<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-----------------------------------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934
For the transition period from to
------------------ ------------------
Commission File Number 1-11457
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ST. PAUL CAPITAL L.L.C.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 41-1806290
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
385 Washington St., Saint Paul, MN 55102
---------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 221-7911
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
----- -----
<PAGE>
ST. PAUL CAPITAL L.L.C.
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Condensed Statement of Income, (Unaudited), for the
period from May 16, 1995 through June 30, 1995 3
Condensed Balance Sheet (Unaudited) as of June 30, 1995 4
Condensed Statement of Cash Flows (Unaudited), for
the period from May 16, 1995 through June 30, 1995 5
Notes to Condensed Financial Statements (Unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature 9
EXHIBIT INDEX 10
<PAGE>
PART I FINANCIAL INFORMATION
ST. PAUL CAPITAL L.L.C.
Condensed Statement of Income
For the period from May 16, 1995 through June 30, 1995
Unaudited
(In thousands)
<TABLE>
<CAPTION>
Revenues:
<S> <C>
Interest income from The St. Paul Companies, Inc.
6% Convertible Subordinated Debentures $1,966
-----
Total revenues 1,966
-----
Expenses: 0
-----
Net income 1,966
Dividends on 6% Convertible Monthly Income
Preferred Securities 1,553
-----
Earnings available for Common Securities $ 413
=====
</TABLE>
See notes to condensed financial statements.
<PAGE>
ST. PAUL CAPITAL L.L.C.
Condensed Balance Sheet
June 30, 1995
Unaudited
(In thousands)
<TABLE>
<S> <S>
Assets:
The St. Paul Companies, Inc.
6% Convertible Subordinated Debentures $262,026
--------
Total assets $262,026
========
6% Convertible Monthly Income Preferred Securities
(4,140 securities issued and outstanding,
at liquidation preference of $50 per security) $207,000
Common Securities 55,026
--------
Total Preferred Securities and Common Securities $262,026
========
</TABLE>
See notes to condensed financial statements.
<PAGE>
ST. PAUL CAPITAL L.L.C.
Consolidated Statement of Cash Flows
For the period from May 16, 1995 through June 30, 1995
Unaudited
(In thousands)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 1,966
--------
Net cash provided by operating activities 1,966
--------
INVESTING ACTIVITIES
Purchase of investments (262,026)
--------
Net cash used in investing activities (262,026)
--------
FINANCING ACTIVITIES
Proceeds from issuance of 6% Convertible
Monthly Income Preferred Securities 207,000
Capital contributions from The St. Paul
Companies, Inc. and St. Paul Capital Holdings, Inc. 55,026
Preferred dividends (1,553)
Common distributions (413)
--------
Net cash provided by financing activities 260,060
--------
Change in cash 0
Cash at beginning of period 0
--------
Cash at end of period $ 0
========
</TABLE>
See notes to condensed financial statements.
<PAGE>
ST. PAUL CAPITAL L.L.C.
Notes to Condensed Financial Statements
Unaudited
June 30, 1995
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of St. Paul Capital
L.L.C. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all necessary
adjustments have been reflected for a fair presentation of the results of
operations, financial position and cash flows. The results for an interim
period are not necessarily indicative of the results to be expected for the
entire year.
NOTE 2 FORMATION OF THE COMPANY AND ISSUANCE OF SECURITIES
St. Paul Capital L.L.C. (the "Company") is a special purpose, limited liability
company formed under the laws of the State of Delaware by The St. Paul
Companies, Inc., ("The St. Paul") which owns, directly and indirectly through
its wholly-owned subsidiary, St. Paul Capital Holdings, Inc., all the
outstanding common limited liability company interests ("Common Securities") of
the Company. The Company was formed exclusively for the purposes of issuing
preferred limited liability company interests ("Preferred Securities") and
investing the proceeds thereof, together with substantially all the capital
contributed in respect of the Common Securities, in Convertible Subordinated
Debentures of The St. Paul. The Company had no operating history prior to its
incorporation on April 4, 1995, and is not engaged in (and will not engage in)
any activity other than the issuance of its Common and Preferred Securities and
the investment of proceeds thereof in the Convertible Subordinated Debentures of
The St Paul. The Company is managed by The St. Paul in its capacity as direct
and indirect holder of all the Common Securities of the Company.
On May 16, 1995, the Company issued $207 million of 6% Convertible Monthly
Income Preferred Securities ("MIPS"). Holders of the MIPS are entitled to
receive cumulative cash distributions ("dividends") at an annual rate of 6% of
the liquidation preference of $50 per security. The proceeds from the sale of
the MIPS along with the capital contributed with respect to the Common
Securities (together amounting to $262 million) were invested in The St. Paul's
Convertible Subordinated Debentures (the "Debentures"). The Debentures bear an
interest rate of 6% per annum and are due and payable on May 31, 2025.
<PAGE>
ST. PAUL CAPITAL L.L.C.
Notes to Condensed Financial Statements, continued
Interest and principal payments on the Debentures are intended to fund the
payment of dividends and redemption and liquidation distributions on the MIPS
and Common Securities. The payment of dividends and all payments upon
liquidation or redemption of the MIPS are guaranteed by The St. Paul to the
extent described in the Registration Statement on Form S-3 (No. 33-58491) of the
Company and The St. Paul. The St. Paul has the right under the Debentures to
extend interest payment for periods up to 60 months, and as a result, monthly
dividends on the MIPS may be deferred (but will continue to accumulate, together
with additional dividends on any accumulated but unpaid dividends at the
dividend rate) by the Company during such extended interest payment period.
The MIPS are convertible, at the option of the holders at any time, into 0.8475
shares of The St. Paul's common stock (equivalent to a conversion price of $59
per common share). On and after May 31, 1999, the Company, provided that the
Company is current in the payment of dividends, may cause the conversion rights
of holders of the MIPS to expire, if for 20 trading days within any period of 30
consecutive trading days, the current market price of The St. Paul's common
stock exceeds 120% of the conversion price of the MIPS.
The MIPS have no maturity date, but are subject to mandatory redemption upon the
repayment at maturity of the Convertible Subordinated Debentures on May 31, 2025
or as a result of the acceleration of the Convertible Subordinated Debentures.
<PAGE>
ST. PAUL CAPITAL L.L.C.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the period from May 16, 1995 through June 30, 1995
St. Paul Capital L.L.C. (the "Company") is a special purpose finance subsidiary
of The St. Paul Companies, Inc. ("The St. Paul"). The Company had no operating
history prior to its incorporation on April 4, 1995, and was formed for the sole
purpose of issuing securities and investing the proceeds thereof in debt
securities issued by The St. Paul. The Company is managed by The St. Paul in
its capacity as the direct and indirect holder of all the common securities of
the Company.
Net income for the period ended June 30, 1995 was $1.966 million, representing
income received from The St. Paul at an annual rate of 6% for the period from
May 16, 1995 through June 30, 1995.
Assets at June 30, 1995 totaled $262.0 million, representing the principal
amount of 6% Convertible Subordinated Debentures purchased from The St. Paul.
Common interests at June 30, 1995 totaled $55.0 million, representing capital
contributions from The St. Paul and its wholly-owned subsidiary, St. Paul
Capital Holdings, Inc.
The Company's sole source of cash is from interest and principal payments
received from The St. Paul which are intended to fund the payment of dividends
and redemption and liquidation distributions on the MIPS issued by the Company.
See "Note 2 Formation of the Company and Issuance of Securities" to the
condensed financial statements for further discussion of the Company and its
activities.
The Company believes that it meets certain criteria whereby it is exempt from
the periodic filing requirements of the Securities Exchange Act of 1934 (the
"Exchange Act") and has submitted a request to the Securities and Exchange
Commission ("SEC") for such exemption, or alternately, confirmation from the SEC
that it will not recommend any enforcement action if the Company does not comply
with the periodic reporting requirements of the Exchange Act. As a
precautionary measure and without prejudice to such request, the Company elected
to file this Form 10-Q for the period ended June 30, 1995. At such time that
the Company receives a favorable response from the SEC, the Company will
discontinue its filings under the Exchange Act.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. An exhibit index is set forth on page 10 of this
report.
(b) Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ST. PAUL CAPITAL L.L.C.
-----------------------
(Registrant)
By The St. Paul Companies, Inc.
as Managing Member
Date: August 9, 1995 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
<PAGE>
EXHIBIT INDEX
How
Exhibit Filed
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2.1 Certificate of Formation of St. Paul Capital L.L.C. ............(1)
2.2 Amended and Restated Limited Liability Agreement
of St. Paul Capital L.L.C. ....................................(2)
4.1 St. Paul Capital Preferred Securities
Certificate (included in 2.2) .................................(2)
4.5 Guarantee Agreement ............................................(2)
27 Financial Data Schedule ........................................(2)
(1) Incorporated by reference to Registration Statement on
Form S-3 (File No. 33-58491).
(2) Filed herewith.
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ST. PAUL CAPITAL L.L.C.
DATED AS OF MAY 16, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINED TERMS Page
----
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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. . . . . . . . . . . . . . . . 13
Section 4.5 Allocation of Distributions . . . . . . . . . . . . . . . . . . 14
Section 4.6 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7 Interests as Personal Property. . . . . . . . . . . . . . . . . 14
-i-
<PAGE>
Page
----
ARTICLE V
MEMBERS
Section 5.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.2 Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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. . . . . . . . . . . . . . . . . . . . . . . 19
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 . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 8.1 Common Securities and Preferred Securities. . . . . . . . . . . 22
Section 8.2 General Provisions Regarding Preferred
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.3 Preferred Securities. . . . . . . . . . . . . . . . . . . . . . 24
Section 8.4 Conversion Rights of Preferred Securities . . . . . . . . . . . 29
-ii-
<PAGE>
Page
----
Section 8.5 Optional Exchange for Depositary Shares
Representing St. Paul Preferred Stock . . . . . . . . . . . . 34
ARTICLE IX
VOTING AND MEETINGS
Section 9.1 Voting Rights of Preferred Members . . . . . . . . . . . . . . 37
Section 9.2 Voting Rights of Holders of
Common Securities . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.3 Meetings of the Members . . . . . . . . . . . . . . . . . . . . 38
ARTICLE X
DIVIDENDS
Section 10.1 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.2 Limitations on Distributions . . . . . . . . . . . . . . . . . 40
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 Books and Records; Accounts. . . . . . . . . . . . . . . . . . 40
Section 11.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . 40
Section 11.3 Limitation on Access to Records. . . . . . . . . . . . . . . . 40
Section 11.4 Accounting Method. . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.5 Annual Audit . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XII
TAX MATTERS
Section 12.1 Company Tax Returns. . . . . . . . . . . . . . . . . . . . . . 41
Section 12.2 Tax Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.3 Taxation as a Partnership. . . . . . . . . . . . . . . . . . . 41
Section 12.4 Taxation of Partners . . . . . . . . . . . . . . . . . . . . . 42
-iii-
<PAGE>
Page
----
ARTICLE XIII
EXPENSES
Section 13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XIV
LIABILITY
Section 14.1 Liability of Common Members. . . . . . . . . . . . . . . . . . 43
Section 14.2 Liability of Preferred Members . . . . . . . . . . . . . . . . 43
ARTICLE XV
TRANSFERS OF INTERESTS BY MEMBERS
Section 15.1 Right of Assignee to Become a Preferred
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 15.2 Events of Cessation of Membership. . . . . . . . . . . . . . . 44
Section 15.3 Persons Deemed Preferred Members . . . . . . . . . . . . . . . 44
Section 15.4 Transfer of Interests. . . . . . . . . . . . . . . . . . . . . 44
Section 15.5 Transfer of Preferred Certificates . . . . . . . . . . . . . . 45
Section 15.6 Book-Entry Interests . . . . . . . . . . . . . . . . . . . . . 45
Section 15.7 Notices to Clearing Agency . . . . . . . . . . . . . . . . . . 46
Section 15.8 Definitive Preferred Certificates. . . . . . . . . . . . . . . 46
ARTICLE XVI
MERGERS, CONSOLIDATIONS AND SALES
Section 16.1 St. Paul . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.2 The Company. . . . . . . . . . . . . . . . . . . . . . . . . . 47
-iv-
<PAGE>
Page
----
ARTICLE XVII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 17.1 No Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.2 Events Causing Dissolution . . . . . . . . . . . . . . . . . . 49
Section 17.3 Notice of Dissolution. . . . . . . . . . . . . . . . . . . . . 50
Section 17.4 Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 17.5 Certain Restrictions on Liquidation
Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 17.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 18.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . 51
Section 18.3 Successors; Counterparts . . . . . . . . . . . . . . . . . . . 51
Section 18.4 Law; Severability. . . . . . . . . . . . . . . . . . . . . . . 51
Section 18.5 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 18.6 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . 52
Section 18.7 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 18.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 53
Section 18.9 Additional Documents . . . . . . . . . . . . . . . . . . . . . 53
Section 18.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ANNEX A -- Form of Preferred Certificate
Evidencing Preferred Securities
ANNEX B -- Form of Notice of Conversion
ANNEX C -- Form of Notice of Exchange
-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 May 16, 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 6% 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 6% 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.
"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
-2-
<PAGE>
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.
"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.
-3-
<PAGE>
"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 May 16,
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.
"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
1/100th interest in a share of St. Paul Preferred Stock deposited with the
Depositary pursuant to the Deposit Agreement.
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"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 May 31, 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, 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 May 16, 1995 of
St. Paul in favor of the Preferred Members with respect to the Preferred
Securities.
"INDENTURE" means the Indenture, dated as of May 16, 1995, among St.
Paul, the Company and the Trustee relating to the Subordinated Debentures.
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"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 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.
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"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.
"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
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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.
"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
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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, without par value, 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 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
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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 May 9,
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.
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.
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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 May 31, 2025, unless the Company 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 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.
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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.
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 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.
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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). 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.
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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.
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
Articles 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
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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 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;
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(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;
(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
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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.
(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;
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(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
(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 Preferred Securities then outstanding.
The Managing Members shall notify all Preferred Members of any notice of default
received from the Trustee with respect to Subordinated Debentures.
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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
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
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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:
(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
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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 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
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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.
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.
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(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, 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 " 6% CONVERTIBLE MONTHLY
INCOME PREFERRED SECURITIES".
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(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 6% 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 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 May 31,
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 6% 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 in 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
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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
(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
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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 Securities not
fewer than 30 nor more than 60 days prior to the date fixed for redemption
thereof. 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
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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 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 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 the
Managing Members elect to dissolve the Company, the Preferred Securities will
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 the Subordinated Debentures to be delivered upon such distribution
and (iv) any Preferred Certificates not held by
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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 $50 principal amount of
Subordinated Debentures, and (ii) immediately convert such Subordinated
Debentures and any accrued interest thereon into fully paid and nonassessable
shares of St. Paul Common Stock, at an initial rate of 0.8475 shares of St. Paul
Common Stock per $59 principal amount of Subordinated Debentures (which is
equivalent to a conversion price of $59 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 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
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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 May 31, 1999, 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 May
31, 1999). 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 DATE" shall be a date selected by the
Company which shall be
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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 written notice containing the same information set forth in the press
release 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 unless and until the Person requesting such issue has paid to the Company
the
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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, including any suc failure
caused by a deferral of interest payments on 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
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Preferred Securities then outstanding at an Exchange Election Meeting or, in the
absence of such meeting, upon receipt by the Company of written consents 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 interest
thereon for Depositary Shares, each representing a 1/100th interest in a fully
paid and non-assessable 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
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Depositary Share or 1/100th of a share of St. Paul Preferred Stock for each
Preferred Security). Any accumulated and 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
vote or consent, be treated as if they were not outstanding.
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 of the Members shall be vested exclusively in the Common
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Members. The Common Securities shall entitle the Common Members to vote in
proportion to their percentage ownership interest in the Company upon all
matters upon which Common Members have the right to vote. All Common Members
shall have the right to vote separately as a class on any matter on which the
Common Members have the right to vote regardless of the voting rights of any
other Member.
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 and (iii) instructions for the delivery of proxies or
consents.
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(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 (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.
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ARTICLE XI
BOOKS AND RECORDS
Section 11.1 BOOKS AND RECORDS; ACCOUNTS. The Managing Members shall
furnish annually to each Preferred Member St. Paul's Annual Report to
Shareholders containing audited consolidated financial statements of St. Paul,
as soon as such report is available after the end of each fiscal year of St.
Paul.
Section 11.2 FINANCIAL STATEMENTS. The Managing Members shall, as
soon as available after the end of each Fiscal Year, cause to be prepared and
mailed to each Preferred Member of record the unaudited financial statements of
the Company for such Fiscal Year prepared in accordance with generally accepted
accounting principles.
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 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.
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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.
ARTICLE XIII
EXPENSES
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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.
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")
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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 Members 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 to the extent set forth in the
Delaware Act.
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
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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_% 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 of 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 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
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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 bound by this Agreement. The
transferror 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 Preferred Certificates and shall have no obligation to the Preferred
Security Owner; and
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(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 entity 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 Securities rank, with respect to participation in
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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,
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;
(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;
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(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 in full the aggregate Liquidation Distributions, then the amounts payable
directly by the Company on the Preferred Securities and shall be paid on a PRO
RATA basis.
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<PAGE>
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 cancelled 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 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
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<PAGE>
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.
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
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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 party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
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<PAGE>
(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: /s/ Bruce A. Backberg
--------------------------
Name: Bruce A. Backberg
Title: Vice President and
Corporate Secretary
ST. PAUL CAPITAL HOLDINGS, INC.
By: /s/ Bruce A. Backberg
------------------------------
Name: Bruce A. Backberg
Title: Vice President and
Corporate Secretary
<PAGE>
ANNEX A
[FORM OF PREFERRED CERTIFICATE]
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 4,140,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP NO. 792856 20 5
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
ST. PAUL CAPITAL L.L.C.
6% 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 6% Convertible Monthly Income Preferred Securities
(liquidation preference $50 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are fully paid and are nonassessable
limited liability company interests in the Company, as to which the Members in
the Company who hold the Preferred
A-1
<PAGE>
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 May 16, 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 May 16, 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 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
A-2
<PAGE>
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 16th day of May, 1995.
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.
6% 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 6% 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 May 16, 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
B-1
<PAGE>
Preferred Member will pay transfer taxes payable with respect thereto.
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.
Social Security or
Other Taxpayer
------------------------- Identification Number
(Name)
------------------------- -------------------------
(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)
B-2
<PAGE>
Signature Guaranteed By:
-------------------------
B-3
<PAGE>
ANNEX C
[FORM OF NOTICE OF EXCHANGE]
St. Paul Capital L.L.C.
6% 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 6% 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 May 16, 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 Signature Guaranteed by:
of Preferred Securities:
------------------------ -------------------------
C-3
<PAGE>
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (this "Guarantee"), dated as of May 16, 1995, is
executed and delivered by The St. Paul Companies, Inc., a corporation organized
under the laws of the State of Minnesota ("St. Paul"), for the benefit of the
Holders (as hereinafter defined) from time to time of the Preferred Securities
(as hereinafter defined) of St. Paul Capital L.L.C., a limited liability company
formed under the laws of the State of Delaware ("St. Paul Capital" or the
"L.L.C.").
WHEREAS, St. Paul Capital desires to issue up to 4,140,000 of its 6%
Convertible Monthly Income Preferred Securities, with a liquidation preference
of $50 each (the "Preferred Securities"), and St. Paul desires to issue this
Guarantee for the benefit of the Holders, as provided herein; and
WHEREAS, St. Paul Capital will purchase the Subordinated Debentures
(as hereinafter defined) issued pursuant to the Indenture (as hereinafter
defined) with substantially all of the proceeds from the issuance and sale of
the Preferred Securities and its common limited liability company interests (the
"Common Securities"); and
WHEREAS, St. Paul desires to unconditionally and irrevocably agree, to
the extent set forth herein, to pay to the Holders the Guarantee Payments (as
hereinafter defined) and to perform the other obligations set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase St. Paul hereby agrees shall benefit
St. Paul, St. Paul executes and delivers this Guarantee for the benefit of the
Holders.
ARTICLE I
DEFINITIONS
As used in this Guarantee, the terms set forth below shall, unless the
context otherwise requires, have the following meanings. Capitalized terms used
herein but not otherwise defined herein shall have the meanings ascribed to such
terms in the Amended and Restated Limited Liability Company Agreement of
St. Paul Capital, dated as of May 16, 1995 (the "L.L.C. Agreement").
<PAGE>
1.1 "Additional Dividends" means Dividends which shall accumulate on
any Dividend arrearages in respect of the Preferred Securities at the rate of 6%
per annum, compounded monthly.
1.2 "Conversion Agent" shall mean The Chase Manhattan Bank (National
Association) and its successors, acting as agent of the Holders in effecting the
conversion of Preferred Securities into shares of St. Paul Common Stock or the
exchange of Preferred Securities for Depositary Shares, in each case as and in
the manner set forth in the L.L.C. Agreement.
1.3 "Deposit Agreement" shall mean the Deposit Agreement, dated as of
May 16, 1995 among St. Paul, the Depositary and the holders from time to time of
the Depositary Receipts.
1.4 "Depositary" shall mean The Chase Manhattan Bank (National
Association) and its successors and assigns.
1.5 "Depositary Receipt" shall mean one of the depositary receipts,
issued by the Depositary under the Deposit Agreement, each representing any
number of whole Depositary Shares.
1.6 "Depositary Share" shall mean one of the depositary shares, each
representing a one hundredth (1/100th) interest in a share of St. Paul Preferred
Stock deposited with the Depositary pursuant to the Deposit Agreement.
1.7 "Dividends" means the cumulative cash distributions from the
L.L.C. with respect to the Interests represented by the Preferred Securities,
accumulating from May 16, 1995 and payable monthly in arrears on the last day of
each calendar month of the year, commencing May 31, 1995.
1.8 "Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by St. Paul Capital: (a) any accumulated and
unpaid Dividends (including any Additional Dividends accrued thereon) which have
been declared on the Preferred Securities from funds legally available therefor;
(b) the Redemption Price (including all accumulated and unpaid Dividends and
distributions) payable with respect to Preferred Securities called for
redemption by St. Paul Capital 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
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Capital available for distribution to Holders in liquidation of St. Paul
Capital.
1.9 "Holder" shall mean any holder from time to time of any Preferred
Securities of St. Paul Capital; PROVIDED, HOWEVER, that in determining whether
the Holders of the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include
St. Paul or any Subsidiary thereof, either directly or indirectly.
1.10 "Indenture" shall mean the Indenture, dated as of May 16, 1995,
among St. Paul, St. Paul Capital and The Chase Manhattan Bank (National
Association), as trustee.
1.11 "Liquidation Distribution" shall mean the aggregate of the
stated liquidation preference of $50 per Preferred Security and all accumulated
and unpaid dividends and distributions (whether or not declared) to the date of
payment, including any Additional Dividends accrued thereon.
1.12 "Managing Members" means St. Paul and St. Paul's wholly-owned
subsidiary, St. Paul Capital Holdings, Inc., a corporation organized under the
laws of the State of Delaware, each in their capacity as the members and
managers of St. Paul Capital which hold all of St. Paul Capital's outstanding
Common Securities.
1.13 "Nuveen" shall mean The John Nuveen Company, a corporation
organized under the laws of the State of Delaware.
1.14 "Redemption Price" shall have the meaning ascribed to such term
in the L.L.C. Agreement.
1.15 "St. Paul Common Stock" shall mean the shares of Common Stock,
without par value, of St. Paul.
1.16 "St. Paul Preferred Stock" shall mean the Series C Cumulative
Convertible Preferred Stock of St. Paul, liquidation preference $50 per share.
1.17 "Subordinated Debentures" shall mean the 6% Convertible
Subordinated Debentures issued pursuant to the Indenture and sold by St. Paul to
the L.L.C. in connection with the issuance and sale by the L.L.C. of the
Preferred Securities. The Subordinated Debentures will evidence the loans to be
made by the L.L.C. to St. Paul of substantially all of the proceeds received by
the L.L.C. from the issuance and sale of the Preferred Securities and the Common
Securities.
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1.18 "Subsidiary" of any Person means a corporation more than 50% of
the outstanding voting stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries, or by such Person and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency. For the purposes of this definition neither
Nuveen nor any of Nuveen's consolidated subsidiaries is a Subsidiary of St.
Paul.
ARTICLE II
GUARANTEE
2.1 GENERAL. St. Paul irrevocably and unconditionally agrees to pay
in full to the Holders the Guarantee Payments, as and when due (except to the
extent paid by St. Paul Capital), regardless of any defense, right of set-off or
counterclaim which St. Paul Capital may have or assert. This Guarantee is
continuing, irrevocable, unconditional and absolute. St. Paul's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by St. Paul to the Holders or by causing St. Paul Capital to pay such
amounts to the Holders.
2.2 WAIVER OF CERTAIN RIGHTS. St. Paul hereby waives notice of
acceptance of this Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
2.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements
and duties of St. Paul under this Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by St. Paul Capital of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by St. Paul Capital;
(b) the extension of time for the payment by St. Paul Capital of all
or any portion of the Dividends, distributions, Additional Dividends,
Redemption Price, Liquidation Distribution or any other sums payable under
the terms of the Preferred
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Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of St. Paul Capital granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, St. Paul
Capital or any of the assets of St. Paul Capital;
(e) any invalidity of, or defect or deficiency in, any of the
Preferred Securities; or
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain any
consent of, St. Paul with respect to the happening of any of the foregoing.
2.4 HOLDERS MAY PROCEED DIRECTLY AGAINST ST. PAUL. This Guarantee is
a guarantee of payment and not of collection. A Holder may enforce this
Guarantee directly against St. Paul, and St. Paul waives any right or remedy to
require that any action be brought against St. Paul Capital or any other person
or entity before proceeding against St. Paul. Subject to Section 2.5 hereof,
all waivers herein contained shall be without prejudice to the Holders' right at
the Holders' option to proceed against St. Paul Capital, whether by separate
action or by joinder. St. Paul agrees that this Guarantee shall not be
discharged except by payment of the Guarantee Payments in full.
2.5 SUBROGATION. St. Paul shall be subrogated to all (if any) rights
of the Holders against St. Paul Capital in respect of any amounts paid to the
Holders by St. Paul under this Guarantee and shall have the right to waive
payment of any amount of dividends or distributions in respect of which payment
has been made to the Holders by St. Paul pursuant to Section 2.1 hereof;
PROVIDED, HOWEVER, that St. Paul shall not (except to the extent required by
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mandatory provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Guarantee. If any amount shall be
paid to St. Paul in violation of the preceding sentence, St. Paul agrees to pay
over such amount to the Holders.
2.6 INDEPENDENT OBLIGATIONS. St. Paul acknowledges that its
obligations hereunder are independent of the obligations of St. Paul Capital
with respect to the Preferred Securities and that St. Paul shall be liable as
principal and sole debtor under this Guarantee to make Guarantee Payments
pursuant to the terms of this Guarantee notwithstanding the occurrence of any
event referred to in subsections (a) through (f), inclusive, of Section 2.3
hereof.
2.7 TERMINATION. This Guarantee shall terminate and be of no further
force and effect upon full payment of the Redemption Price of all Preferred
Securities then outstanding, upon full payment of the amounts payable to the
Holders upon liquidation of St. Paul Capital or upon the conversion or exchange
(in the manner provided in the L.L.C. Agreement) of all Preferred Securities
into St. Paul Common Stock or Depositary Shares representing St. Paul Preferred
Stock, as the case may be, and the distribution of such stock or Depositary
Shares to the Holders of the Preferred Securities then outstanding; PROVIDED,
HOWEVER, that this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Guarantee for any reason whatsoever. St. Paul agrees to indemnify
each Holder and hold it harmless from and against any loss it may suffer in such
circumstances.
ARTICLE III
CERTAIN COVENANTS OF ST. PAUL
3.1 DIVIDENDS AND OTHER PAYMENTS. So long as any Preferred
Securities remain outstanding, neither St. Paul, nor any Subsidiary of St. Paul,
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
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<PAGE>
another class or series of capital stock) or make any Guarantee Payments with
respect to the foregoing (other than payments under this Guarantee or dividends
or Guarantee Payments to St. Paul by a Subsidiary of St. Paul), if at such time
St. Paul has exercised its option to extend the interest payment period on the
Subordinated Debentures and such extension is continuing, St. Paul shall be in
default with respect to its payment or other obligations hereunder 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 Subordinated
Debentures. St. Paul shall take all actions necessary to ensure the compliance
of its Subsidiaries with this Section 3.1.
3.2 CERTAIN OTHER COVENANTS. St. Paul covenants that, so long as any
Preferred Securities remain outstanding it shall: (i) not cause or permit any
Common Securities 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 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 Preferred Securities
outstanding for Depositary Shares) or either of the Managing Members; (v) cause
St. Paul and St. Paul Capital Holdings, Inc. to remain the Managing Members of
St. Paul Capital and timely perform all of their respective duties as Managing
Members (including the duty to declare and pay dividends on the Preferred
Securities); 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 United States federal income tax purposes; provided that,
notwithstanding the foregoing, 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 in the L.L.C. Agreement.
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<PAGE>
ARTICLE IV
SUBORDINATION
4.1 SUBORDINATION. St. Paul covenants and agrees, and each holder of
Preferred Securities by his acceptance of such Preferred Securities shall be
deemed to acknowledge and agree that for all purposes (including any bankruptcy,
insolvency, or reorganization of St. Paul) this Guarantee constitutes an
unsecured obligation of St. Paul ranking (i) subordinate and junior in right of
payment to all liabilities of St. Paul and the Subordinated Debenture, (ii) PARI
PASSU with the most senior preferred shares 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 (iii) senior
to St. Paul Common Stock and any other class or series of capital stock issued
by 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.
ARTICLE V
CONVERSION AND EXCHANGE OF PREFERRED SECURITIES
5.1 ISSUANCE OF ST. PAUL COMMON STOCK. St. Paul hereby agrees that,
upon the request of the Conversion Agent, on behalf of one or more Holders of
Preferred Securities, to convert Subordinated Debentures into St. Paul Common
Stock in accordance with the terms of the L.L.C. Agreement, St. Paul shall
deliver to the Conversion Agent certificates representing the full number of
shares of St. Paul Common Stock issuable upon conversion of such Subordinated
Debentures in accordance with the terms of the Indenture and such Subordinated
Debentures. St. Paul has reserved and will keep available for issuance, solely
for the purpose of effecting the conversion of the Subordinated Debentures, the
full number of shares of St. Paul Common Stock deliverable upon the conversion
of all outstanding Preferred Securities not theretofore converted.
5.2 VALIDITY OF ST. PAUL COMMON STOCK. St. Paul hereby represents
and warrants that all shares of St. Paul Common Stock delivered by St. Paul upon
such conversion will be duly and validly issued and fully paid and
nonassessable.
5.3 ISSUANCE OF ST. PAUL PREFERRED STOCK AND DEPOSITARY SHARES.
St. Paul hereby agrees that, upon the making of an Exchange Election by the
Holders of a majority
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in outstanding liquidation preference of the Preferred Securities in accordance
with the terms of the L.L.C. Agreement, it will issue one hundredth (1/100th) of
a share of St. Paul Preferred Stock in respect of each $50 principal amount of
Subordinated Debentures then outstanding. St. Paul further agrees to deposit as
soon as may be practicable after the Exchange Election the full number of shares
of St. Paul Preferred Stock so issuable with the Depositary and to cause to be
delivered to the Conversion Agent the Depositary Receipts representing
Depositary Shares issued in respect of the deposited shares of St. Paul
Preferred Stock. St. Paul shall reserve and keep available for issuance, solely
for the purpose of effecting such exchange, the full number of shares of
St. Paul Preferred Stock issuable upon exchange of all outstanding Preferred
Securities.
5.4 VALIDITY OF ST. PAUL PREFERRED STOCK AND DEPOSITARY SHARES. St.
Paul hereby represents and warrants that all shares of St. Paul Preferred Stock
issued by St. Paul upon such exchange will be duly and validly issued and fully
paid and nonassessable, and upon due issuance by the Depositary of Depositary
Receipts evidencing the Depositary Shares against the deposit of shares of
St. Paul Preferred Stock in accordance with the provisions of the Deposit
Agreement, such Depositary Receipts will be duly and validly issued and will
entitle the holders thereof to the rights specified in such Depositary Receipts
and in the Deposit Agreement.
5.5 TERMINATION OF OBLIGATION TO ISSUE ST. PAUL COMMON STOCK AND
ST. PAUL PREFERRED STOCK. St. Paul's obligations under this Article V to issue
St. Paul Common Stock shall terminate upon the termination of the right of
Holders of Preferred Securities to request the Conversion Agent to effect such
conversion as set forth in the L.L.C. Agreement and, with respect to a
particular Holder, upon such conversion. St. Paul's obligations under this
Article V to issue St. Paul Preferred Stock shall terminate upon the termination
of the right of Holders of Preferred Securities to make an Exchange Election as
set forth in the L.L.C. Agreement and upon such exchange.
ARTICLE VI
MISCELLANEOUS
6.1 THIRD PARTY BENEFICIARIES. All of St. Paul's representations,
warranties and obligations under this Guarantee shall be directly enforceable by
the Holders from
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time to time of the Preferred Securities. Each Holder of Preferred Securities
is an intended third-party beneficiary of this Guarantee.
6.2 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained
in this Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of St. Paul and shall inure to the benefit of the Holders.
Except as permitted by Section 6.4 hereof, St. Paul shall not assign its rights
or delegate its obligations hereunder without the prior approval of the Holders
of not less than 66-2/3% of the aggregate liquidation preference of all
Preferred Securities then outstanding.
6.3 AMENDMENTS. This Guarantee may only be amended by an instrument
in writing signed by St. Paul with the prior approval of the Holders of not less
than 66-2/3% of the aggregate liquidation preference of all Preferred Securities
then outstanding.
6.4 MERGER, CONSOLIDATION OR SALE OF ASSETS. St. Paul, without the
consent of any Holders of Preferred Securities, may merge or consolidate with or
into another entity or may permit another entity to merge or consolidate with or
into St. Paul, and may sell, transfer or lease all or substantially all of
St. Paul's assets to another entity, IF AND ONLY IF (a) at such time no Event of
Default (as defined in the Indenture) shall have occurred and be continuing, or
would occur as a result of such merger, consolidation or sale, transfer or lease
and (b) the successor is an entity organized under the laws of the United States
or any state thereof, acquires directly or indirectly all of the Common
Securities, assumes all of St. Paul's obligations under this Guarantee and has a
net worth equal to at least 10% of the total capital contributions to St. Paul
Capital.
6.5 NOTICES. Any notice, request or other communication required or
permitted to be given hereunder to St. Paul shall be given in writing by
delivering the same against receipt therefor by registered mail, hand delivery,
facsimile transmission (confirmed by registered mail) or telex, addressed to
St. Paul, as follows (and if so given, shall be deemed given when mailed; upon
receipt of facsimile confirmation, if sent by facsimile transmission; or upon
receipt of an answer-back, if sent by telex):
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The St. Paul Companies, Inc.
385 Washington Street
St. Paul, Minnesota 55102
Attention: Senior Vice President and
General Counsel
Telecopy: (612) 221-8204
Any notice, request or other communication required or permitted to be
given hereunder to the Holders shall be given by St. Paul in the same manner as
notices are sent by St. Paul Capital to the Holders.
6.6 GENDERS. The masculine and neuter genders used herein shall
include the masculine, feminine and neuter genders.
6.7 GUARANTEE NOT SEPARATELY TRANSFERABLE. This Guarantee is solely
for the benefit of the Holders and is not separately transferable from the
Preferred Securities.
6.8 GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
6.9 SEVERABILITY. In case any provision of this Guarantee shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.10 HEADINGS. The Article and section headings herein are for
convenience only and shall not affect the construction hereof.
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IN WITNESS WHEREOF, St. Paul has caused this Guarantee to be duly
executed as of the day and year first above written.
THE ST. PAUL COMPANIES, INC.
By: /s/ Bruce A. Backberg
---------------------------
Bruce A. Backberg
Vice President and
Corporate Secretary
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