EXHIBIT 10(u)


 


April 18, 2002


 


 


Mr. William H. Heyman


1111 Park Avenue, Apt. 9C


New York, NY  10128


 


Dear Bill:


 


It is my pleasure to provide
you with this letter to confirm our offer for the position of Executive Vice
President – Chief Investment Officer reporting directly to me.  I am very excited about the future of The
St. Paul, and your leadership and experience will be invaluable in building a
successful company.


 


Your employment terms and total
compensation package will consist of the following (effective on the first day
of employment):


 


	
  Term

  	
   

  	
  The term of
  this agreement shall be three (3) years from the first day of employment.

  
	
   

  	
   

  	
   

  
	
  Base Salary

  	
   

  	
  $500,000 per
  annum

  
	
   

  	
   

  	
   

  
	
  Annual Incentives

  	
   

  	
  You will be
  paid a bonus for 2002 of at least $500,000 in February of 2003, if you are
  actively employed by The St. Paul at that time.  For subsequent years commencing with 2003, the annual target
  opportunity for this position will be 100% of base salary.

  
	
   

  	
   

  	
   

  
	
  Initial Stock Option

  Award

  	
   

  	
  In
  recognition of joining The St. Paul, you will receive a grant of 200,000
  stock options on the first day of employment.  The grants will be non-qualified stock options, will have a
  grant price equal to the closing price of The St. Paul Companies common stock
  on the initial date of your employment, and will have a ten-year expiration
  period and four-year pro-rata (i.e., 50,000 options per year) vesting
  provision.  You will be responsible
  for all applicable taxes.  The options
  will include a “reload” feature.

  
	
   

  	
   

  	
   

  
	
  Stock Options

  	
   

  	
  For each
  year of the term commencing with 2003, you will also be eligible for an
  annual stock option grant each year of your employment with The St.
  Paul.  These options will be similar
  in terms and conditions to the options you receive as part of your initial stock
  option award.

  
	
   

  	
   

  	
   

  
	
  Executive Tax and

  Financial Planning

  	
   

  	
  You will be
  eligible for a first year allowance for 2002 of $15,000 and an annual
  allowance of $11,000 thereafter in tax and financial planning services
  (subject to subsequent change in benefit programs as discussed below).

  
	
   

  	
   

  	
   

  
	
  Executive Savings Plus

  	
   

  	
  You will be
  eligible for a non-qualified deferred compensation plan that allows
  executives to save money on a tax-deferred basis above IRS imposed limits for
  401(k) plans (subject to subsequent change in benefit programs as discussed
  below).

  
	
   

  	
   

  	
   

  
	
  Change in Control

  	
   

  	
  As a key
  employee, you will be eligible as a Tier One participant in the Amended and
  Restated Special Severance Policy which provides a lump-sum separation
  payment equal to three times the sum of your base salary and target annual
  incentive if your employment is terminated without cause or for “good reason”
  in a two year period following a change in control.  A copy of the plan is enclosed herewith.

  



 

















 


	
  Severance Plan

  	
   

  	
  If you are
  terminated without “cause” or voluntarily terminate your employment for “good
  reason” as defined before the end of the Term, you will be entitled to a
  severance payment within ten (10) business days following the date of
  termination equal to the greater of (i) the sum of (a) salary payable through
  the remainder of the Term (at your then current salary level) and (b) the
  amount of your target bonus pro-rated for the remainder of the Term, or (ii)
  the sum of your base salary and annual target bonus, and continuation of
  coverage under medical and dental plans for one year following
  termination.  All stock options and
  restricted stock awards granted more than one year before termination will
  vest.  Stock options will be eligible
  for exercise for up to three years from termination.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For purposes
  of this paragraph, “cause” means (A) your willful and continued failure to
  perform substantially your duties with The St. Paul (other than any such
  failure resulting from incapacity due to physical or mental illness) after a
  written demand for substantial performance is delivered to you which
  specifically identifies the manner in which you have not substantially
  performed your duties, or (B) your willful engagement in illegal conduct or
  gross misconduct which is demonstrably and materially injurious to The St.
  Paul or its affiliates.  In addition,
  “good reason” means (A) any material and adverse change in your duties or
  responsibilities with The St. Paul or a material and adverse change in your
  titles or offices with The St. Paul; (B) any reduction in your rate of annual
  base salary or annual target bonus opportunity; or (C) any requirement of The
  St. Paul that you be based anywhere more than thirty (30) miles from your
  office in either New York City or St. Paul.

  
	
   

  	
   

  	
   

  
	
  Miscellaneous

  	
   

  	
  In addition
  to the foregoing, you will be entitled to all changes in compensation
  structure (i.e., annual incentive targets), benefits and perquisites which
  are applicable to other senior executives of similar rank.  The benefits applicable to senior
  executives are currently being reviewed in connection with a comprehensive
  review of all employee benefit plans. 
  In the event of any changes in such benefit plans, you will be
  extended the same benefits applicable to other senior executives of similar
  rank.  You will also be entitled to
  first class air travel.

  



 


If you have any questions at
any time, please give me a call at 651-310-5656.


 


Sincerely,


 


 


	
  Jay S.
  Fishman

  	
   

  
	
  Jay S.
  Fishman

  
	
  Chairman
  & CEO

  
	
   

  
	
   

  
	
  Accepted:

  
	
   

  
	
   

  
	
  William H.
  Heyman

  	
   

  
	
  William H.
  Heyman

  
	
  Date: April
  18, 2002