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Exhibit 10.6
SAFECO CORPORATION
[INCENTIVE] STOCK OPTION CONTRACT
SAFECO Corporation ("SAFECO") grants to ("Optionee") an [incentive] stock option
to purchase xxxxx shares of SAFECO Common Stock subject to the SAFECO Long-Term
Incentive Plan of 1997 and the following terms and conditions.
1. TERM. This option contract is effective from the date stated below until
the earlier of (i) the close of business ten years from such date or (ii)
such other date as may apply pursuant to paragraph 5 of the Standard
Provisions relating to retirement, death or other termination of
employment and paragraph 8 regarding forfeiture.
2. PURCHASE PRICE. Optionee may purchase the shares covered by this option
contract at a price of $XXXX per share.
3. LIMITATIONS ON EXERCISE (VESTING). Except as otherwise provided in the
Standard Provisions, this option may be exercised (or, as stated herein,
shall "vest") as follows:
(i) On or after XXXX, up to but not exceeding xx% of the total
number of shares covered by this option;
(ii) On or after XXXX, up to but not exceeding XX% of the total
number of shares covered by this option;
(iii) On or after XXXX, up to but not exceeding XX% of the total
number of shares covered by this option;
(iv) On and after XXXX, up to the total number of shares covered by
this option.
4. STANDARD PROVISIONS. Each provision stated in the attached SAFECO
CORPORATION STANDARD PROVISIONS APPLICABLE TO STOCK OPTIONS ("Standard
Provisions") is incorporated by reference into this option contract.
DATED: _________________, ____
SAFECO CORPORATION OPTIONEE
By_____________________ _____________________
Chief Executive Officer
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SAFECO CORPORATION
STANDARD PROVISIONS APPLICABLE TO STOCK OPTIONS
GRANTED UNDER THE SAFECO LONG-TERM INCENTIVE PLAN OF 1997
1. EXERCISE OF OPTIONS. As an option vests pursuant to paragraph 3 of the
option contract, Optionee may exercise up to the total number of shares
that have vested, subject to a minimum purchase of 10 shares at any one
time. Shares that have vested may be purchased at any time until the
option contract terminates. All unexercised rights will terminate upon the
expiration of the option contract term.
2. METHOD OF EXERCISE. To exercise an option, in whole or in part, the
Optionee shall deposit with the chief executive officer of SAFECO
Corporation ("SAFECO") a written notice identifying the option by date and
designating the number of shares as to which Optionee is exercising the
option, accompanied by payment in full for the number of shares being
purchased.
3. EXERCISE OF RIGHTS FOLLOWING CHANGE IN CONTROL. Notwithstanding the
limitations on exercise set forth in paragraph 3 of the option contract,
in the event there is a Change in Control of SAFECO (as defined in the
Plan), the option shall become exercisable in full immediately prior to
the Change in Control and may thereafter be exercised in whole or in part
at any time prior to the expiration of the stated term of the option.
4. TRANSFERABILITY. Options shall not be subject to execution, attachment or
similar process. Except as permitted by the Plan and the Compensation
Committee, options may not be assigned, pledged or transferred in any
manner, by operation of law or otherwise, except by will or by the laws of
descent and distribution, and during the lifetime of the Optionee, only
the Optionee or the Optionee's guardian may exercise an option.
5. TERMINATION OF EMPLOYMENT, RETIREMENT, DISABILITY AND DEATH
(a) In the event the Optionee ceases to be employed by any member of the
SAFECO family of companies, the option may be exercised, but only to
the extent exercisable on the date of termination of employment, at
any time within three months following such
termination of employment, except that:
(i) If the Optionee's termination of employment is on account of
Retirement, then the option, to the extent exercisable at the
date of termination of employment, may be exercised at any
time prior to the expiration of its stated term, but in no
event later than the fifth anniversary date of the Optionee's
termination of employment.
(ii) If the Optionee's termination of employment is on account
of a permanent and total disability within the meaning of
Section 22(e)(3) of the Internal Revenue Code, then the
option, to the extent exercisable at the date of termination
of employment, may be exercised at any time within one year
after the date of termination.
(iii) If the Optionee's termination of employment is caused by
the death of the Optionee, then the option may be exercised at
any time prior to the expiration of the term stated in the
option contract by the person(s) to whom the Optionee's rights
pass by will or by operation of law without regard to any
requirements related to continued employment or installment
vesting.
(iv) If the Optionee dies following termination of employment and
during the period in which the option is exercisable under
subparagraph (i) or (ii) of this paragraph 5, then, to the
extent the option was vested at the date of termination of
employment, the option may be exercised at any time prior to
the expiration of the term stated in the option contract by
the person(s) to whom the Optionee's rights pass by will or
by operation of law.
(b) Any portion of an option that is not exercisable on the date of
termination of the Optionee's employment shall terminate on such
date, unless the Committee determines otherwise.
(c) To the extent that the option is not exercised following termination
of employment within the time periods provided above, all further
rights to exercise the option shall terminate at the expiration of
the applicable period.
6. RIGHTS AS STOCKHOLDER. Neither the Optionee nor the Optionee's legal
representative, heir, legatee or distributee shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any
shares subject to an option, until after the stock is issued.
7. PROVISIONS OF THE SAFECO LONG-TERM INCENTIVE PLAN OF 1997. The option is
subject to all of the provisions of the SAFECO Long-Term Incentive Plan of
1997 and, to the extent provided in such Plan, to all constructions,
interpretations, rules and regulations which may from time to time be
promulgated pursuant to or in connection with the Plan. Capitalized terms
not otherwise defined in these Standard Provisions shall have the meanings
assigned to them in the Plan.
8. FORFEITURE.
(a) If, at any time within (i) one year after the exercise of any
portion of the option or (ii) one year after termination of
employment, whichever is the later (the "Restricted Period"), the
Optionee engages in any activity harmful to SAFECO's interests or
which is in competition with any of SAFECO's operations, then the
Optionee's rights under the option shall terminate effective as of
the date on which the Optionee commences
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such activity (unless terminated sooner by operation of another term
or condition of the option), and any option gain realized by the
Optionee from exercising all or any portion of the option during the
Restricted Period shall be immediately payable to SAFECO.
(b) Such harmful or competitive activities include, without limitation,
(i) engaging in conduct related to the Optionee's employment for
which either criminal or civil penalties may be sought; (ii)
accepting employment with or serving as a consultant, advisor or in
any other capacity to any party which is in competition with any
member or members of the SAFECO family of companies in any of their
lines of business; (iii) disclosing or misusing any confidential
information concerning the SAFECO companies; and (iv) participating
in a hostile attempt to acquire control of SAFECO.
(c) SAFECO shall have the right to reduce payment of any amounts owed to
the Optionee (for wages, fringe benefits, unused vacation or any
other reason except as may be prohibited by law) to the extent of
any amounts owing to SAFECO by the Optionee under the foregoing
forfeiture provisions.
