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EXHIBIT 10.3
INCENTIVE COMPENSATION PLAN
FOR PRESIDENT/CHIEF EXECUTIVE OFFICER
2001
The purpose of this Incentive Compensation Plan (the "Plan") of SAFECO
("Company") is to offer Michael S. McGavick ("Executive") the opportunity to
earn an annual incentive ("Incentive") based on the level of achievement of
specified Performance Goals during the Performance Period.
1. EFFECTIVE DATE. The Plan shall be effective as of January 26, 2001.
2. ELIGIBLE PARTICIPANTS. Only the Executive shall be eligible to participate
in the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the SAFECO
Corporation Board of Directors or under the Board's delegated authority by
the Compensation Committee of the Board (the "Committee"). The Board shall
have broad authority to adopt, amend and rescind rules and procedures
relating to the Plan and shall have exclusive authority to interpret the
Plan and to determine how Plan provisions should be applied. In the event
that any of the Performance Goals referenced in this Plan are
discontinued, superseded, or no longer appropriate in the Board's opinion,
the Board shall substitute such other Performance Goals as it deems
suitable.
4. PERFORMANCE PERIOD. The initial Performance Period shall commence on the
Effective Date and extend through calendar year 2001. Subsequent
Performance Periods are defined as the period from January 1 through
December 31 of each calendar year.
5. PERFORMANCE GOALS.
a. Setting Performance Goals. The Performance Goals on which the
Executive's Incentive will be based shall be discussed and agreed
upon by and among the Executive, the Lead Director of the Board and
the Committee. The Performance Goals for the Performance Period are
set forth on Appendix A to this Plan.
b. Adjusting Performance Goals. The Board may adjust Performance Goals
in such a manner as it deems equitable in recognition of unusual or
nonrecurring events affecting SAFECO, changes in applicable tax laws
or accounting principles, or such other factors as the Board may
determine.
6. CALCULATION AND PAYMENT OF INCENTIVES.
a. Determination of Amount. The Board in its sole discretion will
determine whether a Performance Goal has been met, the level of
achievement and the amount of Incentive that has been earned. The
Board shall utilize such assessment means as advisable to evaluate
the Executive's or Company's performance relative to the agreed upon
Performance Goals.
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As soon as practicable after the end of the Performance Period, the
Incentive shall be calculated by multiplying the Executive's Base
Salary by a whole percentage from 0 to 200%.
b. Maximum Incentive. The maximum incentive payable under the Plan to
the Executive shall be 200% of the Executive's Base Salary.
c. Base Salary. "Base Salary" shall mean the base annual salary earned
by the Executive during the Performance Period before reduction for
(i) compensation voluntarily deferred or contributed by the
Executive under qualified or nonqualified plans of SAFECO or any
subsidiary and (ii) amounts not included in the Executive's gross
income under Internal Revenue Code Sections 125, 402(e) and 402(h)
pursuant to plans established by SAFECO or any subsidiary. Base
Salary excludes any Incentives paid, accrued or awarded under this
Plan or otherwise.
d. Payment. Incentive payments shall be made within 45 days following
the end of the calendar year (unless the data necessary for the
calculations are not available, in which case payment will be made
within 30 days following availability of necessary data).
e. Guaranteed Incentives. For the 2001 Performance Period, the
incentive shall be at least 100% of the Executive's Base Salary. For
the 2002 Performance Period, the incentive shall be at least 50% of
the Executive's Base Salary.
8. TAX WITHHOLDING. SAFECO shall withhold from incentive payments all amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements.
9. TERMINATION OF EMPLOYMENT. If the Executive ceases to be an eligible
employee for any reason, the Executive's participation in the Plan shall
cease immediately. The Executive shall not be entitled to payment of any
incentive under the Plan, except as specified in the Employment Agreement
dated January 26, 2001 or Change in Control Agreement dated January 26,
2001. Nevertheless, the Executive shall be entitled to payment on the
regular payment date of any incentive earned for the year prior to the
year in which the termination of eligibility occurred.
10. COORDINATION WITH OTHER BENEFIT PLANS. Incentives paid, accrued or awarded
under the Plan shall not be taken into account in administering other
employee benefit and bonus programs for which the Eligible Participant may
also be eligible (e.g., the SAFECO Employees' Profit Sharing Retirement
Plan, Cash Balance Plan or 401(k) Savings Plan). The Executive shall be
entitled to receive the SAFECO profit-sharing cash bonus.
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11. CONTINUATION OF EMPLOYMENT. Employment of the Executive is pursuant to the
Employment Agreement dated January 26, 2001 and may be terminated
according to the provisions of that agreement.
12. GOVERNING LAW. The laws of the State of Washington, excluding any
conflict-of-laws or choice-of-law rule or principle that might otherwise
refer construction or interpretation of this Plan to the substantive law
of another jurisdiction shall govern this Plan. Participant and Company
submit to the exclusive jurisdiction and venue of the federal or state
courts in King County, Washington, to resolve issues that may arise out of
or relate to this Plan.
13. AMENDMENTS. The Plan may be modified or terminated at any time by a
resolution duly adopted by the Board. A certified copy of the Board
resolution authorizing such action shall evidence adoption of any
amendment or any action to terminate the Plan. Notwithstanding the
foregoing, no such amendment or termination of the Plan shall affect an
Executive's right to any Incentive earned prior to the date of the
amendment or Plan termination. Unless otherwise specified in the Board
resolution, any amendment of the Plan shall take effect with respect to
all Eligible Executives as of the date the resolution was adopted.
14. INTERPRETATION OF THE PLAN. The Board shall have the exclusive right to
interpret the provisions of this Plan and determine the disposition of all
situations not specifically addressed in the Plan.
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APPENDIX A
PRESIDENT/CHIEF EXECUTIVE OFFICER
2001 INCENTIVE COMPENSATION PLAN PERFORMANCE GOALS
BALANCE SHEET IMPROVEMENT
Redacted
PROFIT IMPROVEMENT PLAN
Redacted
EXPENSE REDUCTION
Redacted
STRATEGIC PLANNING
Redacted
DIVERSITY AND EMPLOYEE COMPETENCY
Redacted
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