Exhibit 10.23

SAFECO LEADERSHIP PERFORMANCE PLAN

 

Effective January 1, 2002

 

(As amended September 4, 2003)

 

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

SECTION 1: PURPOSE    3 SECTION 2: DEFINITIONS    4             2.1    Business
Unit    4             2.2    Change in Control    4             2.3    Committee
   4             2.4    Company    4             2.5    Corporate    4
            2.6    Corporation    4             2.7    Disability    4
            2.8    Effective Date    4             2.9    Eligible Employee    4
            2.10    Employee    5             2.11    Incentive Award    5
            2.12    Minimum Financial Requirement    5             2.13   
Participant    5             2.14    Performance Period    5             2.15   
Plan    5             2.16    Retirement    5             2.17    Salary    5
            2.18    Senior Leadership    6             2.19    Target Award    6
SECTION 3: PARTICIPATION    7             3.1    Eligible Employees    7
            3.2    Participation Date    7             3.3    Rehired Eligible
Employees    7 SECTION 4: INCENTIVE POOL    8             4.1    Funding
Performance Measures    8             4.2    Incentive Pool Calculation    8
SECTION 5: INCENTIVE AWARDS    10             5.1    Calculation of Incentive
Award    10             5.2    Condition Precedent to Payment of Incentive Award
   10             5.3    Payment of Incentive Award    11             5.4   
Termination of Employment    11             5.5    Partial Year Participation   
12 SECTION 6: ADMINISTRATION    13             6.1    Activities, Duties and
Responsibilities of the Committee    13             6.2    Notices    13 SECTION
7: AMENDMENT AND TERMINATION    14

--------------------------------------------------------------------------------

            7.1    Amendment and Termination of the Plan    14 SECTION 8:
MISCELLANEOUS    15             8.1    Tax Withholding    15             8.2   
Continuation of Employment    15             8.3    Products and Underwriting   
15             8.4    No Trust or Fund    15             8.5    Governing Law;
Severability    15             8.6    Spendthrift Clause    16             8.7
   Entire Plan    16             8.8    Effective Date and Term    16

 

2

--------------------------------------------------------------------------------

SECTION 1: PURPOSE

 

The purpose of the SAFECO Leadership Performance Plan (the “Plan”) is to provide
certain managers and other salaried employees of the Company with the
opportunity to earn an incentive bonus based on achievement of specified
performance goals during a Performance Period, thereby motivating participating
employees to achieve company financial and operational objectives.

 

3

--------------------------------------------------------------------------------

SECTION 2: DEFINITIONS

 

2.1 Business Unit

 

“Business Unit” means the following operating organizations of SAFECO
Corporation’s subsidiaries: Life & Investments, Property & Casualty, SAFECO
Business Insurance, SAFECO Personal Insurance, and Surety.

 

2.2 Change in Control

 

“Change in Control” has the meaning set forth in the SAFECO Long-Term Incentive
Plan of 1997, or any successor plan thereto.

 

2.3 Committee

 

“Committee” means the Compensation Committee of the SAFECO Corporation Board of
Directors.

 

2.4 Company

 

“Company” means collectively SAFECO Corporation and its subsidiaries.

 

2.5 Corporate

 

“Corporate” means the overall administrative organization for the Corporation,
which organization supports and is distinct from the Business Units.

 

2.6 Corporation

 

“Corporation” means the SAFECO Corporation.

 

2.7 Disability

 

“Disability” has the meaning set forth in the SAFECO 401(k)/Profit Sharing
Retirement Plan or any successor plan thereto.

 

2.8 Effective Date

 

“Effective Date” has the meaning set forth in Section 8.8.

 

2.9 Eligible Employee

 

“Eligible Employee” means an Employee who has satisfied the eligibility criteria
of Section 3.1.

 

4

--------------------------------------------------------------------------------

2.10 Employee

 

“Employee” means any person who is employed on a salaried basis other than
someone who is (a) a non-union hourly Employee, (b) included in a unit of
persons covered by a collective bargaining agreement, or (c) is a leased
employee within the meaning of Internal Revenue Code section 414(n)(2).

 

2.11 Incentive Award

 

“Incentive Award” means the annual amount awarded to an Eligible Employee under
the Plan pursuant to Section 5.1.

 

2.12 Minimum Financial Requirement

 

“Minimum Financial Requirement” means an overall financial result established
for the Corporation by the Committee below which no Incentive Awards are made
under the Plan, unless at the discretion of the Committee.

 

2.13 Participant

 

“Participant” means an Eligible Employee who qualifies for participation as
provided in Section 3.2.

 

2.14 Performance Period

 

“Performance Period” means the calendar year period during which performance
goals are established and an Eligible Employee’s performance is measured in
order to determine whether the Eligible Employee is eligible for an Incentive
Award.

 

2.15 Plan

 

“Plan” means this SAFECO Leadership Performance Plan.

 

2.16 Retirement

 

“Retirement” has the meaning set forth in the SAFECO 401(k)/Profit Sharing
Retirement Plan or any successor plan thereto.

 

2.17 Salary

 

“Salary” means for each Performance Period the total of all amounts the Employer
paid to an Employee for personal services, including:

 

  (a) Base salary;

 

5

--------------------------------------------------------------------------------

  (b) Amounts paid to an Employee while on an Authorized Leave of Absence or
short term disability; and

 

  (c) Any pre-tax Employee contributions made by the Employer on behalf of the
Employee for the Plan Year to the SAFECO Flexible Benefits Program or the SAFECO
401(k)/Profit Sharing Retirement Plan;

 

but excluding:

 

  (d) Amounts paid for overtime;

 

  (e) All Employer contributions to deferred compensation or other fringe
benefit plans;

 

  (f) Cash incentives and bonuses paid, accrued or earned under any incentive
compensation plan;

 

  (g) Long-term disability benefits;

 

  (h) Severance pay; and

 

  (i) Any other payments or benefits.

 

2.18 Senior Leadership Team

 

“Senior Leadership Team” means the Senior Leadership Team appointed from time to
time by the Corporation’s Chief Executive Officer.

 

2.19 Target Award

 

“Target Award” means the value, stated as a percentage of Salary or as a dollar
amount, which represents the Participant’s expected payment when Corporate,
Business Unit and personal goals are achieved.

 

The initial Target Award is the percentage of Salary or dollar amount
established for the Participant’s position. In the event of an Employee’s
position change during a Performance Period (e.g. promotion, reclassification,
or transfer), the initial Target Award for that Performance Period may be
adjusted according to any reasonable methodology chosen by the Committee.

 

6

--------------------------------------------------------------------------------

SECTION 3: PARTICIPATION

 

3.1 Eligible Employees

 

An Employee of the Company shall be eligible to participate in the Plan if he or
she:

 

  (a) is a key management employee, or a non-management employee holding a key
leadership position with the Company as determined at the discretion of the
Corporation’s Chief Executive Officer or a Business Unit President;

 

  (b) occupies a position that is assigned to a leadership job band within the
Corporation’s compensation structure; and

 

  (c) is not eligible to participate concurrently in the SAFECO Success Sharing
Plan or any other Company-sponsored variable pay or incentive bonus plan.
Provided however, that the Committee may extend participation in the Plan to any
Employee in its sole discretion.

 

3.2 Participation Date

 

An Eligible Employee shall commence participation on the later of:

 

  (a) the Effective Date;

 

  (b) the date when transferred or promoted from an ineligible position into a
Plan-eligible position;

 

  (c) if hired by the Company after September 30 in a Performance Period,
January 1 of the next following Performance Period.

 

3.3 Rehired Eligible Employees

 

An individual who terminates employment and is rehired during the same
Performance Period and who satisfies the eligibility criteria of Section 3.1
shall be eligible to participate in the Plan for such Performance Period only if
he or she has been employed for at least 90 consecutive days during such
Performance Period.

 

7

--------------------------------------------------------------------------------

SECTION 4: INCENTIVE POOL

 

4.1 Funding Performance Measures

 

  (a) The Committee shall establish Corporate and Business Unit funding
performance measures (“Funding Performance Measures”) and a Corporation Minimum
Financial Requirement for each Performance Period on the basis of such criteria
and to accomplish such objectives as the Committee may from time to time select.
Funding Performance Measures may include performance criteria for the
Corporation, a subsidiary, a Business Unit, an operating group, or a division of
the Company or a subsidiary.

 

  (b) During any Performance Period, the Committee may adjust the Funding
Performance Measures for such Performance Period as it deems equitable in
recognition of unusual or nonrecurring events affecting the Company, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine.

 

  (c) The Funding Performance Measures shall be any one or a combination of net
income, earnings per share, return on equity, return on assets, stock price
appreciation, total shareholder return, cash flow, revenues, item count, market
share, assets, assets under management, any profit-related ratio or calculation,
or any growth, concentration-of-business or market-share ratio or calculation.
Such Funding Performance Measures may be measured on an absolute basis or
relative to a group of peer companies selected by the Committee, relative to
internal goals, or relative to levels attained in prior years.

 

  (d) The Committee will establish Funding Performance Measures and the Minimum
Financial Requirement not later than 90 days after the beginning of the
Performance Period.

 

4.2 Incentive Pool Calculation

 

For each Performance Period, the Committee shall establish a target incentive
pool based on the sum of Target Awards for all Corporate Participants. The
Committee shall further establish Business Unit target incentive pools based on
the sum of Target Awards for all Business Unit Participants. The target
incentive pools shall then be adjusted as follows:

 

  (a) for Corporate, the target incentive pool shall be adjusted based on
Corporate performance results relative to Corporate Funding Performance Measures
established under Section 4.1; and

 

8

--------------------------------------------------------------------------------

  (b) for Business Units, the target incentive pool shall be adjusted based on a
combination of Corporate and relevant Business Unit results relative to Funding
Performance Measures established under Section 4.1.

 

After such adjustments, the incentive pools shall be allocated among Corporate
and the Business Units in order to calculate Incentive Awards to Participants.

 

9

--------------------------------------------------------------------------------

SECTION 5: INCENTIVE AWARDS

 

5.1 Calculation of Incentive Award

 

  (a) The Participant’s Incentive Award for a Performance Period shall be based
on (1) the amount of the incentive pool (if any) for the relevant Corporate or
Business Unit assignment, (2) the Participant’s paid Salary during the
Performance Period, (3) the Participant’s Target Award, and (4) individual
performance measures.

 

As soon as practical after the end of a Performance Period, the Participant’s
management shall assess individual performance by measuring results attributable
to performance goals established for the Performance Period. Such performance
goals may represent any combination and weighting of Business Unit, operating
group, division, unit or individual objectives. Assessment of results shall
occur through application of Company-approved performance evaluation tools.

 

  (b) In the event that the performance of Corporate or a Business Unit does not
meet the threshold level of performance to result in the funding of an incentive
pool under Section 4.2, an Incentive Award may nonetheless be paid to a
Participant in the discretion of the Committee or the Corporation’s Chief
Executive Officer; provided, however, that the Incentive Award shall not exceed
25% of the Participant’s Target Award. No Incentive Awards may be granted under
the Plan unless the Corporation’s Minimum Financial Requirement has been
satisfied.

 

  (c) In no event may the Participant’s Incentive Award exceed 200% of his or
her Target Award.

 

5.2 Condition Precedent to Payment of Incentive Award

 

To receive an Incentive Award under Section 5.1, a written performance
evaluation must have first been completed for the Participant and, except as
stated in Section 5.4 and 5.5, the Employee must have been a Participant as of
the last day of the Performance Period and remain continuously employed with the
Company through the date of the payment of the Incentive Award.

 

10

--------------------------------------------------------------------------------

5.3 Payment of Incentive Award

 

Subject to the conditions set forth below, Incentive Awards shall be paid to
Participants in a lump sum as soon as administratively feasible after the close
of the Performance Period. Such payment shall consist of 100% cash; provided,
however:

 

  (a) The Committee may direct that Participants who are also members of the
Senior Leadership Team receive all or a portion of their respective Incentive
Awards in the form of restricted stock rights (“RSRs”) under the SAFECO
Long-Term Incentive Plan of 1997 or any successor plan thereto. The actual
amount of such RSRs will be determined pursuant to any reasonable methodology
chosen by the Committee. The Committee, in accordance with the SAFECO Long-Term
Incentive Plan of 1997, shall have full and final authority to establish the
terms, conditions and definitions that govern such RSRs.

 

  (b) The Committee may permit deferral of some or all of a Participant’s
Incentive Award to the SAFECO Deferred Compensation Plan for Executives in
accordance with such plan’s terms.

 

5.4 Termination of Employment

 

If an employee’s employment with the Company terminates prior to the date of the
payment of an Incentive Award, he or she shall not be entitled to an Incentive
Award; provided however,

 

  (a) in the event the Participant’s employment with the Company terminates on
account of Retirement, death or Disability, the Participant (or his or her
estate) will be entitled to receive an Incentive Award based on his/her Salary
for the portion of the Performance Periods(s) in which the Participant was
actively employed with the Company, calculated pursuant to any reasonable
methodology chosen by the Committee.

 

  (b) in the event the Participant’s employment with the Company is
involuntarily terminated by the Company due to a reduction in force, office
closure or other organizational change, and the Participant is entitled to
severance under the Safeco Employees’ Severance Plan and meets the criteria for
participation under that plan, the Participant will be entitled to receive an
Incentive Award based on his/her Salary for the portion of the Performance
Period in which the Participant was actively employed with the Company,
calculated pursuant to any reasonable methodology chosen by the Committee.

 

  (c) in the event the employment of a Participant who has executed a Change in
Control Severance Agreement is terminated without cause (as determined in the
sole discretion of the Committee) during the Performance Period by the Company
(or an acquirer corporation or affiliate thereof) following a Change in Control,
the Participant shall be eligible to receive an Incentive Award for the entire
Performance Period, calculated and paid in accordance with Section 5.1,
notwithstanding the Participant’s termination of employment. If the extent to
which the Funding Performance Measures are achieved following the

 

11

--------------------------------------------------------------------------------

Change in Control cannot be determined because the Company or its operations are
merged into or otherwise combined with those of the acquirer corporation, then
the amount of the Incentive Award payable to the Participant shall be determined
by analyzing the performance results of the calendar quarters completed prior to
such merger or combination.

 

5.5 Partial Year Participation

 

If any employee that was an Eligible Employee and Participant in the Plan for
any portion of the Performance Period, terminates from the Plan and remains
continuously employed with the company through the date of the payment of the
Incentive Award, such employee shall be entitled to a pro-rated Incentive Award
for such Performance Period, calculated pursuant to any reasonable methodology
chosen by the Committee.

 

12

--------------------------------------------------------------------------------

SECTION 6: ADMINISTRATION

 

6.1 Activities, Duties and Responsibilities of the Committee

 

This Plan shall be administered by the Committee. The Committee shall have
exclusive authority, in its discretion, to determine all matters relating to
Incentive Awards under the Plan. The Committee shall also have exclusive
authority to interpret the Plan and may from time to time adopt and change rules
and regulations of general application for the Plan’s administration. The
Committee’s interpretation of the Plan and its rules and regulations, and all
actions taken and determinations made by the Committee pursuant to the Plan,
shall be conclusive and binding on all parties involved or affected. The
Committee may delegate administrative duties to the Company’s officers or
managers.

 

6.2 Notices

 

All notices and communications to the Committee in connection with this Plan
shall be in writing, shall be delivered by first class mail, by courier or by
hand, shall be addressed to the Committee at the following address: SAFECO
Leadership Performance Plan, Attn: Corporate Compensation and Benefits, SAFECO
Corporation, SAFECO Plaza, 4333 Brooklyn N.E., Seattle, WA 98185, and shall be
deemed to have been given and delivered only upon actual receipt by the
Committee. All notices and communications to an Eligible Employee shall be in
writing and shall be delivered via paper or electronic media as determined by
the Company.

 

13

--------------------------------------------------------------------------------

SECTION 7: AMENDMENT AND TERMINATION

 

7.1 Amendment and Termination of the Plan

 

The Committee shall each have the right to amend or terminate the Plan at any
time and to discontinue (either temporarily or permanently) the distribution of
Incentive Awards; provided, however, that no amendment or termination of the
Plan shall adversely affect an Eligible Employee’s right to payment of an
Incentive Award that was earned and awarded prior to the date of the amendment
or termination.

 

14

--------------------------------------------------------------------------------

SECTION 8: MISCELLANEOUS

 

8.1 Tax Withholding

 

The Company shall withhold from Incentive Awards all amounts necessary to
satisfy applicable federal, state and local withholding tax requirements.

 

8.2 Continuation of Employment

 

The existence of the Plan does not create any employment contract, any guarantee
of continued employment, or any right or assurance as to any minimum length of
employment. An Eligible Employee’s employment may be terminated at any time,
with or without reason and with or without prior notice, at the option of the
Company or the Eligible Employee.

 

8.3 Products and Underwriting

 

The Company reserves the right to withdraw existing products from distribution,
reassign distribution of specific products, make new products available, adjust
production credit, revise its business plans and strategies and modify its
underwriting, reserves, claims, employment and other practices and policies
without the Eligible Employee’s consent and without adjusting the performance
measures.

 

8.4 No Trust or Fund

 

The Plan is intended to constitute an “unfunded” plan. Nothing contained herein
shall require the Company to segregate any monies or other property, or to
create any trusts, and no Eligible Employee shall have any rights that are
greater than those of a general unsecured creditor of the Company.

 

8.5 Governing Law; Severability

 

The Plan shall be governed by the laws of the State of Washington, without
regard to its choice of law or conflict of law provisions. The federal and state
courts in King County, Washington, shall have exclusive jurisdiction and venue
to resolve issues that may arise out of or relate to the Plan. If any provision
of the Plan is held to be invalid or unenforceable, such invalidity or
unenforceability shall in no way affect the validity or enforceability of any
other Plan provision.

 

15

--------------------------------------------------------------------------------

8.6 Spendthrift Clause

 

Except as may be otherwise provided by law, no benefit, payment or distribution
under the Plan, or right to receive such a benefit, payment or distribution,
shall be subject either to the claim of any creditor of an Eligible Employee or
to attachment, garnishment, levy, execution or other legal or equitable process
by any creditor of such person. No Eligible Employee shall have any right to
alienate, commute, anticipate or assign (either in law or equity) all or any
portion of any benefit, payment or distribution under the Plan.

 

8.7 Entire Plan

 

The Plan contains the entire understanding and undertaking of the Company with
respect to the provision of an incentive plan for Eligible Employees and, as to
that subject, supersedes any and all prior and contemporaneous undertakings,
agreements, understandings, practices, policies, inducements or conditions,
whether express or implied, oral or written, except as herein contained.

 

8.8 Effective Date and Term

 

The effective date of the Plan is January 1, 2002. The Plan shall continue from
year to year until terminated in accordance with Section 7.

 

16