STOCK OPTION AGREEMENT
AGREEMENT made as of the 10th day of November 1993, by and
between USF&G Corporation (the "Corporation") and Norman P.
Blake, Jr. (the "Option Holder").
WHEREAS, the Corporation has adopted the Stock Incentive Plan
of 1991 (such plan, as currently constituted and as hereinafter
amended or restated, is referred to herein as 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 on the terms and conditions set forth in this
Agreement, subject only to shareholder approval of amendments to
the Plan increasing the number of shares of Common Stock of the
Corporation issuable to the Option Holder under the Plan;
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 under the Plan to purchase one hundred fifty thousand
(150,000) shares of the Common Stock of the Corporation at a
price of Thirteen Dollars ($13.00) per share, exercisable on and
after December 31, 1998, provided the Option Holder is employed
by the Corporation or one of its subsidiaries through December
31, 1998. This grant is effective November 10, 1998, subject
to the conditions as set forth in Section 10 of this Agreement.
2. This Option shall become exercisable before December 31,
1998, only:
(a) After the Option Holder dies, retires under
criteria established by the Committee or is determined by the
Committee to be permanently disabled;
(b) After the Option Holder's employment with the
Corporation is terminated by the Corporation other than for
cause, as defined in the then applicable employment agreement
between the Option Holder and the Corporation; and
(c) After the occurrence of a Fundamental Corporate
Transaction. For purposes of this Section a "Fundamental
Corporate Transaction" shall be and be deemed to occur on the
date (i) of the first purchase of shares of 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.
3. The term of the Option is ten (10) years and one (1) day.
Once the Option becomes exercisable, it shall remain exercisable
throughout the term of the Option regardless of (i) whether or
not the Option Holder remains in the employ of the Corporation
or (ii) the activities of the Option Holder after he has
terminated employment with the Corporation, provided, that the
Option shall become nonexercisable and be cancelled only if the
Option Holder violates Section 2 of the Employment Agreement
dated November 20, 1993, or the Employment Agreement dated
November 10, 1993, as determined under Section 9 of such
Employment Agreements. The Option may be exercised after the
Option Holder's death and during the term of the Option by the
person to whom the Option passes or is transferred in accordance
with Section 6 of this Agreement. In no event shall this Option
be exercisable by anyone after the expiration of ten (10) years
and one (1) day after the date it is granted.
4. At such time as this Option becomes exercisable, it shall be
exercisable for the whole amount or for any part of the amount
of shares of Common Stock subject to the Option, but not for
less than ten (10) shares at any one time unless the exercise is
to exhaust this Option.
5. When the Option Holder desires to exercise this Option,
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. Full payment
of the option price shall accompany the notice. 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.
6. 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 or
pursuant to a qualified domestic relations order to the extent
permitted under the Plan.
7. 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.
8. 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.
9. This Agreement is not a contract of employment or a
modification of any written 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, if and to the
extent otherwise allowed by law or under any applicable contract
of employment.
10. This Agreement is effective November 10, 1993, subject to
the condition that the shareholders of the Corporation approve
amendments to the Plan increasing the number of shares of Common
Stock issuable to the Option Holder under the Plan.
Notwithstanding anything to the contrary in this Agreement, this
Option shall not become exercisable unless and until the
shareholders of the Corporation approve such amendments to the
Plan. The terms of this Agreement are subject to any additional
requirements or limitations set forth in the Plan. All
capitalized terms in this Agreement not otherwise defined herein
shall have the meaning assigned by the Plan.
IN WITNESS WHEREOF, the parties hereto have duly executed or
caused this Agreement to be executed as of the day and year
first specified above.
USF&G CORPORATION
DAN L. HALE
Dan L. Hale,
Executive Vice President
OPTION HOLDER
NORMAN P. BLAKE, JR.
Norman P. Blake, Jr.