STOCK OPTION AGREEMENT
UNDER THE
STOCK OPTION PLAN OF ____
AGREEMENT made as of the ____ day of _____________, by and
between USF&G Corporation (the "Corporation"), and
________________ (the "Option Holder").
WHEREAS, the Corporation has adopted the Stock Option Plan of
______ (the "Plan"); and
WHEREAS, by action of the Compensation Committee of the Board of
Directors of the Corporation (the "Committee"), the Option
Holder has been selected to participate in, and designated as a
Key Person under the Plan, and has this day been granted an
Option thereunder;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH: That in
consideration of the mutual promises and representations herein
contained and of other good and valuable consideration, the
Corporation and the Option Holder agree as follows:
1. The Corporation grants to the Option Holder the right
and option to purchase _____________________________(_____)
shares of the Common Stock of the Corporation at a
price of ______________________ Dollars ($_____) per share,
exercisable only as follows: up to 33 1/3% of the shares
may be purchased at any time before expiration of the Option and
after one year from the date hereof; up to 66 2/3% of the shares
may be purchased at any time before expiration of the Option and
after two years from the date hereof; and all of such shares may
be purchased at any time before expiration of the Option and
after three years from the date hereof; provided, however, that
all such shares may be purchased at any time after the
occurrence of a Fundamental Corporate Transaction as defined in
section 6 and in the Plan. The Option will expire on the date
ten (10) years and one day from the date hereof, subject to
earlier termination as provided herein or in the Plan.
2. This Agreement is subject to restrictions and
limitations set forth in the Plan, a copy of which is incorporated
by reference and made a part hereof. Pursuant to the Plan, but without
altering any of the provisions thereof: It is agreed that this
Option shall only be exercisable while the Option Holder is
employed by the Corporation or one of its subsidiaries, except
that:
(a) If the Option Holder retires under criteria established by
the Compensation Committee or becomes permanently disabled,
this Option may be exercised by him not later than one (1)
year after the date of such retirement or onset of permanent
disability, but only as to the vested shares eligible for
purchase under Section 1 as of the retirement date or date
of permanent disability; and
(b) If the Option Holder shall die and on the date of his
death was entitled to exercise this Option, this Option
may be exercised not later than one (1) year after his
death by his executor or administrator or other person at
the time entitled by law to his rights under this Option,
but only as to the vested shares eligible for purchase under
Section 1 at the date of death,
(c) The Committee, in its sole discretion, may permit the
Option Holder to settle this Option in lieu of exercise
if the participant becomes permanently disabled or as a
death benefit in accordance with the terms and conditions
of Article V of the Plan, and
(d) The Committee, in its sole discretion, may permit payment
of the option price to be by surrender of unrestricted
shares of the Common Stock of the Corporation (at their
then market value on the date of exercise), or by a
combination of cash, check and such surrendered shares.
3. It is agreed that in no event shall this Option be
exercisable by anyone after the expiration of ten (10) years and
one day after the date it is granted.
4. This Option shall be exercisable for the whole amount
then exercisable, at any time during the option period, or for any
part of the amount then exercisable (but not as to less than
ten (10) shares at any one time unless the exercise is to exhaust
this Option) from time to time during such period.
5. When an Option Holder desires to exercise his option
under the Plan, notice shall be given in writing to the Corporation
(Attn.: Corporate Secretary) of the number of shares to be
purchased and the date that the purchase is to be consummated.
Except as otherwise provided hereby, payment of the purchase
price is to be by check or money order and should accompany the
written notice of exercise.
6. For purposes of this Section and Section 1, a
"Fundamental Corporate Transaction" shall be and be deemed to occur on the
date (i) of the first purchase of shares of the Common Stock of
the Corporation pursuant to a tender offer or an exchange offer
(other than one made by the Corporation or holding company for
the Corporation) for all or any part of the Corporation's Common
Stock, (ii) of approval of the stockholders of the Corporation
of a merger, consolidation, sale, statutory or other share
exchange, or disposition of all or substantially all of the
Corporation's assets in which the Corporation (or holding
company for the Corporation) will not survive as a
publicly-owned corporation operating the business it operated
prior to such transaction or (iii) on which any entity, person
or group acquires beneficial ownership of shares of the
Corporation's Common Stock (whether in one or a series of
transactions), directly or indirectly, amounting to 30% or more
of the outstanding shares of such class. A "holding company for
the Corporation" means, in the foregoing, an entity that becomes
a holding company for the Corporation without altering or
planning to alter in any material respect the stockholders of
the Corporation or the business of the Corporation and its
subsidiaries as a whole, other than a case in which an
acquisition of another company by the Corporation or the holding
company is being accomplished concurrently.
7. This Option shall be non-transferable and non-assignable
except that this Option may be transferred by testamentary
instrument or by the laws of descent and distribution.
8. Upon exercise of this Option, Option Holder shall pay to
the Corporation, or shall authorize the Corporation to withhold in
accordance with applicable law from any compensation payable to
him, any taxes required to be withheld by federal, state or
local law as a result of the exercise of the Option.
9. This Agreement may be simultaneously executed in two
counterparts, each of which when so executed shall be deemed
to be an original; but such counterparts shall together
constitute but one and the same instrument.
10. This Agreement is not a contract of employment, and
shall not be construed to limit the right of the Corporation or a
subsidiary, as applicable, to terminate the Option Holder's
employment at any time, with or without cause.
11. The terms of this Agreement are also subject to any
additional requirements or limitations as set forth in
the Plan.
IN WITNESS WHEREOF, the parties hereto have duly executed or
caused this Agreement to be executed on the day and year first
above written.
USF&G CORPORATION
By____________________________
Senior Vice President
____________________________
Option Holder