ____.
ST. PAUL CAPITAL L.L.C.
By: THE ST. PAUL COMPANIES, INC.,
as Managing Member
By:
------------------------------
Name:
Title:
By: THE ST. PAUL COMPANIES, INC.,
as Guarantor
By:
-------------------------------
Name:
Title:
Registered and Countersigned by
The Chase Manhattan Bank (National Association)
By:
---------------------------
Authorized Signature
A-3
<PAGE>
ANNEX B
[FORM OF NOTICE OF CONVERSION]
St. Paul Capital L.L.C.
* % Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security)
To: The Chase Manhattan Bank (National Association)
Conversion Agent
[ADDRESS OF CONVERSION AGENT]
The undersigned (the "Preferred Member") hereby irrevocably
exercises its option to convert * % Convertible Monthly Income Preferred
Securities (liquidation preference $50 per Preferred Security) (the "Preferred
Securities") of St. Paul Capital L.L.C. (the "Company"), as designated below and
surrendered herewith to the Conversion Agent, into shares of Common Stock,
without par value (the "St. Paul Common Stock"), of The St. Paul Companies, Inc.
("St. Paul") in accordance with the terms of the Amended and Restated Limited
Liability Company Agreement of the Company, dated as of *, 1995, as the same
may be amended from time to time in accordance with its terms (the
"Agreement").
The Preferred Member directs the Conversion Agent, on behalf of the
Preferred Member, to effect the conversion of the Preferred Securities
designated under (A) below for shares of St. Paul Common Stock pursuant to and
in the manner described in Section 8.4 of the Agreement. The Conversion Agent
shall instruct St. Paul that the shares of St. Paul Common Stock issuable and
deliverable upon the conversion, together with any check in lieu of fractional
shares, be issued to the Preferred Member unless, in the case of the St. Paul
Common Stock, a different name has been indicated below and to deliver such
shares and such check, if any, to the Conversion Agent. The Conversion Agent
shall distribute, as promptly as possible after the date hereof, (x) the
certificate or certificates for the number of full shares of St. Paul Common
Stock issuable upon conversion of the Preferred Securities designated under (A)
below, (y) any check in lieu of fractional shares and (z) any certificate or
certificates issued by the Company for Preferred Securities surrendered herewith
but not designated for conversion under (a) below, to the person or persons
entitled to receive the same.
If shares of St. Paul Common Stock are to be issued in the name of a
person other than the Preferred Member, the Preferred Member will pay transfer
taxes payable with respect thereto.
B-1
<PAGE>
A. PREFERRED SECURITIES TO BE CONVERTED
Certificate Numbers of Surrendered
Certificate(s): _______________
Number of Preferred Securities to be
Converted: ____________
Number of Preferred Securities Surrendered
But Not to be Converted: ____________
B. SPECIAL ISSUANCE INSTRUCTIONS
To be completed if St. Paul Common Stock Certificate(s) and/or check in
lieu of fractional shares to be issued otherwise than to Preferred Member.
Please type or print.
_____________________
(Name) Social Security or
Other Taxpayer
Identification Number
________________________
_____________________
(Address)
_____________________
________________________
C. SIGNATURE
Dated: ________
_________________________
Signature of Preferred Member (must conform
in all respects to the name of the
registered owner of the Preferred Securities
certificate(s) specified in (A) and
surrendered herewith)
Signature Guaranteed By:
_________________________
B-2
<PAGE>
ANNEX C
[FORM OF NOTICE OF EXCHANGE]
St. Paul Capital L.L.C.
* % Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security)
To: The Chase Manhattan Bank (National Association)
Conversion Agent
[ADDRESS OF CONVERSION AGENT]
The undersigned holders of a majority in liquidation preference (the
"Preferred Members") of the * % Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security) (the "Preferred Securities")
of St. Paul Capital L.L.C. (the "Company") have, pursuant to an Exchange
Election on the date hereof, elected to cause the Conversion Agent to effect an
exchange of all (but not less than all) of the outstanding Preferred Securities
for Depositary Shares (the "Depositary Shares"), each representing a 1/100th
ownership interest in a share of Series C Cumulative Convertible Preferred Stock
(the "St. Paul Preferred Stock") of the St. Paul Companies, Inc. ("St. Paul") in
accordance with the terms of the Amended and Restated Limited Liability Company
Agreement of the Company, dated as of *, 1995, as the same may be amended from
time to time in accordance with its terms (the "Agreement"). Capitalized
terms not defined herein have the meanings ascribed to them in the Agreement.
The Preferred Members direct the Conversion Agent, on their behalf,
to effect the exchange of the Preferred Securities for Depositary Shares
pursuant to and in the manner described in Section 8.5 of the Agreement. The
Conversion Agent is directed to instruct St. Paul, as promptly as possible after
the date hereof, (x) to issue and deposit with the Depositary the number of
shares of St. Paul Preferred Stock issuable upon such exchange in return for a
Depositary Receipt or Receipts evidencing Depositary Shares, (y) to request the
Depositary to issue the Depositary Receipts evidencing Depositary Shares
issuable and deliverable upon the exchange to all registered owners of Preferred
Securities unless any such owners have indicated a different name or names on
copies of Attachment 1 hereto and (z) to deliver such Depositary Receipts to the
Conversion Agent. The Conversion Agent shall distribute, as promptly as
possible after the date hereof, the Depositary Receipt or Receipts to the Person
or Persons entitled to receive the same.
C-1
<PAGE>
If Depositary Receipts are to be issued in the name of a Person
other than a registered owner of Preferred Securities as specified on one or
more copies of Attachment 1 hereto, each owner requesting such special issuance
will pay any transfer taxes payable with respect thereto.
SIGNATURES OF PREFERRED MEMBERS
Signatures of Preferred Members must conform in all respects to the names of
registered owners of Preferred Securities. This Notice of Exchange may be
executed in more than one counterpart of this signature page with the same
effect as though all Preferred Members had signed on a single page.
Dated: _______________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
C-2
<PAGE>
ATTACHMENT 1 TO NOTICE OF EXCHANGE
SPECIAL ISSUANCE INSTRUCTIONS
To be completed if Depositary Receipt(s) are to be issued otherwise than to
registered owners of Preferred Securities. Please type or print.
Name of
Registered Owner Number of Preferred
of Preferred Securities: Securities Owned:
- ------------------------ -------------------
_______________________ ____________________
Person to whom
Depositary Receipts
To Be Issued:
- -----------------------
Social Security or
_______________________ Other Taxpayer
(Name) Identification Number:
----------------------
_______________________ ______________________
(Address)
Signature of Registered Owner
of Preferred Securities: Signature Guaranteed by:
_______________________ ____________________
C-3
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
The St. Paul Companies, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
Our reports refer to changes in the method of accounting for certain
investments, reinsurance, income tax and postretirement benefits other
than pensions.
/s/ KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
May 9, 1995
