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                                                                    EXHIBIT 10.6

                                CHANGE IN CONTROL
                               SEVERANCE AGREEMENT


THIS AGREEMENT, effective January 26, 2001, is made by and between SAFECO
Corporation, a Washington corporation ("SAFECO"), and Michael S. McGavick (the
"Executive").

WHEREAS, SAFECO (together with its subsidiaries, collectively, the "Company"),
considers it essential to the best interests of its stockholders to foster the
continued employment of key management personnel; and

WHEREAS, SAFECO recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and

WHEREAS, SAFECO has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive agree as follows:

1. Defined Terms. The definitions of capitalized terms used in this Agreement
are provided in Section 15.

2. Term of Agreement. The Term of this Agreement shall commence on the date
hereof and shall continue in effect until the earlier of (i) the date it is
terminated by written agreement between the Company and the Executive and (ii)
seventh anniversary of a Change in Control.

3. Company's Covenants Summarized. In order to induce the Executive to remain in
the employ of the Company and in consideration of the Executive's covenants
stated in Section 4, the Company agrees, under the conditions described herein,
to pay the Executive the Severance Payments and the other payments and benefits
described herein. Except as provided in Section 5.1, Section 5.4, Section
6.2(A), and Section 9.1, no amount or benefit shall be payable under this
Agreement unless there shall have been a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.

4. The Executive's Covenants. The Executive agrees that, subject to the terms
and conditions of this Agreement, in the event of a Potential Change in Control
during the Term, the Executive will remain in the employ of the Company until
the earliest of (i) a date which is six

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(6) months from the date of such Potential Change of Control, (ii) the date of a
Change in Control, (iii) the date of termination by the Executive of the
Executive's employment for Good Reason or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the Executive's employment
for any reason.

5.    Compensation Other Than Severance Payments.

      5.1 Salary During Incapacity or Illness. Following a Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's fulltime duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive's full salary to
the Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the
terms of any applicable compensation or benefit plan, program or arrangement
maintained by the Company during such period, until the Executive's employment
is terminated by the Company for Disability.

      5.2 Salary During Term. If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of the Company's applicable
compensation and benefit plans, programs or arrangements.

      5.3 Post-Termination Compensation and Benefits. If the Executive's
employment shall be terminated for any reason following a Change in Control and
during the Term, the Company shall pay to the Executive the normal
post-termination compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Company's applicable retirement, insurance and other
compensation or benefit plans, programs and arrangements.

      5.4   Incentive Awards.

      (A) Stock Options and SARs. Immediately prior to the Change in Control,
all awards of stock options and stock appreciation rights ("SARs") previously
granted to the Executive shall become fully vested and exercisable. The phrase
"immediately prior to the Change in Control" shall be understood to mean
sufficiently in advance of a Change in Control to permit the Executive to take
all steps reasonably necessary to exercise all options and SARs and to deal with
the shares of stock underlying the awards of stock options and SARs so that such
shares may be treated in the same manner as the shares of stock of other
shareholders in connection with the Change in Control.

      (B) Performance Stock Rights. To the extent deemed earned, each
outstanding performance stock right ("PSR") previously granted to the Executive
shall become immediately payable in cash upon a Change in Control, and the
remainder of each outstanding PSR shall be canceled for no value. All
outstanding PSRs shall be deemed to have been earned to the extent of the
greater of:

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      (i)   the number of shares determined by the Committee based on the extent
            to which the performance goals specified in the PSR award agreement
            have been achieved during the portion of the performance period
            ending on the last day of the last fiscal quarter of the Company
            ending on or before the date of the Change in Control, and

      (ii)  the number of shares equal to the product of the target shares
            identified in the PSR award agreement multiplied by a fraction with
            a numerator equal to the whole number of calendar months beginning
            with the month in which the PSR was granted and ending on the date
            of the Change in Control and a denominator equal to the whole number
            of calendar months in the entire performance period covered by the
            PSR award agreement and less any shares previously issued under the
            PSR award agreement.

      (C) Restricted Stock Rights. All restrictions with respect to restricted
stock rights ("RSRs") shall lapse upon a change in Control, and all outstanding
RSRs of the Executive shall be immediately settled by a cash payment.

      (D) Other Incentive Awards. All other restrictions with respect to
outstanding incentive awards of the Executive not described in subsections (A)
through (C) of this Section 5.4 shall lapse upon a Change in Control, and such
awards shall be fully vested and nonforfeitable.

      (E) Fair Market Value. For purposes of this Section 5.4, with respect to
determining the cash equivalent value of an RSR or PSR or the spread payable
upon exercise of an SAR, the fair market value of a share of the Company's stock
shall be deemed to equal the greater of (i) the fair market value of a share of
stock as of the date on which a Change in Control occurs and (ii) the highest
price of a share of stock which is paid or offered to be paid, by any person or
entity, in connection with any transaction which constitutes a Change in
Control.

      5.5 Deferral Election. The Executive may elect to defer all or a portion
of the payments that are to be made to the Executive under Section 6.1(A) and
Section 6.2. The Executive may exercise such election by delivering a notice of
election (in accordance with Section 10) prior to the occurrence of the Change
in Control, which notice shall state the portion of such payments that is to be
deferred (expressed as a dollar amount or as a percentage ("the Deferred
Benefit")), the date the payment of the Deferred Benefit shall commence ("the
Deferred Benefit Commencement Date"), and the number of equal consecutive
monthly installments (not to exceed 120) that the Deferred Benefit is to be paid
in. In no event shall the Deferred Benefit Commencement Date be subsequent to
the first day of January of the year immediately following the Executive's
sixty-fifth birthday. In the event such an election is made:

      (A) The amount that would have otherwise been paid under the provisions of
Section 6.1(A) and Section 6.2 shall be reduced by an amount equal to the
Deferred Benefit.

      (B) The Deferred Benefit, together with simple interest calculated at an
annual rate of

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ten percent (10%) on the unpaid balance of the Deferred Benefit from the date
that payment of the Deferred Benefit would have otherwise been made, shall be
paid in the number of equal consecutive monthly installments selected by the
Executive, with the first such installment being made on the Deferred Benefit
Commencement Date and a subsequent payment being made on the first day of each
month thereafter.

      (C) If the Executive dies prior to receiving the full amount of the
Deferred Benefit, the Company shall continue to pay the Deferred Benefit to the
estate of the Executive in the same manner as the Deferred Benefit would have
been paid to the Executive if the Executive had not died.

      (D) The Deferred Benefit shall in no event be set aside or deposited to a
separate account or fund, and the rights of the Executive to the Deferred
Benefit shall not be greater than the rights of any other general, unsecured
creditor of the Company.

      (E) The Executive, the Executive's spouse, and any other person or entity
claiming through or under the Executive shall not have any power or authority to
commute, encumber, or dispose of any right to receive payment of the Deferred
Benefit, all of which payments are expressly declared to be non-assignable. In
the event of any attempt at assignment or other disposition, the Company shall
have no further liability to pay the Deferred Benefit. The Deferred Benefit
provided for in this Agreement shall not be subject to seizure for the payment
of any debts, judgments, alimony, separate maintenance or child support, or be
reached or transferred by operation of law, or in the event of bankruptcy,
insolvency or otherwise.

6.    Severance Payments.

      6.1 Severance Payments Enumerated. The Company shall pay the Executive the
payments described in this Section 6.1 (the "Severance Payments") upon the
termination of the Executive's employment following a Change in Control and
during the Term, in addition to any payments and benefits to which the Executive
is then entitled under Section 5, unless such termination is (i) by the Company
for Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the
Executive without Good Reason. Additionally, during the one-month period
beginning with the first day of the month immediately following the first
anniversary of the Change in Control, the Executive may voluntarily terminate
his employment for any reason and, upon such termination, the Company shall pay
the Executive the Severance Payments and the Gross-Up Payment, in addition to
any payments and benefits to which the Executive is then entitled under Section
5. For purposes of this Agreement, the Executive's employment shall be deemed to
have been terminated following a Change in Control by the Company without Cause
or by the Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to a Change in Control and such
termination was at the request or direction of a Person who has entered into an
agreement with the Company the consummation of which would constitute a Change
in Control, (ii) the Executive terminates his employment with Good Reason prior
to a Change in Control and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person, or (iii) the
Executive's employment is terminated by the Company without Cause prior to a
Change in Control and the Executive reasonably demonstrates that such
termination is otherwise in connection with or in anticipation

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of a Change in Control.

      (A) In lieu of any further salary payments to the Executive for periods
subsequent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a
lump sum severance payment, in cash, equal to three (or, if less, the number of
years, rounded to the nearest hundredth of a year, remaining until December 31
of the year in which the Executive attains age 65) times the higher of the
Executive's annual base salary in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of Termination is based and the
Executive's base salary in effect immediately prior to Date of Termination.

      (B) For the thirty-six (36) month period immediately following the Date of
Termination or, if shorter, for the period commencing immediately following the
Date of Termination and ending on December 31 of the year in which the Executive
attains age 65 (such applicable period, the "Severance Period"), the Company
shall arrange to provide the Executive with life, disability, accident and
health insurance benefits substantially similar to those which the Executive is
receiving immediately prior to the Date of Termination; provided, however, that,
unless the Executive consents to a different method (after taking into account
the effect of such method on the calculation of "parachute payments" pursuant to
Section 6.2), such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1 (B) shall be reduced to the extent comparable benefits are
actually received by or made available to the Executive during the Severance
Period (and any such benefits actually received by or made available to the
Executive shall be reported to the Company by the Executive).

      (C) Notwithstanding any provision of any annual or long-term incentive
plan to the contrary, the Company shall pay to the Executive a lump sum amount,
in cash, equal to the sum of (i) any incentive compensation which has been
allocated or awarded to the Executive for a completed year or other measuring
period preceding the Date of Termination under any such plan and which, as of
the Date of Termination, is contingent only upon the continued employment of the
Executive to a subsequent date, and (ii) a pro rata portion to the Date of
Termination of the aggregate value of all contingent incentive compensation
awards to the Executive for all then uncompleted periods under any such plan,
calculated as to each such award by multiplying the award that the Executive
would have earned on the last day of the performance award period, assuming the
achievement, at the level that would produce the maximum award, of the
individual and corporate performance goals established with respect to such
award, by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the
Date of Termination by the total number of months contained in such performance
award period.

      6.2   "Gross-Up Payment."

      (A)   Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person

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whose actions result in a Change in Control or any Person affiliated with the
Company or such Person) (such payments or benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the "Total Payments") will be subject
to the Excise Tax, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up payment,
shall be equal to the Total Payments.

      (B) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel selected
by the accounting firm which was, immediately prior to the Change in Control,
the Company's independent accountant (the "Accountant") and which tax counsel is
reasonably acceptable to the Executive ("Tax Counsel"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Accountant in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest marginal rate
of federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of
Termination (or if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section 6.2), net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.

      (C) In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Gross-Up Payment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive
to the extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction) plus interest on the
amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined. The Executive and the Company shall
Each reasonably cooperate with the other in connection with any

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administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

      6.3 Severance Payments Pay Date. The payments provided in subsections (A)
and (C) of Section 6.1 and in Section 6.2 shall be made not later than the fifth
day following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Executive or, in the case of payments under Section 6.2, in accordance
with Section 6.2, of the minimum amount of such payments to which the Executive
is clearly entitled and shall pay the remainder of such payments (together with
interest on the unpaid remainder (or on all such payments to the extent the
Company fails to make such payments when due) at 120% of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at 120% of the rate provided
in section 1274(b)(2)(B) of the Code). At the time that payments are made under
this Section, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Accountant or other
advisors or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).

      6.4 Executive's Legal Fees. The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive in disputing in good faith
any issue hereunder relating to the termination of the Executive's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.

7.    Termination Procedures and Compensation During Dispute.

      7.1 Notice of Termination. After a Change in Control and during the Term,
any purported termination of the Executive's employment (other than by reason of
death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 10. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall state in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the

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Board, the Executive was guilty of conduct stated in clause (i) or (ii) of the
definition of Cause herein, and specifying the particulars thereof in detail.

      7.2 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).

      7.3 Dispute Concerning Termination. If within fifteen (15) days after any
Notice of Termination is given, or, if later, prior to the Date of Termination
(as determined without regard to this Section 7.3), the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be extended until the earlier of
(i) the date on which the Term ends or (ii) the date on which the dispute is
finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable diligence.

      7.4 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the Term and the Date of Termination is
extended in accordance with Section 7.3, the Company shall continue to pay the
Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with
Section 7.3. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2) and
shall not be offset against or reduce any other amounts due under this
Agreement.

8.    No Mitigation. The Company agrees that, if the Executive's employment with
the Company terminates during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in this Agreement (other than
Section 6.1(B)) shall not be reduced by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company, or
otherwise.

9.    Successors; Binding Agreement.

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      9.1 SAFECO Successors. In addition to any obligations imposed by law upon
any successor to SAFECO, SAFECO will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of SAFECO to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that SAFECO would be required to perform it if no such succession had taken
place. Failure of SAFECO to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.

      9.2 Executive's Successors. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable to
the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.

10.   Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's signature on the final
page and, if to the Company, to the address stated below, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of a change of address shall be effective only upon
actual receipt:

      To the Company:

      SAFECO Corporation
      SAFECO Plaza
      Seattle, WA 98185
      Attention: Chief Executive Officer

11.   Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and an officer of SAFECO. No waiver by either party
hereto at any time of any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to its subject matter which have been made by either
party. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of

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Washington. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7) shall survive such expiration.

12.   Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

13.   Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

14.   Settlement of Disputes; Arbitration.

      (A) All claims by the Executive for benefits under this Agreement shall be
directed to and determined by the Committee and shall be in writing. Any denial
by the Committee of a claim for benefits under this Agreement shall be delivered
to the Executive in writing and shall state the specific reasons for the denial
and the specific provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to appeal to the Committee
a decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.

      (B) Any further dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Seattle,
Washington in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Notwithstanding any provision of this Agreement to the
contrary, the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement.

15.   Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated below:

      (A) "Accountant" shall have the meaning stated in Section 6.2.

      (B) "Affiliate" shall have the meaning stated in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.

      (C) "Base Amount" shall have the meaning stated in section 280G(b)(3) of
the Code.

      (D) "Beneficial Owner" shall have the meaning stated in Rule 13d-3 under
the

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Exchange Act.

      (E) "Board" shall mean the Board of Directors of SAFECO.

      (F) "Cause" for termination by the Company of the Executive's employment
shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1) after a
written demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.

      (G) A "Change in Control" shall be deemed to have occurred if the event
stated in any one of the following paragraphs shall have occurred:

      (i) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of SAFECO (not including in the securities beneficially owned by
such Person any securities acquired directly from SAFECO or its affiliates)
representing 25% or more of the combined voting power of SAFECO's then
outstanding securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (a) of paragraph (iii)
below; or

      (ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of SAFECO) whose appointment or election by the
Board or nomination for election by SAFECO's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or

      (iii) there is consummated a merger or consolidation of SAFECO or any
direct or indirect subsidiary of SAFECO with any other corporation, other than
(a) a merger or consolidation which would result in the voting securities of
SAFECO outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in

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combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of SAFECO or any subsidiary of SAFECO,
at least 75% of the combined voting power of the securities of SAFECO or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (b) a merger or consolidation effected to implement a
recapitalization of SAFECO (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of SAFECO
(not including in the securities Beneficially Owned by such Person any
securities acquired directly from SAFECO or its Affiliates) representing 25% or
more of the combined voting power of SAFECO's then outstanding securities; or

      (iv) the stockholders of SAFECO approve a plan of complete liquidation or
dissolution of SAFECO or there is consummated an agreement for the sale or
disposition by SAFECO of all or substantially all of SAFECO's assets, other than
a sale or disposition by SAFECO of all or substantially all of SAFECO's assets
to an entity, at least 75% of the combined voting power of the voting securities
of which are owned by stockholders of SAFECO in substantially the same
proportions as their ownership of SAFECO immediately prior to such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of SAFECO immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of SAFECO
immediately following such transaction or series of transactions.

      (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

      (I) "Committee" shall mean (i) the individuals (not fewer than three in
number) who, on the date six months before a Change in Control, constitute the
Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above for
any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)).

      (J) "Company" shall mean SAFECO and its subsidiaries, collectively.

      (K) "Date of Termination" shall have the meaning stated in Section 7.2.

      (L) "Deferred Benefit" shall have the meaning stated in Section 5.4.

      (M) "Deferred Benefit Commencement Date" shall have the meaning stated in
Section 5.4.

      (N) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's

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<PAGE>   13

duties with the Company for a period of one hundred and thirty (130) consecutive
business days, the Company shall have given the Executive a Notice of
Termination for Disability, and, within thirty (30) days after such Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.

      (O) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

      (P) "Excise Tax" shall mean any excise tax imposed under section 4999 of
the Code.

      (Q) "Executive" shall mean the individual named in the first paragraph of
this Agreement.

      (R) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clause (ii) of the second sentence of Section 6.1
(treating all references in paragraphs (i) through (vii) below to a "Change in
Control" as references to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in paragraph (i), (v), (vi) or (vii)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:

      (i) the assignment to the Executive of any duties inconsistent with the
Executive's status as a senior executive officer of the Company or a substantial
adverse alteration in the nature or status of the Executive's responsibilities
from those in effect immediately prior to the Change in Control;

      (ii) a reduction by the Company in the Executive's annual base salary as
in effect on the date hereof or as the same may be increased from time to time;

      (iii) the relocation of the Executive's principal place of employment to a
location outside of King County, Washington (or, if different, the county in
which such principal place of employment is located immediately prior to the
Change in Control) or the Company's requiring the Executive to be based anywhere
other than such principal place of employment (or permitted relocation thereof)
except for required travel on the Company's business to an extent substantially
consistent with the Executive's present business travel obligations;

      (iv) the failure by the Company to pay to the Executive any portion of the
Executive's current compensation, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation program of
the Company, within seven (7) days of the date such compensation is due;

      (v) the failure by the Company to continue in effect any compensation plan
(including stock option, restricted stock, stock appreciation right, incentive
compensation and bonus plans) in which the Executive participates immediately
prior to the Change in Control which is material

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<PAGE>   14

to the Executive's total compensation, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount or timing of payment of benefits
provided and the level of the Executive's participation relative to other
participants, as existed immediately prior to the Change in Control;

      (vi) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the Executive under any of
the Company's profit sharing, pension, savings, life insurance, medical, health
and accident, or disability plans in which the Executive was participating
immediately prior to the Change in Control, the taking of any action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time of
the Change in Control; or

      (vii) any purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 7.1; for purposes of this Agreement, no such purported termination shall
be effective.

      The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.

      For purposes of any determination regarding the existence of Good Reason,
any claim by the Executive that Good Reason exists shall be presumed to be
correct unless the Company establishes to the Committee by clear and convincing
evidence that Good Reason does not exist.

      (S) "Gross-Up Payment" shall have the meaning stated in Section 6.2.

      (T) "Notice of Termination" shall have the meaning stated in Section 7.1.

      (U) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) SAFECO or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
SAFECO or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of SAFECO in substantially
the same proportions as their ownership of stock of SAFECO.

      (V) "Potential Change in Control" shall be deemed to have occurred if the
event stated in any one of the following paragraphs shall have occurred:

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<PAGE>   15

      (i) SAFECO enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;

      (ii) SAFECO or any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would constitute a Change in
Control;

      (iii) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of SAFECO representing 10% or more of either the then outstanding
shares of common stock of SAFECO or the combined voting power of the SAFECO's
then outstanding securities (not including in the securities beneficially owned
by such Person any securities acquired directly from SAFECO or its affiliates);
or

      (iv) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.

      (W) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated on or after the date Executive attains age 65.

      (X) "SAFECO" shall mean SAFECO Corporation and, except in determining
under Section 15(G) whether or not any Change in Control has occurred, shall
include any successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

      (Y) "Severance Payments" shall mean the payments so described in Section
6.1.

      (Z) "Severance Period" shall have the meaning stated in Section 6.1(B).

      (AA) "Tax Counsel" shall have the meaning stated in Section 6.2.

      (BB) "Term" shall mean the period of time described in Section 2
(including any extension, continuation or termination described therein).

      (CC) "Total Payments" shall mean the payments so described in Section 6.2.



SAFECO CORPORATION


By:
    ---------------------------------    --------------------------------------
    William G. Reed, Jr.                 Michael S. McGavick
    Chairman of the Board of Directors   Address:

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