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EXHIBIT 10
SEVERANCE AGREEMENT
BETWEEN
SAFECO CORPORATION
SAFECO LIFE INSURANCE COMPANY
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Dated February 7, 1998
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TABLE OF CONTENTS
Defined Terms...........................................................1
Term of Agreement.......................................................1
Company's Covenants Summarized..........................................1
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..........................................................11
Successors; Binding Agreement..........................................12
Notices................................................................13
Miscellaneous..........................................................13
Validity...............................................................14
Counterparts...........................................................14
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Settlement of Disputes; Arbitration....................................14
Definitions............................................................15
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SEVERANCE AGREEMENT
THIS AGREEMENT, dated February 7, 1998, is made by and between SAFECO
Corporation ("Safeco"), SAFECO Life Insurance Company ("Safeco Life") and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Executive").
WHEREAS, Safeco (together with its subsidiaries, including Safeco Life,
collectively the "Company") considers it essential to the best interests of its
stockholders to ▇▇▇▇▇▇ the continued employment of key management personnel; and
WHEREAS, Safeco recognizes that the possibility of a Change in 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;
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 Employer and the
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Executive and (ii) seventh anniversary of a Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Employer and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Employer 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 Employer 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 Employer, the Executive shall not have any
right to be retained in the employ of the Employer.
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
Employer as a result of incapacity due to physical or mental illness, the
Employer 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,
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program or arrangement maintained by the Employer during such period, until the
Executive's employment is terminated by the Employer 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 Employer shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect at the time the 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 Employer'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 Employer 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 Employer'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
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same manner as the shares of stock of other shareholders in connection with the
Change in Control, if applicable.
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. 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.
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(C) If Executive dies prior to receiving the full amount of the
Deferred Benefit, the Employer 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 Employer.
(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 non-assignable. In the event of any attempt at assignment
or other disposition, the Employer shall have no further liability to
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 Employer 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
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the Executive is then entitled under Section 5 hereof, unless such termination
is (i) by the Employer 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 Employer 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 Employer 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 the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Employer 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)
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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 Employer 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 Employer by the Executive).
(C) Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Employer 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
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of Termination, is contingent only upon the continued 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
Employer 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
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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 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,
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the Executive shall repay to the Employer, 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 Employer shall make an additional
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 Employer
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 Employer
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
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Employer 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 Employer to the Executive, payable on the fifth (5th) business day
after demand by the Employer (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 Employer 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 Employer 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 Employer 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 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 Employer 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
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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
the Notice of Termination (which, in the case of a termination by the Employer,
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
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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 Employer 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.
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8. No Mitigation. The Employer agrees that, if the Executive's
employment with the Employer terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Employer 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 Employer, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor to
Safeco or Safeco Life, Safeco and Safeco Life will each 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 or Safeco Life
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that Safeco or Safeco Life would be required to perform it if
no such succession had taken place. Failure of Safeco or Safeco Life 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 Employer 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
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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 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 Employer, 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 Safeco:
SAFECO Corporation
SAFECO Plaza
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
To Safeco Life Insurance Company:
SAFECO Life Insurance Company
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Secretary
11. Miscellaneous. No provision of this
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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 the Employer. 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 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.
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.
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(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 in 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.
(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
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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 prior to a
Change in Control and the Board of Directors of the Employer following a Change
in Control.
(F) "Cause" for termination by the Employer 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 Employer (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 Employer 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 Employer and (y) in the event of a dispute
concerning the application of this provision, no claim by the Employer that
Cause exists shall be given effect unless the Employer establishes to the
Committee by clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall mean the first to occur of a Change in
Control of Safeco and a Change in Control of Safeco Life.
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(H) A "Change in Control of Safeco" 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 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 securi-
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ties 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 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 75%
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 of Safeco" shall not
be deemed to have occurred by virtue of the consummation of any transaction or
series of
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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.
(I) A "Change in Control of Safeco Life" shall be deemed to have
occurred if the event set forth in either of the following paragraphs shall have
occurred:
(I) Safeco or the stockholders of Safeco approve a plan of
complete liquidation or dissolution of Safeco Life or there is
consummated an agreement for the sale or disposition by Safeco or the
stockholders of Safeco of all or substantially all of Safeco Life's
assets; or
(II) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Safeco Life representing 50% or more of
the combined voting power of Safeco Life's then outstanding securities.
Notwithstanding the foregoing, if, within thirty days following a Change in
Control of Safeco Life, Executive is offered employment with Safeco or a
subsidiary or Affiliate of Safeco on terms substantially similar to the terms of
Executive's employment with the Company immediately prior to such Change in
Control of Safeco Life, then, for purposes of this Agreement, a Change in
Control of Safeco Life shall not be deemed to have occurred and this Agreement
shall continue in full force and effect, except that all references to "Change
in Control of Safeco Life" herein shall be deemed deleted, and the "Employer"
shall mean the "Company" for the remainder of the Term. Failure of the Executive
to accept employment described in this paragraph shall be deemed a termination
of employment by
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the Executive without Good Reason.
(J) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(K) "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)).
(L) "Company" shall mean Safeco and its subsidiaries, collectively.
(M) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof.
(N) "Deferred Benefit" shall have the meaning set forth in Section 5.4
hereof.
(O) "Deferred Benefit Commencement Date" shall have the meaning set
forth in Section 5.4 hereof.
(P) "Disability" shall be deemed the reason for the termination by the
Employer 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
Employer for a period of one hundred and thirty (130) consecutive business days,
the Employer 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
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duties.
(Q) "Employer" shall mean, (x) prior to a Change in Control, the Company
and (y) following a Change in Control, (i) if the Change in Control was a Change
in Control of Safeco, the Company and (ii) if the Change in Control was a Change
in Control of Safeco Life, Safeco Life.
(R) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(S) "Excise Tax" shall mean any excise tax imposed under section 4999 of
the Code.
(T) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(U) "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
"Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Employer, or failures by the Employer 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 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
Employer or a substantial adverse alteration in the nature or status of
the Executive's respon-
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sibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Employer 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 Employer'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 Employer's business to an extent substantially
consistent with the Executive's present business travel obligations;
(IV) the failure by the Employer 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 Employer, within seven (7) days
of the date such compensation is due;
(V) the failure by the Employer 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 Employer 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 Employer to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Employer's profit sharing, pension, savings,
life insurance, medical, health and accident, or disability plans in
which the Executive was participating immediately prior to the Change in
Control, the taking of any action by the Employer 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 Employer 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 Employer
in accordance with the Employer'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
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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 the Employer establishes to the Committee by clear and convincing
evidence that Good Reason does not exist.
(V) "Gross-Up Payment" shall have the meaning set forth in Section 6.2
hereof.
(W) "Notice of Termination" shall have the meaning set forth in Section
7.1 hereof.
(X) "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.
(Y) "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) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention
to take or to consider taking actions which, if consummated,
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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.
(Z) "Retirement" shall be deemed the reason for the termination by the
Employer or the Executive of the Executive's employment if such employment is
terminated on or after the date Executive attains age 65.
(AA) "Safeco" shall mean Safeco Corporation and, except in determining
under Section 15(H) hereof whether or not any Change in Control of Safeco has
occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(BB) "Safeco Life" shall mean Safeco Life Insurance Company, a wholly
owned subsidiary of Safeco and except in determining under Section 15(I) hereof
whether or not any Change in Control of Safeco Life has occurred, shall include
any successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(CC) "Severance Payments" shall mean those payments so described in
Section 6.1 hereof.
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(DD) "Severance Period" shall have the meaning set forth in Section
6.1(B).
(EE) "Tax Counsel" shall have the meaning set forth in Section 6.2
hereof.
(FF) "Term" shall mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described therein).
(GG) "Total Payments" shall mean those payments so described in Section
6.2 hereof.
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SAFECO Corporation
By: ____________________________________
Name:
Title:
SAFECO Life Insurance Company
By: ____________________________________
Name:
Title:
________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address:
________________________________________
________________________________________
________________________________________
(Please print carefully)
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