1
Exhibit 10.3
RETIREMENT AGREEMENT
This Retirement Agreement is entered into this 25th day of November,
1997 by and between Xxxxxxx X. Xxxxxx ("Xxxxxx") and SAFECO Life Insurance
Company (the "Company"), and is intended as a full and complete agreement
regarding the terms and conditions of Xxxxxx'x retirement from the Company.
RECITALS
X. Xxxxxx is employed as President of the Company.
B. This Agreement sets forth the complete understanding between Xxxxxx and the
Company regarding the commitments and obligations arising out of Xxxxxx'x
retirement from employment.
AGREEMENT
1. Continued Employment.
1.1 Employment Transition Period. Under the terms and subject to the
conditions of this Agreement: Xxxxxx'x employment with the Company shall
continue through and including August 31, 1998; Xxxxxx shall resign as President
of the Company effective February 7, 1998; and Xxxxxx shall be named Vice
Chairman of the Company from February 7, 1998 through August 31, 1998. From the
effective date of this Agreement through August 31, 1998, Xxxxxx shall assist in
the completion of those projects or activities deemed essential by the President
of SAFECO Corporation, shall provide support so that the transition to his
successor is completed smoothly and with a minimum of disruption, and shall be
available to complete other duties, including representing the Company or its
parent or affiliates in community and industry activities, as may from
time-to-time be assigned by the President of SAFECO Corporation.
1.2 Compensation. Xxxxxx shall be compensated at his current annual
salary ($300,000 per year) and paid at the Company's normal bi-monthly pay dates
through August 31, 1998. Xxxxxx shall be paid amounts due to him under
Restricted Stock Rights granted under the SAFECO Incentive Plan of 1987 ("RSRs")
when those RSRs are settled in February 1998. Xxxxxx shall be paid such amount,
if any, determined to be due him under that Performance Stock Rights Award
Agreement dated May 7, 1997 ("PSR Award") after such a determination has been
made by the Compensation Committee of the Board of Directors of SAFECO
Corporation in February 1998.
1.3 Group Benefits Coverage. The Company shall continue to provide
coverage under any group benefits plan under which Xxxxxx and/or Xxxxxx'x
dependents are covered on the date hereof, through and including August 31,
1998. Xxxxxx shall be responsible to pay any amounts chargeable as "employee
premium contribution" amounts with respect to any such coverage. The Company
will deduct such normal employee premium contributions from Xxxxxx'x salary.
From and after August 31, 1998, the Company shall provide Xxxxxx and/or
-1-
2
Xxxxxx'x dependents with 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.
1.4 Eligible for Other Group Benefits. Xxxxxx shall be eligible as an
"employee" of the Company for group benefits under the Company's employee
benefit plans as follows: for 1997 Xxxxxx shall be eligible to participate in
and shall receive pro rata contributions to the SAFECO Employees' Profit Sharing
Retirement Plan, Savings Plan, and Cash Balance Plan, and for a Profit Sharing
Bonus, all on the basis of Xxxxxx'x service through December 31, 1997; for 1998
Xxxxxx shall be eligible to participate in and shall receive pro rata
contributions to the SAFECO Employees' Profit Sharing Retirement Plan, Savings
Plan, and Cash Balance Plan, and for a Profit Sharing Bonus, all on the basis of
Xxxxxx'x service through August 31, 1998. Xxxxxx shall not receive an accrual
for vacation or sick leave benefits after August 31, 1998.
1.5 Payment for Sick Leave and Vacation Units. On or after August 31,
1998, the Company shall pay Xxxxxx for any vested sick leave units and vacation
pay accrued but unused at August 31, 1998 (to the extent compensable under the
Company's normal vacation policies and procedures).
1.6 Reimbursement for Expenses Incurred. The Company shall reimburse
Xxxxxx for reasonable and necessary business expenses incurred by him on or
before August 31, 1998, but not submitted for reimbursement at such August 31,
1998, to the extent reimbursable under the Company's normal expense
reimbursement policies and procedures and submitted for payment within 30 days
of August 31, 1998.
1.7 RSRs and Performance Stock Rights. Xxxxxx acknowledges and agrees
that as a consequence of his retirement on August 31, 1998, any rights he may
have under any RSR granted or under the PSR Award will expire and he will not be
entitled to any payment under any RSR or the PSR Award after August 31, 1998.
1.8 Stock Options. Xxxxxx acknowledges and agrees that as a consequence
of his retirement on August 31, 1998, and pursuant to the terms of each stock
option for SAFECO Corporation common stock ("Stock Option") that has been
granted to him under the SAFECO Incentive Plan of 1987, he will have through
November 30, 1998 to exercise each Stock Option and after that date he will lose
all rights under each Stock Option.
2. Payments. As compensation to Xxxxxx, and in consideration of his resignation
as an employee and officer of the Company, the Company agrees to pay an amount
equal to $400,000 plus the product of 5,225 multiplied by the greater of $50.00
or the closing price of SAFECO Corporation common stock as reported on NASDAQ on
August 31, 1998 ("Total Payment"). The Total Payment shall be allocated and paid
as follows:
-2-
3
2.1 Special Retirement Payment. A payment of $250,000 shall be
allocated as a special retirement payment. This payment shall be made on August
31, 1998. This payment shall be subject to withholding and deduction for payroll
taxes and other deductions as are required by federal and state law, and as set
forth in this Agreement.
2.2 Release Payment. A payment equal to the difference between the
Total Payment and $250,000 shall be allocated as consideration for Xxxxxx'x
release of claims as set forth in section 5 of this Agreement ("Release
Payment"). Xxxxxx and the Company agree that this Release Payment does not
constitute wages and that the Company will not make normal payroll and wage
withholding from it. Xxxxxx assumes full responsibility for tax liability
associated with the Release Payment. The Release Payment shall be made on
January 5, 1999 in the form of two checks, one payable to Xxxxxx in the amount
of 72% of the Release Payment and the second payable to the Internal Revenue
Service on behalf of Xxxxxx in the amount of 28% of the Release Payment.
3. Additional Consideration. As additional consideration to Xxxxxx for the
release granted under Section 5 of this Agreement, the Company agrees to make
the following additional benefits or services available to Xxxxxx:
3.1 SAFECO Stock Option Accelerated Vesting. The Company will recommend
to the Compensation Committee of the Board of Directors of SAFECO Corporation at
its December 15, 1997 meeting that, contingent upon the execution of this
Agreement, each outstanding Stock Option held by Xxxxxx be amended to accelerate
the unvested portion of such Stock Option so as to vest the later of December
15, 1997 or the expiration of the 7-day revocation period described in Section
14.3 of this Agreement.
3.2 Other Services. From February 7, 1998, through August 31, 1998, the
Company shall provide Xxxxxx with an office and secretarial support at the
Company's home office or such other location as Xxxxxx and the Company may
agree.
4. Retirement.
4.1 Resignation. In consideration of the payments and other
compensation described above, Xxxxxx tenders his resignation as President of the
Company and its affiliates effective February 7, 1998; tenders his resignation
as an employee effective August 31, 1998; and agrees to resign as an employee,
officer or director of each affiliate of the Company effective August 31, 1998.
4.2 No Authority To Act. From and after February 7, 1998, other than
with respect to those duties, responsibilities and activities described or
assigned to Xxxxxx under Section 1.1 of this Agreement, Xxxxxx shall have no
further authority to bind the Company to any contract or agreement or to act on
behalf of the Company.
-3-
4
5. Release and Settlement.
5.1 Release Payment. For the purposes of this Agreement "Release
Payment" shall mean the payment by the Company of the amounts referenced in
Section 2.2 above.
5.2.1 Release. In consideration of the Company's delivery of the
Release Payment to Xxxxxx under the terms of this Agreement, Xxxxxx waives any
right to personal recovery and irrevocably, unconditionally and generally
releases the Company and its employees, agents, officers, directors and
shareholders, to the fullest extent permitted by law from all claims, demands,
actions or causes of action of any kind or nature whatsoever which Xxxxxx 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
below.
5.2.2 Subsequent Release. In further consideration of the Company's
agreement to employ Xxxxxx in the capacities described in this Agreement through
August 31, 1998 and the Company's delivery of the Release Payment to Xxxxxx
under the terms of this Agreement, Xxxxxx agrees to execute and deliver to the
Company a release dated August 31, 1998 substantially similar to the release
described in Sections 5.2.1 and 5.3 of this Agreement.
5.3 The Claims.
5.3.1 Claims Generally. 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, the Americans with Disabilities Act, the Family
and Medical Leave 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 Xxxxxx'x employment with the Company and/or
the Xxxxxx'x retirement from the Company.
5.3.2. Age Discrimination Claims Waived. Xxxxxx knowingly and
voluntarily specifically waives any rights or claims arising under the Age
Discrimination in Employment Act and more specifically any right or claim under
29 U.S.C. 626. Xxxxxx specifically states and acknowledges that:
(i) This waiver is part of an Agreement written in a manner
calculated to be understood by Xxxxxx.
(ii) Xxxxxx does not waive rights or claims that may arise
after the date this Agreement is executed.
(iii) Xxxxxx is receiving consideration in addition to
anything of value to which he already would have been entitled prior to
executing this Agreement; specifically, Xxxxxx will receive the Release
Payment only if he waives the rights and claims in this
-4-
5
Section 5 by signing this Agreement and not revoking it within the
seven-day period described in Section 14.3 below.
(iv) Xxxxxx has been and is advised in writing to consult an
attorney before executing this Agreement.
(v) Xxxxxx further acknowledges that he has been given a
period of at least 21 days within which to consider this Agreement.
5.4 Consideration for Release. The Company represents, and Xxxxxx
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 Xxxxxx is a party or under which Xxxxxx
claims some benefit, or under the standard policies and procedures of the
Company, and represents valuable consideration to Xxxxxx for the release of his
ADEA and other claims described above.
6. Confidentiality.
6.1 Confidential Information. Xxxxxx recognizes that by virtue of his
employment by the Company, he has acquired certain non-public information with
respect to the Company, and its operations (the "Confidential Information").
Xxxxxx 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 his duties during his employment.
6.2 Non-Disclosure. Xxxxxx agrees to hold the Confidential Information
in trust and confidence. Xxxxxx agrees not directly or indirectly to (i) 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.
6.3 Materials. Unless the Company otherwise agrees in writing, Xxxxxx
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, ("Materials") that contain Confidential Information or
that belong to the Company. By August 31, 1998 Xxxxxx shall return to the
Company any and all Materials and equipment of the Company in his possession.
7. No Admission. Xxxxxx 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
Xxxxxx (ii) any violation of a federal, state or local statute, regulation or
ordinance, or (iii) any other wrongdoing, but to the contrary represent a
negotiated compromise and agreement. This Agreement shall not in any way be
interpreted to render Xxxxxx a "prevailing party" for any purpose, including,
but not limited to, as award of attorney's fees under any statute or otherwise.
-5-
6
8. Legal Action.
8.1 No Action on Released Claims. Xxxxxx represents that he has not
filed any complaint or any claim against the Company with any local, state or
federal court or agency. Xxxxxx agrees not to xxx or pursue any court or
administrative action against the Company, or any of its employees, agents,
officers, directors or shareholder, regarding any claims released herein or
otherwise arising from his employment with or retirement from the Company,
except with respect to any breach by the Company of its obligations under this
Agreement. Xxxxxx agrees that if any court or agency assumes jurisdiction of any
complaint or claim against the Company, or any of its employees, agents,
officers, directors or shareholder, which claim arose before the execution of
this Agreement, Xxxxxx will immediately request such court or agency to dismiss
the matter and take all such additional steps necessary to facilitate such
dismissal with prejudice. As a further material inducement to the Company to
enter into this Agreement, Xxxxxx covenants and agrees not to xxx or join with
others in suing the Company on any of the released Claims.
8.2 Liability for Defense Costs. If, notwithstanding this Agreement,
Xxxxxx should file any lawsuit or other proceeding based on legal claims that
Xxxxxx has released herein, Xxxxxx agrees that he will pay or reimburse the
Company for all reasonable costs which it, or its employees, agents, officers,
directors or shareholder incur in defending against Xxxxxx'x claims. This
Section 8.2 shall not apply to any claimed breach by the Company of any of the
terms or conditions of this Agreement.
9. Arbitration.
9.1 Notice and Selection of Arbitrator. The parties agree that any
dispute arising under this Agreement 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.
9.2 Rules of Proceeding. Arbitration proceedings shall be conducted
under the commercial 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.
9.3 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.
-6-
7
9.4 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.
10. Confidentiality.
10.1 Terms of Agreement. Xxxxxx 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 payments described in Section 2
above, except under compulsion of law. 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 with regard to this Agreement, or matters
relating to its terms. Notwithstanding the provisions of this Section 10.1,
Xxxxxx after obtaining the agreement of the individual to abide by the
confidentiality terms of this Agreement may discuss the existence and terms of
this Agreement with Xxxxxx'x spouse, attorney, accountant and financial advisor
to the extent necessary to obtain counsel and advice therefrom. Notwithstanding
the provisions of this Section 10.1, the Company after obtaining the agreement
of the individual to abide by the confidentiality terms of this Agreement may
discuss the existence and terms of this Agreement with the Company's attorneys,
accountants and financial advisors to the extent necessary to obtain counsel and
advice therefrom and with those employees of the Company responsible for the
Company complying with the terms of this Agreement.
10.2 Announcement Concerning Retirement. Xxxxxx and the Company shall
discuss and coordinate with respect to any public announcement, or any internal
or private announcement, concerning his retirement from the Company.
10.3 No Introduction In Evidence. Xxxxxx and the Company agree that
neither of them shall attempt to introduce or permit any other party to attempt
to introduce this Agreement in evidence or rely on this Agreement in any legal
proceedings, except for proceedings alleging or arising our of and seeking
redress for a breach of the terms of this Agreement.
11. Costs. Each party shall bear its own costs and expenses incurred in
connection with the negotiation of this Agreement and the preparation of this
Agreement, including but not limited to attorneys' fees.
12. Post-Termination Availability. Xxxxxx, due to the knowledge and information
he possesses gained as a result of his employment with the Company, agrees to be
available at reasonable times to cooperate, consult, advise and testify with
respect to current and future legal actions of any sort in which the Company is
a party. The Company may pay Xxxxxx for the reasonable value of his time with
the express understanding that any such payment is not made for or as an
inducement to the substance of any testimony.
13. No Reliance. Xxxxxx represents and acknowledges that he is not relying and
has not relied on any representation or statements made by the Company with
respect to any of the
-7-
8
matters released or with regard to his rights or asserted rights. Xxxxxx assumes
the risk of any mistake of fact with regard to any of the matters released or
with regard to any of the facts which are now unknown to him relating to such
matters.
14. Acknowledgment.
14.1 Informed Agreement. Xxxxxx declares that he has read and fully
understands the terms of this Agreement, and its significance and consequence.
Xxxxxx further declares that this Agreement is the product of good faith
negotiations between him and the Company, and that he voluntarily accepts the
same for the purpose of resolving arrangements with respect to his retirement
from the Company. Xxxxxx 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 retirement from the Company.
14.2 Attorney. Xxxxxx acknowledges that the Company has advised him to
review the terms of this Agreement with an attorney.
14.3 Review and Revocation Periods. Xxxxxx 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. Xxxxxx understands that he
may revoke this Agreement by delivering a written notice to the president of
SAFECO Corporation at SAFECO Plaza, Seattle, WA 98185 no later than the close of
business on the seventh day after Xxxxxx'x execution hereof. Xxxxxx understands
and acknowledges that if he revokes this Agreement it shall not be effective or
enforceable and he will not receive the consideration described in Sections 2
and 3 above.
15. Entire Agreement. This is the entire agreement concerning its subject matter
between Xxxxxx and the Company. Neither the Company nor any affiliate has made
any promises to Xxxxxx other than those included within this Agreement.
16. 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.
-8-
9
/s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx
STATE OF Washington)
COUNTY OF King)
Sworn to and subscribed before me this the ____ day of _____________,
1997.
----------------------------------------
Notary Public in and for the State of
Washington, residing
at
-------------------------------------
My commission expires:
-----------------
SAFECO LIFE INSURANCE COMPANY
By /s/ X. X. XXXXXX
-----------------------------------
X. X. Xxxxxx, Chairman
STATE OF Washington)
COUNTY OF King)
Sworn to and subscribed before me this the ________ day of ___________,
1997.
----------------------------------------
Notary Public in and for the State of
Washington, residing
at
-------------------------------------
My commission expires:
-----------------
