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Exhibit 10
SEVERANCE AGREEMENT
BETWEEN
SAFECO CORPORATION
AND
Dated August 30, 1996
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TABLE OF CONTENTS
Defined Terms...............................................................1
Term of Agreement...........................................................l
Company's Covenants Summarized..............................................l
The Executive's Covenants...................................................2
Compensation Other Than Severance Payments..................................2
Severance Payments..........................................................5
Termination Procedures and Compensation During Dispute.....................10
Notice of Termination......................................................10
Date of Termination........................................................10
Dispute Concerning Termination ............................................11
Compensation During Dispute................................................11
No Mitigation..............................................................12
Successors; Binding Agreement..............................................12
Notices....................................................................13
Miscellaneous..............................................................13
Validity...................................................................14
Counterparts...............................................................14
Settlement of Disputes; Arbitration .......................................14
Definitions................................................................14
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SEVERANCE AGREEMENT
THIS AGREEMENT, dated August 30, 1996, is made by and between
SAFECO Corporation, a Washington corporation ("Safeco"), and (the
"Executive").
WHEREAS, Safeco (together with its subsidiaries, collectively,
the "Company"), considers it essential to the best interests of its stockholders
to foster the continued employment of key management personnel; and
WHEREAS, Safeco recognizes that, as is the case with many
publicly held corporations, the possibility of a Change ill Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, Safeco has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
WHEREAS, the Executive is a party to an Executive Severance
Agreement with the Company dated (the "Prior Agreement");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect until the earlier of
(i) the date it is terminated by written agreement between the Company and the
Executive and (ii) seventh anniversary of a Change in Control. The Prior
Agreement shall terminate on the date hereof.
3. Company's Covenants Summarized. In order to induce the
Executive-to remain in the employ of the Company and in consideration of the
Executive's covenants
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set forth in Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and the other
payments and benefits described herein. Except as provided in the first sentence
of Section 6.2(A), Section 5.4 and Section 9.1, no amount or benefit shall be
payable under this Agreement unless there shall have been a termination of the
Executive's employment with the Company following a Change in Control and during
the Term. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right to
be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii)*the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any applicable
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect at the time the
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Notice of Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under the terms of the
Company's applicable compensation and benefit plans, programs or arrangements.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
applicable retirement, insurance and other compensation or benefit plans,
programs and arrangements.
5.4. Immediately prior to the Change in Control, all awards of
nonqualified stock options, stock appreciation rights granted in connection with
nonqualified stock options, restricted stock rights and performance stock rights
previously granted to the Executive shall become fully vested and, with respect
to options and stock appreciation rights, exercisable. The phrase "immediately
prior to the Change in Control" shall be understood to mean sufficiently in
advance of a Change in Control to permit the Executive to take all steps
reasonably necessary to exercise all options and stock appreciation rights and
deal with the shares of stock underlying the awards of stock options, stock
appreciation rights, restricted stock rights and performance stock rights so
that such shares may be treated in the same manner as the shares of stock of
other shareholders in connection with the Change in Control.
5.5 Executive may elect to defer all or a portion of the
payments that are to be made to Executive under subsection (A) of Section 6.1
hereof and Section 6.2 hereof. Executive may exercise such election by
delivering a notice (in accordance with Section 10 hereof) of election prior to
the occurrence of Change in Control, which notice shall state the portion of
such payments that is to be deferred (expressed as a dollar amount or as a
percentage ("the Deferred Benefit")), the date the payment of the Deferred
Benefit shall commence ("the Deferred Benefit Commencement Date"), and the
number of equal consecutive monthly installments (not to exceed 120) that the
Deferred Benefit is to be paid in.
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In no event shall the Deferred Benefit Commencement Date be subsequent to the
first day of January of the year immediately following the Executive's
sixty-fifth birthday. In the event such an election is made:
(A) The amount that would have otherwise been paid under the
provisions of subsection (A) of Section 6.1 hereof and Section 6.2
hereof shall be reduced by an amount equal to the Deferred Benefit.
(B) The Deferred Benefit, together with simple interest
calculated at an annual rate of ten percent (10%) on the unpaid balance
of the Deferred Benefit from the date that payment of the Deferred
Benefit would have otherwise been made, shall be paid in the number of
equal consecutive monthly installments selected by Executive, with the
first such installment being made on the Deferred Benefit Commencement
Date and a subsequent payment being made on the first day of each month
thereafter.
(C) If Executive dies prior to receiving the full amount of
the Deferred Benefit, the Company shall continue to pay the Deferred
Benefit to the estate of Executive in the same manner as the Deferred
Benefit would have been paid to Executive if he had not died.
(D) The Deferred Benefit shall in no event be set aside or
deposited to a separate account or fund, and the rights of Executive to
the Deferred Benefit shall not be greater than the rights of any other
general, unsecured creditor of the Company.
(E) Executive, his spouse, and any other person or entity
claiming through or under Executive shall not have any power or
authority to commute, encumber, or dispose of any right to receive
payment of the Deferred Benefit, all of which payments are expressly
declared to be nonassignable. In the event of any attempt at assignment
or other disposition, the Company shall have no further liability to
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pay the Deferred Benefit. The Deferred Benefit provided for in this
Agreement shall not be subject to seizure for the payment of any debts,
judgments, alimony, separate maintenance or child support, or be
reached or transferred by operation of law, or in the event of
bankruptcy, insolvency or otherwise.
6. Severance Payments.
6.1 The Company shall pay the Executive the payments described
in this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the Term, in
addition to any payments and benefits to which the Executive is then entitled
under Section 5 hereof, unless such termination is (i) by the Company for Cause,
(ii) by reason of death, Disability or Retirement, or (iii) by the Executive
without Good Reason. Additionally, during the one-month period beginning with
the first day of the month immediately following the first anniversary of the
Change in Control, the Executive may voluntarily terminate his employment for
any reason and, upon such termination, the Company shall pay the Executive the
Severance Payments and the Gross-Up Payment, in addition to any payments and
benefits to which the Executive is then entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason, if (i) the Executive's employment is terminated
by the Company without Cause prior to a Change in Control and such termination
was at the request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a Change in Control,
(ii) the Executive terminates his employment with Good Reason prior to a Change
in Control and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person, or (iii) the Executive's employment is
terminated by the Company without Cause prior to a Change in Control and the
Executive reasonably demonstrates that such termination is otherwise in
connection with or in anticipation of a Change in Control.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to
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the Date of Termination and in lieu of any severance benefit otherwise
payable to the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (or, if less, the number
of years, rounded to the nearest hundredth of a year, remaining until
December 31 of the year in which the Executive attains age 65) times
the higher of Executive's annual base salary in effect immediately
prior to the occurrence of the event or circumstance upon which the
Notice of Termination is based and Executive's base salary in effect
immediately prior to Date of Termination.
(B) For the thirty-six (36) month period immediately following
the Date of Termination or, if shorter, for the period commencing
immediately following the Date of Termination and ending on December 31
of the year in which the Executive attains age 65 (such applicable
period, the "Severance Period"), the Company shall arrange to provide
the Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to the Date of Termination; provided,
however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on the calculation
of "parachute payments" pursuant to Section 6.2 hereof), such health
insurance benefits shall be provided through a third-party insurer
Benefits otherwise receivable by the Executive pursuant to this Section
6.1 (B) shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive during the Severance
Period (and any such benefits actually received by or made available to
the Executive shall be reported to the Company by the Executive).
(C) Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Company shall pay to the Executive
a lump sum amount, in cash, equal to the-sum of (i) any incentive
compensation which has been allocated or awarded to the Executive for a
completed year or other measuring period preceding the Date of
Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the contin-
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ued employment of the Executive to a subsequent date, and (ii) a pro
rata portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such
award by multiplying the award that the Executive would have earned on
the last day of the performance award period, assuming the achievement,
at the level that would produce the maximum award, of the individual
and corporate performance goals established with respect to such award,
by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained
in such performance award period.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or ANY Person affiliated with
the Company or such Person) (such payments or benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the Total Payments") will be subject
to the Excise Tax, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up payment,
shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as Parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel selected by the accounting firm which was, immediately prior to the
Change in Control, the Company's independent accountant (the "Accountant") and
which tax counsel is reasonably acceptable to the Executive ("Tax Counsel"),
such payments or benefits (in whole or in part) do not constitute
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parachute payments, including by reason of section 280G(b)(4)(A) of the Code,
(ii) all "excess parachute payments" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Accountant in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date of Termination (or
if there is no Date of Termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 6.2), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income or employment tax deduction) plus
interest on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional
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Gross-Up Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A) and (C) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Section, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax
Counsel, the Accountant or other advisors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any
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benefit or right provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such payments shall be
made within five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in
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the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as.determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek
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other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to Safeco, Safeco will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Safeco to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that Safeco would be required to perform it if no such succession had taken
place. Failure of Safeco to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for
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in the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive's signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
SAFECO Corporation
SAFECO Plaza
Seattle, WA 98185
Attention: Chief Executive Officer
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and an officer of Safeco. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements (including the
Prior Agreement) or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Washington. All references to sections
of the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law and
any additional withholding to which the Executive has agreed. The obligations of
the Company and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration of the Term
(including, without limitation, those under Sections 6 and 7 hereof) shall
survive such expiration.
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12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
(a) All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement
relied upon. The Committee shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Executive's claim
has been denied.
(b) Any further dispute or controversy arising under or on
connection with this Agreement shall be settled exclusively by arbitration in
Seattle, Washington in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding any provision of this Agreement
to the contrary, the Executive shall be entitled to seek specific performance of
the Executive's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
15. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Accountant" shall have the meaning set forth in Section
6.2 hereof.
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(B) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of Safeco.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to.act, on the Executive's part shall be
deemed Willful unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of
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securities of Safeco (not including in the securities
beneficially owned by such Person any securities acquired
directly from Safeco or its 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 (i)
of paragraph (III) below; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the
Board 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 or
nomination for election by Safeco's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved or recommended; or
(III) there is consummated a merger or consolidation
of Safeco or any direct or indirect subsidiary of Safeco with
any other corporation, other than (i) 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 of Safeco, 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 (ii) a merger or consolidation effected
to implement a recapitalization of
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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) representing 25% or
more of the combined voting power of Safeco's then outstanding
securities; or
(IV) the stockholders of Safeco approve a plan of
complete liquidation or dissolution of Safeco or there is
consummated an agreement for the sale or disposition by Safeco
of all or substantially all of Safeco's assets, other than a
sale or disposition by Safeco of all or substantially all of
Safeco's assets to an entity, at least 75k of the combined
voting power of the voting securities of which are owned by
stockholders 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 of Safeco 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 the assets of Safeco
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer
than three in number) who, on the date six months before a Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the individual
or individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)).
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(J) "Company" shall mean Safeco and its subsidiaries,
collectively.
(K) "Date of Termination" shall have the meaning set forth
in Section 7.2 hereof.
(L) "Deferred Benefit" shall have the meaning set forth in
Section 5.4 hereof.
(M) "Deferred Benefit Commencement Date" shall have the
meaning set forth in Section 5.4 hereof.
(N) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of one hundred and thirty (130) consecutive business
days, the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
(O) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(P) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(Q) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(R) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clause (ii) of the second sentence
of Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a exchange in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act
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is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in
the nature or status of the Executive's responsibilities from
those in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time;
(III) the relocation of the Executive's principal
place of employment to a location outside of King County,
Washington (or, if different, the county in which such
principal place of employment is located immediately prior to
the Change in Control) or the Company's requiring the
Executive to be based anywhere other than such principal place
of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation,
or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program
of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect
any compensation plan (including stock option, restricted
stock, stock appreciation right, incentive compensation and
bonus plans) in which the Executive participates immediately
prior to the Change in Control which is material to the
Executive's total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the
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failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms
of the amount or timing of payment of benefits provided and
the level of the Executive's participation relative to other
participants, as existed immediately prior to the Change in
Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
profit sharing, pension, savings, life insurance, medical,
health and accident, or disability plans in which the
Executive was participating immediate]y prior to the Change in
Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits
or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control,
or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 hereof;
for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless
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the Company establishes to the Committee by clear and convincing evidence that
Good Reason does not exist.
(S) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(T) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(U) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) Safeco or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of 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 the stockholders of Safeco in
substantially the same proportions as their ownership of stock of Safeco.
(V) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) Safeco enters into an agreement, the
consummation of which would result in the occurrence of
a Change in Control;
(II) Safeco or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of Safeco representing
10% or more of either the then outstanding shares of common
stock of Safeco or the combined voting power of the Safeco's
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired
directly from Safeco or its affiliates); or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
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(W) "Retirement" shall be deemed the reason for the
termination by the Company or the Executive of the Executive's employment if
such employment is terminated on or after the date Executive attains age 65.
(X) "Safeco" shall mean Safeco Corporation and, except in
determining under Section 15(G) hereof whether or not any Change in Control has
occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of laws or otherwise.
(Y) "Severance Payments" shall mean those payments so
described in Section 6.1 hereof.
(Z) "Severance Period" shall have the meaning set forth in
Section 6.1 (B) .
(AA) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(AB) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AC) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
SAFECO Corporation
By:_________________________________________
Name:
Title:
____________________________________________
Address:
____________________________________________
____________________________________________
____________________________________________
(Please print carefully)
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