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 Sixteen Dollars and Twenty-Five Cents ($16.25) 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.