FIRST AMENDMENT
TO
USF&G SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS FIRST AMENDMENT TO USF&G SUPPLEMENTAL EXECUTIVE
RETIREMENT AGREEMENT (this "First Amendment"), made by and between
USF&G (the "Employer") and NORMAN P. BLAKE, JR. (the "Employee").
W I T N E S S E T H:
In order to induce the Employee to continue in the
service of the Employer after November 26, 1995, the Employer
desires to amend the USF&G Supplemental Executive Retirement
Agreement between the Employer and the Employee ("Agreement") to
extend to the Employee certain additional unfunded retirement
benefits.
In consideration of the mutual covenants and promises
contained herein and the Waiver dated November 10, 1993, the
parties agree to the following changes to the Agreement effective
as of the date hereof:
FIRST CHANGE
Section 1.1 of the Agreement is amended to read as
follows:
1.1 Average Compensation - The average
monthly rate of Employee's Compensation, equal to
1/36th of the total amount of his Compensation for
the 36 consecutive Qualifying Months which produce
the highest total. A Qualifying Month shall mean
any month during Employee's employment with the
Corporation which ends prior to his Normal
Retirement Date or earlier termination of
employment. If Employee's employment does not
provide 36 consecutive Qualifying Months as
aforesaid, Compensation for his actual number of
consecutive Qualifying Months will be totaled and
divided by the number of such Qualifying Months.
Any month during which Employee was not actively
employed for the entire period shall be disregarded
for purposes of the foregoing, and the existence of
such months shall be ignored in determining whether
or not Qualifying Months are consecutive.
Compensation shall mean the Employee's earnings
paid by the Corporation as provided and administered
under the Qualified Plan but (i) excluding, for
purposes hereof, any Signing Bonus or Additional
Bonus as defined in the Employment Agreement dated
November 20, 1990, (ii) determined without regard
to the limitations of section 401(a)(17) of the
Internal Revenue Code or any successor provision
and (iii) using as the Employee's annual base
salary his Salary of Record, which, for purposes
of this Agreement, shall be the Employee's base salary
for the twelve-month period ending November 26, 1993
as set forth in the Employment Agreement dated
November 20, 1990 (One Million, Forty-One Thousand,
Two Hundred Eighty-Five Dollars ($1,041,285)), increased
annually for each twelve-month period thereafter by
a percentage specified by the Compensation
Committee of the Board of Directors based solely on
the Employee's performance, but which percentage
shall not be less than average percentage increase
in annual base salary for the four (4) executives
most senior in rank of the Employer other than the
Employee, unless for any twelve-month period the
Compensation Committee of the Board of Directors
shall provide the Employee with a written statement
of the specific reasons, based solely on the
Employee's performance, for a lesser or no annual
increase for such period.
SECOND CHANGE
Section 1.17 of the Agreement is amended to read as
follows:
1.17 Employment Agreement - Until the close
of business on November 26, 1995, the Employment
Agreement between the Employer and the Employee
dated November 20, 1990 and thereafter the
Employment Agreement between the Employer and the
Employee dated November 10, 1993.
THIRD CHANGE
Section 15 of the Agreement is amended to read as
follows:
15. Special Minimum Benefit. Any other
provision of this Agreement to the contrary
notwithstanding, if benefits become payable under
this Agreement for any reason, those benefits will
be at least equal in value to those which would
have been payable under the arrangements of the
Employee with his immediately preceding employer
had the Employee's service with the preceding
employer continued until the date his employment
with the Employer terminated (or until March 31,
1994, if later), provided that (i) such benefits
shall be based upon the Employee's actual
compensation levels under his employment with the
Employer (excluding for that purpose the Signing
Bonus and the Additional Bonus, as defined in the
Employment Agreement dated November 20, 1990, but
using his Salary of Record (as defined in Section
1.1) rather than his actual base salary for any
twelve-month period for which the former is
greater), (ii) in calculating such benefits, any
amendments to the preceding employer's aforesaid
arrangements adopted after the Effective Date
shall be disregarded and (iii) such benefits shall
be reduced by any benefits hereinafter received
under any defined benefit plan or arrangement of
any prior employer.
FOURTH CHANGE
Section 5 of the Agreement is amended to read as follows:
5. Payment of Retirement Benefit.
(a) Employee's retirement benefit shall be
payable as of the first day of each month,
commencing with the month following the Employee's
termination of employment, or, in the case of a
benefit payable pursuant to Section 4, the month in
which his Normal Retirement Date occurs (referred
to in this Section 5 as the "benefit commencement
date"), and shall continue until the last monthly
payment prior to Employee's death; provided that
the Employee may, with the consent of the Pension
Committee, elect to have the benefit to which he
would otherwise be entitled under Section 2 or 3,
as the case may be, paid in a lump sum on the
benefit commencement date. The amount of the lump sum
shall be the actuarial equivalent of the benefit
payable under Section 2 or 3 of this Agreement,
determined without regard to any possible increase
in such benefit under Section 8, and based upon the
interest rate which would be used by the Pension
Benefit Guaranty Corporation on the benefit
commencement date for purposes of valuing immediate
annuities on a plan termination. To elect the lump
sum option, the Employee shall give written notice
to the Pension Committee not later than 30 days
before his benefit commencement date. If the
Employee has not elected to receive a lump sum
payment but is nevertheless deemed for federal
income tax purposes to be in constructive receipt
of a lump sum, the Employee shall be immediately
entitled to receive the remaining portion of his
benefits in a lump sum.
(b) If the Employee is a "covered employee"
within the meaning of section 162(m)(3) of the
Internal Revenue Code on the benefit commencement
date, then no payments which are otherwise required
under paragraph (a) of this Section 5 shall be made
before the first day of the Employer's first fiscal
year commencing after the benefit commencement date
(hereinafter referred to as the "deferred
commencement date"). On the deferred commencement
date, benefit payments shall commence in the manner
provided in paragraph (a) of this Section 5 and the
Employee shall receive a lump sum amount equal to
all payments which, but for this paragraph, would
have been made under paragraph (a) prior to the
deferred commencement date plus interest at 8% per
annum, compounded quarterly, from the date on which
such payments otherwise would have been made under
paragraph (a) until the deferred commencement date.
FIFTH CHANGE
The provisions of Section 6 of the Agreement are amended
to read as follows:
6. Optional Deferral Election.
Notwithstanding the provisions of Section 5,
Employee may, by written notice to the Employer
given not later than 30 days before his Normal
Retirement Date or other commencement of benefits
under this Agreement, elect to defer commencement
of the benefits payable pursuant to Section 2 or 3
until the first day of the month of January in the
calendar year following the year in which
employment termination occurs. If Employee makes
the election described in the preceding sentence,
his first payment shall include all amounts which
would have been paid previously had the election
not been made plus interest at eight percent (8%)
per annum, compounded quarterly, from the date on
which payments otherwise would have been made under
Section 5 until the date on which the first payment
is made hereunder.
SIXTH CHANGE
Section 16 of the Agreement is redesignated as Section 17
and the following is added as new Section 16:
16. Additional Deferred Compensation. In
addition to any other benefits payable to the
Employee under this Agreement, if the Employee's
employment with the Employer terminates for any
reason after December 31, 1998, or his employment
is terminated before such date by the Employer
other than for cause (as defined in the Employment
Agreement), on account of death or disability or
after the occurrence of a Fundamental Corporate
Transaction (as hereinafter defined), the Employer
shall pay the Deferred Compensation Amount
determined under this Section 16 to the Employee
(or, upon death, to the person designated by the
Employee and, in the event there is no such
designation, to the Employee's Beneficiary
hereunder) in a single lump sum payment as soon as
practicable after the end of the Employer's fiscal
year in which such termination of employment
occurs, provided, however, that the Deferred
Compensation Amount determined under this Section
16 shall be paid no later than the date on which
the Employee attains age 60 unless the Employee
elects later payment before the beginning of the
calendar year in which his 60th birthday occurs.
For purposes of this Section 16, the Deferred
Compensation Amount shall be equal to:
(a) the sum of (i) the principal amount
of One Million, Nine Hundred and Fifty
Thousand Dollars ($1,950,000); and
(ii) interest compounded quarterly on such
principal amount and any previously accrued
interest at one hundred twenty percent (120%)
of the applicable Federal long-term rate
(determined in accordance with Section 1274 of
the Internal Revenue Code), beginning on the
date on which the Employee exercises the
option granted to him on November 10, 1993, to
purchase 150,000 shares of the Corporation's
Common Stock at $13.00 per share (the
"Option"), and ending on the date on which the
Deferred Compensation Amount is paid pursuant
to this Section 16. In the event a portion,
but not all, of the Option is exercised,
interest will be credited only with respect to
such portion of the principal amount which
bears the same ratio to the total principal
amount as the number of shares of Common Stock
received upon partial exercise of the Option
bears to the total number of shares subject to
the Option (adjusted, as appropriate, for any
stock dividends, split-ups, recapitalizations
and the like affecting the number of shares of
Common Stock subject to the Option); and
(b) the sum of (i) the product of
(I) the per-share cash dividend payable with
respect to each share of the Corporation's
Common Stock with respect to any dividend
record date on or after November 10, 1993, and
before the date on which the Deferred
Compensation Amount is paid, and (II) the
total number of shares of Common Stock for
which the Option has not been exercised on
such dividend record date (adjusted, as
appropriate, for any stock dividends,
split-ups, recapitalizations and the like
affecting the number of shares of Common Stock
subject to the Option) (such product referred
to as "Dividend Equivalent Amounts") plus
(ii) interest compounded quarterly on Dividend
Equivalent Amounts at one hundred twenty
percent (120%) of the applicable Federal
long-term rate (determined in accordance with
Section 1274 of the Code) from the dividend payment date
corresponding with each such dividend record
date until the date on which the Deferred
Compensation Amount is paid pursuant to this
Section 16.
Notwithstanding the foregoing, if on the date the
Deferred Compensation Amount is to be paid pursuant
to this Section 16, (w) all or any portion of the
Option has not been exercised, and (x) the
thirty-day average of the average of the high and
low sales prices of the Corporation's Common Stock
quoted on the New York Stock Exchange composite
listing or, if the Corporation's Common Stock is
not listed on the New York Stock Exchange composite
listing, the thirty-day average of the fair market
value of the Corporation's Common Stock as
determined pursuant to the plan pursuant to which
the Option was granted (referred to as the "30-day
Average") is less than the option exercise price of
the Option (as adjusted for any stock dividends,
split-ups, recapitalizations and the like affecting
the number of shares of Common Stock subject to the
Option) (referred to as the "Option Price"), then
the Deferred Compensation Amount shall be reduced
by the product of (y) the number of shares for
which the Option has not been exercised on the date
payment is to be made pursuant to this Section 16,
and (z) the difference between the 30-day Average
and the Option Price on such date.
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 Employer pursuant to
a tender offer or an exchange offer (other than one
made by the Employer or holding company for the
Employer) for all or any part of the Employer's
Common Stock, (ii) of approval of the stockholders
of the Employer of a merger, consolidation, sale,
statutory or other share exchange, or disposition
of all or substantially all of the Employer's
assets in which the Employer (or holding company
for the Employer) 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 Employer'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 Employer" means, in the foregoing,
an entity that becomes a holding company for the
Employer without altering or planning to alter in
any material respect the stockholders of the
Employer or the business of the Employer and its
subsidiaries as a whole, other than a case in which
an acquisition of another company by the Employer
or the holding company is being accomplished
concurrently.
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the 10th day of November, 1993.
WITNESS: USF&G CORPORATION
JOHN A. MACCOLL DAN L. HALE (SEAL)
Dan L. Hale,
Executive Vice President
WITNESS: EMPLOYEE
THERESA L. ABATO NORMAN P. BLAKE, JR. (SEAL)
Norman P. Blake, Jr.