Exhibit 10(i)
January 18, 1998
Mr. Xxxxxx Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Xx. Xxxxx:
Pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 19, 1998, among Parent
("Parent"), Merger Subsidiary ("Sub") and USF&G Corporation (the
"Company"), Sub will merge with and into the Company ("Merger"),
subject to the terms and conditions set forth in the Merger
Agreement. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the
Severance Agreement (as defined below) or in the Merger
Agreement.
The purpose of this letter agreement is to confirm our respective
understandings and agreements with regard to:
- The Key Executive Severance Agreement dated February 27,
1997 (the "Severance Agreement") between the Company and Xxxxxx
Xxxxx (the "Executive").
- The Executive's duties with the Parent after the Merger is
completed, and the remuneration to be paid by Parent to the
Executive for such services.
Parent has requested that for its and its shareholders' benefit,
the Company and the Executive enter into this Agreement.
In the event the Merger is ultimately consummated, the Parent
agrees to make those payments to which Executive is entitled
pursuant to the Severance Agreement (the "Severance Payments")
and to otherwise honor the terms of the Severance Agreement or
otherwise cause the Severance Payments to be made and the terms
honored. For purposes of this agreement, Parent, the Company and
the Executive agree that upon the approval of the shareholders of
the Company of the Merger Agreement, a Change in Control will
have occurred for purposes of the Severance Agreement. Executive
agrees that his Severance Payments will be made to him no earlier
than the date which is one hundred eight (108) days following the
date the Merger is consummated and no later than one hundred
twenty five (125) days following the date the Merger is
consummated; it being understood that Executive shall be paid
interest on the Severance Payments at the Prime Rate from the
date that the Merger is consummated until the payment date.
In the event that the Merger is ultimately consummated, the
Executive shall be appointed to the Parent's Board of Directors
for a term that shall expire on May 4, 1999. The Executive shall
serve as Vice Chairman of the Parent's Board and report to the
Chairman of the Parent's Board. The Executive shall act in the
role of independent consultant and counselor to the Parent's
Chairman and other designated executives until December 31, 1998,
and, as such, during that time, shall not be an employee of the
Parent, the Sub or the Company and shall not have direct reports
who are employees of the Parent, the Sub or the Company. The
Executive may be employed on a full-time basis by a third-party
at any time after the date the Merger is consummated and during
the consulting term, provided that such employment does not
conflict with the non-compete and confidentiality covenants
recited below and that such employment does not materially
interfere with the performance of Executive's duties under the
consulting agreement.
The Executive's principal responsibility during this Board term
shall be to assist in the integration of the Sub and the Company.
The Executive's specific duties shall be those assignments made
by the Parent's Chairman to the Executive from time to time
during the term of this letter agreement.
The Executive and the Parent agree that between the date this
letter agreement is signed and the date that the Merger is
consummated, the parties shall negotiate and intend to enter into
a detailed consulting agreement, the effectiveness of which shall
be conditioned upon the occurrence of the Merger. In addition to
reiterating the Executive's duties as described above, Parent
agrees that such agreement will include remuneration as follows:
- A guaranteed consulting fee ("Consulting Fee") in the amount
of Seven Hundred Twenty-Five Thousand Dollars ($725,000.) payable
in equal installments, prorated over the period of time
commencing on the date the Merger is consummated and concluding
on December 31, 1998. All prorated installments of the
Consulting Fee shall be paid to the Executive within five days
after the close of the calendar month in which earned.
- A performance-based incentive fee ("Incentive Fee") to be
paid to the Executive based on the same earnings per share
measurement criteria contained in the 1998 annual incentive plan
for the Parent's Chairman of the Board. The Executive's
Incentive Fee will be a percentage of his Consulting Fee, that
percentage to equal the ratio of the Parent Chairman's 1998
actual annual incentive award as the numerator and the Parent
Chairman's 1998 annualized base salary rate as the denominator.
- The Executive shall receive Twenty-Five Thousand (25,000)
Stock Appreciation Rights ("SAR's") with a term of four years
from the consummation of the Merger and a stock price equal to
the fair market value on the date the Merger is consummated.
- Continued medical insurance benefits coverage at the
Parent's expense, under the Company's or the Parent's regular or
retiree plan, or by individual policy.
- To the extent allowed by the respective Company stock option
plans, i) Executive's employment will be deemed to continue
during the consulting period solely for the purpose of enabling
Executive to exercise outstanding Company stock options during
the consulting period, and ii) Executive will be deemed to retire
for purposes of such plans, allowing one (1) year to exercise
options after the end of the consulting period.
In exchange for the remuneration outlined above, in addition to
the consultation services to be rendered by the Executive during
the term of the consulting agreement, the Executive agrees to
provide the Parent and all its affiliates with the following
convenants of confidentiality and non-competition:
- Executive shall keep confidential any trade secrets and
confidential or proprietary information of the Parent and its
affiliates (including the Company) which are now known to him or
which hereafter may become known to him as a result of his
employment or association with the Parent and its affiliates 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
Parent or its affiliates during and at all times after the
expiration of the consultancy period. For purposes of this
agreement, "trade secrets and confidential or proprietary
information" means information unique to the Parent or any of its
affiliates which has a significant business purpose and is not
known or generally available from sources outside the Parent or
any of its affiliates or typical of industry practice.
- The Executive convenants that he will not, without the prior
written consent of the Parent, during the Term of this Agreement
and for a period of one (1) year following the date he ceases,
for whatever reason, serving on the Parent's Board of Directors
or serving as a consultant or counselor to the Parent's executive
management, whichever date is later, either individually or in
partnership or jointly or in conjunction with any person as
principal, agent, employee, shareholder (other than by way of
holding shares listed on a stock exchange in a number not
exceeding five percent of the outstanding class or series of
shares so listed), consultant or in any other manner whatsoever
carry on, be engaged in, advise, lend money to, guarantee the
debts or obligations of or permit his name or any part thereof to
be used or employed by, any person engaged in a business if a
material portion of that business is in direct competition with
any significant business of the Parent or any of its material
affiliates.
Except as expressly set forth herein, this letter agreement shall
not be deemed to affect or modify any provision of the Severance
Agreement.
This letter agreement may not be amended or terminated without
the prior written consent of the Company, the Executive and the
Parent.
This letter agreement may be executed in any number of
counterparts which together shall constitute but one agreement.
This letter agreement may not be assigned by any party hereunto
and shall be binding on and inure to the benefit of their
respective successors and, in the case of the Executive, heirs
and other legal representatives.
Each of Parent, the Company, Sub and the Executive has caused
this letter agreement to be duly executed as of the date first
above written.
MERGER SUBSIDIARY THE ST. XXXX COMPANIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxxx
-------------------------- --------------------------
Xxxxxxx X. Xxxxxxxxxxx Xxxxxxx X. Xxxxxxxxxxx
EXECUTIVE USF&G CORPORATION
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx
