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EXHIBIT 10.1
SAFECO CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
AS AMENDED AND RESTATED ON NOVEMBER 4, 1998
(AS LAST AMENDED AUGUST 2, 2000)
1. PURPOSE
The purpose of this Deferred Compensation Plan ("Plan") is to provide for
deferral of payment of all or any portion of the annual retainer, meeting fees,
and any other fees or retainers payable to non-employee directors of SAFECO
Corporation ("Company") and all or any part of certain gains realized by such
directors on stock-for-stock exercises of options to purchase the Company's
common stock ("Common Stock").
2. ADMINISTRATIVE COMMITTEE
The Board shall from time to time appoint a committee to administer this Plan
(the "Administrative Committee"). The Administrative Committee shall have full
power and authority to construe and interpret the Plan. Members of the
Administrative Committee who are otherwise eligible to participate in this Plan
may do so while serving as members of that Committee, provided that no member
shall be entitled to vote or take any other action as part of the Committee with
respect to his or her benefits under the Plan. Decisions of the Administrative
Committee shall be final and binding upon the directors, their legal
representatives and beneficiaries. Approval by the Administrative Committee of
any election or request made by a director or the legal representative or
beneficiary of a director shall be subject to the sole discretion of the
Administrative Committee.
3. ELIGIBILITY
Any non-employee director of the Company is eligible to participate in the Plan.
4. ELECTION TO DEFER FEES
(a) Deferral Election. A non-employee director may elect to defer all
or a specified percentage of the annual retainer, meeting fees,
and any other fees or retainers (all of the foregoing are
collectively referred to as "Fees") that may thereafter become
payable by executing and delivering to the Administrative
Committee an election ("Deferral Election") stating the dollar
amount or percentage of the Fees to be deferred.
(b) Timing. To be effective, a Deferral Election must be filed with
the Administrative Committee by December 31 of the year prior to
the year in which the Fees are payable, except that any director
newly elected to the Company's Board of Directors shall have 30
days following the date of such director's election in which to
file an irrevocable Deferral Election covering Fees payable during
the remainder of the current year. A Deferral Election filed by
December 31 shall be irrevocable
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for the next year and will thereafter remain in effect
indefinitely on a year-by-year basis until participation in the
Plan terminates, or until the Deferral Election is amended or
revoked by a new Deferral Election, which shall take effect the
following year.
(c) Special Rule for New Fees. If, during the course of a year, a
non-employee director becomes eligible to receive a type of Fee
for which the director was not eligible on December 31 of the
prior year, the director may file a Deferral Election with respect
to any payments of such Fee payable during the remainder of the
current year, provided the Deferral Election is made before the
earlier of (i) 30 days following the date the director becomes
eligible for the Fee, and (ii) the date the Fee or any portion
thereof is payable.
5. ELECTION TO DEFER GAINS ON STOCK-FOR-STOCK OPTION EXERCISES
(a) Deferral of Qualifying Gains. A non-employee director may elect to
defer Qualifying Gain (as defined below) realized on the exercise
of one or more non-qualified stock options to purchase Common
Stock, provided the option exercised was granted under a plan or
program that permits deferral of gain with respect to such option.
(i) Qualifying Gain. "Qualifying Gain" means the net value
accrued upon exercise of an option using a stock-for-stock
payment method (i.e., the amount by which the total value
of the shares exercised exceeds the total value of the
shares used to pay the exercise price). For example, a
director elects to defer the Qualifying Gain accrued upon
exercise of an option to purchase 1,000 shares of Common
Stock at an exercise price of $20 per share when the Common
Stock has a current fair market value of $25 per share. The
director delivers 800 shares of Common Stock (worth
$20,000) to pay the exercise price. In return, the director
receives 800 shares of Common Stock worth $20,000 and the
director's Account (as defined below) is credited with a
Qualifying Gain of $5,000.
(ii) Valuation of shares. For purposes of calculating the
Qualifying Gain, shares shall be valued at the price at
which the last sale of the Common Stock was made prior to
1:00 p.m. Pacific Time on the NASDAQ Stock Market on the
date the option is exercised.
(b) Stock Option Election. An election to defer Qualifying Gain on a
stock option exercise shall be valid only if: (i) a separate
irrevocable election ("Stock Option Election") is completed and
signed by the director with respect to the stock option; (ii) the
Stock Option Election is delivered to and accepted by the
Administrative Committee at least six months before the director
elects to exercise the stock option; (iii) the exercise price is
paid in Common Stock (either through physical delivery or
attestation); and (iv) the director complies with such other rules
as the Administrative Committee may establish from time to time.
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6. DEFERRAL ACCOUNTS
(a) Establishment of Accounts. The Company shall establish an account
("Account") in the name of each participating non-employee
director, to which all deferred Fees and Qualifying Gains
attributable to the director and the earnings thereon shall be
credited. A director's Account shall at all times be a bookkeeping
entry only and shall not represent any investment made by the
Company on the director's behalf. A director shall be fully vested
at all times in the deferred Fees and Qualifying Gains credited to
his or her Account.
(b) Crediting of Accounts. Deferrals of Fees shall be credited to the
director's Account on the date the Fees would have been paid but
for the Deferral Election. Each Qualifying Gain shall be credited
to the director's Account on the date that the option to which the
gain relates is exercised.
7. MEASUREMENT FUNDS
(a) Allocation Among Measurement Funds. A director's Account shall be
allocated among phantom investments (each a "Measurement Fund")
designated by the Administrative Committee for use as an index to
value the portion, if any, of the director's Account allocated to
that phantom investment. The allocation of a director's deferred
Fees and Qualifying Gains shall be governed by the director's most
recent Allocation Election (described below) and such rules as the
Administrative Committee may establish from time to time. The
Account of each director shall be credited (or debited) on a daily
basis according to the performance of each Measurement Fund
selected by the director.
(b) Available Funds. The Measurement Funds available under this Plan
at any given time shall be set forth on Appendix A. The Company is
under no obligation to offer any particular investment as a
Measurement Fund and reserves the right to eliminate, change and
add Measurement Funds at any time by action of the Administrative
Committee.
(c) Allocation Election. Each non-employee director shall file a
written election ("Allocation Election") with the Administrative
Committee indicating the manner in which the director's future
Qualifying Gains and deferred Fees are to be allocated among the
available Measurement Funds. A director may file a new Allocation
Election at any time. An Allocation Election will be given effect
no later than the next business day after it is received and
accepted by the Administrative Committee.
(d) Reallocation Election. Once each year, in accordance with such
rules as the Administrative Committee may establish from time to
time, a director may file a written election with the
Administrative Committee reallocating the director's Account among
the available Measurement Funds (a "Reallocation Election"). A
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Reallocation Election shall be effective as of the next
regularly-scheduled quarterly meeting of the Company's Board of
Directors held after the Administrative Committee's receipt and
acceptance of the director's Reallocation Election, except that a
Reallocation Election will not be given effect if it would
generate a "non-exempt" transaction for purposes of the rules
promulgated under Section 16 of the Securities Exchange Act of
1934, as amended. (A "non-exempt" transaction would result if a
director's Reallocation Election would cause a transfer of all or
part of the director's Account into (or out of) the Phantom Stock
Fund less than six months after the director filed a Reallocation
Election electing an opposite-way transfer into or out of that
Fund.)
(e) No Actual Investment. Notwithstanding any other Plan provision
that may be interpreted to the contrary, the Measurement Funds are
to be used for measurement purposes only. Neither a director's
election of any Measurement Fund nor the crediting or debiting of
amounts to the director's Account in accordance with that election
shall be construed as an actual investment of the director's
Account in any Measurement Fund.
8. PHANTOM STOCK FUND
(a) Phantom Stock Fund. Amounts allocated to the Phantom Stock Fund
shall be credited in units ("Units" or "Phantom Stock Units")
based on the price at which the last sale of Common Stock was made
prior to 1:00 p.m. Pacific Time on the NASDAQ Stock Market on the
date of crediting (the "Closing Price"). Fractional Units shall be
credited to three decimal points.
(b) Dividends. To the extent cash dividends are paid by the Company on
the Common Stock, a director's Account shall be credited with
phantom dividends on Phantom Stock Units. Phantom dividends shall
equal the product of the dividend paid on a share of Common Stock
multiplied by the number of Units in a director's Account on the
record date for the cash dividend. Phantom dividends shall be
credited to a director's Account in the form of additional Phantom
Stock Units. The number of additional Units credited shall be
determined based on the Closing Price of the Common Stock on the
dividend payment date.
(c) No Actual Shares. No actual shares of Common Stock will be issued
directly or indirectly under the Plan in respect of Phantom Stock
Units.
(d) Reorganizations. In the event of any change in the Common Stock by
reason of an issuance of additional shares, recapitalization,
reclassification, merger, reorganization, stock split, reverse
stock split, combination of shares, stock dividend or similar
transaction, the number of Phantom Stock Units held by directors
under the Plan shall be proportionately adjusted by the
Administrative Committee.
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(e) No Voting Rights. No voting or other rights of any kind associated
with the ownership of Common Stock shall inure to a director by
virtue of the director's allocation of all or any part of the
director's Account to the Phantom Stock Fund.
9. DISTRIBUTION OF DEFERRED COMPENSATION ACCOUNT
(a) General. Except as otherwise expressly provided in this Plan, no
withdrawal or payment shall be made from a director's Account
except following the first to occur of the director's death,
permanent disability, retirement as a director or other
termination of service as a director of the Company. Payments
shall be made in accordance with paragraphs (b) and (c) of this
Section 9 unless the director has filed an election under
paragraph (d) of this Section requesting an alternative
distribution type and/or time period. All payments shall be made
in cash, regardless of the Measurement Funds selected by the
director.
(b) Retirement and Disability Distributions. If a director terminates
service as a director on account of a permanent disability, as
determined by the Administrative Committee, or retires as a
director of the Company under the Company's retirement policy for
directors as then in effect, the balance in the director's Account
shall be paid to the director in 10 annual installments, with each
installment payable in January as soon as practicable after
year-end, commencing the January next following the director's
retirement or termination of service. The amount of the
installment payable following any given year-end shall be
determined by valuing the director's Account as of the close of
business on the last business day of the year and then multiplying
that value by a fraction, the numerator of which is one and the
denominator of which is the remaining number of installment
payments.
(c) Distributions Following Death and Other Non-Retirement
Terminations. If a director dies prior to retirement as a director
or terminates service as a director of the Company for any reason
besides retirement or a permanent disability, the entire balance
of the director's Account shall be paid out in a single lump sum
within 30 days after the termination of service or the date the
Company is notified, in a form acceptable to the Administrative
Committee, of the director's death, as applicable. The value of
the director's Account shall be determined as of the date of the
director's death or termination of service.
(d) Distribution Election.
(i) Election permitted. A director shall be permitted, in
accordance with rules established by the Administrative
Committee from time to time, to elect a distribution type
and/or period (up to ten years) different from those set
forth in paragraphs (b) and (c) above (a "Distribution
Election"), provided that distributions must commence no
later than the year after the director retires from the
Board of Directors or otherwise terminates service as a
director.
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(ii) Procedure. To be effective, a Distribution Election must be
made in writing and be received by the Administrative
Committee at least 12 months prior to the director's
retirement or termination of service as a director of the
Company, except that the 12-month waiting period shall not
apply if the termination of service was due to the
director's death or permanent disability. Except as
provided in paragraph (iv) below, a director may revoke a
Distribution Election by written notice or file a new
Distribution Election with the Administrative Committee at
any time, subject to the above 12-month waiting period,
except that a Distribution Election shall become
irrevocable once the director is within 12 months of normal
retirement under the Company's retirement policy for
directors as then in effect.
(iii) Entire Account. Any Distribution Election filed by a
director shall apply to his or her entire Account,
including both the amounts credited to the Account prior to
the date of the Distribution Election and those credited
thereafter, without regard to how the Account may be
allocated among investment options.
(iv) Elections by first-time directors. In the case of a
director making his or her first Deferral Election under
this Plan, a Distribution Election filed with the
Administrative Committee at the same time as the director's
initial Deferral Election shall be given effect even if the
director terminates service as a director less than 12
months later. A Distribution Election filed at the same
time as the director's initial Deferral Election shall be
irrevocable for 12 months.
(v) Prior Distribution Elections. In the case of any director
already participating in the Plan who files a new
distribution election at the Administrative Committee's
request by December 31, 1998, the new distribution election
shall be given effect even if the director terminates
service as a director less than 12 months later.
(e) Tax Distributions. If, for any reason, all or any portion of a
director's Account becomes taxable to the director prior to
distribution in accordance with the Plan, a director may petition
the Administrative Committee for a special distribution of the
taxable portion. Upon the grant of such a petition, which shall
not be unreasonably withheld, the Company shall promptly
distribute to the director the portion of his or her Account that
has become taxable.
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10. BENEFICIARIES
A director may designate one or more beneficiaries to receive amounts payable
under the Plan in the event of the director's death. To designate beneficiaries,
the director shall complete a beneficiary designation form in accordance with
the Administrative Committee's rules and procedures as in effect from time to
time. A director may change a beneficiary designation at any time by filing a
new beneficiary designation form with the Administrative Committee. Upon the
Administrative Committee's acceptance of the new form, all beneficiary
designations previously filed shall be canceled. If the director names someone
other than his or her spouse as primary beneficiary, a spousal consent, in the
form designated by the Administrative Committee, must be signed by the
director's spouse and returned to the Administrative Committee. If the director
fails to designate a beneficiary or if the designated beneficiary predeceases
the director, then the unpaid amounts in the Account of a deceased director
shall be paid to the director's surviving spouse, or, if the director has no
surviving spouse, to the personal representative of the director's probate
estate.
11. ANNUAL STATEMENTS
At least annually, the Company will provide each non-employee director with a
statement showing the deferred Fees and Qualifying Gains credited to the
director's Account and any additional amounts credited (or debited) thereto in
accordance with the director's Allocation Election(s) and the provisions of this
Plan.
12. TERMINATION OR AMENDMENT OF THE PLAN
The Plan may be terminated, modified, or amended from time to time by resolution
of the Board of Directors. If the Plan is terminated, all amounts accrued in
directors' Accounts before termination will remain subject to the provisions of
the Plan as though the Plan had not been terminated.
13. DIRECTORS' RIGHTS
(a) No Funding or Interest in Company Assets. Amounts deferred and
accrued under the Plan remain the property of the Company, and no
director or other person shall acquire any property interest in
any assets of the Company on account of participation in the Plan.
A director's rights are limited to receiving from the Company the
payments provided for in the Plan. The Plan is unfunded, and to
the extent that any director acquires a right to receive payments
from the Plan, such right shall be no greater than the right of an
unsecured creditor of the Company.
(b) Transferability. Interests in the Plan may not be transferred,
assigned, pledged or encumbered. Prior to the time payment of an
Account is actually made to a director, the director shall have no
rights by way of anticipation or otherwise to assign or dispose of
any interest under the Plan.
14. GOVERNING LAW
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This Plan shall be governed by and interpreted in accordance with the internal
laws of the state of Washington without regard to conflict of law principles.
15. EFFECTIVE DATE
The effective date of this Plan is November 2, 1994.
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Appendix A
MEASUREMENT FUNDS UNDER
THE SAFECO CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS
The following Measurement Funds shall be available under the Plan:
a. Phantom Stock Fund (described in Section 8 of the Plan);
b. Interest-Accruing Fund (interest credited at an annual rate equal
to the applicable federal long-term rate for purposes of Section
1274 of the Internal Revenue Code of 1986, as amended, in effect
at January 1 of each year);
c. SAFECO 401(k) Savings Plan Investment Options:
- Diversified Common Stock Portfolio
- Intermediate Term Bond Portfolio
- Money Market Portfolio
- SAFECO Equity Fund
- SAFECO Growth Fund
- SAFECO Income Fund
- SAFECO International Stock Fund
- SAFECO Small Company Stock Fund
- Vanguard Total Bond Market Index Fund
- Vanguard Total Stock Market Index Fund
- Vanguard Growth Index Fund
- Vanguard Balanced Index Fund
- RS Emerging Growth Fund
- SAFECO High-Yield Bond Fund
- Fidelity Growth Company Fund
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