Exhibit 10.3

 

TERMS OF STOCK AWARD PROGRAM

FOR NON-EMPLOYEE DIRECTORS

UNDER THE SAFECO LONG-TERM INCENTIVE PLAN OF 1997

 

Adopted by the SAFECO Corporation Board of Directors

November 4, 1998

and as Amended and Restated November 6, 2002

 

The following provisions set forth the terms of the stock award program (the
“Program”) for non-employee directors of SAFECO Corporation (“Company”) under
the SAFECO Long-Term Incentive Plan of 1997 (the “Plan”). The following terms
are intended to supplement, not alter or change, the provisions of the Plan, and
in the event of any inconsistency between these terms and those in the Plan, the
Plan shall govern. All capitalized terms that are not defined in this Program
shall be as defined in the Plan.

 

1. Eligibility

 

Each director of the Company who is not an employee of the Company or any
Subsidiary (an “Eligible Director”) shall be eligible to receive annual awards
under the Plan, as described below.

 

2. Annual Award

 

Commencing with the 2003 annual meeting of the Company’s shareholders, a
restricted stock right (“RSR”) of 2,500 shares of the Company’s common stock
shall automatically be granted to each Eligible Director in office immediately
after the annual shareholders’ meeting and, if the initial election of an
Eligible Director occurs other than at an annual meeting of shareholders, then
the award shall be granted immediately following the initial election. The terms
of the award shall be set forth in an Award Agreement.

 

3. Restricted Period and Settlement

 

RSRs granted to Eligible Directors shall be settled upon termination of service
as an Eligible Director as described in Section 4, such period of time
constituting the “Restricted Period.”

 

4. Settlement Upon Termination of Service as an Eligible Director

 

  a.

Death or Disability. If an Eligible Director ceases to serve on the Company’s
Board of Directors because of the Eligible Director’s death or a permanent and
total disability within the meaning of Section 22(e)(3) of the Code, all of the
Eligible Director’s RSRs shall be settled in shares of the Company’s common
stock, regardless of how long such RSRs have been held. Such shares shall be
issued to the Eligible Director or the personal representative of the Eligible
Director’s estate, as the case may be, as soon as practical following the date
of death or the date of termination of employment due to determination of
disability

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(the “Disability Termination Date”). The Eligible Director or personal
representative may request a cash payment in lieu of stock, in which case the
cash payment shall equal the fair market value of the shares at the date of
death or the Disability Termination Date.

 

  b. Retirement, Resignation or Other Termination. If an Eligible Director
ceases to be a director of the Company for any reason other than the Eligible
Director’s death or disability, then the Eligible Director’s RSR’s to the extent
held for at least one year on the Eligible Director’s termination date, shall be
settled in shares of the Company’s common stock on that date.

 

5. Non-Transferable

 

RSRs granted to Eligible Directors shall not be transferable other than by will
or the laws of descent and distribution.

 

6. Deferral of Dividends and RSR Settlement

 

An Eligible Director may elect to defer the dividends accrued on any or all RSRs
granted to the Eligible Director under this Program and settled RSRs under this
Program as provided in the SAFECO Corporation Deferred Compensation Plan for
Directors, as it may be amended from time to time, or any other plan or
arrangement under which settled RSRs or dividends accrued on RSRs is permitted
to be deferred.

 

7. Corporate Transactions

 

In the event of a Change in Control of the Company, all outstanding RSRs shall
be settled by a payment in cash. The fair market value of each share shall be
equal to the greater of (i) the fair market value of a share of the Company’s
common stock as of the date on which a Change in Control occurs, and (ii) the
highest price of a share of Company common stock that is paid or offered to be
paid by any Person or entity in connection with any transaction that constitutes
a Change in Control.

 

8. Other Provisions

 

Except for certain provisions of the Plan whose application is clearly limited
to employee participants, the provisions of the Plan, as it may be amended from
time to time, shall apply to Awards granted to Eligible Directors under this
Program.

 

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