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Exhibit 10
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into this 6th day of November, 1987, by
and among SAFECO CORPORATION, a Washington corporation, referred to herein as
("SAFECO") and XXXXX X. XXXXX ("Executive").
RECITALS:
A. Executive presently serves as Associate General Counsel of SAFECO
Corporation and is an integral part of the management of SAFECO.
B. SAFECO considers the establishment and maintenance of a sound and vital
management to be essential to protect and enhance the best interests of SAFECO
and its shareholders. In this connection, SAFECO recognizes that the possibility
of a change in the control of SAFECO Corporation may exist from time to time,
and that such possibility, and the uncertainty and questions that it may create
for Executive and other SAFECO management, may result in the departure or
distraction of such management to the detriment of SAFECO Corporation and its
shareholders. Further, SAFECO recognizes that, in the early stages of an attempt
to gain control of SAFECO, certain Executives may be called upon by SAFECO to
take certain actions against the party attempting to gain control that may
jeopardize the Executive's continued employment should the attempt be
successful. Accordingly, the Board of Directors of SAFECO Corporation (the
"Board") has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of the Executive and other
SAFECO management personnel to their assigned duties.
C. SAFECO desires to enter into this Executive Severance Agreement to induce
Executive to remain in the employ of SAFECO and in consideration of Executive's
agreement to remain in the employ of SAFECO subject to the terms and conditions
set forth herein. Executive is willing
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to enter into this Agreement in consideration of the severance benefits which
SAFECO herein promises to pay Executive in the event Executive's employment with
SAFECO is terminated subsequent to a change in control of SAFECO under certain
conditions described herein.
D. This Agreement is not intended to alter the compensation and benefits that
Executive could reasonably expect in the absence of a change in control of
SAFECO Corporation and, accordingly, this Agreement will be operative only upon
a change in control of SAFECO Corporation as that term is hereafter defined.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto mutually agree as follows:
1. Definitions.
In addition to the words and terms elsewhere defined herein, the
following words and terms as used herein shall have the following meaning unless
the context or use indicate a different meaning:
(a) "Cause." SAFECO shall be deemed to have terminated
Executive's employment for "Cause" if such termination is a result of a good
faith determination by the Board or an authorized committee of the Board that:
(i) Executive has committed a felony;
(ii) Executive has committed any crime involving moral
turpitude;
(iii) Executive has misappropriated funds of SAFECO;
(iv) Executive has continually engaged in conduct that
constitutes gross malfeasance of duty; or
(v) Executive has been habitually absent from work for
reasons unrelated to disability.
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Notwithstanding the foregoing, the Executive's termination shall not be deemed
to be for Cause unless and until there shall have been delivered to Executive a
copy of a Notice of Termination described in paragraph 4 hereof and Executive
shall have been given the opportunity to be heard as specified in such paragraph
4.
(b) "Change in Control." A "Change in Control" of SAFECO
Corporation shall mean a change in control of a nature that would be required to
be reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided without limitation, that such a change in control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of
securities of SAFECO Corporation representing 25% or more of the combined voting
power of SAFECO Corporation's then outstanding securities; or (ii) at any time
less than fifty-one percent (51%) of the members of the Board shall be persons
who are either nominated for election by the Board or an authorized committee of
the Board or elected by the Board.
(c) "Disability." SAFECO shall be deemed to have terminated
Executive's employment based on "Disability" if such termination is attributable
to Executive's absence from his duties with SAFECO on a full-time basis for one
hundred thirty (130) consecutive business days, as a result of Executive's
incapacity due to physical or mental illness, unless within thirty (30) days
after giving the Notice of Termination described in paragraph 4 hereof Executive
shall have returned to the full-time performance of his duties.
(d) "Code." The Internal Revenue Code of 1986, as amended from
time to time.
(e) "Good Reason." Executive shall be deemed to have
terminated his employment with SAFECO for "Good Reason" if such termination is
based on:
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(i) Subsequent to a Change in Control of SAFECO
Corporation, and without Executive's express written consent, the assignment to
Executive of any duties inconsistent with Executive's position, duties,
responsibilities and status with SAFECO immediately prior to a Change in
Control, or a change in Executive's reporting responsibilities, titles or
offices as in effect immediately prior to a Change in Control, or any removal of
Executive from or any failure to re-elect Executive to any position, except in
connection with the termination of Executive's employment for Cause, Disability
or Retirement or as a result of Executive's death;
(ii) Subsequent to a Change in Control of SAFECO
Corporation, a reduction by SAFECO in Executive's base salary as in effect on
the date hereof or as the same may be increased from time to time;
(iii) Subsequent to a Change in Control of SAFECO
Corporation, a failure by SAFECO to continue any bonus plans in which Executive
actually participates as the same may be modified from time to time but
substantially in the forms in effect immediately prior to the Change in Control,
or a failure by SAFECO to continue Executive's participation in bonus plans on
at least the same basis as Executive participates immediately prior to the
Change in Control;
(iv) Subsequent to a Change in Control of SAFECO
Corporation and without Executive's express written consent, SAFECO's requiring
Executive to occupy an office anywhere outside of King County, Washington,
except for required travel on SAFECO's business to an extent substantially
consistent with Executive's business travel obligations immediately prior to the
Change in Control;
(v) Subsequent to a Change in Control of SAFECO
Corporation, the failure of SAFECO to continue in effect any benefit or
compensation plan, stock option plan, life insurance plan, health and accident
plan or disability plan in which Executive is participating at the
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time of a Change in Control of SAFECO Corporation (or plans providing Executive
with substantially similar benefits), the taking of any action by SAFECO which
would adversely affect Executive's participation in or significantly reduce
Executive's benefit under any such plans or deprive Executive of any significant
fringe benefit enjoyed by Executive at the time of the Change in Control, or the
failure by SAFECO to provide Executive with the number of paid vacation days to
which Executive is then entitled in accordance with SAFECO's normal vacation
policy in effect immediately prior to a Change in Control; or
(vi) Subsequent to a Change in Control of SAFECO
Corporation, the failure to SAFECO to obtain the assumption of, or the agreement
to perform, this Agreement by any successor as contemplated in paragraph 11
hereof.
(f) "Retirement." Executive's termination of employment shall
be based on "Retirement" if termination is in accordance with the retirement
policy of SAFECO generally applicable to its salaried employees and in effect
immediately prior to any Change in Control of SAFECO Corporation.
(g) "SAFECO Affiliate." A corporation shall be deemed to be a
SAFECO Affiliate if 80% or more of its combined outstanding voting stock is
owned by SAFECO.
2. Executive's Employment.
It is understood and agreed that, until there has been a change in
Control of SAFECO Corporation, this Executive Severance Agreement creates in the
Executive no rights to continued employment with SAFECO, it being understood
that Executive's employment with SAFECO prior to any Change in Control is at
will, as are all SAFECO's current employment arrangements. It is further
understood and agreed that Executive's existing employment arrangement with
SAFECO entitled Executive to certain rights on any termination of employment,
including the right to receive his full base salary through the date of
termination, the right to be paid for any
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accrued vacation and sick leave, the right to be paid any bonuses for any past
fiscal year which have not yet been paid to Executive under any bonus plan
maintained by SAFECO, and the right to receive his vested rights in savings,
profit sharing, retirement, stock option plans and other employee benefit
programs maintained by SAFECO in accordance with the terms of such plans and
programs. The parties acknowledge that such rights fall outside the scope of,
and shall not be affected by, this Agreement in any respect.
3. Conditions to Termination Benefits.
In no event shall any benefits described in paragraph 5 hereof be
payable unless and until there is a Change in Control of SAFECO Corporation and
Executive's employment by SAFECO is terminated: (a) By SAFECO other than for
Cause, Disability or Retirement; or (b) By Executive for Good Reason.
4. Notice and Date of Termination.
Any purported termination by SAFECO for Cause, Disability or
Retirement, or by the Executive for Good Reason, shall be communicated by a
written Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall state the
specific basis for the termination under this Agreement and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the applicable provision of this
Agreement. If the termination is due to Disability, the Notice of Termination
shall not be given until the expiration of the 130-day disability period. The
effective date of termination (the "Date of Termination") shall mean:
(a) If Executive's employment is terminated for Disability,
thirty (30) days after the Notice of Termination is given (provided that
Executive shall not have returned to the performance of his full-time duties
during said thirty (30) day period); or
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(b) If Executive's employment is terminated for Cause, the
date specified in the Notice of Termination, provided in no event shall such
date be prior to the delivery of the Notice; or
(c) If Executive's employment is terminated for any other
reason, the date on which the Notice of Termination is given. If the Notice of
Termination specifies that the Executive's termination of employment is for
Cause, Executive's Termination shall be deemed to have been for Cause only if
the Executive, within thirty (30) days following the Date of Termination, is
given an opportunity to be heard before the board or an authorized committee of
the board and the board or such authorized committee thereafter makes a good
faith determination the Executive is guilty of conduct described in
subparagraphs (i) through (v) of paragraph 1(a) hereof.
5. Benefits Upon Termination.
If, after a Change in Control of SAFECO Corporation shall have
occurred, Executive's employment by SAFECO shall be terminated by SAFECO other
than for Cause, Disability or Retirement or shall be terminated by Executive for
Good Reason, then, subject to the provisions of paragraph 7 hereof, Executive
shall be entitled to the following benefits:
(a) SAFECO shall maintain in full force and effect, for
Executive's continued benefit until the earlier of (i) three (3) years after the
Date of Termination, (ii) Executive's commencement of full-time employment with
a new employer, or (iii) December 31 of the year in which Executive's
sixty-fifth (65th) birthday occurs, all life insurance and all medical, health
and accident insurance programs and arrangements in which Executive was entitled
to participate immediately prior to the Date of Termination, provided that
Executive's continued participation is possible under the terms and conditions
of such plans and programs. In the event Executive's participation in any such
plan or program is barred, SAFECO shall arrange to provide Executive
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with benefits substantially similar to those which Executive is entitled to
receive under such plans and programs.
(b) SAFECO shall pay to Executive on the Date of Termination a
lump sum benefit equal to the lesser of:
(i) That amount, which when added to the "Other Change
in Control Benefits" paid to Executive is equal to 2.99 times the average annual
compensation paid by SAFECO to the Executive and included in the gross income of
the Executive during the most recent five (5) taxable years ending before the
Change in Control of SAFECO Corporation occurs (or such portion of such period
during which the Executive was an employee of SAFECO). For purposes of this
subparagraph, the "Other Change in Control Benefits" shall equal the present
value (determined in accordance with Section 1274(b)(ii) of the Code, or any
successor provision thereof) of all other payments and benefits (including
without limitation the value of the Deferred Option Benefit provided in
paragraph 6 hereof) that the Executive receives, or is entitled to receive,
under this Agreement or otherwise, as a result of a Change in Control of SAFECO
Corporation or any other change in ownership or control of SAFECO Corporation
within the meaning of Section 280G (or any successor provision thereof); or
(ii) The "Executive's Projected Annual Benefit,"
multiplied by the lesser of (a) three or (b) the number of years (rounded to the
nearest hundredth of a year) from the Date of Termination to December 31 of the
year in which Executive's sixty-fifth (65th) birthday occurs. For purposes of
this Agreement, the "Executive's Projected Annual Benefit" shall equal the
highest monthly salary paid to the Executive during the 12 months immediately
preceding the Date of Termination, multiplied by 12.
Executive shall not be required to mitigate the amount of any payment provided
in this paragraph 5 by seeking other employment or otherwise, nor shall the
amount of any payment provided for in
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this paragraph 5 be reduced by any compensation earned by Executive as a result
of employment with another employer after the Date of Termination, or otherwise.
6. Deferral Option.
(a) SAFECO agrees that Executive may elect to defer all or a
portion of the payments that are to be made to Executive under paragraph 5(b)
hereof. Executive may exercise such election by delivering to the President and
Secretary of SAFECO Corporation a written notice of election prior to the
occurrence of any Change in Control of SAFECO Corporation, which notice shall
state the portion of the payments under paragraph 5(b) 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 (65th)
birthday. In the event such an election is made:
(i) The amount that would have otherwise been paid
under the provisions of paragraph 5(b) hereof shall be reduced by an amount
equal to the Deferred Benefit.
(ii) 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 under the provisions of paragraph 5(b) hereof, 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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(b) The parties agree that the following provisions shall
apply with respect to payment of the Deferred Benefit to the Executive under the
provisions hereof:
(i) If Executive dies prior to receiving the full
amount of the Deferred Benefit that he is entitled to receive hereunder, SAFECO
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.
(ii) It is understood by the parties that the Deferred
Benefit shall in no event be set aside or deposited to a separate account or
fund, and that the rights of Executive to the deferred Benefit shall not be
greater than the rights of any other general, unsecured creditor
of SAFECO.
(iii) 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, SAFECO 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.
(iv) SAFECO shall have no right to offset the payment
of any portion of the Deferred Benefit against any amounts that the Executive
owes or may owe SAFECO.
7. Golden Parachute Provisions of Code.
The parties acknowledge their intention to not have any payments
under this Agreement be characterized as "excess parachute payments" under
Section 280G of the Code, and that this Agreement has been prepared with that
intention in mind. Accordingly, the parties hereto agree
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that all terms and provisions of this Agreement shall be construed and
interpreted to give effect to such intention. In addition, if at any time it is
determined that any payment hereunder does constitute an "excess parachute
payment" under such Section 280G, as may be amended from time to time, or is
otherwise subject to special adverse tax treatment under a successor provision
to such Section 280G or any other provision of the Code, it is agreed that such
payment or payments shall be reduced (or eliminated if necessary), as determined
by the Compensation Committee of the Board of Directors of SAFECO Corporation,
to the extent necessary to avoid such special adverse tax treatment.
8. Taxes and Withholdings.
All amounts payable to Executive hereunder shall be subject to such
payroll and withholding deductions as are required by law.
9. Term of Agreement.
This Agreement shall remain in effect until Executive's employment
with SAFECO is terminated unless prior thereto a Change in Control of SAFECO
Corporation shall have occurred, in which event the terms of this Agreement
shall remain in effect until the seventh anniversary date of such Change in
Control; provided, however, in the event Executive has become entitled to
receive payments hereunder prior to said seventh anniversary date, the terms of
this Agreement shall remain in effect until all amounts due Executive hereunder
have been paid.
10. Successors; Binding Agreement.
(a) 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, by agreement in form
and substance satisfactory to Executive, 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
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such agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Executive to compensation from SAFECO
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "SAFECO" shall include SAFECO Corporation and SAFECO Life
Insurance Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this paragraph 11 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's estate.
11. Notice.
For the purposes 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 certified or
registered mail, return receipt requested, postage prepaid, addressed to the
appropriate address set forth on the last page of this Agreement, or to such
other address as the addressee may have furnished to the other in writing in
accordance herewith, provided that all notices to SAFECO shall be directed to
the attention of the President of SAFECO Corporation with a copy to the
Secretary of SAFECO Corporation.
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12. Miscellaneous.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Executive and such officer as may be specifically designated by the Board of
Directors of SAFECO Corporation. No waiver by either party hereto at any time of
any breach by the other party hereto of, or 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. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement; provided,
however, that this Agreement shall not supersede or in any way limit the rights,
duties or obligations Executive may have under any other written agreement with
SAFECO. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Washington.
13. 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.
14. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
15. Arbitration.
Any 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
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American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have signed this Agreement the day
and year first written above.
SAFECO CORPORATION
By: /s/ Xxxxx Xxxxxx
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President
Address: SAFECO Corporation
XXXXXX Xxxxx
Xxxxxxx, XX 00000
/s/ Xxxxx X. Xxxxx
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XXXXX X. XXXXX
Address: SAFECO Corporation
SAFECO Plaza
Seattle, WA 9818
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