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EXHIBIT 10.4
SAFECO CORPORATION
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
NON-EMPLOYEE DIRECTOR
SAFECO Corporation ("SAFECO") hereby grants to _________________ ("Optionee") a
nonqualified option to purchase 2,000 shares of SAFECO Common Stock, subject to
the Terms of the Stock Option Grant Program for Non-Employee Directors under the
SAFECO Long-Term Incentive Plan of 1997 ("Plan") adopted by the Board of
Directors on November 4, 1998 ("Director Grant Program") and the following terms
and conditions:
1. TERM. This Award Agreement is effective from the date stated below until
the earlier of (i) the close of business on _______________, _____, and
(ii) such other date as may apply pursuant to the provisions of the
Director Grant Program governing retirement, death, disability or other
termination of service as a director of SAFECO.
2. PURCHASE PRICE. Optionee may purchase the shares covered by this Award
Agreement at a price of $______ per share.
3. VESTING. The option shall vest and become fully exercisable on
__________, ____ [date of next shareholders' meeting].
4. EXERCISE OF OPTIONS. After the option vests, Optionee may exercise up to
the total number of shares covered by this option contract, subject to a
minimum purchase of 10 shares at any one time, at any time prior to
expiration of the term stated in Section 1.
5. METHOD OF EXERCISE. To exercise the option, in whole or in part,
Optionee shall deliver a written notice to the Company's Chief Executive
Officer, stating the number of shares as to which the option is being
exercised, accompanied by payment in full for that number of shares. The
option exercise price may be paid (i) in cash and/or (ii) in shares of
the Company's common stock (either through physical delivery of
certificates or by attestation of existing stock ownership), or (iii) by
delivering a properly executed cashless exercise notice containing an
irrevocable request to the Company to withhold the number of shares
necessary to pay the exercise price.
6. EXERCISE OF RIGHTS FOLLOWING CHANGE IN CONTROL. Notwithstanding the
limitations on exercise stated in Section 3, in the event of a Change in
Control of SAFECO (as defined in the Plan), the option shall become
exercisable in full immediately prior to the Change in Control and may
thereafter be exercised in whole or in part at any time before
expiration of the term stated in Section 1.
7. RIGHTS AS STOCKHOLDER. Neither Optionee nor Optionee's legal
representative, heir, legatee or distributee shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any
shares subject to the option until after the stock is issued.
8. INCORPORATED PROVISIONS. Each provision stated in the attached Program
is incorporated by reference into this Award Agreement.
DATED: ___________, ______.
SAFECO CORPORATION OPTIONEE
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By ________________________ ________________________
Roger H. Eigsti, Chairman
TERMS OF STOCK OPTION GRANT PROGRAM
FOR NON-EMPLOYEE DIRECTORS
UNDER THE SAFECO LONG-TERM INCENTIVE PLAN OF 1997
ADOPTED BY THE SAFECO CORPORATION BOARD OF DIRECTORS
NOVEMBER 4, 1998
The following provisions set forth the terms of the stock option grant program
(the "Program") for non-employee directors of SAFECO Corporation ("Company")
under the SAFECO Long-Term Incentive Plan of 1997 (the "Plan"). The following
terms are intended to supplement, not alter or change, the provisions of the
Plan, and in the event of any inconsistency between these terms and those in the
Plan, the Plan shall govern. All capitalized terms that are not defined in this
Program shall be as defined in the Plan.
1. ELIGIBILITY
Each director of the Company who is not an employee of the Company or any
Subsidiary (an "Eligible Director") shall be eligible to receive annual grants
under the Plan, as described below.
2. ANNUAL GRANT
Commencing with the 1999 annual meeting of the Company's shareholders, a
nonqualified stock option to purchase 2,000 shares of the Company's common stock
shall automatically be granted to each Eligible Director in office immediately
after the annual shareholders' meeting. The terms of the option shall be set
forth in an Award Agreement.
3. PRICE
The exercise price for shares purchased under each option shall be the Fair
Market Value of the Company's common stock on the date of grant.
4. VESTING
Options granted to directors shall vest and become fully exercisable on the date
of the first annual meeting of shareholders after the grant.
5. METHOD OF EXERCISE
Each exercise of an option granted under this Program shall be by written notice
to the Company's Chief Executive Officer, stating the number of shares as to
which the option is being exercised and accompanied by payment in full for that
number of shares. The option exercise price may be paid in cash and/or in shares
of the Company's common stock (either through physical delivery or by
attestation) at their Fair Market Value on the date of exercise, or by
delivering a properly executed cashless exercise notice containing an
irrevocable request to the Company to withhold the number of shares necessary to
pay the exercise price.
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6. TERM
The term of each option shall be ten years from the date it is granted;
provided, however, that in the case of options granted to any Eligible Director
who has less than ten years remaining until his or her scheduled retirement date
under the Company's retirement policy for directors, the options shall expire on
the third anniversary of the Eligible Director's retirement from the Company's
Board of Directors.
7. TERMINATION OF SERVICE AS A DIRECTOR
a. Retirement. If an Eligible Director retires from the Company's
Board of Directors in accordance with the Company's retirement
policy for directors or terminates service as a director under
any other circumstances deemed by the Committee to be a
"retirement" for purposes of this paragraph, then the Eligible
Director's options, to the extent exercisable on the Eligible
Director's retirement date, may be exercised at any time prior to
the expiration of the term stated in the Award Agreement.
b. Death or Disability. If an Eligible Director ceases to serve on
the Company's Board of Directors because of the Eligible
Director's death or a permanent and total disability within the
meaning of Section 22(e)(3) of the Code, the Eligible Director's
options may be exercised at any time, without regard to any
vesting requirements, prior to the expiration of the term set
forth in each Award Agreement, by the disabled Eligible Director
or, in the case of a decedent's options, by the personal
representative of the Eligible Director's estate or the person(s)
to whom the Eligible Director's rights under the options have
passed by will or the applicable laws of descent and
distribution.
c. Resignation or Other Termination. If an Eligible Director ceases
to be a director of the Company for any reason other than the
Eligible Director's death, disability or retirement, then to the
extent the Eligible Director's options are vested on the Eligible
Director's last day of service as a director, the options may be
exercised at any time within one year after that date or until
the expiration of the term stated in the applicable Award
Agreement, whichever is earlier.
8. NON-TRANSFERABLE
Options granted to Eligible Directors shall not be transferable
other than by will or the laws of descent and distribution and
during the lifetime of a director shall be exercisable only by
the director or, in the event the director becomes legally
incompetent, by the Eligible Director's guardian.
9. DEFERRAL OF GAINS
An Eligible Director may elect to defer the gain realized on exercise of any or
all options granted to the Eligible Director under this Program, provided the
exercise price is paid in shares of the Company's common stock already owned by
the Eligible Director, subject to the terms and conditions set forth in the
SAFECO Corporation Deferred Compensation Plan for Directors, as it may be
amended from time to time, or any other plan or arrangement under which the gain
is permitted to be deferred.
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10. CORPORATE TRANSACTIONS
In the event of a Change in Control of the Company, each option outstanding at
the time of the Change in Control shall become fully vested and exercisable
immediately prior to the Change in Control.
11. OTHER PROVISIONS
Except for certain provisions of the SAFECO Long-Term Incentive Plan whose
application is clearly limited to employee participants, the provisions of the
Plan, as it may be amended from time to time, shall apply to stock options
granted to Eligible Directors under this Program.