USF&G CORPORATION
STOCK APPRECIATION RIGHTS PLAN AND AGREEMENT
FOR PAUL B. INGREY
STOCK APPRECIATION RIGHTS PLAN AND AGREEMENT, entered into
this 24th day of July, 1996, between USF&G CORPORATION, a Maryland corporation
(the "Corporation"), and PAUL B. INGREY (the "Grantee").
1. PURPOSE. This grant of Stock Appreciation Rights is intended to
advance the interests of the Corporation by providing Paul B. Ingrey (the
"Grantee") an incentive to expend maximum effort for the growth and success of
the Corporation and its subsidiaries.
2. CANCELLATION OF STOCK OPTIONS. In consideration of the Stock
Appreciation Rights granted hereunder, Grantee hereby surrenders and agrees to
the cancellation of the stock options previously granted to him by the
Corporation on February 26, 1993, February 28, 1994, March 9, 1995 and March 8,
1996, said stock options being all of the outstanding and unexercised stock
options previously granted to him under the Corporation's Stock Incentive Plan
of 1991, Amended and Restated Stock Incentive Plan of 1991, and all other stock
option plans maintained by the Corporation, other than 31,000 stock options
granted on February 25, 1992, which if not exercised prior to the date hereof,
are not to be surrendered and canceled under this Agreement.
3. GRANT OF STOCK APPRECIATION RIGHTS. In consideration of the
Grantee's entering into an Executive Consulting Agreement of even date herewith
and the Grantee's agreement to cancel the stock options as described in Section
2 above, the Corporation hereby grants to the Grantee as of the date hereof the
following Stock Appreciation Rights which shall entitle the Grantee to receive
cash payments upon exercise equal to the product of (1) the number of Units for
which the Stock Appreciation Right is exercised (which may be less than the
total number of Units subject to such Stock Appreciation Right) multiplied by
(2) the difference between (i) the closing price of one share of Common Stock of
the Corporation on the New York Stock Exchange for the last business day
immediately preceding the date on which the Stock Appreciation Right is
exercised and (ii) the Unit Price for the Stock Appreciation Right being
exercised:
STOCK APPRECIATION RIGHT NO. 1
Number of Units: 26,300
Unit Price: $13.75
Stock Appreciation Right No. 1 shall be fully vested and exercisable
as of the date hereof.
STOCK APPRECIATION RIGHT NO. 2
Number of Units: 24,300
Unit Price: $14.38
Stock Appreciation Right No. 2 shall be vested and exercisable as to
16,200 Units as of the date hereof and shall be fully vested and exercisable on
and after February 28, 1997.
STOCK APPRECIATION RIGHT NO. 3
Number of Units: 23,300
Unit Price: $13.63
Stock Appreciation Right No. 3 shall be vested and exercisable as to
7,766 Units as of the date hereof, shall be vested and exercisable as to an
additional 7,766 Units on and after March 9, 1997, and shall be fully vested and
exercisable on and after March 9, 1998.
STOCK APPRECIATION RIGHT NO. 4
Number of Units: 54,600
Unit Price: $14.56
Stock Appreciation Right No. 4 shall be vested and exercisable as to
18,200 Units on and after March 8, 1997, shall be vested and exercisable as to
an additional 18,200 Units on and after March 8, 1998, and shall be fully
vested and exercisable on and after March 8, 1999.
4. LIMITATIONS ON EXERCISE. Stock Appreciation Rights shall be
exercisable to the extent provided in Section 3 only during the period
commencing on the date this Plan and Agreement is executed and ending on the
last day of the Consulting Period (as defined in the Executive Consulting
Agreement) and for a period of 90 days following the expiration of such
Consulting Period; provided, however, that if the Grantee violates the
provisions of paragraph 4 of the Executive Consulting Agreement, all unexercised
Stock Appreciation Rights, whether vested or unvested, shall be immediately
canceled and forfeited, and provided further, that in the event of the death or
disability of the Grantee, all unexercised Stock Appreciation Rights which are
vested and exercisable as of the date of death or disability shall continue to
be vested and exercisable for a period of one year after death or disability. No
Stock Appreciation Rights shall first become vested and exercised after the
termination of the Consulting Period. Any Units of Stock Appreciation Rights
which are exercised shall be canceled immediately upon exercise. Notwithstanding
anything in the Agreement to the contrary, Stock Appreciation Rights may be
exercised only at such times as the purchase and sale of the Corporation's
Common Stock is allowed under the Corporation's Insider Trading Policy.
5. EFFECT OF FUNDAMENTAL CORPORATE TRANSACTION. Notwithstanding the
limitations on exercisability of Stock Appreciation Rights set forth in Section
3 of this Agreement, in the event of a Fundamental Corporate Transaction which
occurs prior to the commencement of or during the Consulting Period, all
unexercised Stock Appreciation Rights shall become immediately vested and
exercisable. 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 the Corporation's Common Stock 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.
6. EXERCISE OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right
which is vested and exercisable may be exercised by delivery to the Corporation
on any business day, at its principal office addressed to the attention of the
Corporate Secretary, a written notice of exercise. Such notice shall specify the
number of Units for which the Stock Appreciation Right is being exercised and
note which Stock Appreciation Rights are being exercised.
7. EFFECT OF CHANGES IN CAPITALIZATION. In the event of changes in the
Common Stock of the Corporation by reason of stock dividends, split-ups,
recapitalizatons, mergers, consolidations, combinations or exchanges of shares
and the like, the Compensation Committee of the Board of Directors shall make
appropriate adjustments in the Stock Appreciation Rights which are outstanding,
so that the value of the Stock Appreciation Rights immediately following such
event shall, to the extent practicable, be proportionate to the value of the
Stock Appreciation Rights immediately prior to such event. No fractional Units
of Stock Appreciation Rights shall be recognized pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole Unit.
8. MISCELLANEOUS.
8.1 NOT A CONTRACT FOR SERVICES. Nothing in this Agreement
shall be deemed to be a contract for employment or for other services to be
provided by the Grantee. Nothing in this Agreement shall affect the rights of
the Corporation or the Grantee under the Executive Consulting Agreement or any
other agreement entered into between the Corporation and the Grantee.
8.2 STOCK APPRECIATION RIGHT NOT A DERIVATIVE SECURITY. The
Stock Appreciation Rights granted hereunder shall in all events be interpreted
in a manner which will not cause them to be deemed "derivative securities" for
purposes of Rule 16a-1(c) under the Securities Exchange Act of 1934 (the "1934
Act") or otherwise subject to Section 16 of the 1934 Act. Stock Appreciation
Rights granted hereunder may be redeemed or exercised only for cash and shall
not permit receipt of equity securities of the Corporation in lieu of cash. For
this purpose, this Plan and Agreement shall be deemed to be a plan pursuant to
which only the Grantee is eligible to participate and pursuant to which no
securities may be offered other than those which may be deemed to result from
the grant of the Stock Appreciation Rights to the Grantee as provided in Section
3 of this Plan and Agreement. No Stock Appreciation Rights granted hereunder are
transferable by the Grantee other than by will or laws of descent and
distribution. This Agreement shall be a formula award for purposes of Rule
16b-3(c)(2)(ii), and the provisions of this Agreement which state the amount and
price of securities to be awarded to the Grantee and the timing of such Grant
may not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder. The Compensation Committee of the Board of
Directors will, in all respects, be responsible for administration of the plan
evidenced by this Plan and Agreement and any matter or interpretation determined
by the Compensation Committee shall be final and binding.
8.3 APPROVAL. This Plan and Agreement and the grant of Stock
Appreciation Rights hereunder has been approved by the Compensation Committee of
the Board of Directors, by action taken on July 23, 1996.
8.4 TAX WITHHOLDING. Upon exercise of any Stock Appreciation
Right, the Corporation is authorize to withhold in accordance with applicable
law any taxes required to be withheld by federal, state or local law as a result
of such exercise.
8.5 BINDING AGREEMENT. This Agreement shall be binding upon
the Grantee and the Corporation as of the date of this Agreement.
8.6 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Maryland, other than the conflicts of law provisions
thereof.
8.7 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the Grantee 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 a
written instrument signed by the parties. The invalidity or unenforceability of
any provisions hereof shall in no way affect the validity or enforceability of
any of the other provisions.
IN WITNESS WHEREOF, the parties have executed and delivered
this Plan and Agreement as of the date first above written.
ATTEST USF&G CORPORATION
By: /s/NORMAN P. BLAKE, JR.
Norman P. Blake, Jr.,
Chief Executive Officer
WITNESS GRANTEE
/s/PAUL B. INGREY
Paul B. Ingrey