Document:

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (the "Agreement") is entered
into   by   and   between   Phar-Mor,   Inc.,   a   Pennsylvania    Corporation,
Debtor-in-Possession (the "Company"),  and Martin S. Seekely (the "Employee") as
of February 15, 2002 (the "Effective Date").

     WHEREAS,  Employee is currently  employed by Company  pursuant to a written
Employment  Letter  Agreement dated October 23, 2000 (the "Existing  Agreement);
and

     WHEREAS,  the Company desires to continue  employing Employee upon modified
terms and conditions of employment; and

     WHEREAS, the Company and Employee desire to set forth in this Agreement the
terms and conditions of Employee's continued employment.

     NOW,  THEREFORE,  in  consideration  of the mutual  promises and  covenants
contained herein, the parties agree as follows:

I.       EMPLOYMENT AND TERM.

     The Company  hereby  employs  Employee  and  Employee  hereby  accepts such
employment,  upon the terms and conditions hereinafter set forth. This Agreement
shall  commence on the  Effective  Date and continue in force and effect for the
stated term of two years (the "Stated Term") and shall be automatically extended
daily,  it being the intent of the parties that this Agreement shall have a term
that is an "evergreen" or "rolling" term of two years,  unless sooner terminated
pursuant to the provisions of Section IV of the Agreement.

II.      DUTIES.

         Subject to the provisions of Section IV of this Agreement:

     A. The Company shall employ  Employee and Employee  shall serve the Company
for the  Stated  Term in the  capacity  of Vice  President  and Chief  Financial
Officer.  In such  capacity,  Employee  shall  be  responsible  for  all  duties
customarily  associated  with the office of Vice  President and Chief  Financial
Officer.  Employee shall have such  corporate  power and authority as reasonably
required to enable the discharge of duties in the office which he holds.

     B.  Employee  agrees  to devote  substantially  all of his  business  time,
energies and  abilities to the  business of the  Company.  Nothing  herein shall
prevent  Employee,  upon approval of the Board,  from serving,  or continuing to
serve  upon  termination  of  employment,  as a  director  or  trustee  of other
corporations or businesses that are not in competition  with the business of the
Company as set forth in Section V of this Agreement or in  competition  with any
present or future affiliate of the Company.

     C. Employee shall report to the President and Chief  Executive  Officer and
Chairman of the Board or, at the Board's direction, to the Board.

III.     COMPENSATION.

     A.  Base  Salary.  The  Company  shall  pay to  Employee  a base  salary of
$175,000.00 per year for the first year of the Stated Term. Such salary shall be
paid weekly to the employee  and shall be subject to increase  effective on each
June 1st  thereafter,  beginning with June 1, 2002.  The amount of increase,  if
any, shall be determined by the Company based upon the individual performance of
the Employee  and the  Company,  in general.  Should  confirmation  of a Plan of
Reorganization  or approval of a sale of the Company or substantially all of its
assets by the  Bankruptcy  court not occur on or before  June 1, 2002,  then any
increase for the Employee  shall only be effective  after review by the official
committee of unsecured creditors of the Company.  Should such committee disagree
with the Company's  recommendation  for the  increase,  then the matter shall be
submitted to the Bankruptcy Court for its  consideration.  In no event shall the
minimum annual salary be decreased. Amounts payable shall be reduced by standard
withholding  and  other  deductions   authorized  by  Employee  or  required  by
applicable law.

     B. Operating Bonus. The Company will pay to Employee  annually an operating
bonus in an amount not less than the amount  Employee  is  entitled to under the
Company's  incentive/bonus  plan. For the Company's  fiscal year ending in 2002,
the  Employee  shall be  entitled  to  receive a bonus  equal to 50% of his base
salary  earned  during  such fiscal year (the  "Target  Bonus"),  subject to the
achievement of certain  financial  objectives under such plan.  Thereafter,  the
Company  will  pay the  Employee  a bonus  equal  to the  amount  to which he is
entitled  under the  incentive/bonus  plan of the Company in effect from time to
time.  If the  fiscal  year of the  Company  is  changed,  or if the  Employee's
employment is terminated  without Cause (as defined in Section IV.B.  hereof) or
by the  Employee  for Good  Reason (as  defined in Section  IV.C.  hereof),  the
Employee  will  receive,  in addition to all other  compensation  to which he is
entitled, an operating bonus pro-rated to the amount to which he would otherwise
be entitled  hereunder  based on the number of months in the short year, or such
other  equitable  method as may be  mutually  agreed  upon by  Employee  and the
Company.

     C.  Retention  Bonus.  Notwithstanding  any  other  amounts  due  per  this
Agreement,  Employee shall receive a retention bonus of $275,000  payable during
the course of the Company's  bankruptcy  proceedings as follows: (1) 33 1/3% due
and payable to the Employee on December 15,  2001;  and (2) 66 2/3% due,  earned
and payable to the Employee upon  confirmation  of a plan of  reorganization  or
approval of a sale of the  Company or  substantially  all of its assets,  by the
Bankruptcy  Court. If the Employee is terminated  during the Stated Term of this
Agreement  for any reason  other than  Cause,  or the  Employee  terminates  his
employment for Good Reason,  Employee shall be paid  immediately  any balance of
the retention bonus.

     D. Stock Options. Employee has previously earned and received stock options
over the course of employment to the Effective  Date of this  Agreement.  If, at
any time, the Employee's  employment is terminated by the Company without Cause,
or the Employee terminates employment with the Company for Good Reason, all said
options shall immediately vest. During the term of this Agreement Employee shall
remain eligible, subject to the discretion of the Company, to receive additional
option awards ("Additional Options").

     E. Other Stock or Equity Plans.  Employee  shall be eligible to participate
under any other  stock or  equity  incentive  plan or  benefit  provided  by the
Company to senior  officers at the  discretion  of the Company.  For purposes of
this Agreement,  "senior officer" means an officer of the Company of the rank of
senior vice president or above.

     F. Welfare Benefit Plans.  The Company shall, at its sole cost and expense,
pay for all (and not less than all) of the medical,  hospitalization  and dental
costs and expenses of Employee  and his spouse and  children  (which may, at the
Company's sole election, include insurance,  supplemental coverage and/or direct
payment/reimbursement),  and the Company  shall  reimburse  Employee for any net
after tax cost  incurred  by him in  connection  with any of the  foregoing.  In
addition,  the  Company  shall  maintain  a  disability  insurance  policy  (the
"Disability  Income  Policy") which shall pay to Employee at least sixty percent
(60%) of his Base Salary  during any period of  disability  up to age 75,  which
insurance shall be in lieu of any disability insurance otherwise provided by the
Company.

     Employee shall participate in all retirement and other benefit plans of the
Corporation available from time to time to employees and/or senior executives of
the Company.

     During the Stated Term, the Company shall also pay such amounts to Employee
as may be required to permit Employee, or a trust established by him, to acquire
and  maintain a whole life  insurance  policy or  policies in the face amount of
$500,000.00,  or at Employee's  election,  a term policy requiring an equivalent
premium,  on  Employee's  life,  issued  by  a  nationally-recognized  insurance
carrier(s)  having the highest and second highest  available  Best rating;  such
payment shall be paid in such amounts so that  Employee  incurs no net after tax
cost in connection therewith.

     G. Expenses. Employee shall be entitled to receive prompt reimbursement for
all  reasonable  employment  expenses  incurred  by him in  accordance  with the
policies,  practices and  procedures of the Company as in effect  generally with
respect  to  senior  officers.  In  addition,  the  parties  recognize  that the
Company's retail stores,  warehouses,  headquarters and other potential business
opportunities  are spread over a large  geographical area and are in a number of
metropolitan  areas. Also, in order to facilitate the Employee's  performance of
his duties,  the Employee  will be provided  with the use of a vehicle  owned or
leased by the Company or a comparable  vehicle  allowance and will be reimbursed
for all reasonable and customary  charges Employee incurs in connection with the
operation of such vehicle (such as for fuel,  insurance and maintenance) and, in
addition,   the  Company  will  provide  other  convenient   time-efficient  and
cost-effective   transportation  for  Employee's  business  travel  requirements
commensurate  with  transportation  made  available to other  similarly-situated
chief financial officers.

     H. Vacation.  Employee shall be entitled  during the term of this Agreement
to four (4) weeks paid vacation per annum. Employee may accumulate vacation only
to the extent permitted by the policies, practices and procedures of the Company
as in effect generally with respect to senior officers.

     I. Attorneys' Fee Reimbursement.  Within ten days after presentation of the
invoice  therefore,  the Company  shall pay to the law firm of  Honigman  Miller
Schwartz and Cohn in Detroit,  Michigan,  an amount not to exceed $10,000.00 for
legal fees incurred by Employee  relative to the  preparation and review of this
Agreement.

     J. Reservation of Right to Amend.  With respect to the benefits provided to
Employee in accordance  with Section III.E.,  the Company  reserves the right to
modify, suspend or discontinue any and all of the plans, practices, policies and
programs  at any time  without  recourse  by  Employee so long as such action is
taken with  respect to senior  officers  or  management  generally  and does not
single out Employee.

     K. Liability Insurance.  During the Stated Term, the Company shall maintain
customary  directors'  and officers'  liability  insurance if such  insurance is
available to the Company at reasonable costs.

IV.      TERMINATION.

     A. Death or Disability. Employee's employment shall terminate automatically
upon Employee's death. If the Company determines in good faith that a Disability
of Employee has occurred  (pursuant to the  definition of  Disability  set forth
below),  Company may  terminate  Employee's  employment  by  providing  Employee
written  notice in  accordance  with Section XVI of the  Company's  intention to
terminate  Employee's  employment.  In such event,  Employee employment with the
Company shall  terminate  effective on the 30th day after receipt of such notice
by Employee,  provided  that,  within the 30 days after such  receipt,  Employee
shall not have returned to full-time performance of his duties.

     For  purposes of this  Agreement,  "Disability"  means a physical or mental
impairment  which (i)  substantially  limits a major life  activity of Employee,
(ii) renders Employee unable to perform the essential functions of his position,
even with reasonable accommodation that does not impose an undue hardship on the
Company,  and (iii) has  contributed to Employee's  absence from his duties with
the Company on a full-time basis for more than 60 consecutive  days. The Company
reserves the right, in good faith, to make the determination of Disability under
this Agreement based upon  information (as to items (i) and (ii) above) supplied
by a  physician  selected  by the  Company or its  insurers  and  acceptable  to
Employee or his legal  representative (such agreement as to acceptability not to
be withheld unreasonably).

     B.  Cause.  The  Company  may  terminate  Employee's  employment  for Cause
(pursuant to the  definition  of Cause set forth  below) by  providing  Employee
written  notice in  accordance  with Section XVI of the  Company's  intention to
terminate  Employee's  employment,  setting  forth in such  notice the  specific
grounds therefor.  In such event,  Employee's  employment with the Company shall
terminate effective as of the date of receipt of such notice by Employee.

     For  purposes of this  Agreement,  "Cause"  means (1) a material  breach by
Employee of Employee's  obligations  under Section II of this  Agreement  (other
than as a result of  incapacity  due to  physical or mental  illness),  which is
demonstrably  willful and deliberate on the Employee's  part and is committed in
bad  faith  or  without  reasonable  belief  that  such  conduct  is in the best
interests of the Company,  or which is the result of Employee's gross neglect of
duties,  and, in either case,  not  remedied in a reasonable  period of time not
more than five days after  receipt of written  notice from the Board  specifying
such breach, (2) the conviction of Employee of a felony or other crime involving
fraud,  dishonesty or moral  turpitude,  or (3) the  commission by Employee of a
fraud which results in a material financial loss to the Company.

     C. Good  Reason.  Employee may  terminate  Employee's  employment  for Good
Reason.  Employee shall provide the Company  written  notice in accordance  with
Section XVI of Employee's intention to terminate Employee's  employment for Good
Reason, setting forth in such notice the grounds therefor. Employee's employment
with the Company shall terminate effective as of the earlier of (i) the 15th day
after the Company's  receipt of such notice or (ii) such later date as set forth
in such notice, unless the Company has cured the grounds therefor.

     For purposes of this Agreement, "Good Reason" means (1) Employee's position
(including  responsibilities,  title,  reporting  requirements  or authority) is
reduced  below the level set forth in Section II.A.  hereof (2) Employee  and/or
his job  functions  are  transferred  to a location  more than 25 miles from the
location of his current office (3) the Company fails in any material  respect to
comply with the  provisions of Section III of this Agreement (4) the Company has
within the prior twelve  months  undergone a Change of Control  (pursuant to the
definition of Change of Control set forth below), or (5) the Company purports to
terminate  Employee's  employment  otherwise than as expressly permitted by this
Agreement or without  payment of any amounts  required to be paid under  Section
IV.F.  For purposes of this  Agreement,  "Change of Control"  shall mean (a) the
acquisition by any individual, entity or group of beneficial ownership of 20% or
more of either (i) the then  outstanding  shares of common stock of the Company,
or (ii) the combined voting power of the then outstanding  voting  securities of
the Company  entitled to vote  generally  in the  election of  directors  of the
Company or (b) individuals who, as of the date of this Agreement, constitute the
Board of  Directors  of the  Company  (the  "Board")  cease  for any  reason  to
constitute at least a majority of the Board; or (c) approval by the shareholders
of the Company of a reorganization,  merger or consolidation  which results in a
change  of the  ownership  and/or  voting  rights of 30% or more of (i) the then
outstanding  shares of common  stock of the  Company,  or (ii) a majority of the
members of the Board of the  Company  do not remain  members of the Board of the
entity  resulting  from  such  reorganization,  merger or  consolidation  or (d)
approval by the  shareholders  of the Company of a liquidation or dissolution of
the Company, or the sale or other disposition of all or substantially all of the
assets of the  Company.  For the purposes of this  Agreement,  Change of Control
shall not  include  any  change  in  ownership  of the  Company's  common  stock
resulting from any transaction between the Company and Avatex  Corporation,  the
Company's principal shareholder.

     D. Other Than Cause or Good Reason or Death or Disability.  The Company may
terminate  Employee's  employment  without cause by providing  Employee  written
notice in accordance  with Section XVI of the  Company's  intention to terminate
Employee's  employment.  In such event,  Employee's  employment  shall terminate
effective on the 30th day after receipt of such notice by Employee.

     E.  Termination  by Employee  Other Than for Good Reason.  The Employee may
voluntarily terminate his employment with the Company for any reason whatsoever,
other than in a situation  where he has Good  Reason for doing so, by  providing
Employer  written notice thereof in accordance  with Section XVI. In such event,
Employee's  employment shall terminate  effective on the thirtieth day after the
receipt  of such  notice by  Company  unless the  parties  mutually  agree to an
earlier termination.

     F.  Obligations  of the  Company  Upon  Termination.  Upon  termination  of
Employee's  employment  for any  reason,  the  Company  shall  have  no  further
obligations  to  Employee  (or his  estate or legal  representative)  under this
Agreement other than the following:

     1. Death or Disability. If Employee's employment is terminated by reason of
Employee's  Death  or  Disability,  the  Company  shall  (a)  pay the sum of (i)
Employee's annual base salary through the end of the calendar month during which
the termination  occurs (to the extent not theretofore  paid),  (ii) any accrued
vacation pay not theretofore paid, and (iii) any accrued incentive  compensation
that has been fixed and  determined,  which the Company shall pay to Employee or
his estate or beneficiary,  as applicable,  in a lump sum in cash within 30 days
of the date of termination,  or earlier as may be required by applicable law (b)
pay any  amounts  then due or payable  pursuant  to the terms of any  applicable
welfare  benefit plans  notwithstanding  such  termination of employment and (c)
perform its  obligations  under any then  outstanding  stock option  awards,  in
accordance with the terms of any applicable  stock or equity incentive plan (the
sum of the amounts and  benefits  described in clauses (a), (b) and (c) shall be
hereinafter referred to as the "Accrued Obligations").

     2. Cause. If Employee's  employment is terminated by the Company for Cause,
the Company  shall  timely pay any Accrued  Obligations.  If it is  subsequently
determined  that the Company did not have Cause for  termination  under  Section
IV.B.,  then the  Company's  decision to terminate  shall be deemed to have been
made under Section  IV.D,  and the amounts  payable  under Section  IV.F.3 below
shall be the only amounts Employee may receive for his termination.

     3. Other Than for Cause or by Reason of Death or Disability. If the Company
terminates  Employee's  employment (other than for Cause or because of his Death
or  Disability),  or Employee  terminates his  employment  for Good Reason,  the
Company shall pay the following:

     a.  Salary,  Bonus and Stock  Options.  Company  shall  timely  pay (1) any
Accrued  Obligations  (including but not limited to any immediately vested stock
options in accordance  with Section  III.D.  herein) and any prorated  operating
bonus and the retention bonus as described in Section III.B. and C., and (2) pay
Employee a lump sum equal to  $425,000.  In  addition,  any  Additional  Options
granted to Employee  under any applicable  stock or equity  incentive plan shall
accelerate  and  vest  immediately.  Notwithstanding  anything  to the  contrary
contained herein and in the event a Change of Control occurs, then the foregoing
lump  sum  payment  to the  Employee  shall  be  reduced  to  $275,000  and this
Employment  Agreement shall be extended for a term of six (6) months  commencing
from the date such Change of Control  occurs.  Also, the Employee's  annual base
salary shall be increased  to $300,000 for the  six-month  term and the Employee
shall not be entitled to any  Operating  Bonus  during  such  six-month  period.
Should Employee be terminated for any reason, other than Cause or as a result of
Good  Reason,  during  the  six-month  term,  then in  addition  to the  amounts
contained in this  section,  the Employee  shall be paid his base salary for the
remainder of the six-month term plus the amount of $225,000.

     b.  Additional  Benefits.  Company shall also pay on behalf of Employee the
full cost of the  continuation for one year all benefits  currently  received by
Employee  including,  but not limited to that level of health  benefit  coverage
provided  by the  Company to  Employee  and/or his family  immediately  prior to
termination of his employment. Employee shall be entitled to exercise his rights
to continued  coverage under COBRA upon the expiration of said year of continued
health benefit  coverage.  Additionally,  Company shall pay Employee any and all
other benefits due at the time of termination,  with the exception of sick leave
and vacation  pay.  Employee  agrees to use best efforts to mitigate the cost of
such benefits to the Company.

     4.  Termination  by Employee  Other Than for Good  Reason.  If the Employee
voluntarily  terminates his employment with the Company without Good Reason, the
Company shall timely pay any Accrued Obligations.

     5.  Withholdings and Deductions.  Any payment made pursuant to this Section
IV.F. shall be paid, less standard  withholdings and other deductions authorized
by  Employee or required by law.  All amounts due  Employee  under this  Section
IV.F.  shall be paid within 14 days after the date of  termination or as earlier
required by law.

     6. Exclusive Remedy. Employee agrees that the payments contemplated by this
Agreement shall  constitute the exclusive and sole remedy for any termination of
his  employment,  and  Employee  covenants  not to assert  or  pursue  any other
remedies, at law or in equity, with respect to any termination of employment.

V.       NONCOMPETITION.

     Employee agrees that so long as he remains in the employ of the Company, he
will not,  directly  or  indirectly,  without the prior  written  consent of the
Board,  provide consulting  services with or without pay, own, manage,  operate,
join,  control,  participate  in, or be  connected  as a  stockholder,  partner,
employee,  director,  officer  or  otherwise  with any other  person,  entity or
organization  engaged  directly or  indirectly  in the  business of  operating a
regional or national discount drug store chain.

VI.      UNIQUE SERVICES; INJUNCTIVE RELIEF; SPECIFIC PERFORMANCE.

     Employee  agrees (i) that the services to be rendered by Employee  pursuant
to this Agreement,  the rights and privileges granted to the Company pursuant to
this  Agreement and the rights and  privileges  granted to Employee by virtue of
his  position,  are  of  a  special,  unique,   extraordinary,   managerial  and
intellectual character,  which gives them a peculiar value, the loss of which to
the Company  cannot be adequately  compensated  in damages in any action at law,
(ii) that the Company will or would suffer  irreparable  injury if Employee were
to terminate this Agreement  without Good Reason or to compete with the business
of the Company or solicit employees of the Company in violation of Section V. or
VII.  of this  Agreement,  and (iii)  that the  Company  would by reason of such
breach or violation of this Agreement be entitled to the remedies of injunction,
specific  performance  and  other  equitable  relief  in a court of  appropriate
jurisdiction.  Employee  consents  to the  jurisdiction  of a court of equity to
enter provisional equitable relief to prevent a breach or anticipatory breach of
Section V. of this Agreement by Employee.

VII.     SOLICITING EMPLOYEES.

     Employee,  while  employed  by the  Company  and  for  one  year  following
termination  of his  employment,  will not  directly or  indirectly  solicit any
employee of the Company or of any  subsidiary  or affiliate of the Company in an
executive,  managerial,  sales or marketing  capacity to work for any  business,
individual,  partnership, firm, corporation, or other entity then in competition
with the  business  of the  Company or of any  subsidiary  or  affiliate  of the
Company.

VIII.    CONFIDENTIAL INFORMATION.

     Employee  agrees that during the Stated Term of this  Agreement  and at all
times  thereafter  (notwithstanding  the  termination  of this  Agreement or the
expiration of the Stated Term of this Agreement):

     A.  Employee  shall hold in a  fiduciary  capacity  for the  benefit of the
Company all secret or  Confidential  Information,  knowledge or data relating to
the Company or any of its affiliated companies,  and their respective businesses
that are obtained by Employee during his employment by the Company or any of its
affiliated  companies and that are not or do not become public  knowledge (other
than by acts by Employee or his representatives in violation of this Agreement).

     For the purposes of this  Agreement,  "Confidential  Information"  includes
financial  information  about the  Company  (including  gross  profit  margins),
contract terms with the Company's  vendors and others,  customer lists and data,
trade  secrets  and such  other  competitively  sensitive  information  to which
Employee  has  access  as a result  of his  positions  with the  Company.  After
termination of Employee's employment with the Company, he shall not, without the
prior written consent of the Company,  or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.

     B.  Employee  agrees that all styles,  designs,  lists,  materials,  books,
files, reports, computer equipment,  pharmacy cards, Company automobiles,  keys,
door  opening  cards,  correspondence,  records  and other  documents  ("Company
material")  used,  prepared or made  available to  Employee,  shall be and shall
remain the property of the Company.  Upon the  termination  of employment or the
expiration  of  this  Agreement,   all  Company   materials  shall  be  returned
immediately  to the Company,  and  Employee  shall not make or retain any copies
thereof.

IX.      SUCCESSORS.

     A. This  Agreement  is personal to Employee and neither it nor any benefits
hereunder shall, without the prior written consent of the Company, be assignable
by Employee.

     B. This  Agreement  shall inure to the  benefit or and be binding  upon the
Company and its  successors and assigns and any such successor or assignee shall
be deemed  substituted for the Company under the terms of this Agreement for all
purposes.  As used herein,  "successor" and "assignee" shall include any person,
firm,  corporation  or  other  business  entity  that at any  time,  whether  by
purchase, merger or otherwise,  directly or indirectly acquires the stock of the
Company or to which the Company  assigns  this  Agreement by operation of law or
otherwise.

X.       WAIVER.

     No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other  breach of this  Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.

XI.      MODIFICATION.

     This  Agreement  may not be  amended  or  modified  other than by a written
agreement  executed by the  Employee  and (a) the Chairman of the Board or (b) a
duly  authorized  member of the Board who is not an officer or  employee  of the
Company or a subsidiary of the Company.

XII.     SAVINGS CLAUSE.

     If any  provision  of this  Agreement  or the  application  thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement  that  can  be  given  effect   without  the  invalid   provisions  or
applications,  and to this end the  provisions of this Agreement are declared to
be severable.

XIII.    COMPLETE AGREEMENT.

     This  Agreement   constitutes   and  contains  the  entire   agreement  and
understanding  concerning  Employee's  employment and the other subject  matters
addressed  herein  between the parties and  supersedes  and  replaces  all prior
negotiations and all agreements proposed or otherwise,  whether written or oral,
concerning  the  subject  matters  of this  Agreement,  including  the  Existing
Agreement.

XIV.     GOVERNING LAW.

     This Agreement  shall be deemed to have been executed and delivered  within
the State of Ohio, and the rights and obligations of the parties hereunder shall
be construed and enforced in accordance  with,  and governed by, the laws of the
State of Ohio without regard to principles of conflict of laws.

XV.      CAPTIONS.

     The  captions  of this  Agreement  are not part of the  provisions  of this
Agreement and shall have no force or effect.

XVI.     COMMUNICATIONS.

     All notices,  requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed:

                  If to Employee, to
                  Martin Seekely
                  33163 Ashdown Drive
                  Solon, Ohio 44139

                  If to Company, to
                  20 Federal Plaza West
                  Youngstown, Ohio 4450l,
                  Attention:  Chairman of the Board of Directors.

     Either  party may change  the  address  at which  notice  shall be given by
written notice given in the above manner.

XVII.    ARBITRATION.

     Except as otherwise provided in Section VI. of this Agreement, any dispute,
controversy  or claim  arising  out of or in respect of this  Agreement  (or its
validity,  interpretation  or enforcement),  the employment  relationship or the
subject  matter  of this  Agreement  shall at the  request  of  either  party be
submitted to and settled by arbitration  conducted in either Cleveland,  Ohio or
Pittsburgh,  Pennsylvania,  as directed by the party requesting the arbitration,
in  accordance  with the  Employment  Dispute  Resolution  Rules of the American
Arbitration  Association.  The  arbitration  shall be  governed  by the  Federal
Arbitration Act (9 U.S.C. ss. 1-16).  The arbitration of such issues,  including
the determination of any amount of damages suffered,  shall be final and binding
upon the parties to the maximum extent  permitted by law. The arbitrator in such
action shall not be authorized to ignore,  change, modify, add to or delete from
any  provision  of this  Agreement.  Judgment  upon the  award  rendered  by the
arbitrator  may be  entered  by  any  court  having  jurisdiction  thereof.  The
arbitrator  shall award  reasonable  expenses  (including  reimbursement  of the
assigned arbitration costs) to the prevailing party upon application therefor.

XVIII. EXECUTIONS.

     This Agreement may be executed in one or more  counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same Agreement.  Photographic copies of such signed counterparts may be used
in lieu of the originals for any purpose.

XIX.     LEGAL COUNSEL.

     In entering this  Agreement,  the parties  represent  that they have relied
upon the advice of their  respective  attorneys,  who are attorneys of their own
choice,  and that the  terms of this  Agreement  have been  completely  read and
explained to them by their attorneys,  and that those terms are fully understood
and voluntarily accepted by them.

XX.      LIMITATION ON PAYMENTS.

     A. Notwithstanding  anything contained herein to the contrary, prior to the
payment of any  amounts  pursuant  to Section  IV.F.3.  hereof,  an  independent
national accounting firm designated by the Company (the "Accounting Firm") shall
compute whether there would be any "excess  parachute  payments"  payable to the
Employee,  within the meaning of Section  280G of the  Internal  Revenue Code of
1986,  as  amended  (the  "Code),  taking  into  account  the  total  "Parachute
payments,"  within  the  meaning  of  Section  280G of the Code,  payable to the
Employee or  otherwise.  If there would be any excess  parachute  payments,  the
Accounting Firm will compute the net after-tax proceeds to the Employee,  taking
into  account  the excise tax  imposed by Section  4999 of the Code,  if (i) the
payments  hereunder  were  reduced,  but not  below  zero,  such  that the total
parachute  payments  payable  to the  Employee  would not  exceed two and 99/100
(2.99) times the "base  amount" as defined in Section 280G of the Code,  or (ii)
the  payments  hereunder  were not reduced.  If reducing the payments  hereunder
would result in a greater  after-tax amount to the Employee,  such lesser amount
shall be paid to the  Employee.  If not reducing the  payments  hereunder  would
result in a greater after-tax amount to the Employee, such payments shall not be
reduced.  The  determination  by the  Accounting  Firm shall be binding upon the
Company and the Employee subject to the application of Section XX.B. hereof.

     B. As a result of the uncertainty in the application of Section 280G of the
Code,  it is possible  that  excess  parachute  payments  will be paid when such
payment would result in a less after-tax amount to the Employee; this is not the
intent hereof. In such cases, the payment of any excess parachute  payments will
be void ab initio as regards  any such  excess.  Any excess will be treated as a
loan by the Company to the Employee.  The Employee will return the excess to the
Company,  within  fifteen  (15)  business  days  of  any  determination  by  the
Accounting  Firm  that  excess  parachute  payments  have  been paid when not so
intended,  with interest at an annual rate equal to the rate provided in Section
1274(d) of the Code (or 120% of such rate if the Accounting Firm determines that
such rate is  necessary  to avoid an excise tax under  Section 4999 of the Code)
from the  date the  Employee  received  the  excess  until it is  repaid  to the
Company.

     C. All fees, costs and expenses (including, but not limited to, the cost of
retaining  experts) of the Accounting Firm shall be borne by the Company and the
Company  shall  pay such  fees,  costs  and  expenses  as they  become  due.  In
performing the computations required hereunder, the Accounting Firm shall assume
that taxes will be paid for state and federal  purposes at the highest  possible
marginal  tax rates which  could be  applicable  to the  Employee in the year of
receipt of the payments, unless the Employee agrees otherwise.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

PHAR-MOR, INC.

By: ___________________________             __________________________________
     Abbey J. Butler                                          Martin Seekely
     Co-Chairman and Chief
     Executive Officer

By: ___________________________
     Melvyn J. Estrin
     Co-Chairman and Chief
     Executive Officer

DET_B\295603.2<PAGE>
                                                                    EXHIBIT 10.1

                                CHANGE IN CONTROL

                               SEVERANCE AGREEMENT

THIS AGREEMENT, effective January 24, 2002, is made by and between SAFECO
Corporation, a Washington corporation ("SAFECO"), and Christine Mead (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 (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

                                       1
<PAGE>

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 or, if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, together with
all compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's 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 as in effect
immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.

      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:

                                       2
<PAGE>

      (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)   Leadership Performance Plan. The Executive shall be eligible to
receive an incentive award pursuant to the terms of the Leadership Performance
Plan.

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

      (F)   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.

                                       3
<PAGE>

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

                                       4
<PAGE>

reasonably demonstrates that such termination is otherwise in connection with or
in anticipation 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 (other than
benefits available pursuant to the Consolidated Omnibus Budget Reform Act of
1985) 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

                                       5
<PAGE>

of this Agreement or any other plan, arrangement or agreement with the Company,
any Person 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, and after taking into account the phase out of the itemized
deductions attributable to 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

                                       6
<PAGE>

the Company shall each reasonably cooperate with the other in connection with
any 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

                                       7
<PAGE>

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.

                                       8
<PAGE>

9.    Successors; Binding Agreement

      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

                                       9
<PAGE>

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 Exchange Act.

                                       10
<PAGE>

      (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 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

                                       11
<PAGE>

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 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

                                       12
<PAGE>

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 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

                                       13
<PAGE>

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:

      (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;

                                       14
<PAGE>

      (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:___________________________________    ______________________________________
    Michael S. McGavick                   Christine Mead
    President and Chief Executive         Such address as may appear on the
    Officer                               personnel records of SAFECO or such
                                          other address as Name may specify in
                                          writing

                                       15

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