EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of November 10, 1993, between
USF&G CORPORATION, a Maryland corporation (the "Corporation"),
and NORMAN P. BLAKE, JR. (the "Executive").
W I T N E S S E T H:
Pursuant to an Employment Agreement dated November 20, 1990
(the "Initial Employment Agreement"), the Executive is serving as
the Corporation's Chief Executive Officer having chief executive
responsibility with respect to the affairs of the Corporation and
such other specific responsibilities and duties as may be
assigned to him from time to time by the Board of Directors. The
Corporation desires to assure the Corporation the continued
benefits of the Executive's expertise and knowledge after the
expiration of the employment period specified by the Initial
Employment Agreement. The Executive, in turn, desires to
continue full-time employment with the Corporation on the terms
provided herein upon the expiration of the employment period
specified by the Initial Employment Agreement.
Accordingly, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as
follows:
1. Full-time Employment of Executive.
1.1. Duties and Status.
(a) The Corporation hereby engages the Executive as a
full-time executive employee for the period (the "Employment
Period") specified in paragraph 4, and the Executive accepts
such employment, on the terms and conditions set forth in
this Agreement. During the Employment Period, the Executive
shall exercise such authority and perform such executive
duties as are commensurate with the duties of the Chief
Executive Officer of the Corporation.
(b) During the Employment Period, the Executive shall
(i) devote his full time and efforts to the business of the
Corporation and will not engage in consulting work or any
trade or business for his own account or for or on behalf of
any other person, firm or corporation which competes or
conflicts or interferes with the performance of his duties
hereunder in any way and (ii) accept such additional office
or offices to which he may be elected by the Board of
Directors of the Corporation, provided that the performance
of the duties of such office or offices shall be consistent
with the scope of the duties provided for in subparagraph
(a) of this paragraph 1.1. The foregoing shall not preclude
the Executive from devoting a reasonable amount of his time
to civic and charitable affairs or to the supervision of his
personal investments nor from serving on boards of directors
in accordance with the Corporation's policies, provided such
activities do not unreasonably interfere with the
performance of the Executive's duties under this Agreement.
(c) The Executive shall be required to perform the
services and duties provided for in subparagraph (a) of this
paragraph 1.1 only at the location of the principal
executive offices of the Corporation in the Baltimore
metropolitan area. The Executive shall be entitled to
vacation, leave of absence, and leave for illness or
temporary disability in accordance with the policies of the
Corporation in effect, which shall not be less favorable
than those in effect at the date of this Agreement; and any
leave on account of illness or temporary disability which is
short of total disability, as defined in the Corporation's
long-term disability insurance plan ("Total Disability") and
which has lasted for a continuous period of less than one
hundred and eighty (180) consecutive days, shall not
constitute a breach by the Executive of his obligations
hereunder.
1.2. Compensation and General Benefits. As compensation for
his services under this Agreement, the Executive shall be
compensated as follows:
(a) The Corporation shall pay the Executive an annual
base salary of not less than (i) $850,000 per annum for the
first twelve months of the Employment Period, (ii) $900,000
per annum for the next twelve months thereof, (iii) $950,000
per annum for the remainder of the Employment Period. Such
base salary shall be payable in periodic equal installments
which are no less frequent than the periodic installments in
effect for salaries of senior executives of the Corporation
immediately prior to the effective date of this Agreement.
Such salary shall be subject to normal periodic review at
least annually for increases based on the policies of the
Corporation and contributions to the enterprise.
(b) The Corporation shall also pay the Executive
incentive bonuses of such amounts as are determined from
time to time by the Board of Directors based on criteria
to be established by the Board, provided, however, that
all bonuses shall be determined using as the Executive's
annual base salary the Executive's Salary of Record which,
for purposes of the Agreement, shall mean the Executive's
base salary stated in the Initial Employment Agreement for
the twelve-month period ending November 26, 1993 (One
Million, Forty-One Thousand, Two Hundred Eighty-Five
Dollars ($1,041,285)), increased annually for each
twelve-month period thereafter by a percentage determined
by the Board based solely on the Executive's performance,
but which percentage shall not be less than the average
percentage increase in annual base salary for the four (4)
executives most senior in rank of the Corporation other
than the Executive, unless for any twelve-month period the
Compensation Committee of the Board of Directors shall
provide the Executive with a written statement of the
specific reasons, based solely on the Executive's
performance, for a lesser or no increase for such period.
(c) The Executive shall be eligible to participate
in such profit-sharing, stock option, bonus, incentive and
performance award programs which provide opportunities to
receive compensation which are the greater of the
opportunities (i) available to the Executive on the date
of this Agreement or (ii) then provided to executives with
senior authority and duties (and in any event not less
than those provided to executives of lower rank). All
such programs shall provide benefits to the Executive
using as Executive's annual base salary his Salary of
Record. In considering annual awards, stock options and
other incentive compensation, the stock options for a
total of three hundred thousand (300,000) shares of Common
Stock of the Corporation granted on November 10, 1993,
shall be disregarded for all purposes.
(d) In addition to and except for the matters
governed by this Agreement, the Executive shall be
entitled to receive employee benefits, including, without
limitation, pension, disability, group life, sickness,
accident and health insurance programs and split-dollar life
insurance programs, and perquisites provided by the Corporation
to executives which are the greater of the employee benefits and
perquisites (i) comparable to those available to the Executive on
the date of this Agreement or (ii) then provided to executives with
senior authority or duties (and in any event not less than
those provided to executives with lower rank). All such
programs shall provide benefits to the Executive
determined using as the Executive's base salary his Salary
of Record. It is understood and recognized by the
Corporation and the Executive that, with respect to
pension benefits, it is not possible to include the
Executive in the Corporation's qualified pension plan with
full credit for service in his prior organization and
accordingly, the Corporation and the Executive have
entered into, and the Corporation agrees to continue, an
unfunded supplemental retirement agreement and a First
Amendment thereto (the "Executive's Supplemental
Retirement Agreement") designed to provide benefits on an
unfunded basis after three (3) years and four (4) months
of service from the date of the Initial Employment
Agreement of the greater of (i) benefits under the
Corporation's qualified and comparable supplemental plans
for senior executives, as if the Executive had then been
employed by the Corporation for purposes of those plans
for twenty-five (25) years or (ii) benefits of equivalent
value to those under the existing arrangements of the
Executive with his immediately preceding employer for
twenty-five (25) years of service or deemed service, in
each case based upon his actual compensation levels under
his employment with the Corporation (excluding for that
purpose the Signing Bonus and the Additional Bonus, but
using his Salary of Record rather than his actual base
salary for any twelve-month period for which the former is
greater), and net of any retirement benefits received from
any prior employer. References in this Agreement to
pension benefits refer to that arrangement.
(e) At least annually during the Employment
Period, the Executive shall receive a written statement of
all benefits and deferred compensation earned or accrued
for the year and accrued and unpaid through the date of
the statement.
2. Competition; Confidential Information. The Executive
and the Corporation recognize that due to the nature of
his association with the Corporation and of his engagements hereunder,
and the relationship of the Executive to the Corporation hereunder, the
Executive has had access to and has acquired, will have access to and
will acquire, and will assist in developing, confidential and proprietary
information relating to the business and operations of the Corporation
and its affiliates, including, without limiting the generality of the
foregoing, information with respect to their present and
prospective products, systems, customers, agents, processes, and
sales and marketing methods. The Executive acknowledges that
such information has been and will continue to be of central
importance to the business of the Corporation and its affiliates
and that disclosure of it to or its use by others could cause
substantial loss to the Corporation. The Executive and the
Corporation also recognize that an important part of the
Executive's duties will be to develop good will for the
Corporation and its affiliates through his personal contact with
customers, agents and others having business relationships with
the Corporation and its affiliates, and that there is a danger
that this good will, a proprietary asset of the Corporation and
its affiliates, may follow the Executive if and when his
relationship with the Corporation is terminated. The Executive
accordingly agrees as follows:
2.1. Non-Competition.
(a) During the Employment Period (notwithstanding
any early termination by the Corporation under paragraph
4.3 hereof) or until December 31, 1998, in the event of a
termination by the Corporation for cause under paragraph
4.2 hereof, the Executive will not, directly or
indirectly, either individually or as owner, partner,
agent, employee, consultant or otherwise, except for the
account of and on behalf of the Corporation or its
affiliates engage in any activity competitive with the
business of the Corporation or its affiliates, nor will
he, in competition with the Corporation or its affiliates,
solicit or otherwise attempt to establish for himself or
any other person, firm or entity, any business
relationships with any person, firm or corporation which
was, at any time during the Employment Period or the
employment period under the Initial Employment Agreement,
a customer of the Corporation or one of its affiliates.
(b) The provisions of subparagraph (a) of this
paragraph 2.1 may be extended, at the option of the
Corporation (exercised by written notice within fifteen
(15) days prior to the expiration of the Employment
Period), for a period of either one (l) or two (2) years from
the expiration of the Employment Period, if (i) the Corporation
offers at any time not more than sixty (60) days nor less than
thirty (30) days prior to the expiration of the Employment Period
to continue the employment of the Executive under this Agreement
for a period of either one (l) or two (2) years from the
expiration of the Employment Period, as the case can be,
(ii) the Executive declines to accept such continuation of
employment and (iii) the Corporation pays the Executive,
at the time of such election, a lump sum amount equal to
the highest annual base salary provided by paragraph 1.2
of this Agreement during the Employment Period, multiplied
by the number of years of such extension; provided, that
the Executive shall not be bound by such election at any
time if the Corporation is in violation of any of its
obligations under this Agreement and thereafter.
(c) Nothing in this paragraph 2 shall be construed
to prevent the Executive from owning, as an investment,
not more than 1% of a class of equity securities issued by
any competitor of the Corporation or its affiliates and
publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934.
2.2. Trade Secrets. The Executive will keep
confidential any trade secrets or confidential or proprietary
information of the Corporation and its affiliates which are now
known to him or which hereafter may become known to him as a
result of his employment or association with the Corporation and
shall not at any time directly or indirectly disclose any such
information to any person, firm or corporation, or use the same
in any way other than in connection with the business of the
Corporation or its affiliates during and at all times after the
expiration of the Employment Period. For purposes of this
Agreement, "trade secrets or confidential or proprietary
information" means information unique to the Corporation or any
of its affiliates which has a significant business purpose and is
not known or generally available from sources outside the
Corporation or any of its affiliates or typical of industry
practice.
3. Corporation's Remedies for Breach. It is
recognized that damages in the event of breach of paragraph 2 by
the Executive would be difficult, if not impossible, to
ascertain, and it is therefore agreed that the Corporation, in
addition to and without limiting any other remedy or right it may
have, shall have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such
breach, and the Executive hereby waives any and all defenses he may
have on the ground of lack of jurisdiction or competence of the court
to grant such an injunction or other equitable relief. The existence
of this right shall not preclude any other rights and remedies at law or
in equity which the Corporation may have.
4. Employment Period.
4.1. Duration. Subject to paragraph 7 hereof, the
Employment Period shall commence as of the close of the business
day on November 26, 1995, and shall continue until the earliest
of (i) December 31, 1998; (ii) the Executive's death or Total
Disability; or (iii) a termination by the Corporation for cause
under Paragraph 4.2 hereof.
4.2. Termination For Cause. The Executive's employment
under this Agreement may be terminated by the Board of Directors
of the Corporation for cause. As used in this Agreement a
termination for cause shall mean the Executive's termination for
gross negligence, commission of a felony, incompetence, fraud or
dishonesty involving the Corporation's assets, misconduct
materially detrimental to business of the Corporation, or
intentional failure to perform his duties hereunder or under the
Initial Employment Agreement or any other material breach by the
Executive of this Agreement (including Paragraph 2 hereof) or the
Initial Employment Agreement (including paragraph 2 thereof).
The Corporation shall notify the Executive in writing at least
thirty days in advance of any proposed termination for cause
indicating in detail the specific reasons for such termination
and shall extend to the Executive the opportunity during such
thirty days to cure the breach or misconduct if the same is
capable of being cured.
4.3. Termination Without Cause. In the event the
Executive's employment with the Corporation is terminated without
cause during the Employment Period or during the employment
period specified by the Initial Employment Agreement, the
Executive will be entitled to receive the compensation and
benefits described in paragraph 1.2(a), (c), and (d) of this
Agreement for the unexpired remainder of the Employment Period.
In such event, the Executive shall not be required to mitigate
the amount of any payment or benefit to which he may be entitled
under this Agreement by seeking other employment, nor shall any
such amount be reduced by remuneration earned from other sources.
5. Legal Costs. The Executive shall be entitled to
consult with counsel with respect to the Executive's rights hereunder,
and the Corporation agrees to pay the reasonable fees
and expenses of independent counsel for the Executive in advising
him or in bringing any proceedings, or in defending any
proceedings, involving the Executive's rights under this
Agreement or in the negotiation of the terms hereof, such right
to reimbursement to be contingent upon the presentment by the
Executive of written billings for such reasonable fees and
expenses.
6. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Corporation or, in the case of the Corporation, at its principal
executive offices.
7. Binding Agreement. This Agreement shall be binding
upon the Executive and the Corporation on and after the date of
this Agreement. This Agreement shall take effect as of the close
of the business day on November 26, 1995, if the Executive is
employed by the Corporation pursuant to the Initial Employment
Agreement on such date, or his employment with the Corporation
has been terminated before such date by the Corporation without
cause pursuant to paragraph 4.3 of the Initial Employment
Contract. The rights and obligations of the Corporation under
this Agreement shall inure to the benefit of and shall be binding
upon the Corporation and any successor of the Corporation as
defined in the Maryland General Corporation Law as now in effect;
provided, that this Agreement may not be assigned by the
Corporation without the consent of the Executive, and in the case
of a successor by transfer of all or substantially all of the
assets of the Corporation, or any other successor in which the
Corporation does not cease to exist by operation of the
transaction in question as a matter of law, the Corporation shall
not be relieved of its obligations hereunder.
8. Entire Agreement. This Agreement constitutes the
entire understanding of the Executive and the Corporation with
respect to the subject matter hereof and supersedes any and all
prior understandings written or oral. This Agreement may not be
changed, modified, or discharged orally, but only by an
instrument in writing signed by the parties. The Executive's
failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision or
any other provision hereof. This Agreement shall be governed by
the laws of the State of Maryland and the invalidity or
unenforceability of any provisions hereof shall in no way affect
the validity or enforceability of any other provision.
9. Arbitration. Any disputes hereunder which cannot
be resolved by negotiations between the Corporation and the
Executive shall be submitted to, and determined by, arbitration
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and the parties agree to be
bound by the final award of the arbitrator in any such
proceeding. The arbitrator shall apply the laws of the State of
Maryland. Arbitration may be held in Baltimore, Maryland or such
other place as the parties hereto may mutually agree. Judgment
upon the award by the arbitrator may be entered in any court
having jurisdiction thereof.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
WITNESS: USF&G CORPORATION
JOHN A. MACCOLL DAN L. HALE
Dan L. Hale,
Executive Vice President
EXECUTIVE
THERESA L. ABATO NORMAN P. BLAKE, JR.
Norman P. Blake, Jr.