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EXHIBIT 10.13
SEPARATION AGREEMENT
This Separation Agreement is made and entered into by and between ROGER
H. EIGSTI ("Eigsti") and SAFECO CORPORATION (the "Company"), as of the date
written under the signature of Eigsti on the signature page of this Agreement.
RECITALS
A. Eigsti is employed as Chairman and chief executive officer of the Company,
and, pursuant to terms of this Agreement, resigns as a director and officer and
retires as an employee, all effective December 31, 2000.
B. This Agreement sets forth the complete understanding between Eigsti and the
Company regarding the commitments and obligations arising out of the termination
of their employment relationship.
AGREEMENT
1. Continued Employment.
1.1 Employment Period. Under the terms and subject to the conditions of
this Agreement, Eigsti's employment status with the Company shall continue
through and including December 31, 2000. Eigsti will retire from employment with
the Company effective December 31, 2000.
1.2 Group Insurance Benefits Coverage. The Company shall continue to
provide coverage under any group insurance benefits plan under which Eigsti
and/or his dependents were covered on the date hereof, through and including
December 31, 2000. Eigsti shall be responsible to pay any amounts chargeable as
"employee premium contribution" amounts with respect to any such coverage. From
and after December 31, 2000, Eigsti and/or his dependents shall be eligible for
such benefits continuation or conversion coverage as may be available or
required under the terms of the Company's benefits plans or policies, or as may
be required under the group health plan provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as subsequently amended (COBRA), or other
applicable federal or state law.
1.3 Eligibility for Other Group Benefits. Eigsti shall continue to be
eligible as an "employee" of the Company through December 31, 2000 for group
benefits under the Company's employee benefit plans. Eigsti shall be eligible to
participate in and shall receive contributions to the SAFECO Employees' Profit
Sharing Retirement Plan, Savings Plan, and Cash Balance Plan, and for a Profit
Sharing Bonus (based on an assumed annual salary of $900,000) as the same may be
available to other employees of the Company
1.4 Payment for Accrued Sick Leave and Vacation Units. The Company shall
by December 31, 2000 pay Eigsti for any vested sick leave units and vacation pay
accrued but unused
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at December 31, 2000, but only to the extent compensable under the Company's
normal sick leave and vacation policies and procedures.
1.5 Reimbursement for Expenses Incurred. The Company shall reimburse
Eigsti for reasonable and necessary business expenses incurred by him on or
before December 31, 2000, but not submitted for reimbursement at such date, to
the extent reimbursable under the Company's normal expense reimbursement
policies and procedures and submitted for payment by January 15, 2001.
1.6 RSRs and Performance Stock Rights. Eigsti acknowledges and agrees
that as a consequence of his retirement on December 31, 2000, any rights he may
have under any grant of a restricted stock right ("RSR") or performance stock
right award ("PSR Award") granted under the SAFECO Long-Term Incentive Plan of
1997 ("Plan") will expire, and he will not be entitled to any payment under any
RSR or PSR Award after December 31, 2000.
1.7 Stock Options. Eigsti acknowledges and agrees that as a consequence
of his retirement on December 31, 2000, and pursuant to the terms of each stock
option for SAFECO Corporation common stock ("Stock Option") that has been
granted to him under either the SAFECO Incentive Plan of 1987 or the Plan, other
than the Stock Options granted to him in May 1998 and May 1999 whose terms have
been set pursuant to Section 3.1, he will have through March 31, 2001, to
exercise each Stock Option and after that date he will lose all rights under
each Stock Option.
2. Payments. As compensation to Eigsti, and in consideration of his retirement
as an employee and resignation as a director and officer of the Company and his
release granted herein, the Company agrees to pay a total sum of $2,700,000,
plus an amount equal to 17,022 multiplied by the closing price of SAFECO
Corporation common stock as reported on NASDAQ on December 29, 2000 ("Calculated
Payment"). This payment shall be allocated and paid as follows:
2.1 Release Payment. $1,200,000 shall be allocated as consideration for
Eigsti's release of claims as set forth in section 5 of this Agreement (the
"Release Payment"). Eigsti and the Company agree that $200,000 of the Release
Payment represents liquidated damages for potential wage-related claims and
shall be subject to withholding and deduction for payroll taxes and other
deductions as are required by federal and state law. Eigsti and the Company
agree that $1,000,000 of the Release Payment represents liquidated damages for
other potential claims being released and does not constitute wages or a wage
substitute and that the Company will not make payroll deductions or wage
withholding from that amount. The Release Payment shall be made January 15, 2001
in the form of three checks, one payable to Eigsti in the amount of $200,000
less the applicable withholding and deduction for payroll taxes, one payable to
Eigsti in the amount of $720,000 (72% of $ $1,000,000 of the Release Payment)
and one payable to the Internal Revenue Service on behalf of Eigsti in the
amount of $280,000 (28% of $1,000,000 of the Release Payment).
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2.2 Non-Compete, Non-Solicitation and Non-Disparagement Payments. In
consideration of the promise made by Eigsti not to compete in Section 7.1, the
Company will pay Eigsti $1,000,000 on September 1, 2001. In consideration of the
promises made by Eigsti not to solicit employees and not to disparage the
Company in Sections 7.2 and 7.3, the Company will pay Eigsti $500,000 on
September 1, 2002, and the Calculated Payment on December 29, 2000,
respectively. Each of the 2001 and 2002 payments shall be made in the form of
two checks, one payable to Eigsti in the amount of 72% of the specified payment
and the second payable to the Internal Revenue Service on behalf of Eigsti in
the amount of 28% of the specified payment. Eigsti has previously elected to
defer payment of the Calculated Payment under the SAFECO Deferred Compensation
Plan for Executives.
2.3 Payments in Case of Death. Should Eigsti die after his execution of
this Agreement but before one or more of the payments described under Sections
2.1 or 2.2 have been made, then, so long as Eigsti has not made any claim
described in Section 5 of this Agreement against the Company or any of its
affiliates, employees, officers or directors, or otherwise violated the terms of
this Agreement, Eigsti's right to receive the payments described in Sections 2.1
and 2.2 and his right to the ownership of the membership and automobile
described in Sections 3.2 and 3.3 shall pass to his estate, i.e., to the person
or persons to whom such rights pass by will or under applicable laws of descent
and distribution.
3. Further Consideration. As further consideration to Eigsti for the release
granted under Section 5 of this Agreement, the Company, at no cost to Eigsti,
will do the following:
3.1 SAFECO Stock Option Term. Contingent upon Eigsti's execution of this
Agreement and the expiration of the revocation period described in Section 13.3,
SAFECO Corporation through the Compensation Committee of its Board of Directors
has agreed to amend those SAFECO Corporation stock options previously granted to
Eigsti in May 1998 and May 1999 to provide that the term of each shall expire on
December 31, 2003, the third anniversary of Eigsti's resignation, to amend each
of those options to accelerate the vesting of any unvested shares to October 3,
2000, and to amend the April 1997 stock options to accelerate the vesting of any
unvested shares to August 2, 2000. Eigsti acknowledges that as a consequence of
setting the term of the May 1998 and May 1999 stock options none of them will
qualify for preferential income tax treatment as an incentive stock option under
the Internal Revenue Code.
3.2 Transfer of Ownership.
3.2.1 Broadmoor Country Club. The Company agrees to transfer to
Eigsti by December 31, 2000 the ownership of the membership in the
Broadmoor Country Club that Eigsti has used.
3.2.2 Automobile. The Company agrees to transfer to Eigsti by
December 31, 2000 the ownership of the Lexus automobile that Eigsti has
used.
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3.2.3 Liability for Taxes. Eigsti acknowledges that the
transfers of ownership under Sections 3.2.1 and 3.2.2 will constitute
income to him and that he is responsible for the payment of any federal
income tax and any other taxes due upon transfer.
3.3 Attorney's Fees. The Company agrees to pay up to $5,000 of the
attorney's fees incurred by Eigsti for a review of this Agreement.
3.4 Tax Consultation. The Company agrees to pay up to $5,000 of the tax
consultation fees incurred by Eigsti for a review of matters raised by the
payments contemplated by this Agreement.
3.5 Desert Island Condominium. The Company agrees that at mutually
agreeable dates during 2001 and for periods of time in the aggregate not to
exceed four weeks Eigsti may use without charge one of the Desert Island
Condominiums owned by SAFECO Properties and have the use of one of the golf
memberships at Desert Island Country Club during such time; provided, however,
that all food, drink, cart rental and merchandise purchases shall be paid for by
Eigsti.
4. Retirement and Resignation.
4.1 Retirement and Resignation. In consideration of the payments and
other compensation described above, Eigsti notifies the Company of his
retirement as an employee of the Company effective December 31, 2000 and tenders
his resignation as a director and officer of the Company effective December 31,
2000.
4.2 No Authority To Act. From and after December 31, 2000, Eigsti shall
have no further authority to bind the Company to any contract or agreement or to
act on behalf of the Company, and the Company shall have no obligation to
reimburse Eigsti for any expenses incurred by him on or after December 31, 2000,
except as expressly stated in this Agreement.
4.3 Return of Materials; Transfer of Memberships. By January 31, 2001,
Eigsti shall return all devices or materials owned by the Company and used by
him in the course of his employment and shall transfer to the Company or
cooperate with the Company in the transfer of membership in the Columbia Tower
Club and sell the membership in the Central Park Tennis Club and transfer the
proceeds to the Company.
5. Release and Settlement.
5.1 Release Payment. For the purposes of this Agreement "Release
Payment" means the payment by the Company of the amounts referenced in Section
2.1.
5.2 Release. In consideration of the Company's delivery of the Release
Payment to Eigsti under the terms of this Agreement, Eigsti hereby releases the
Company and its affiliated companies, and the employees, agents, officers,
directors and shareholders of any of them, from all claims, demands, actions or
causes of action of any kind or nature whatsoever which Eigsti
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may now have or may ever have had against any of them, whether such claims are
known or unknown, and including but not limited to the Claims described in
Section 5.3. However, nothing in this Separation Agreement shall create or imply
any waiver by Eigsti (i) with respect to his entitlement to compensation for
vested retirement benefits or deferred compensation, in accordance with the
terms and conditions of the Company's employee benefit plans, or (ii) of any
claims with respect to any breach by the Company of its obligations under this
Agreement.
5.3 The Claims. For the purposes of this Agreement, "Claims" shall mean
and include claims with respect to any of the following: (i) breach of contract;
(ii) discrimination, retaliation, or constructive or wrongful discharge; (iii)
lost wages, lost employee benefits, physical and personal injury, stress, mental
distress, or impaired reputation; (iv) claims arising under the Age
Discrimination in Employment Act ("ADEA"), Title VII of the Civil Rights Act,
the Equal Pay Act, or any other federal, state or local laws or regulations
prohibiting employment discrimination; (v) attorneys' fees; and (vi) any other
claim arising from or relating to Eigsti's employment with the Company and/or
his separation from service, including claims with respect to the Severance
Agreement dated May 5, 1999 between Eigsti and the Company, which the parties
agree is terminated by mutual consent as of the date of the expiration of the
revocation period described in Section 13.3.
5.4 Consideration for Release. The Company represents, and Eigsti
acknowledges, that the Release Payment and the further consideration described
in Section 3 exceed any amount the Company may arguably be required to pay under
any agreement or arrangement to which Eigsti is a party or under which he claims
some benefit, or under the standard policies and procedures of the Company, and
represents valuable consideration to him for the release of his ADEA and other
claims described above.
6. Confidential Information.
6.1 Confidential Information. Eigsti recognizes that by virtue of his
employment by the Company, Eigsti has acquired certain non-public information
with respect to the Company, and its operations (the "Confidential
Information"). Eigsti recognizes and acknowledges that the Confidential
Information constitutes valuable, special and unique assets of the Company,
access to and knowledge of which were essential to the performance of Eigsti's
duties during his employment.
6.2 Non-Disclosure. Eigsti agrees to hold the Confidential Information
in trust and confidence. Eigsti agrees not to (i) directly or indirectly make
use of the Confidential Information, (ii) reveal any Confidential Information to
any other party, or (iii) divulge or use any Confidential Information for any
purpose other than for the benefit of the Company, except and to the extent
Eigsti may be required to disclose by lawful order or process of a court (in
which event Eigsti will provide reasonable advance notice of such disclosure to
the Company and will cooperate with the Company's efforts to obtain protective
treatment for such information).
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6.3 Materials. Unless the Company otherwise agrees, Eigsti shall not
remove from the Company's premises or possession any documents, compilations of
data or other files or records of any nature, or any copy or reproduction
thereof, that contain Confidential Information or that belong to the Company.
7. No Competing Employment; No Solicitation of Employees.
7.1 No Competing Employment. Eigsti agrees that until January 1, 2002,
Eigsti shall not work for or consult with any company that competes with the
Company or its affiliates in the insurance business without the prior written
consent of the Company.
7.2 No Solicitation of Employees. Eigsti agrees that until January 1,
2003, Eigsti shall not solicit, directly or indirectly, any employee of the
Company or its affiliates to leave such employment and/or to become an employee,
officer or consultant of or to any other enterprise.
7.3 Non-Disparagement. Eigsti agrees not to criticize, disparage, or
make negative comments about the Company, its affiliates, or any of its or their
directors, officers or employees. This Section 7.3 shall not be construed to
prohibit Eigsti from responding truthfully to any court or regulatory body or to
responding truthfully under oath in compliance with a subpoena or other legal
process.
8. No Admission. Eigsti understands and acknowledges that neither the Release
Payment nor the execution and delivery of this Agreement by the Company
constitutes an admission by the Company to (i) any breach of an agreement with
Eigsti, (ii) any violation of a federal, state or local statute, regulation or
ordinance, or (iii) any other wrongdoing.
9. Legal Action.
9.1 No Action on Released Claims. Eigsti agrees not to sue or pursue any
court or administrative action against the Company, or any of its employees,
agents, officers, directors or shareholders, regarding any claims released
herein or otherwise arising from Eigsti's employment with the Company or his
separation from service, except with respect to any breach by the Company of its
obligations under this Agreement.
9.2 Liability for Defense Costs. If, notwithstanding this Agreement,
Eigsti should file any lawsuit or other proceeding based on legal claims that
Eigsti has released herein, Eigsti agrees that he will pay or reimburse the
Company for all reasonable costs which it, or its employees, agents, officers or
directors, incur in defending against Eigsti's claims. This Section shall not
apply to any claimed breach by the Company of any of the terms or conditions of
this Agreement.
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10. Arbitration.
10.1 Notice and Selection of Arbitrator. The parties agree that any
dispute arising under this Agreement, other than an action at law or in equity
by the Company to seek damages for or to seek injunctive relief against Eigsti
for a violation of any provision of Sections 3.2, 6 or 7, shall be submitted to
arbitration in Seattle, Washington, before a disinterested arbitrator.
Arbitration shall be commenced by service on the other party to the dispute by a
written request for arbitration, containing a brief description of the matter at
issue and the names and addresses of three arbitrators acceptable to the
petitioner. The other party shall within thirty (30) days following receipt of
such notice either select one of the proposed arbitrators or provide the names
and addresses of three other arbitrators acceptable to the proposing party. If
the parties are unable to select an arbitrator from those proposed, or, if they
are unable to select a third arbitrator, an arbitrator shall be chosen
impartially by the American Arbitration Association.
10.2 Rules of Proceeding. Arbitration proceedings shall be conducted
under the employment rules then prevailing of the American Arbitration
Association. The arbitrator shall not be bound to any formal rules of evidence
or procedure, and may consider such matters as a reasonable business person
would take into account in decision-making.
10.3 Decision Final and Binding. The decision of the arbitrator shall be
final and binding on the parties, and may be entered and enforced in any court
of competent jurisdiction.
10.4 Expenses. Each party shall share equally the expenses of the
arbitrator and other arbitration expenses. Attorney fees, witness fees and other
expenses incurred by a party in preparing for the arbitration are not
"arbitration expenses" and shall be paid by the party incurring them.
11. Confidentiality.
11.1 Terms of Agreement. Eigsti and the Company agree that neither of
them shall reveal or publicize the existence of this Agreement or its terms,
including but not limited to the amount of the Release Payment, except under
compulsion of law and as required under the rules and regulations of the
Securities and Exchange Commission ("SEC"). Eigsti acknowledges that a copy of
this Agreement will be filed as an exhibit to a filing made by the Company with
the SEC and that a description of compensation paid or to be paid to him under
this Agreement will be included in the Company's proxy statement. Further, the
parties agree that they shall not discuss with or make to the public at large or
to any individual person or persons any statements about this Agreement, or
matters relating to its terms. Notwithstanding the provisions of this Section
10.1, the parties may discuss the existence and terms of this Agreement with
their respective attorneys, accountants and financial advisors to the extent
necessary to obtain counsel and advice therefrom. Eigsti may also discuss the
existence and terms of this Agreement with his spouse after obtaining her
agreement to be bound by this confidentiality provision.
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11.2 Announcement Concerning Separation from Service. Eigsti and the
Company shall discuss and coordinate with respect to any public announcement, or
any internal or private announcement, concerning the severance of their
employment relationship.
11.3 Employment References. In the event a prospective employer contacts
the Company for an employment reference with respect to Eigsti, the Company
shall not provide any information relating to Eigsti or his employment history
or performance with the Company except for such information Eigsti authorizes
the Company in writing from time to time to release in response to such
inquiries.
12. Costs. Except for the Company's agreement to pay for Eigsti's attorney's
fees and tax consultation as stated and limited in Sections 3.3 and 3.4,
respectively, each party shall bear its own costs and expenses incurred in
connection with the negotiation of this Agreement and the preparation of this
Agreement.
13. Acknowledgment.
13.1 Informed Agreement. Eigsti declares that he has read and fully
understands the terms of this Agreement, and its significance and consequence.
Eigsti further declares that this Agreement is the product of good faith
negotiations between himself and the Company, and that he voluntarily accepts
the same for the purpose of resolving arrangements with respect to his
separation from service. Eigsti understands and acknowledges that, except as
specifically reserved herein, in exchange for the Release Payment he is waiving
and giving up every possible claim arising out of his employment with the
Company and/or his separation from service.
13.2 Attorney. Eigsti acknowledges that the Company has advised him to
review the terms of this Agreement with an attorney and that he has done so.
13.3 Review and Revocation Periods. Eigsti acknowledges that the Company
has given him at least 21 days during which to consider this Agreement prior to
signing, and understands that he has seven days after signing in which he may
revoke this Agreement. This Agreement shall not become effective or enforceable
until such seven-day period has expired. Eigsti understands that he may revoke
this Agreement by delivering a written notice to Allie Mysliwy at SAFECO Plaza,
Seattle, WA 98185, no later than the close of business on the seventh day after
his execution hereof. Eigsti understands and acknowledges that if he revokes
this Agreement it shall not be effective or enforceable and he will not receive
the payments described herein.
14. Entire Agreement. This is the entire agreement between Eigsti and the
Company. Neither the Company nor any affiliate has made any promises to Eigsti
other than those included within this Agreement.
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15. Governing Law. The parties acknowledge that this Agreement shall be
interpreted under and enforced by and consistent with the laws of the State of
Washington.
SAFECO CORPORATION
_____________________ By_____________________
ROGER H. EIGSTI Robert S. Cline
Chair, Compensation Committee
Dated:________________ Dated:__________________
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