Terms of Stock Award Program



 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 













	 	 
(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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