SEPARATION AGREEMENT
This Separation Agreement is made and entered into this 31 day of July, 2002 by
and between H. Paul Lowber ("Lowber") and SAFECO Corporation (the "Company").
RECITALS
A. Lowber is employed as a Vice President, Controller and Principal
Accounting Officer of the Company.
B. This Agreement sets forth the complete understanding between Lowber and the
Company regarding Lowber's resignation as an officer of the Company and its
affiliates effective July 8, 2002 and his resignation as an employee effective
December 31, 2002, and the commitments and obligations arising out of the
termination of the employment relationship between Lowber and the Company.
AGREEMENT
1. Continued Employment.
1.1 Employment Transition Period. Under the terms and subject to the
conditions of this Agreement, Lowber's employment status with the Company shall
continue through December 31, 2002. During the period from and after July 22,
2002 Lowber shall not be required to report regularly to the Company for any
work and shall be considered an "employee" of the Company for the limited
purposes of the employee benefit plan coverages available to employees of the
Company and under the SAFECO Incentive Stock Option Plan of 1987 and the SAFECO
Long-Term Incentive Plan of 1997.
1.2 Group Benefits Coverage. The Company shall continue to provide coverage
under any group benefits plan under which Lowber and/or his dependents were
covered on the date hereof, through and including December 31, 2002. Lowber
shall be responsible to pay any amounts chargeable as "employee premium
contribution" amounts with respect to any such coverage. From and after January
1, 2003, the Company shall provide Lowber and/or his dependents with such
benefits continuation or conversion coverage as may be available or required
under the terms of the Company's benefits plans or policies, or required under
the group health plan provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as subsequently amended (COBRA), or other applicable
federal or state law.
1.3 Payment for Accrued Sick Leave and Vacation Units. On or before January
15, 2003, the Company shall pay Lowber for any vested sick leave units and
vacation pay accrued but unused at December 31, 2002, but only to the extent
compensable under the Company's normal sick leave and vacation policies and
procedures.
1.4 Reimbursement for Expenses Incurred. The Company shall reimburse Lowber
for reasonable and necessary business expenses incurred by him on or before July
22, 2002, but not submitted for reimbursement at such date, to the extent
reimbursable under the Company's normal expense reimbursement policies and
procedures and submitted for payment by July 31, 2002.
1.5 Stock Options and Restricted Stock Rights. Lowber acknowledges and
agrees that as a consequence of his SAFECO employment ending on December 31,
2002, and pursuant to the terms of each stock option for SAFECO Corporation
common stock ("Stock Option") that has been granted to him under either the
SAFECO Incentive Plan of 1987 or the SAFECO Long-Term Incentive Plan of 1997, he
will have through March 31, 2003 or, if sooner, the stated term of any stock
option, to exercise each Stock Option to the extent each Stock Option was vested
on December 31, 2002, and after March 31, 2003 he will lose all rights under
each such Stock Option. Contingent upon Lowber's execution of this Agreement and
the expiration of the Revocation Period stated in Section 13.3 of this
Agreement, the Company shall agree to vest each of Lowber's outstanding unvested
stock options such that each such stock option shall be fully vested, fully
exercisable, and wholly non-forfeitable as of December 31, 2002 and to agree to
amend the terms of all Company unvested stock options that have been granted to
Lowber to so provide. Lowber acknowledges and agrees that pursuant to the terms
of each restricted stock right granted to him under the SAFECO Long-Term
Incentive Plan of 1997 shall expire as of December 31, 2002 and that he shall
not be entitled to any payment as respects any RSR that remains unvested at such
date.
2. Payments; Contributions.
2.1 Severance and Release Payments. As compensation to Lowber, and in
consideration of his resignation as an employee and resignation as an officer of
the Company and its affiliates, his release granted in Section 5 and other
agreements made herein, in addition to the benefits provided under Section 1
above and the further consideration provided under Section 3 below, the Company
agrees to pay Lowber a total sum of $95,000.00 plus an amount equal to 1,235
multiplied by the closing price of SAFECO common stock on December 31, 2002
("Calculated Amount") in severance and release payments as follows:
(a) $70,000.00 of such amount shall be allocated and paid as severance
benefits ("Severance Pay") for lost wages. All Severance Pay shall be subject to
withholding and deduction for payroll taxes and other deductions as are required
by federal and state law. The Severance Pay shall be paid in two equal
semi-monthly installment payments of $35,000.00 each, made on the Company's
normal payroll dates beginning January 15, 2003 and ending January 31, 2003.
(b) $25,000.00 of such amount shall be allocated and paid as consideration
for Lowber's release of claims as set forth in Section 5 of this Agreement (the
"Release Payment") and shall be paid on or about January 15, 2003. The Release
Payment shall be subject to withholding and deduction for payroll taxes and
other deductions as are required by federal and state law. Lowber and the
Company agree that the Release Payment represents sufficient consideration for
the potential claims being released.
(c) The Calculated Amount shall be allocated and paid as consideration in
consideration of the agreements stated in Section 8 and shall be paid on January
15, 2003. The Calculated Amount payment shall be subject to withholding and
deduction for payroll taxes and other deductions as are required by federal and
state law.
2.2 Benefit Plan Contributions. Lowber shall continue to be eligible as an
"employee" of the Company through December 31, 2002 for employer contributions
paid under the Company's employee benefit plans. Lowber shall be eligible to
participate in and shall receive pro rata contributions to the SAFECO
401(k)/Profit Sharing Retirement Plan, as the same may be available to other
employees of the Company. Lowber acknowledges that any employer contributions
to, or interest or other income credited to, any of the SAFECO 401(k)/Profit
Sharing Retirement Plan or SAFECO Employees' Cash Balance Plan shall be
additional compensation to him in excess of the total Severance Pay amount
described above.
3. Further Consideration. As further consideration to Lowber for the release
granted under Section 5 of this Agreement, the Company agrees to provide Lowber
the following:
3.1 Outplacement Services. The Company agrees to provide Lowber up to six
months' outplacement services through either Lee Hecht Harrison or David Nelson
Associates, as Lowber chooses, at the Company's expense.
3.2 Attorney's Fees. The Company agrees to pay up to $500 of the attorney's
fees incurred by Lowber for a review of this Agreement.
3.3 COBRA Benefit. The Company agrees to pay on Lowber's behalf the full
cost plus the administrative fee for the first six (6) months that Lowber
receives coverage under applicable group benefit plans provided that the Company
receives notice from Lowber of his decision to continue coverage under COBRA
within 60 days of Lowber's termination date.
4. Resignation.
4.1 Resignation. In consideration of the payments and other compensation
described above, Lowber tenders his resignation as an officer of the Company and
its affiliates effective July 8, 2002, and agrees that his employment shall
terminate December 31, 2002.
4.2 No Authority To Act. From and after July 8, 2002, Lowber shall neither
have authority to bind the Company to any contract or agreement, nor to act on
behalf of the Company. The Company shall have no obligation to reimburse Lowber
for any expenses incurred by him on or after July 22, 2002, except as expressly
stated in this Agreement.
4.3 Return of Materials. By July 31, 2002, Lowber shall return all
equipment, devices and materials, including but not limited to any and all
documents (whether existing in paper or electronic/digital media), compilations
of data, files, manuals, letters, notebooks, reports, diskettes and all other
materials and records of any kind, and any copies or other reproductions
thereof, owned by the Company or its affiliates and used by Lowber in the course
of his employment.
5. Release and Settlement.
5.1 Release Payment. For the purposes of this Agreement "Release Payment"
means the payment by the Company of the amounts referenced in paragraph 2.1(b)
above.
5.2 Release. In consideration of the Company's delivery of the Release
Payment to Lowber under the terms of this Agreement, Lowber hereby releases the
Company and its affiliated companies, and the employees, agents, officers,
directors and shareholders of any of them, from all claims, demands, actions or
causes of action of any kind or nature whatsoever which Lowber may now have or
may ever have had against any of them, whether such claims are known or unknown,
and including but not limited to the Claims described in paragraph 5.3 below.
However, nothing in this Separation Agreement shall create or imply any waiver
by Lowber of any claims (a) with respect to his entitlement to compensation for
vested benefits arising under any Company pension, retirement or welfare benefit
plan, program or agreement, in accordance with the terms and conditions of such
plans, (b) arising under any insurance or investor account or similar client
relationship, (c) with respect to any breach by the Company of its obligations
under this Agreement, all of which rights shall be preserved and unaffected by
this release, or (d) with respect to indemnification by the Company, to the
extent that such indemnification rights may arise or be provided under the
Company's articles of incorporation or bylaws, in connection with Lowber's
official actions (or omissions) on behalf of the Company during the period he
served as an officer of the Company.
5.3 The Claims. For the purposes of this Agreement, "Claims" shall mean and
include claims with respect to any of the following: (i) breach of contract;
(ii) discrimination, retaliation, or constructive or wrongful discharge; (iii)
lost wages, lost employee benefits, physical and personal injury, stress, mental
distress, or impaired reputation; (iv) claims arising under the Age
Discrimination in Employment Act ("ADEA"), Title VII of the Civil Rights Act,
the Equal Pay Act, or any other federal, state or local laws or regulations
prohibiting employment discrimination; (v) attorneys' fees; and (vi) any other
claim arising from or relating to Lowber's employment with the Company and/or
his separation from service, including claims with respect to the Severance
Agreement dated November 7, 2001, which the Parties agree is terminated by
mutual consent as of the date of the expiration of the seven day revocation
period described in Section 13.3 of this Agreement; provided, however, that the
term "Claims" shall not include any claims reserved by Lowber pursuant to
Section 5.2 of this Agreement.
5.4 Consideration for Release. The Company represents, and Lowber
acknowledges, that the Release Payment and the further consideration described
in Section 3 exceed any amount the Company may arguably be required to pay under
any agreement or arrangement to which Lowber is a party or under which he claims
some benefit, or under the standard policies and procedures of the Company, and
represents valuable consideration to him for the release of his ADEA and other
claims described above.
6. Confidential Information.
6.1 Possession of Non-Public Information. Lowber recognizes that by virtue
of his employment by the Company, Lowber has acquired significant non-public
information with respect to the Company and its affiliated companies, and their
operations (the "Confidential Information"). Lowber recognizes and acknowledges
that the Confidential Information constitutes valuable, special and unique
assets of the Company and its affiliates, access to and knowledge of which were
essential to the performance of Lowber's duties during his employment.
6.2 Non-Disclosure. Lowber agrees to hold the Confidential Information in
trust and confidence. Lowber agrees not to (i) directly or indirectly make use
of the Confidential Information, (ii) reveal any Confidential Information to any
other party, or (iii) divulge or use any Confidential Information for any
purpose other than for the benefit of the Company, except and to the extent
Lowber may be required to disclose by lawful order or process of a court (in
which event Lowber will provide reasonable advance notice of such disclosure to
the Company and will cooperate with the Company's efforts to obtain protective
treatment for such information).
6.3 Materials. Unless the Company otherwise agrees, Lowber shall not remove
from the Company's premises or possession any documents, compilations of data or
other files or records of any nature, or any copy or reproduction thereof, that
contain Confidential Information or that belong to the Company.
7. No Admission. Lowber understands and acknowledges that neither the Release
Payment nor the execution and delivery of this Agreement by the Company
constitutes an admission by the Company to (i) any breach of an agreement with
Lowber, (ii) any violation of a federal, state or local statute, regulation or
ordinance, or (iii) any other wrongdoing.
8. No Competing Employment; No Solicitation of Employees; Non-Disparagement.
8.1 No Competing Employment. Lowber agrees that until July 1, 2003, without
the prior written consent of the chief executive officer of the Company, he
shall not work for, or consult with any person or entity that competes directly
and materially with the Company.
8.2 No Solicitation of Employees. Lowber agrees that until July 1,
2003, without the prior written consent of the chief executive officer of the
Company, he shall not solicit, directly or indirectly, any individual who he
knows is then an employee of the Company or any of its affiliates to leave such
employment and/or to become an employee, officer or consultant of or to any
other enterprise. Anything to the contrary notwithstanding, the Company agrees
that neither (a) Lowber's responding to an unsolicited request from an employee
of the Company or any of its affiliates nor (b) Lowber responding to an
unsolicited request for an employment reference regarding an employee of the
Company or any of its affiliates from such employee, or from a third party, by
providing a reference setting forth his personal views about such employee,
shall be deemed a violation of this Section 8.2.
8.3 Non-Disparagement. Lowber agrees that he shall not make any statement
that is intended to criticize or disparage the Company, its affiliates or any of
its or their directors, officers or employees. This Section 8.3 shall not be
construed to prohibit Lowber from responding publicly to incorrect public
statements or from making truthful statements when required by law or order of a
court or other person or body having jurisdiction.
9. Legal Action.
9.1 No Action on Released Claims. Lowber agrees not to sue or pursue any
court or administrative action against the Company or any of its affiliates, or
any of their employees, agents, officers, directors or shareholders, regarding
any Claims released herein or otherwise arising from Lowber's employment with
the Company or his separation from service, except with respect to any breach by
the Company of its obligations under this Agreement.
9.2 Liability for Defense Costs. If, notwithstanding this Agreement,
Lowber should file any lawsuit or other proceeding based on legal claims that
Lowber has released herein, Lowber agrees that he will pay or reimburse the
Company for all reasonable costs which it, or its employees, agents, officers or
directors, incur in defending against Lowber's claims. This paragraph shall not
apply to any claimed breach by the Company of any of the terms or conditions of
this Agreement.
10. Arbitration.
10.1 Notice and Selection of Arbitrator. The parties agree that any dispute
arising under this Agreement, other than an action by the Company to seek
injunctive relief against breaches of Sections 6 or 8 of this Agreement, shall
be submitted to arbitration in Seattle, Washington, before a disinterested
arbitrator. Arbitration shall be commenced by service on the other party to the
dispute by a written request for arbitration, containing a brief description of
the matter at issue and the names and addresses of three arbitrators acceptable
to the petitioner. The other party shall within thirty (30) days following
receipt of such notice either select one of the proposed arbitrators or provide
the names and addresses of three other arbitrators acceptable to the proposing
party. If the parties are unable to select an arbitrator from those proposed,
or, if they are unable to select a third arbitrator, an arbitrator shall be
chosen impartially by the American Arbitration Association.
10.2 Rules of Proceeding. Arbitration proceedings shall be conducted
under the commercial rules then prevailing of the American Arbitration
Association. The arbitrator shall not be bound to any formal rules of evidence
or procedure, and may consider such matters as a reasonable business person
would take into account in decision-making.
10.3 Decision Final and Binding. The decision of the arbitrator shall be
final and binding on the parties, and may be entered and enforced in any court
of competent jurisdiction.
10.4 Expenses. Each party shall share equally the expenses of the
arbitrator and other arbitration expenses. Attorney fees, witness fees and other
expenses incurred by a party in preparing for the arbitration are not
"arbitration expenses" and shall be paid by the party incurring them.
11. Agreement Confidential.
11.1 Terms of Agreement. Lowber and the Company agree that neither of them
shall publicize the existence of this Agreement or its terms, including but not
limited to the amount of the Severance Pay or the Release Payment, except under
compulsion of law or as required under the rules and regulations of the
Securities and Exchange Commission ("SEC"). Lowber acknowledges that a copy of
this Agreement will be filed as an exhibit to a filing made by the Company with
the SEC. Further, the parties agree that they shall not discuss with or make to
the public at large or to any individual person or persons any statements with
regard to this Agreement, or matters relating to its terms. Notwithstanding the
provisions of this paragraph 11.1, the parties may discuss the existence and
terms of this Agreement with their respective attorneys, accountants and
financial advisors to the extent necessary to obtain their counsel and advice.
Lowber may also disclose the terms of this Agreement in confidence to his spouse
and may discuss the Agreement in confidence with any prospective employer.
11.2 Employment References. In the event a prospective employer contacts
the Company for an employment reference with respect to Lowber, the Company
shall not provide any information relating to Lowber or his employment history
or performance with the Company except for Lowber's dates of employment and
title and salary at December 31, 2002.
12. Costs. Except for the Company's agreement to pay a portion of Lowber's
attorney's fees, as stated and limited in paragraph 3.2, each party shall bear
its own costs and expenses incurred in connection with the negotiation of this
Agreement and the preparation of this Agreement.
13. Acknowledgment.
13.1 Informed Agreement. Lowber declares that he has read and fully
understands the terms of this Agreement, and its significance and consequence.
Lowber further declares that this Agreement is the product of good faith
negotiations between himself and the Company, and that he voluntarily accepts
the same for the purpose of resolving arrangements with respect to his
separation from service. Lowber understands and acknowledges that, except as
specifically reserved herein, in exchange for the Release Payment he is waiving
and giving up every possible claim arising out of his employment with the
Company and/or his separation from service.
13.2 Attorney. Lowber acknowledges that the Company has advised him to
review the terms of this Agreement with an attorney of his own choosing and that
he has done so or knowingly waived his right to do so.
13.3 Review and Revocation Periods. Lowber acknowledges that the Company
has given him at least 21 days during which to consider this Agreement prior to
signing, and understands that he has seven days after signing in which he may
revoke this Agreement. This Agreement shall not become effective or enforceable
until such seven-day period has expired. Lowber understands that he may revoke
this Agreement by delivering a written notice to Allie Mysliwy at 4333 Brooklyn
Avenue N.E., SAFECO Plaza, Seattle, WA 98185, no later than the close of
business on the seventh day after he signs this Agreement. Lowber understands
and acknowledges that if he revokes this Agreement it will not be effective or
enforceable and he will not receive the payments described herein.
14. Entire Agreement. This is the entire agreement between Lowber and the
Company. Neither the Company nor any affiliate has made any promises to Lowber
other than those included within this Agreement.
15. Governing Law. The parties acknowledge that this Settlement Agreement shall
be interpreted under and enforced by and consistent with the laws of the State
of Washington.
/s/ Paul Lowber
H. Paul Lowber
SAFECO Corporation
By /s/ Michael McGavick
Michael S. McGavick, President