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EXHIBIT 10.2
SAFECO DEFERRED COMPENSATION PLAN FOR EXECUTIVES
AS AMENDED AND RESTATED NOVEMBER 4, 1998
(AS LAST AMENDED AUGUST 2, 2000)
1. PURPOSE
The purpose of the SAFECO Deferred Compensation Plan for Executives (the
"Plan") is to provide a select group of management or highly compensated
employees of SAFECO Corporation ("SAFECO") and its Subsidiaries with an
opportunity to defer all or part of the Eligible Compensation payable to
such employees and all or part of such employees' Excess Contributions to
the Savings Plan. The Plan shall be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
2. DEFINITIONS
2.01 Account. The term "Account" means a separate deferred compensation
account established by SAFECO under this Plan in the name of a
Participant.
2.02 Administrative Committee. The "Administrative Committee" means the
three-person committee appointed by the SAFECO Board of Directors
to administer the Corporation's qualified retirement and savings
plans.
2.03 Annual Installment Method. "Annual Installment Method" means a
distribution of a Participant's Account in annual installments
over a stated number of years (not to exceed 20), with each
installment paid in January as soon as practicable after year-end.
The amount of the installment payable following any given year-end
shall be determined by valuing the Participant's Account as of the
close of business on the last business day of the year and then
multiplying that value by a fraction, the numerator of which is
one and the denominator of which is the remaining number of annual
payments. (For example, for an Annual Installment Method of 10
years, the first payment will be 1/10 of the Account, the
following year, 1/9 of the Account, etc.)
2.04 Beneficial Owner. "Beneficial Owner" has the meaning set forth in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended.
2.05 Beneficiary. "Beneficiary" refers to one or more trusts, estates,
other entities or individuals designated by the Participant to
receive certain benefits described in the Plan in the event of the
Participant's death.
2.06 Board of Directors or Board. The "Board of Directors" or the
"Board" refers to the Board of Directors of SAFECO Corporation.
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2.07 Change in Control. A "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs has occurred:
(a) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of SAFECO securities (not including in the
securities beneficially owned by such Person any securities
acquired directly from SAFECO or its affiliates, as defined
in Rule 12b-2 adopted under the Exchange Act
("Affiliates")) representing 25% or more of the combined
voting power of SAFECO's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (x) of
paragraph (c) of this Section 2.07; or
(b) The following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who were directors of SAFECO on the
date the Plan was adopted by the SAFECO Board of Directors,
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors
of SAFECO) whose appointment or election by the Board of
Directors or nomination for election by SAFECO's
shareholders was approved by a vote of at least two-thirds
of the directors then still in office who either were
directors on the date the Plan was adopted or whose
appointment, election or nomination for election was
previously so approved or recommended; or
(c) There is consummated a merger or consolidation of SAFECO or
any Subsidiary with any other corporation, other than (x) a
merger or consolidation which would result in the voting
securities of SAFECO outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan
of SAFECO or any Subsidiary, at least 75% of the combined
voting power of the securities of SAFECO or such surviving
entity or any parent thereof outstanding immediately after
such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of
SAFECO (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of SAFECO (not including in the securities
beneficially owned by such Person any securities acquired
directly from SAFECO or its Affiliates other than in
connection with the acquisition by SAFECO or its Affiliates
of a business) representing 25% or more of the combined
voting power of SAFECO's then outstanding securities; or
(d) The shareholders of SAFECO approve a plan of complete
liquidation or dissolution or there is consummated an
agreement for the sale or disposition
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of all or substantially all of SAFECO's assets, other than
a sale or disposition by SAFECO of all or substantially all
of its assets to an entity of which at least 75% of the
combined voting power is owned by shareholders of SAFECO in
substantially the same proportions as their ownership of
SAFECO immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the Common Stock immediately
prior to such transaction or series of transactions continue to
have substantially the same proportionate ownership in an entity
which owns all or substantially all of SAFECO's assets immediately
following such transaction or series of transactions.
2.08 Closing Price. "Closing Price" means the price at which the last
trade of SAFECO Common Stock was made prior to 1:00 p.m. Pacific
Coast time on the NASDAQ Stock Market.
2.09 Code. "Code" means the Internal Revenue Code of 1986, as amended.
2.10 Common Stock. "Common Stock" means SAFECO Corporation common
stock.
2.11 Compensation Committee. "Compensation Committee" means the
Compensation Committee of the Board of Directors.
2.12 Corporation. "Corporation" means SAFECO Corporation and its
Subsidiaries, collectively.
2.13 Deferral Election. "Deferral Election" means a written document in
the form prescribed by the Administrative Committee which an
employee of SAFECO or any of its Subsidiaries has signed and
delivered to the Administrative Committee, and which the
Administrative Committee has accepted, indicating the employee's
intent to participate in the Plan and the amount or percentage of
Eligible Compensation, Qualifying Gains and/or Excess
Contributions which the employee desires to have credited to his
or her Account in the Plan.
2.14 Deferrals. "Deferrals" refers to the Eligible Compensation,
Qualifying Gains and/or Excess Contributions that a Participant
designates in his or her Deferral Election(s) pursuant to the
terms and conditions of the Plan.
2.15 Disability. "Disability" means a physical or mental condition
occurring prior to the Participant's Retirement which, in the sole
judgment of the Administrative Committee, based upon medical
reports and other evidence satisfactory to the Administrative
Committee, presumably permanently prevents a Participant from
satisfactorily performing his or her usual duties for the
Corporation or the duties of
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any other position or positions for the Corporation for which such
Participant is qualified by reason of training, education or
experience.
2.16 Eligible Compensation. "Eligible Compensation" means compensation
payable to a Participant by the Corporation in the form of Salary,
bonus, settlements of RSRs, dividend equivalents payable on RSRs,
settlements of PSRs, and any other form that the Compensation
Committee may determine in its sole discretion, excluding gains on
the exercise of stock options.
2.17 Eligible Stock Option. "Eligible Stock Option" means a
nonqualified stock option to purchase Common Stock exercisable
under any plan or arrangement designated by the Compensation
Committee that permits a Participant to defer gain on the exercise
of the option.
2.18 Excess Contribution. "Excess Contribution" means the amount of
Salary (not to exceed 10%) that a Participant has elected to
contribute to the Savings Plan which is in excess of applicable
Code limitations on contributions to the Savings Plan.
2.19 Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.20 Hardship. "Hardship" means an unforeseeable emergency resulting
from a sudden and unexpected illness or accident of the
Participant or a Participant's dependent (as defined in Section
152(a) of the Code), loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the Participant's
control.
2.21 Match. "Match" means an amount, not to exceed 4% of Salary, equal
to two-thirds of the Excess Contributions which a Participant has
elected to defer under this Plan.
2.22 Measurement Fund. "Measurement Fund" means a phantom investment
designated by the Administrative Committee for use as an index to
value the portion, if any, of a Participant's Account allocated to
that phantom investment.
2.23 Measurement Fund Election. "Measurement Fund Election" means a
written document in the form prescribed by the Administrative
Committee that a Participant has signed and delivered to the
Administrative Committee, and which the Administrative Committee
has accepted, indicating the manner in which the Participant's
Deferrals and/or Account are to be allocated among the available
Measurement Funds.
2.24 Participant. A "Participant" means an employee eligible to
participate in the Plan who has timely filed a Deferral Election
in accordance with Section 3 and whose Deferral Election has been
accepted by the Administrative Committee. Any such person shall be
a Participant as of the effective date of his or her first
Deferral
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Election and shall continue until the date his or her entire
Account has been paid out in accordance with the Plan.
2.25 PSRs. "PSRs" refers to performance stock rights issued under the
SAFECO Long-Term Incentive Plan of 1997 or any successor incentive
plan.
2.26 Person. "Person" for purposes of Section 2.07 means any person (as
defined in Section 2(a)(9) of the Exchange Act, and as such term
is modified in Section 13(d) and 14(d) of the Exchange Act) other
than (i) any employee plan established by SAFECO, (ii) SAFECO or
any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by SAFECO shareholders
in substantially the same proportions as their ownership of
SAFECO.
2.27 Phantom Stock Fund. "Phantom Stock Fund" refers to a Measurement
Fund tied to the performance of the Common Stock, as more
specifically described in Section 5.06.
2.28 Qualifying Gain. "Qualifying Gain" means the net value accrued
upon a stock-for stock exercise of an Eligible Stock Option (i.e.,
the amount by which the total value of the shares exercised
exceeds the value of the shares used to pay the exercise price,
where both the shares paid and the shares exercised are valued at
the Closing Price on the date of exercise). For example, a
Participant elects to defer the Qualifying Gain accrued upon
exercise of an Eligible Stock Option to purchase 1,000 shares at
an exercise price of $20 per share. The Closing Price of the
Common Stock on the date of exercise is $25. The Participant
delivers 800 shares of Common Stock (worth $20,000) to pay the
exercise price. In return, the Participant receives 800 shares of
Common Stock worth $20,000 and his or her Account is credited with
a Qualifying Gain of $5,000.
2.29 RSRs. "RSRs" refers to restricted stock rights issued under the
SAFECO Incentive Plan of 1987, the SAFECO Long-Term Incentive Plan
of 1997, or any successor incentive plan.
2.30 Retirement. "Retirement" means a Participant's termination of
employment with the Corporation occurring at or after age 55
(other than as a result of death or Disability), provided the sum
of the Participant's age and the Participant's years of service
with the Corporation equals or exceeds 75.
2.31 Rollover. "Rollover" means an amount transferred to a
Participant's Account from another nonqualified plan of SAFECO or
any Subsidiary, including but not limited to:
(a) the 401(a)(17) Savings Plan Benefit under the SAFECO
Employees' Supplemental Retirement Plan B, as amended
November 4, 1998
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("SRP B"), if any, deemed transferred to a Participant's
Account on January 1, 1999 in accordance with Section 6.2
of SRP B;
(b) the sum of the 401(a)(17) Cash Balance Benefit, the
401(a)(17) PSRP Benefit, and the Supplemental Percentage
Cash Balance Benefit (as those terms are defined in SRP B)
under SRP B, if any, deemed transferred to a Participant's
Account in accordance with Section 7.2(a) of SRP B upon the
Participant's Retirement;
(c) any benefit under the SAFECO Employees' Supplemental
Retirement Plan A ("SRP A") deemed transferred in
accordance with Section 7.2(a) of SRP A upon the
Participant's Retirement; and
(d) any other amount deemed transferred from any nonqualified
plan of SAFECO or any Subsidiary with the Administrative
Committee's permission, which may be unreasonably withheld.
2.32 Salary. "Salary" means a Participant's base annual salary before
reduction for (i) compensation voluntarily deferred or contributed
by the Participant under qualified or nonqualified plans of SAFECO
or any Subsidiary and (ii) amounts not included in the
Participant's gross income under Code Sections 125, 402(e), and
402(h) pursuant to plans established by SAFECO or any Subsidiary.
2.33 Savings Plan. "Savings Plan" means the SAFECO 401(k) Savings Plan,
as amended and restated effective January 1, 1999.
2.34 Subsidiary. "Subsidiary" means any corporation of which 50% or
more of the voting stock is owned, directly or indirectly, by
SAFECO Corporation.
3. DEFERRAL ELECTIONS
3.01 Filing of Deferral Election. An eligible employee who wishes to
participate in the Plan must file a Deferral Election with SAFECO
on the form(s) prescribed by the Administrative Committee. A
Participant may elect to defer all or any portion of the
Participant's Eligible Compensation and/or Qualifying Gains. If a
Participant elects to defer Excess Contributions, 100% of the
Participant's Excess Contributions must be deferred.
3.02 Deferral Election Irrevocable.
(a) A Deferral Election is irrevocable as to the amount or percentage
of Eligible Compensation or Excess Contributions to be deferred
for the year or years to which the Deferral Election relates. Any
request to change the amount or percentage to be deferred shall
not be effective until January 1 of the next calendar year, except
that (i) in the case of RSRs, the change request shall not be
effective
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until the second settlement date following the date of the
request, and (ii) an election with respect to a PSR may never be
modified or revoked.
(b) A Deferral Election to defer Qualifying Gains with respect to a
designated Eligible Stock Option is irrevocable.
3.03 Timing of Deferral Election
(a) Except as otherwise provided in this paragraph and in
Section 3.04, a Deferral Election for Eligible Compensation
shall be filed with the Administrative Committee no later
than December 31 and shall be effective for Eligible
Compensation earned on or after January 1 of the following
calendar year. A Deferral Election to defer amounts payable
in settlement of RSRs, however, shall not take effect until
one additional year later. A Deferral Election to defer
payments in settlement of PSRs must be made within 10
business days of the grant of the PSR. Notwithstanding the
foregoing, if in its discretion the Compensation Committee
designates as "Eligible Compensation" any form of
compensation that is not specifically identified in Section
2.16 or that has not been previously designated as Eligible
Compensation, a Deferral Election with respect to the newly
designated Eligible Compensation shall be filed with the
Administrative Committee by such time as the Administrative
Committee shall determine but in no event later than the
date the Participant becomes entitled to receive payment of
such compensation. Further notwithstanding the foregoing,
in the first year in which an employee becomes eligible to
participate in the Plan, the newly eligible employee shall
have 30 days after becoming eligible in which to make a
Deferral Election to defer Eligible Compensation for
services to be performed subsequent to the election.
(b) A Deferral Election for Excess Contributions shall be filed
with the Administrative Committee no later than December 31
of the year prior to the year in which the Excess
Contributions will occur; provided, however, that in the
first year in which an employee of SAFECO or any Subsidiary
becomes eligible to participate in the Plan, the newly
eligible employee shall have 30 days after becoming
eligible in which to file a Deferral Election for Excess
Contributions.
(c) A Deferral Election to defer a Rollover described in
Section 2.30(d) must be filed with the Administrative
Committee no later than one calendar year prior to the date
on which the Rollover will be credited to the Participant's
Account under the Plan. (No Deferral Election is required
for a Rollover described in Section 2.30(d) if the Rollover
to the Participant's Account is required by the
Corporation.)
(d) A Deferral Election to defer Qualifying Gain upon exercise
of an Eligible Stock Option shall be valid only if: (i) a
separate Deferral Election is made by the Participant with
respect to the Eligible Stock Option; (ii) the Deferral
Election is delivered to and accepted by the Committee at
least six months
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before the Participant elects to exercise the Eligible
Stock Option; and (iii) the exercise price of the Eligible
Stock Option is paid in Common Stock (either through
physical delivery or attestation).
3.04 Special Rules. Eligible employees shall have until May 15, 1998 to
file Deferral Elections with respect to Eligible Compensation
earned and/or Excess Contributions made during the remainder of
1998 as well as settlements of RSRs payable in February 1999.
Eligible employees shall have until February 15, 2000 to file
Deferral Elections with respect to PSRs granted in February 1999
(excluding any settlements payable under such PSRs in February
2000).
4. DEFERRAL ACCOUNTS
4.01 Establishment of Accounts. An Account shall be established for
each Participant to which all Deferrals, Matches and Rollovers
attributable to the Participant, and the earnings thereon, shall
be credited. A Participant's Account shall at all times be a
bookkeeping entry only and shall not represent any investment made
by SAFECO or any Subsidiary on the Participant's behalf.
4.02 Crediting of Accounts.
(a) Deferrals of Eligible Compensation shall be credited to a
Participant's Account on the date such Deferrals would
otherwise be payable to the Participant.
(b) Deferrals of Excess Contributions and the corresponding
Match shall be credited to a Participant's Account on the
date the Excess Contributions would have been contributed
to the Savings Plan but for applicable Code limitations.
(c) Qualifying Gains shall be credited to a Participant's
Account on the date that the Eligible Stock Option to which
they relate is exercised;
(d) Rollovers shall be credited to a Participant's Account on
the date they are deemed transferred to the Plan.
4.03 Vesting. A Participant shall be fully vested at all times in his
or her Deferrals. A Participant shall be vested in Matches
credited to his or her Account to the same extent that the
Participant is vested in the employer match provided under the
Savings Plan. A Participant shall be fully vested in Rollovers to
the Participant's Account; provided, however, that in the case of
a Rollover described in Section 2.30(d), the Participant initially
shall be vested only to the extent the Participant was vested in
the benefit under the terms of the plan from which it was deemed
transferred, as determined at the time of deemed transfer to the
Participant's Account.
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5. MEASUREMENT FUNDS
5.01 Measurement Funds. A Participant's Account shall be allocated
among the Measurement Funds selected by the Participant in
accordance with the Participant's most recent Measurement Fund
Election and such rules as the Administrative Committee may
establish from time to time. The Account of each Participant shall
be credited (or debited) on a daily basis according to the
performance of each Measurement Fund selected by the Participant.
If a Participant fails to file a Measurement Fund Election, the
Participant's Account shall be allocated to the Money Market
Portfolio Measurement Fund until such time as the Participant
files a Measurement Fund Election making a different allocation.
5.02 Measurement Fund Elections. Each time a Participant files a new
Measurement Fund Election, the Participant shall indicate whether
his or her new allocation among the various Measurement Funds is
intended to apply to the Participant's entire Account or instead
only to future Deferrals, Matches, and Rollovers. A Measurement
Fund Election will be given effect no later than the next business
day after it is received by the Administrative Committee, subject
to the limitation set forth in Section 5.03.
5.03 Limitation Applicable to Section 16 Reporters. In the case of a
Participant who is subject to reporting under Section 16(a) of the
Exchange Act, a Measurement Fund Election applicable to amounts
already accrued in a Participant's Account will not be given
effect if it would generate a "non-exempt" transaction for
purposes of the rules promulgated under Section 16 of the Exchange
Act. (A "non-exempt" transaction would result if a Participant's
Measurement Fund Election caused a transfer of all or part of the
Participant's Account into (or out of) the Phantom Stock Fund less
than six months after the Participant elected an opposite-way
transfer into or out of that Fund.)
5.04 Availability of Measurement Funds. The Measurement Funds available
to Participants at any given time shall be set forth in Appendix
A. SAFECO is under no obligation to offer any particular
investment as a Measurement Fund and reserves the right to
eliminate, change, and add Measurement Funds at any time.
5.05 No Actual Investment. Notwithstanding any other Plan provision
that may be interpreted to the contrary, the Measurement Funds are
to be used for measurement purposes only. Neither a Participant's
election of any Measurement Fund nor the crediting or debiting of
amounts to the Participant's Account in accordance with that
election shall be construed as an actual investment of the
Participant's Account in any Measurement Fund.
5.06 Phantom Stock.
(a) The portion of a Participant's Account that is allocated to
the Phantom Stock Fund, if any, shall be credited or
debited, as the case may be, as if it were 100% invested in
Common Stock. Each amount credited to the
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Phantom Stock Fund shall be credited in units ("Units" or
"Phantom Stock Units") based on the Closing Price of the
Common Stock on the date of crediting. Fractional Units
shall be credited to a minimum of three decimal points
(b) To the extent cash dividends are paid on the Common Stock,
a Participant's Account shall be credited with phantom
dividends. Phantom dividends shall equal the per-share
dividend paid on the Common Stock multiplied by the number
of Phantom Stock Units in the Participant's Account on the
record date for the cash dividend. Phantom dividends shall
be credited to a Participant's Account in the form of
additional Phantom Stock Units. The number of additional
Units credited shall be determined based on the Closing
Price of the Common Stock on the dividend payment date.
(c) No actual shares of Common Stock will be issued directly or
indirectly under the Plan in respect of Phantom Stock
Units. No voting or other rights of any kind associated
with ownership of the Common Stock shall inure to a
Participant by virtue of the Participant's allocation of
all or any portion of his or her Account to the Phantom
Stock Fund.
(d) In the event of any change in the Common Stock reason of an
issuance of additional shares, recapitalization,
reclassification, merger, reorganization, stock split,
reverse stock split, combination of shares, stock dividend
or similar transaction, the number of Phantom Stock Units
held by a Participant under the Plan shall be
proportionately adjusted by the Administrative Committee.
6. DISTRIBUTION OF DEFERRED COMPENSATION ACCOUNT
6.01 General. Except as otherwise expressly provided in this Plan, no
withdrawal or payment shall be made from a Participant's Account
except following the earliest to occur of the Participant's death,
Disability, Retirement or other termination of service with the
Corporation. Payments shall be made in accordance with Sections
6.02 and 6.03 unless the Participant has filed an election
pursuant to Section 6.04 requesting an alternative distribution
type and/or time period. The portion, if any, of a Participant's
Account that is not vested as of the date of the Participant's
termination of service shall not be distributed to the Participant
(unless the Participant is terminated following a Change in
Control, as described in Section 10.01). All payments shall be
made in cash, regardless of the Measurement Funds selected by the
Participant.
6.02 Retirement and Disability Distributions. If a Participant
terminates service with the Corporation on account of Retirement
or Disability, the Participant's Account shall be paid to the
Participant using an Annual Installment Method of 10 years,
commencing in January of the year following the Participant's
Retirement or termination on account of Disability.
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6.03 Distributions Following Death. If a Participant dies prior to
Retirement, the Participant's Account shall be paid out in a
single lump sum within 30 days of the date the Corporation is
notified, in a form acceptable to the Administrative Committee, of
the Participant's death. The value of the Participant's Account
shall be determined as of the date of the Participant's death.
6.04 Distributions Following Other Terminating Events. If a Participant
terminates employment with the Corporation for any reason other
than Retirement, Disability, or death, the Participant's Account
shall be paid out in a single lump sum within 30 days of the
Participant's termination of employment, with the value of the
Participant's Account determined as of the termination date.
6.05 Distribution Election.
(a) A Participant shall be permitted, in accordance with such
rules as the Administrative Committee may establish from
time to time, to elect a distribution that is different
from the default provisions set forth in Sections 6.02 and
6.03 (but not 6.04) and may revoke his or her distribution
election or file a new distribution election with the
Administrative Committee at any time, subject to paragraph
(b) below. Such distribution may consist of a lump sum, an
Annual Installment Method over a stated period of up to 20
years, or a combination of the two. Payments under any
alternative distribution elected by a Participant must
commence no later than January of the year following the
year in which the Participant terminates employment, unless
the Administrative Committee permits otherwise in its sole
discretion, which may be unreasonably withheld. To be
effective, a distribution election must be accepted by the
Administrative Committee at least 12 months prior to the
Participant's termination of employment. Any distribution
election filed by a Participant shall apply to the entire
Account, including amounts credited to the Account prior to
the date of the election and those credited later, without
regard to the way the Account is allocated among
Measurement Funds.
(b) In the case of a Participant making a Deferral Election to
defer Eligible Compensation, Qualifying Gains and/or Excess
Contributions for the first time, a distribution election
filed at the same time as the Participant's initial
Deferral Election shall be given effect even if the
Participant terminates employment within 12 months of the
filing. A distribution election filed with the
Administrative Committee at the same time as the
Participant's initial Deferral Election shall be
irrevocable for 12 months.
6.06 Distribution in the Event of Taxation. If, for any reason, all or
any portion of a Participant's Account becomes taxable to the
Participant prior to distribution in accordance with the Plan, a
Participant may petition the Administrative Committee for a
special distribution of the taxable portion. Upon the grant of
such a petition,
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which shall not be unreasonably withheld, SAFECO shall promptly
distribute to the Participant the portion of his or her Account
that has become taxable.
7. DESIGNATION OF BENEFICIARY
A Participant may designate one or more Beneficiaries to receive amounts
payable under the Plan in the event of the Participant's death. To
designate a Beneficiary, the Participant shall complete a Beneficiary
designation form in accordance with the Administrative Committee's rules
and procedures as in effect from time to time. A Participant may change a
Beneficiary designation at any time by filing a new Beneficiary
designation form with the Administrative Committee. Upon acceptance by
the Administrative Committee of the new form, all Beneficiary
designations previously filed by the Participant shall be canceled. If
the Participant names someone other than his or her spouse as primary
Beneficiary, a spousal consent in the form established by the
Administrative Committee must be signed by the Participant's spouse and
returned to the Administrative Committee. If a Participant fails to
designate a Beneficiary or if the designated Beneficiary predeceases the
Participant, then the Account of the deceased Participant shall be paid
to the Participant's surviving spouse, or if none, to the personal
representative of the Participant's probate estate.
8. HARDSHIP WITHDRAWALS
A Participant may petition the Administrative Committee to make an
immediate, accelerated distribution from his or her Account in the event
the Participant has incurred a severe financial Hardship. Distributions
will not be made to the extent the Hardship can be relieved through
insurance proceeds, liquidation of the Participant's assets (but only to
the extent that such liquidation would not itself cause a severe
financial Hardship) or by cessation of deferrals under the Plan. Payments
for severe financial Hardship under this Plan are limited to the amount
necessary to relieve an "unforeseeable emergency" as defined in Treas.
Reg. Section 1.457-2(h)(4) and (5). The Administrative Committee shall
determine whether the Participant has incurred a severe financial
Hardship and may, in its sole discretion, grant the immediate,
accelerated distribution of all or any portion of the Participant's
Account; provided, however, that such distribution shall not exceed the
amount determined by the Administrative Committee to be necessary to
alleviate the severe financial Hardship. Notwithstanding anything in this
Plan to the contrary, if a Participant obtains a Hardship withdrawal, the
Participant's Deferral Election will be automatically suspended for a
period of twelve months, beginning with the first day of the next
regularly scheduled payroll period.
9. EARLY WITHDRAWAL SUBJECT TO PENALTY
A Participant (or, after a Participant's death, his or her Beneficiary)
may elect, at any time, to withdraw all (but not part) of his or her
Account, less a withdrawal penalty equal to 10% of such amount. (The net
amount shall be referred to as the "Withdrawal Amount".) This election
may be made at any time, before or after the Participant's Retirement,
death, Disability or termination of employment, and whether or not the
Participant (or
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Beneficiary) is in the process of being paid pursuant to an Annual
Installment Method. If the early withdrawal election is made before the
Participant's Retirement, Disability or death, a Participant's Withdrawal
Amount shall be his or her Account calculated as if a termination of
employment had occurred on the date of the election. The Participant (or
Beneficiary) shall make this election by giving the Administrative
Committee written notice in the form determined from time to time by the
Administrative Committee. The Participant (or Beneficiary) shall be paid
the Withdrawal Amount within 30 days of his or her election. Once the
Withdrawal Amount is paid, the Participant's participation in the Plan
shall terminate and the Participant shall not be eligible to participate
in the Plan in the future.
10. CHANGE IN CONTROL
10.01 Termination Following a Change in Control. In the event a
Participant's employment with SAFECO and all Subsidiaries is
terminated within two years following a Change in Control, the
Participant's entire Account, including any unvested portion,
shall be paid to the Participant (or the Participant's
Beneficiary) in a single lump sum within 30 days after the
termination of employment.
10.02 Distributions Triggered by Termination Following a Change in
Control. For purposes of calculating the lump sum distribution
payable under Section 10.01, the Participant's Account shall be
valued as of the date of his or her termination of employment.
Phantom Stock units shall be valued at the higher of (x) and (y),
where (x) equals the Closing Price of the Common Stock on the date
of termination and (y) equals:
(a) If the Change in Control was of the type described in
paragraph (a) of Section 2.07, the highest price paid for
shares of Common Stock by any Person who became a
Beneficial Owner of securities representing 25% or more of
the combined voting power of SAFECO's outstanding
securities; and
(b) If the Change in Control was of any type other than that
described in paragraph (a) of Section 2.07, the highest
Closing Price of the Common Stock during the last 10
trading days prior to and including the date of the Change
in Control.
10.03 Administration. Upon and after the occurrence of a Change in
Control, the Plan shall be administered by the Administrator
appointed under Section 11.02.
10.04 Legal Fees to Enforce Rights After Change in Control. SAFECO is
aware that upon the occurrence of a Change in Control, the Board
or a shareholder of SAFECO (or the board of directors or a
shareholder of a successor corporation) might take action adverse
to one or more Participants, such as (i) causing or attempting to
cause SAFECO or such successor to refuse to comply with its
obligations under the Plan; and (ii) instituting litigation or
causing or attempting to
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cause SAFECO or such successor to institute litigation seeking to
deny Participants the benefits intended under the Plan. In these
circumstances, the purpose of the Plan could be frustrated.
Accordingly, if, following a Change in Control, (i) it should
appear to a Participant that SAFECO or any successor to SAFECO has
failed to comply with its obligations under the Plan or (ii)
SAFECO or any successor to SAFECO takes any action to declare the
Plan void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or recover from any
Participant the benefits intended to be provided under the Plan,
then the Participant shall be authorized to retain counsel of his
or her choice, at the expense of SAFECO or any successor to
SAFECO, to represent the Participant in connection with the
initiation or defense of any litigation or other legal action,
whether by or against SAFECO, such successor, or any director,
officer, shareholder or other person affiliated with SAFECO or
such successor, in any jurisdiction.
11. ADMINISTRATION
11.01 Committee Duties.
(a) Except as otherwise provided in this Section 11, the Plan
shall be administered by the Administrative Committee,
which shall have exclusive authority over all matters
involving administration of the Plan, including the
selection of employees eligible to participate and the type
or types of Deferrals that a given Participant is permitted
to elect. The Administrative Committee shall have the
discretion and authority (i) to make, amend, interpret, and
enforce such rules as it deems necessary or desirable for
the administration of the Plan and (ii) to interpret the
Plan and decide or resolve any and all questions that may
arise in connection with the Plan from time to time,
subject to the Plan's express provisions. The decision or
action of the Administrative Committee with respect to any
question arising out of or in connection with the
administration, interpretation and application of the Plan
and the rules it may adopt thereunder shall be final,
conclusive and binding upon all persons having any interest
in the Plan.
(b) The Administrative Committee may make equitable adjustments
under the Plan from time to time, including retroactive
adjustments, to correct mathematical, accounting, or
factual errors made in good faith by SAFECO or a
Participant.
(c) The Administrative Committee may delegate administrative
duties to other persons, including officers of SAFECO, and
may retain the services of lawyers, accountants, or other
outside third parties to assist with the administration of
the Plan.
(d) In cases where a decision or Plan interpretation by the
Administrative Committee relates specifically to the
benefits to which a member of the
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Administrative Committee may be entitled, the decision or
interpretation shall be subject to review and approval by
the Compensation Committee.
11.02 Administration upon a Change in Control. Upon and after a Change
in Control, the administrative powers and responsibilities of the
Administrative Committee shall pass to an "Administrator," who
shall be an independent third party selected by the individual who
was the Chief Executive Officer of SAFECO immediately prior to the
Change in Control (the "Ex-CEO"). The Administrator shall have the
discretionary power to determine all questions arising in
connection with the administration and interpretation of the Plan,
including without limitation benefit entitlement determinations.
Upon and after a Change in Control, SAFECO must: (i) pay all
reasonable expenses and fees of the Administrator; (ii) indemnify
the Administrator against all costs, expenses and liabilities,
including without limitation attorneys' fees, arising in
connection with the performance of the Administrator's duties
hereunder, except with respect to matters resulting from the gross
negligence or willful misconduct of the Administrator or its
employees or agents; and (iii) supply complete and timely
information to the Administrator about all matters relating to the
Plan, including the Participants and their Beneficiaries;
Participant Accounts; the Retirement, death, Disability or
termination of employment of Participants; and such other
information as the Administrator may reasonably require. The
Administrator may be terminated (and a replacement appointed) only
by the Ex-CEO or by such other person as the Ex-CEO may designate
in writing. SAFECO or any successor to SAFECO may not terminate
the Administrator.
12. AMENDMENT OF THE PLAN
The Compensation Committee may from time to time make such amendments to
the Plan as it deems appropriate; provided, however, that (i) no
amendment which cancels or reduces the benefits to which a Participant is
entitled as of the date of the amendment shall be effective without the
written consent of the Participant, and (ii) Sections 10 and 11.02 and
this Section 12 shall not be amended following a Change in Control
without the written consent of 66.67% of the Participants. The
Administrative Committee shall be authorized to make amendments to the
Plan which are immaterial or clerical in nature or which are, in the
opinion of counsel, required by local, state or federal law or
regulation.
13. TERMINATION OF THE PLAN
The Corporation reserves the right to terminate the Plan at any time by
action of the Board of Directors, subject to the limitations on
amendments set forth in Section 12. Unless the Board determines
otherwise, in the event the Plan is terminated, the Account of each
Participant shall be valued as of the date specified for such purpose by
the Board, and the value of the Account shall be paid in cash to the
Participant within 30 days after the valuation date.
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14. CLAIMS PROCEDURES
14.01 Presentation of Claim. Any Participant or Beneficiary of a
deceased Participant (such Participant or Beneficiary being
referred to below as a "Claimant") may deliver to the
Administrative Committee a written claim for a determination with
respect to the amounts distributable to such Claimant from the
Plan. If the claim relates to the contents of a notice received by
the Claimant, the claim must be made within 60 days after the
Claimant received such notice. All other claims must be made
within 180 days of the date on which the event that gave rise to
the claim occurred. The claim must state with particularity the
determination desired by the Claimant.
14.02 Notification of Decision. The Administrative Committee shall
consider a Claimant's claim within a reasonable time and shall
notify the Claimant in writing:
(a) that the Claimant's requested determination has been made
and the claim has been allowed in full; or
(b) that the Administrative Committee has reached a conclusion
contrary, in whole or in part, to the Claimant's requested
determination, in which case the notice must set forth in a
manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim
(or any part of it);
(ii) specific reference to the provisions of the Plan
upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect
the claim and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 14.03.
14.03 Review of a Denied Claim. Within 60 days after receiving a notice
from the Administrative Committee indicating that a claim has been
denied, in whole or in part, a Claimant may file with the
Administrative Committee a written request for a review of the
denial of the claim. Thereafter, but not later than 30 days after
the review procedure began, the Claimant (or the Claimant's duly
authorized representative) may review pertinent documents, submit
written comments or other documents, and/or request a hearing,
which the Administrative Committee in its sole discretion may
grant.
14.04 Decision on Review. The Administrative Committee shall render its
decision on review promptly and in any case within 60 days after
the Claimant's filing of a
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written request for review of the denial, unless a hearing is held
or other special circumstances require additional time, in which
case the Administrative Committee's decision must be rendered
within 120 days after such date. The decision must be written in a
manner calculated to be understood by the Claimant and shall
contain (i) the specific reasons for the decision, (ii) specific
reference to the Plan provisions upon which the decision was
based, and (iii) such other matters as the Administrative
Committee deems relevant.
14.05 Legal Action. A Claimant's compliance with the provisions of this
Section 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits
under the Plan.
15. MISCELLANEOUS
15.01 No Employment Rights. Nothing in the Plan shall confer upon any
Participant any right to be continued in the employment SAFECO or
any Subsidiary or to interfere in any way with the right of SAFECO
or any Subsidiary, in its sole discretion, to terminate a
Participant's employment at any time.
15.02 No Right to Assets. Participants shall have no right to any assets
of the funds selected as Measurement Funds. The rights of a
Participant (and of his or her Beneficiary) under the Plan shall
be solely those of an unsecured general creditor of SAFECO and
shall not constitute an interest in any specific asset of SAFECO
or any of its Subsidiaries.
15.03 Employment Taxes; FICA; Withholding. SAFECO will collect
applicable employment taxes, including FICA, on all Deferrals,
Rollovers and Matches credited to a Participant's Account;
provided, however, that in the case of a Rollover or Match in
which the Participant is not fully vested under Section 4.03 at
the time the amount is credited to the Participant's Account,
employment taxes will be collected only as the Match or Rollover
becomes vested. From distributions under the Plan, SAFECO will
deduct federal, state, and local taxes and such other amounts as
may be required by law to be withheld with respect to such
payments.
15.04 Governing Law; Severability. This Plan shall be governed by and
interpreted in accordance with the internal laws of the State of
Washington without regard to conflicts of law principles. If any
provision of the Plan is held to be invalid or unenforceable, such
invalidity or unenforceability shall in no way affect the validity
or enforceability of any other Plan provision.
15.05 Binding Provisions. All of the provisions of the Plan, as it may
be amended from time to time, shall be binding upon and inure to
the benefit of SAFECO, its successors and assigns, each
Participant, every Beneficiary or guardian of a Participant, and
the personal representative or executor of a Participant's estate.
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15.06 Transferability. Interests in the Plan may not be transferred,
assigned, pledged or encumbered. Prior to the time payment of an
Account is actually made to a Participant, the Participant shall
have no rights by way of anticipation or otherwise to assign or
dispose of any interest under the Plan.
15.07 Effective Date. The effective date of the Plan is May 6, 1998.
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Appendix A
MEASUREMENT FUNDS UNDER
THE SAFECO DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The following Measurement Funds shall be available under the Plan:
a. Phantom Stock Fund
b. Interest-Accruing Fund (interest credited at an annual rate equal
to the applicable federal long-term rate for purposes of Section
1274 of the Internal Revenue Code of 1986, as amended, in effect
at January 1 of each year)
c. SAFECO 401(k) Savings Plan Investment Options:
- Diversified Common Stock Portfolio
- Intermediate Term Bond Portfolio
- Money Market Portfolio
- SAFECO Equity Fund
- SAFECO Growth Fund
- SAFECO Income Fund
- SAFECO International Stock Fund
- SAFECO Small Company Stock Fund
- Vanguard Total Bond Market Index Fund
- Vanguard Total Stock Market Index Fund
- Vanguard Growth Index Fund
- Vanguard Balanced Index Fund
- RS Emerging Growth Fund
- SAFECO High-Yield Bond Fund
- Fidelity Growth Company Fund
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