Document:

Safeco Deferred Compensation Plan and Supplemental Benefit for Executives

 Exhibit 10.2 
  
 SAFECO CORPORATION 
 DEFERRED COMPENSATION PLAN FOR DIRECTORS 
 As Amended and Restated on November 4, 1998 
 (As Last Amended August 4, 2004) 
  

	1.	Purpose 

  
 The purpose of this Deferred Compensation Plan (“Plan”) is to provide for deferral of payment of all or any portion of the annual retainer, meeting fees, and any other fees or retainers payable to
non-employee directors of SAFECO Corporation (“Company”); dividend equivalents payable on Restricted Stock Rights (“RSRs”) granted to such directors; and all or any part of amounts payable in settlement of RSRs granted to
non-employee directors and certain gains realized by such directors on stock-for-stock exercises of options to purchase the Company’s common stock (“Common Stock”). 
  

	2.	Administrative Committee 

  
 The Board shall from time to time appoint a committee to administer this Plan (the “Administrative Committee”). The Administrative Committee shall have full
power and authority to construe and interpret the Plan. Members of the Administrative Committee who are otherwise eligible to participate in this Plan may do so while serving as members of that Committee, provided that no member shall be entitled to
vote or take any other action as part of the Committee with respect to his or her benefits under the Plan. Decisions of the Administrative Committee shall be final and binding upon the directors, their legal representatives and beneficiaries.
Approval by the Administrative Committee of any election or request made by a director or the legal representative or beneficiary of a director shall be subject to the sole discretion of the Administrative Committee. 
  

	3.	Eligibility 

  
 Any non-employee director of the Company is eligible to participate in the Plan. 
  

	4.	Election to Defer Fees 

  

	 	(a)	Deferral Election. A non-employee director may elect to defer all or a specified percentage of the annual retainer, meeting fees, and any other fees or retainers (all of the
foregoing are collectively referred to as “Fees”) that may thereafter become payable by executing and delivering to the Administrative Committee an election (“Deferral Election”) stating the dollar amount or percentage of the
Fees to be deferred. 

  

	 	(b)	 Timing. To be effective, a Deferral Election must be filed with the Administrative Committee by December 31 of the year prior to the year in which the Fees
are payable, except that any director newly elected to the Company’s Board of Directors shall have 30 days following the date of such director’s election in which to file an 

	 	 
irrevocable Deferral Election covering Fees payable during the remainder of the current year. A Deferral Election filed by December 31 shall be irrevocable
for the next year and will thereafter remain in effect indefinitely on a year-by-year basis until participation in the Plan terminates, or until the Deferral Election is amended or revoked by a new Deferral Election, which shall take effect the
following year. 

  

	 	(c)	Special Rule for New Fees. If, during the course of a year, a non-employee director becomes eligible to receive a type of Fee for which the director was not eligible on
December 31 of the prior year, the director may file a Deferral Election with respect to any payments of such Fee payable during the remainder of the current year, provided the Deferral Election is made before the earlier of (i) 30 days following
the date the director becomes eligible for the Fee, and (ii) the date the Fee or any portion thereof is payable. 

  

	5.	Election to Defer Gains on Stock-for-Stock Option Exercises 

  

	 	(a)	Deferral of Qualifying Gains. A non-employee director may elect to defer Qualifying Gain (as defined below) realized on the exercise of one or more non-qualified stock
options to purchase Common Stock, provided the option exercised was granted under a plan or program that permits deferral of gain with respect to such option. 

  

	 	(i)	Qualifying Gain. “Qualifying Gain” means the net value accrued upon exercise of an option using a stock-for-stock payment method (i.e., the amount by which the
total value of the shares exercised exceeds the total value of the shares used to pay the exercise price). For example, a director elects to defer the Qualifying Gain accrued upon exercise of an option to purchase 1,000 shares of Common Stock at an
exercise price of $20 per share when the Common Stock has a current fair market value of $25 per share. The director delivers 800 shares of Common Stock (worth $20,000) to pay the exercise price. In return, the director receives 800 shares of Common
Stock worth $20,000 and the director’s Account (as defined below) is credited with a Qualifying Gain of $5,000. 

  

	 	(ii)	Valuation of shares. For purposes of calculating the Qualifying Gain, shares shall be valued at the price at which the last sale of the Common Stock was made prior to 1:00
p.m. Pacific Time on the NASDAQ Stock Market on the date the option is exercised. 

  

	 	(b)	Stock Option Election. An election to defer Qualifying Gain on a stock option exercise shall be valid only if: (i) a separate irrevocable election (“Stock Option
Election”) is completed and signed by the director with respect to the stock option; (ii) the Stock Option Election is delivered to and accepted by the Administrative Committee at least six months before the director elects to exercise the
stock option; (iii) the exercise price is paid in Common Stock (either through physical delivery or attestation); and (iv) the director complies with such other rules as the Administrative Committee may establish from time to time.

  

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	6.	Election to Defer RSR Settlements and RSR Dividends 

  

	 	(a)	Deferral of RSR Settlement Amounts. A non-employee director may elect to defer amounts payable in settlement of RSRs (“RSR Settlement Amounts”) granted to such
director by executing and delivering to the Administrative Committee a Deferral Election indicating the RSR Settlement Amounts that the director wishes to defer. RSR Settlement Amounts may be deferred only if the underlying RSR was granted under a
plan or program that permits the deferral of RSR Settlement Amounts. 

  

	 	(b)	Deferral of RSR Dividend Equivalents. A non-employee director may elect to defer dividend equivalents payable on RSRs (“RSR Dividend Equivalents”) granted to such
director by executing and delivering to the Administrative Committee a Deferral Election indicating that the director wishes to defer RSR Dividend Equivalents. Any such election to defer RSR Dividend Equivalents must include all RSR Dividend
Equivalents declared during the following year. RSR Dividend Equivalents may only be deferred if the underlying RSR was granted under a plan or program that permits the deferral of RSR Dividend Equivalents. 

  

	 	(c)	Timing of Elections.  

  

	 	1.	RSR Settlements. A non-employee director may file a Deferral Election with respect to RSR Settlement Amounts with the Administrative Committee no later than December 31 of a
year, provided that such Deferral Election shall not be effective if the non-employee director’s membership on the Board terminates within one year of the date on which such Deferral Election is filed. Notwithstanding this one year rule, if,
during the course of a year, a non-employee director first becomes eligible to receive RSRs, the director may file a Deferral Election for RSR Settlement Amounts, provided that the Deferral Election is made within 30 days following the date the
director is notified of eligibility for the RSR. A non-employee director may revoke or change a previous Deferral Election made with respect to RSR Settlement Amounts, provided that such revocation or change shall not be effective if the
non-employee director’s membership on the Board terminates within one year of the date on which such revocation or change is filed with the Administrative Committee. 

  

	 	2.	 RSR Dividend Equivalents. A Deferral Election with respect to RSR Dividend Equivalents must be filed with the Administrative Committee by December 31 of the
year prior to the calendar year in which the RSR Dividend Equivalents are declared and shall be irrevocable with respect to the RSR Dividend Equivalents declared in such calendar year. Notwithstanding the foregoing, if, during the course of a year,
a non-employee director first becomes eligible to 

  

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receive RSRs, the director may file a Deferral Election with respect to any RSR Dividend Equivalents declared during the remainder of the current year,
provided that the Deferral Election is made within 30 days following the date the director is notified of eligibility for the RSR and applies only to RSR Dividend Equivalents declared after the date the Deferral Election is filed.

  

	7.	Deferral Accounts 

  

	 	(a)	Establishment of Accounts. The Company shall establish an account (“Account”) in the name of each participating non-employee director, to which all deferred Fees,
Qualifying Gains, RSR Settlement Amounts and RSR Dividend Equivalents attributable to the director and the earnings thereon shall be credited. A director’s Account shall at all times be a bookkeeping entry only and shall not represent any
investment made by the Company on the director’s behalf. A director shall be fully vested at all times in the deferred Fees, Qualifying Gains, RSR Settlement Amounts and RSR Dividend Equivalents credited to his or her Account.

  

	 	(b)	Crediting of Accounts. Deferrals of Fees shall be credited to the director’s Account on the date the Fees would have been paid but for the Deferral Election. Each
Qualifying Gain shall be credited to the director’s Account on the date that the option to which the gain relates is exercised. RSR Settlement Amounts that are deferred shall be credited to the director’s Account on the RSR settlement
date. RSR Dividend Equivalents that are deferred shall be credited to the director’s Account on the dividend date. 

  

	8.	Measurement Funds 

  

	 	(a)	Allocation Among Measurement Funds. A director’s Account shall be allocated among phantom investments (each a “Measurement Fund”) designated by the
Administrative Committee for use as an index to value the portion, if any, of the director’s Account allocated to that phantom investment. The allocation of a director’s deferred Fees, Qualifying Gains, RSR Settlement Amounts and RSR
Dividend Equivalents shall be governed by the director’s most recent Allocation Election (described below) and such rules as the Administrative Committee may establish from time to time. The Account of each director shall be credited (or
debited) on a daily basis according to the performance of each Measurement Fund selected by the director. 

  

	 	(b)	Available Funds. The Company is under no obligation to offer any particular investment as a Measurement Fund and reserves the right to eliminate, change and add Measurement
Funds at any time by action of the Administrative Committee. 

  

	 	(c)	 Allocation Election. Each non-employee director shall file a written election (“Allocation Election”) with the Administrative Committee indicating
the manner in which the director’s future Qualifying Gains, deferred Fees, RSR Settlement Amounts and RSR Dividend Equivalents are to be allocated among the available 

  

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Measurement Funds. A director may file a new Allocation Election at any time. An Allocation Election will be given effect no later than the next business day
after it is received and accepted by the Administrative Committee. If an non-employee director fails to file an Allocation Election covering all of the future additions to his or her Account, then the non-employee director will be deemed to have
directed that the future additions to his or her Account be allocated among the available Measurement Funds in accordance with and subject to such rules and procedures as the Administrative Committee shall establish. 

  

	 	(d)	Reallocation Election. In accordance with, and subject to, such rules as the Administrative Committee may establish from time to time, a director may file a written election
with the Administrative Committee reallocating the director’s Account among the available Measurement Funds (a “Reallocation Election”). A Reallocation Election shall be effective no later than the next business day for which fund
prices are available after it is received by the Administrative Committee (or the party designated by the Administrative Committee for such purpose), except as provided in Section 8(e) below. 

  

	 	(e)	Limitation Applicable to Section 16 Reporters. In the case of a non-employee director who is subject to reporting under Section 16(a) of the Exchange Act, a Reallocation
Election applicable to amounts already accrued in a non-employee director’s Account will not be given effect and will be void if it would generate a “short-swing” transaction for purposes of the rules promulgated under Section 16(b)
of the Exchange Act. 

  

	 	(f)	No Actual Investment. Notwithstanding any other Plan provision that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only.
Neither a director’s election of any Measurement Fund nor the crediting or debiting of amounts to the director’s Account in accordance with that election shall be construed as an actual investment of the director’s Account in any
Measurement Fund. 

  

	9.	Safeco Stock Ownership Fund 

  

	 	(a)	 Dividends. To the extent cash dividends are paid by the Company on the Common Stock, a director’s Account shall be credited with phantom dividends by
virtue of his or her allocation, if any, in the Safeco Stock Ownership Fund. The amount of phantom dividends to be credited to a director’s account shall equal the product of the dividend paid on a share of Common Stock multiplied by the number
of shares of Common Stock deemed to be allocated to a director’s Account by virtue of the director’s allocation to the Safeco Stock Ownership Fund on the record date for the cash dividend. The number of shares deemed to be allocated to a
director’s Account shall be determined by dividing the dollar value of the director’s Safeco Stock Ownership Fund Units as of the dividend record date by the closing price of a share of Common Stock also as of the dividend record date.
Phantom dividends shall be credited to a director’s Account in the form of additional Safeco Stock 

  

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Ownership Fund Units. The number of additional Safeco Stock Ownership Fund Units credited shall be determined based on the closing price of the Safeco Stock
Ownership Fund on the dividend payment date. 

  

	 	(b)	No Actual Shares. No actual shares of Common Stock will be issued directly or indirectly under the Plan in respect of Safeco Stock Ownership Fund Units.

  

	 	(c)	No Voting Rights. No voting or other rights of any kind associated with the ownership of Common Stock shall inure to a director by virtue of the director’s allocation of
all or any part of the director’s Account to the Safeco Stock Ownership Fund. 

  

	10.	Distribution of Deferred Compensation Account 

  

	 	(a)	General. Except as otherwise expressly provided in this Plan, no withdrawal or payment shall be made from a director’s Account except following the first to occur of the
director’s death, permanent disability, retirement as a director or other termination of service as a director of the Company. Payments shall be made in accordance with paragraphs (b) and (c) of this Section 10 unless the director has filed an
election under paragraph (d) of this Section requesting an alternative distribution type and/or time period. All payments shall be made in cash, regardless of the Measurement Funds selected by the director. 

  

	 	(b)	Retirement and Disability Distributions. If a director terminates service as a director on account of a permanent disability, as determined by the Administrative Committee,
or retires as a director of the Company under the Company’s retirement policy for directors as then in effect, the balance in the director’s Account shall be paid to the director in 10 annual installments, with each installment payable in
January as soon as practicable after year-end, commencing the January next following the director’s retirement or termination of service. The amount of the installment payable following any given year-end shall be determined by valuing the
director’s Account as of the close of business on the last business day of the year and then multiplying that value by a fraction, the numerator of which is one and the denominator of which is the remaining number of installment payments.

  

	 	(c)	Distributions Following Death and Other Non-Retirement Terminations. If a director dies prior to retirement as a director or terminates service as a director of the Company
for any reason besides retirement or a permanent disability, the entire balance of the director’s Account shall be paid out in a single lump sum within 30 days after the termination of service or the date the Company is notified, in a form
acceptable to the Administrative Committee, of the director’s death, as applicable. The value of the director’s Account shall be determined as of the date of the director’s death or termination of service. 

  

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	 	(d)	Distribution Election. 

  

	 	(i)	Election permitted. A director shall be permitted, in accordance with rules established by the Administrative Committee from time to time, to elect a distribution type and/or
period (up to ten years) different from those set forth in paragraphs (b) and (c) above (a “Distribution Election”), provided that distributions must commence no later than the year after the director retires from the Board of Directors or
otherwise terminates service as a director. 

  

	 	(ii)	Procedure. To be effective, a Distribution Election must be made in writing and be received by the Administrative Committee at least 12 months prior to the director’s
retirement or termination of service as a director of the Company, except that the 12-month waiting period shall not apply if the termination of service was due to the director’s death or permanent disability. Except as provided in paragraph
(iv) below, a director may revoke a Distribution Election by written notice or file a new Distribution Election with the Administrative Committee at any time, subject to the above 12-month waiting period, except that a Distribution Election shall
become irrevocable once the director is within 12 months of normal retirement under the Company’s retirement policy for directors as then in effect. 

  

	 	(iii)	Entire Account. Any Distribution Election filed by a director shall apply to his or her entire Account, including both the amounts credited to the Account prior to the date
of the Distribution Election and those credited thereafter, without regard to how the Account may be allocated among investment options. 

  

	 	(iv)	Elections by first-time directors. In the case of a director making his or her first Deferral Election under this Plan, a Distribution Election filed with the Administrative
Committee at the same time as the director’s initial Deferral Election shall be given effect even if the director terminates service as a director less than 12 months later. A Distribution Election filed at the same time as the director’s
initial Deferral Election shall be irrevocable for 12 months. 

  

	 	(e)	Tax Distributions. If, for any reason, all or any portion of a director’s Account becomes taxable to the director prior to distribution in accordance with the Plan, a
director may petition the Administrative Committee for a special distribution of the taxable portion. Upon the grant of such a petition, which shall not be unreasonably withheld, the Company shall promptly distribute to the director the portion of
his or her Account that has become taxable. 

  

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	11.	Beneficiaries 

  
 A director may designate one or more beneficiaries to receive amounts payable under the Plan in the event of the director’s death. To designate beneficiaries, the director shall complete a beneficiary designation
form in accordance with the Administrative Committee’s rules and procedures as in effect from time to time. A director may change a beneficiary designation at any time by filing a new beneficiary designation form with the Administrative
Committee. Upon the Administrative Committee’s acceptance of the new form, all beneficiary designations previously filed shall be canceled. If the director names someone other than his or her spouse as primary beneficiary, a spousal consent, in
the form designated by the Administrative Committee, must be signed by the director’s spouse and returned to the Administrative Committee. If the director fails to designate a beneficiary or if the designated beneficiary predeceases the
director, then the unpaid amounts in the Account of a deceased director shall be paid to the director’s surviving spouse, or, if the director has no surviving spouse, to the personal representative of the director’s probate estate.

  

	12.	Annual Statements 

  
 At least annually, the Company will provide each non-employee director with a statement showing the deferred Fees, Qualifying Gains, RSR Settlement Amounts and RSR Dividend Equivalents credited to the director’s
Account and any additional amounts credited (or debited) thereto in accordance with the director’s Allocation Election(s) and the provisions of this Plan. 
  

	13.	Termination or Amendment of the Plan 

  
 The Plan may be terminated, modified, or amended from time to time by resolution of the Board of Directors. If the Plan is terminated, all amounts accrued in
directors’ Accounts before termination will remain subject to the provisions of the Plan as though the Plan had not been terminated. 
  

	14.	Directors’ Rights 

  

	 	(a)	No Funding or Interest in Company Assets. Amounts deferred and accrued under the Plan remain the property of the Company, and no director or other person shall acquire any
property interest in any assets of the Company on account of participation in the Plan. A director’s rights are limited to receiving from the Company the payments provided for in the Plan. The Plan is unfunded, and to the extent that any
director acquires a right to receive payments from the Plan, such right shall be no greater than the right of an unsecured creditor of the Company. 

  

	 	(b)	Transferability. Interests in the Plan may not be transferred, assigned, pledged or encumbered. Prior to the time payment of an Account is actually made to a director, the
director shall have no rights by way of anticipation or otherwise to assign or dispose of any interest under the Plan. 

  

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	15.	Governing Law 

  
 This Plan shall be governed by and interpreted in accordance with the internal laws of the state of Washington without regard to conflict of law principles. 
  

	16.	Effective Date 

  
 The effective date of this Plan is November 2, 1994. 
  

 9Amended and Restated Employment Agreement

 Exhibit 10.21 
  
 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 
  
 SAFECO CORPORATION 
  
 and 
  
 MICHAEL S. McGAVICK 
  
 Dated as of January 5, 2005 

 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 
  
 This Amended and Restated Employment Agreement (this “Agreement”), dated as of January 5, 2005 (“Effective
Date”), is made between Safeco Corporation, a Washington corporation (“Safeco”), and Michael S. McGavick (“Employee”); 
  
 Recitals 
  
 A. Safeco desires to provide for the continued services and employment of Employee upon the terms and conditions stated in this Agreement; and 

 
 B. Employee desires to continue to perform services for Safeco upon the
terms and conditions stated in this Agreement. 
  
 Agreement

  
 In consideration of the foregoing premises and for other good
and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, Safeco and Employee agree as follows: 
  
 1. EMPLOYMENT 
  
 Employee has been and is currently employed as Safeco’s President and Chief Executive Officer. Employee will have the authority, subject to
Safeco’s Articles of Incorporation and Bylaws, as may be granted from time to time by the Board of Directors of Safeco. Employee will perform the duties and have the responsibilities and authority assigned to the president in Safeco’s
Bylaws, the duties customarily performed by the chief executive officer of a corporation which is, in all respects, similar to Safeco and such other duties as may be assigned from time to time by the Board of Directors of Safeco, which relate to the
business of Safeco, its subsidiaries, or any business ventures in which Safeco or its subsidiaries may participate. 
  
 2. ATTENTION AND EFFORT 
  
 Employee will devote all of his entire productive time, ability, attention and effort to Safeco’s business and will skillfully serve its interests
during the term of this Agreement; provided, however, that Employee may devote reasonable periods of time to (a) engaging in personal investment activities, (b) serving on the Board of Directors of other corporations, if such service
would not otherwise be prohibited by Section 7 of this Agreement and is approved pursuant to Safeco’s Policy on Outside Directorships, and (c) engaging in charitable or community service activities, so long as none of the foregoing additional
activities materially interfere with Employee’s duties under this Agreement and are approved or reported pursuant to Safeco’s Policy on Outside Directorships. 
  

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 3. COMPENSATION 
  
 During the term of this Agreement, Safeco agrees to pay or cause to be paid to Employee, and Employee agrees to accept in
exchange for the services rendered hereunder by him, the following compensation: 
  
 3.1 Base Salary 
  
 Employee’s compensation shall consist, in part, of an annual base salary at a rate of at least Eight Hundred Fifty Thousand Dollars ($850,000.00) before all customary payroll deductions. Such annual base salary shall be paid in
substantially equal installments and at the same intervals as other officers of Safeco are paid. This salary may be, but is not required to be, increased from time-to-time, subject to and in accordance with the annual compensation review procedures
of Safeco’s Compensation Committee. 
  
 3.2 Bonus 

 
 Employee may also be entitled to receive, in addition to the base salary
described above, an annual bonus in an amount to be determined by the Board of Directors of Safeco or under the Board’s delegated authority by the Compensation Committee of the Board (the “Committee”), in its or their sole discretion.
Employee’s target bonus shall be equal to one hundred twenty per cent (120%) of annual base salary, and his maximum bonus shall not exceed two hundred forty per cent (240%) of annual base salary. 
  
 3.3 Equity Grants 
  
 Employee shall be entitled to participate in any future equity compensation
programs of the Company on the same basis as other executives; provided that awards to Employee, if any, under such programs, will be made in the sole discretion of the Committee. 
  
 3.4 Vesting and Exercisability 
  
 As an incentive to Employee to remain employed by the Company through December 31, 2008, each equity award granted to Employee after December 31, 2004
shall include a December 31, 2008 vesting date in addition to any other vesting date determined by the Committee and set forth in the individual award agreement. The vesting schedule for each award shall provide that the number of shares that vest
on December 31, 2008 shall at least equal the number of shares that vest after that date. In addition, any such stock options that are or become exercisable as of Employee’s termination of employment after December 31, 2008, shall remain
exercisable for five years thereafter; provided, however, that no stock option shall remain exercisable beyond its maximum stated term. Existing awards shall not otherwise be modified. 
  

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 4. BENEFITS 
  
 4.1 Retirement and Savings Plans 
  

During Employee’s employment with Safeco, Employee shall be entitled to participate in all defined contribution plans and defined benefit plans or
plans, including excess benefit or supplemental retirement plans or agreements, maintained by Safeco, as now or hereinafter in effect, that are applicable to Safeco’s employees generally or to its executive officers, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans, programs and arrangements. Benefits payable under such plans shall commence pursuant to the terms of such plans. 
  
 4.2 Other Benefit Programs 
  
 During Employee’s employment with Safeco, Employee will be entitled to
participate, subject to and in accordance with applicable eligibility requirements, in all other employee benefit plans, programs and arrangements of Safeco, as now or hereinafter in effect, that are applicable to Safeco’s employees generally
or to its executive officers, as the case may be, subject to and on a basis consistent with the terms, conditions and overall administration of such plans, programs and arrangements, and subject to Section 4.1.  
  
 4.3 Housing Loan and Benefits 
  
 In connection with Employee’s relocation to Seattle in 2001 Safeco
provided Employee with a home purchase loan in an amount of $1,275,000. The principal amount will be due at the earlier of fifteen (15) years from the date of the loan or one (1) year after the termination of Employee’s employment with Safeco.
Nothing contained in this Agreement or otherwise shall amend this loan in any manner. 
  
 4.4 Vacation and Other Leaves 
  
 Employee shall be entitled to paid vacation and other paid absences, whether for holidays, illness, or any similar purposes, in accordance with policies applicable generally to executive officers of Safeco; provided, however, that Employee
shall be entitled to at least twenty (20) days of paid vacation per calendar year. 
  
 4.5 Air Transportation 
  
 When
Employee requires air travel, Safeco shall provide Employee with the fastest and most efficient form of air transport, whether through commercial or private service. Costs of air transportation for Employee’s personal travel shall be
Employee’s personal responsibility. Costs of air transportation for Employee’s business travel will be paid by Safeco. 
  

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 4.6 Expenses 
  
 Employee shall be entitled to receive reimbursement for all reasonable and customary expenses incurred by him in performing services under this Agreement,
including all expenses of travel and accommodations while away from his residence on business or at the request of and in the service of Safeco; provided, however, that such expenses are incurred, accounted for and approved in accordance with the
policies and procedures established from time-to-time by Safeco. 
  
 5. TERMINATION 
  
 Employment of
Employee pursuant to this Agreement may be terminated as follows, but in any case, the provisions of Section 7 hereof shall survive the termination of this Agreement and the termination of Employee’s employment hereunder: 
  
 5.1 By Safeco 
  
 With or without Cause (as defined below), Safeco may terminate the employment of Employee at any time during the term of
employment upon giving Notice of Termination (as defined below). 
  
 5.2 By Employee 
  
 Employee may terminate his
employment at any time, for any reason, upon giving Notice of Termination. 
  
 5.3 Automatic Termination 
  
 This Agreement and Employee’s employment hereunder shall terminate automatically upon the death or total disability of Employee. The term “total disability” as used herein shall mean Employee’s inability to
perform the duties set forth in Section 1 hereof for a period of sixty (60) consecutive days or periods aggregating one hundred five (105) calendar days in any 12-month period as a result of physical or mental illness, loss of legal capacity or any
other cause beyond Employee’s control, unless Employee is granted a leave of absence by the Board of Directors of Safeco. Employee and Safeco hereby acknowledge that Employee’s ability to perform the duties specified in Section 1 is of the
essence of this Agreement. Termination hereunder shall be deemed to be effective (a) at the end of the calendar month in which Employee’s death occurs or (b) immediately upon a determination by the Board of Directors of Safeco of
Employee’s total disability, as defined herein. 
  
 5.4
Notice 
  
 The term “Notice of Termination”
shall mean at least thirty (30) days’ written notice of termination of Employee’s employment, during which period Employee’s employment and performance of services will continue; provided, however, that Safeco may, upon notice
to Employee and without reducing Employee’s compensation during such period, excuse Employee from any or all of his duties during such period. The effective date of the termination of Employee’s employment hereunder shall be the date on
which such 30-day period expires. 
  

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 6. TERMINATION PAYMENTS 
  
 In the event of termination of the employment of Employee, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 6: 
  
 6.1 Termination by Safeco 
  
 If Safeco terminates
Employee’s employment without Cause, Employee shall receive (a) termination payments equal to one year’s annual base salary (at the annual rate then in effect), and (b) any unpaid annual base salary that has accrued for services already
performed as of the date termination of Employee’s employment becomes effective. If Employee is terminated by Safeco for Cause, Employee shall not be entitled to receive any of the foregoing benefits, other than those set forth in clause (b)
above. Except as provided above, Employee’s rights upon termination of employment will be governed by Safeco’s standard policy and practice, or as determined by the Board of Directors or a committee thereof. The termination payments under
clause (a) above are payable contingent upon Employee’s resignation from Safeco’s Board of Directors and execution of a waiver and release of claims arising out of his employment and/or the termination of his employment with Safeco, other
than normal exclusions for indemnification pursuant to any policies of insurance and/or the provisions of the Safeco’s By-laws or Articles of Incorporation. 
  
 6.2 Termination by Employee 
  
 In the case of the termination of Employee’s employment by Employee, Employee shall not be entitled to any payments hereunder, other than those set
forth in clause (b) of subsection 6.1 above. 
  
 6.3 Procedures
Regarding Termination for Cause 
  
 No termination of
Employee’s employment by Safeco for Cause shall be effective unless the provisions of this Section 6.3 shall have been complied with. Employee shall be given written notice by the Board of Directors of the intention to terminate him for Cause,
such notice (i) to state in detail the particular circumstances that constitute the grounds on which the proposed termination for Cause is based and (ii) to be given no later than 60 days after the Board of Directors first learns of such
circumstances. At the sole discretion of the Board of Directors, Employee may be placed on paid administrative leave and relieved of all employment responsibilities upon issuance of the notice. Employee shall have 15 days after receiving such notice
in which to cure such grounds, to the extent such cure is possible. If he fails to cure such grounds, Employee shall then be entitled to a hearing before the Board of Directors. Such hearing shall be held within 20 days of his receiving such notice,
provided that he requests such hearing within 15 days of receiving such notice. If, within five days following such hearing, the Board of Directors gives written notice to Employee confirming that, in the judgment of at least 
  

 -5- 

 two-thirds of the members of the Board of Directors (excluding Employee), Cause for terminating his employment on the
basis set forth in the original notice exists, his employment with Safeco shall thereupon be terminated for Cause. 
  
 6.4 Termination in Connection With a Change in Control 
  
 Safeco and Employee previously executed a Change in Control Severance Agreement (the “Change in Control Agreement”), a true and correct copy of
which is attached hereto as Exhibit A. In circumstances constituting a Change in Control, as defined in the Change in Control Agreement, Employee’s rights upon termination of employment will be governed by the terms of the Change in Control
Agreement, and this Section 6 will be null and void. 
  
 6.5
Payment Schedule 
  
 All payments under this Section 6 shall be
made to Employee at the same interval as payments of salary were made to Employee immediately prior to termination. 
  
 6.6 Cause 
  
 Wherever reference is made in this Agreement to termination being with or without Cause, “Cause” shall include, without limitation, the
occurrence of one or more of the following events: 
  
 (a) Failure
or refusal to carry out the lawful duties of Employee described in Section 1 of this Agreement or any directions of the Board of Directors of Safeco or any committee of the Board, which directions are reasonably consistent with the duties herein set
forth to be performed by Employee (other than as a result of illness, accident, or other physical or mental incapacity), provided that (i) a demand for performance of services has been delivered to Employee in writing by or on behalf of the Board of
Directors of the Company subsequent to the completion of the procedures set forth in Section 6.3 identifying the manner in which such Board of Directors believes that Employee has failed to perform and (ii) Employee has thereafter failed to remedy
such failure to perform; 
  
 (b) Violation by Employee of a state
or federal criminal law involving the commission of a crime against Safeco or a felony involving moral turpitude or a violation of 18 U.S.C. § 1033 (unless the action constituting such violation was taken with the advice of counsel which may
include the general counsel of Safeco), including the entry of a guilty or nolo contendere plea; 
  
 (c) Conduct by Employee that constitutes willful gross neglect or willful gross misconduct in carrying out his duties, resulting, in either case, in
material harm to Safeco, monetarily or otherwise, unless Employee reasonably believed in good faith that such act or non-act was in or not opposed to the best interests of Safeco; or 
  
 (d) Current use by Employee of illegal substances; deception, fraud, misrepresentation or dishonesty by Employee; any
incident materially compromising Employee’s reputation or ability to represent Safeco with the public. 
  

 -6- 

 7. NONCOMPETITION AND NONSOLICITATION 
  
 7.1 Applicability 
  
 This Section 7 shall survive the termination of Employee’s employment
with Safeco. 
  
 7.2 Scope of Competition 
  
 If Employee’s employment with Safeco terminates on or prior to December
31, 2008, Employee agrees that he will not, directly or indirectly, during his employment and for a period of 1 year from the date on which his employment with Safeco terminates for any reason, or this Agreement expires, be employed by, consult
with, be a director of or otherwise perform services for, own, manage, operate, join, control or participate in the ownership, management, operation or control of or be connected with, in any manner, any Competitor. If Employee’s employment
with Safeco terminates after December 31, 2008 for any reason, the term of Employee’s non-competition obligations described above will increase from 1 year to 3 years. A “Competitor” shall include any entity which, directly or
indirectly, competes with Safeco or produces, markets, distributes or otherwise derives benefit from the production, marketing or distribution of products or services which compete with products then produced or services then being provided or
marketed, by Safeco or the feasibility for production of which Safeco is then actually studying, or which is preparing to market or is developing products or services that will be in competition with the products or services then produced or being
studied or developed by Safeco, in each case within the geographical area of the United States, unless released from such obligation in writing by Safeco’s Board of Directors. Employee shall be deemed to be related to or connected with a
Competitor if such Competitor is (a) a partnership in which he is a general or limited partner or employee, (b) a corporation or association of which he is a shareholder, officer, employee or director, or (c) a partnership, corporation or
association of which he is a member, consultant or agent; provided, however, that nothing in this Agreement shall prevent the purchase or ownership by Employee of shares which constitute less than one percent of the outstanding equity
securities of a publicly or privately held corporation, if Employee had no other relationship with such corporation.  
  
 7.3 Scope of Nonsolicitation 
  
 Employee shall not directly or indirectly solicit, influence or entice, or attempt to solicit, influence or entice, any employee or consultant of Safeco
to cease his or her relationship with Safeco or solicit, influence, entice or in any way divert any customer, distributor, partner, joint venturer or supplier of Safeco to do business or in any way become associated with any Competitor. This Section
7.3 shall apply during the time periods and geographical area described in Section 7.2. 
  
 7.4 Assignment of Intellectual Property 
  
 All concepts, designs, machines, devices, uses, processes, technology, trade secrets, works of authorship, customer lists, plans, embodiments, inventions, improvements or related work product (collectively
“Intellectual Property”) which Employee develops, conceives or first 
  

 -7- 

 reduces to practice during the term of his employment hereunder or within one year after the termination of his
employment hereunder or the expiration of this Agreement, whether working alone or with others, shall be the sole and exclusive property of Safeco, together with any and all Intellectual Property rights, including, without limitation, patent or
copyright rights, related thereto, and Employee hereby assigns to Safeco all of such Intellectual Property. “Intellectual Property” shall include only such concepts, designs, machines, devices, uses, processes, technology, trade
secrets, customer lists, plans, embodiments, inventions, improvements and work product which (a) relate to Employee’s performance of services under this Agreement, to Safeco’s field of business or to Safeco’s actual or demonstrably
anticipated research or development, whether or not developed, conceived or first reduced to practice during normal business hours or with the use of any equipment, supplies, facilities or trade secret information or other resource of Safeco or (b)
are developed in whole or in part on Safeco’s time or developed using Safeco’s equipment, supplies, facilities or trade secret information, or other resources of Safeco, whether or not the work product relates to Safeco’s field of
business or Safeco’s actual or demonstrably anticipated research. 
  
 7.5 Disclosure and Protection of Inventions 
  
 Employee
shall disclose in writing all concepts, designs, processes, technology, plans, embodiments, inventions or improvements constituting Intellectual Property to Safeco promptly after its or their development. At Safeco’s request and at
Safeco’s expense, Employee will assist Safeco or its designee in efforts to protect all rights relating to such Intellectual Property. Such assistance may include, without limitation, the following: (a) making application in the United States
and in foreign countries for a patent or copyright on any work products specified by Safeco; (b) executing documents of assignment to Safeco or its designee of all of Employee’s right, title and interest in and to any work product and related
intellectual property rights; and (c) taking such additional action (including, without limitation, the execution and delivery of documents) to perfect, evidence or vest in Safeco or its designee all right, title and interest in and to any
Intellectual Property and any rights related thereto. 
  
 7.6
Nondisclosure; Return of Materials 
  
 During the Term and
following termination of Employee’s employment with Safeco, Employee will not disclose (except as required by his duties to Safeco) any concept, design, process, technology, trade secret, customer list, plan, embodiment, or invention, any other
Intellectual Property or any other confidential information, whether patentable or not, of Safeco of which Employee becomes informed or aware during his employment, whether or not developed by Employee. In the event of the termination of his
employment with Safeco or the expiration of this Agreement, Employee will return all documents, data and other materials of whatever nature, including, without limitation, drawings, specifications, research, reports, embodiments, software and
manuals to Safeco which pertain to his employment with Safeco or to any Intellectual Property and shall not retain or cause or allow any third party to retain photocopies or other reproductions of the foregoing. 
  

 -8- 

 7.7 Equitable Relief 
  
 Employee acknowledges that the provisions of this Section 7 are essential to Safeco, that Safeco would not enter into this
Agreement if it did not include this Section 7 and that damages sustained by Safeco as a result of a breach of this Section 7 cannot be adequately remedied by damages, and Employee agrees that Safeco, notwithstanding any other provision of this
Agreement, including, without limitation, Section 13 hereof, and in addition to any other remedy it may have under this Agreement or at law, shall be entitled to injunctive and other equitable relief to prevent or curtail any breach of any provision
of this Agreement, including, without limitation, this Section 7. 
  
 7.8 Effect of Violation 
  
 Employee and Safeco
acknowledge and agree that additional consideration has been given for Employee entering into this Section 7, such additional consideration including, without limitation, certain provisions for termination payments pursuant to Section 6 of this
Agreement. Violation by Employee of this Section 7 shall relieve Safeco of any obligation it may have to make such termination payments, but shall not relieve Employee of his obligations, as required hereunder, not to compete. 
  
 7.9 Definition of Safeco 
  
 For purposes of subsection 7.2 and subsection 7.3 hereof,
“Safeco” shall include all subsidiaries of Safeco, Safeco’s and any business ventures in which Safeco, its subsidiaries may participate. 
  

8. REPRESENTATIONS AND WARRANTIES 
  
 In order to induce Safeco to enter into this Agreement, Employee represents and warrants to Safeco as follows: 
  
 8.1 No Violation of Other Agreements 
  
 Neither the execution nor the performance of this Agreement by Employee will
violate or conflict in any way with any other agreement by which Employee may be bound, or with any other duties imposed upon Employee by corporate or other statutory or common law. 
  
 8.2 Patents, Etc. 
  
 Employee has prepared and attached hereto as Schedule 1 a list of all inventions, patent applications and patents made or conceived by Executive prior to
the date hereof, which are subject to prior agreement or which Employee desires to exclude from this Agreement, or, if no such list is attached, Employee hereby represents and warrants to Safeco that there are no such inventions, patent applications
or patents. 
  

 -9- 

 9. INDEMNIFICATION 
  
 Employee shall be indemnified by Safeco to the extent permitted by applicable law and as provided by Article XII of
Safeco’s Bylaws. 
  
 10. FORM OF NOTICE

  
 All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent by telecopy or other electronic facsimile transmission or by registered or certified mail, return receipt requested, at the address set forth below or at such other
address as may hereafter be designated by notice given in compliance with the terms hereof: 
  

			
	If to Employee:	  	Michael S. McGavick
	 	  	[such address as may appear in the personnel
	 	  	records of Safeco or such other address as
	 	  	Employee may specify in writing]
		
	If to Safeco:	  	Secretary
	 	  	Safeco Corporation
	 	  	Safeco Plaza
	 	  	Seattle, WA 98185
		
	Copy to:	  	General Counsel
	 	  	Safeco Corporation
	 	  	Safeco Plaza
	 	  	Seattle, Washington 98185

  
 If notice is mailed,
such notice shall be effective upon mailing, or if notice is personally delivered or sent by telecopy or other electronic facsimile transmission, it shall be effective upon receipt. 
  
 11. ASSIGNMENT 
  
 This Agreement is personal to Employee and shall not be assignable by Employee. Subject to the provisions of Section 6.5 and Section 6.6 of this
Agreement, Safeco may assign its rights hereunder to (a) any corporation resulting from any merger, consolidation or other reorganization to which Safeco is a party or (b) any corporation, partnership, association or other person to which Safeco may
transfer all or substantially all of the assets and business of Safeco existing at such time. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns. 
  
 12. WAIVERS 
  
 No delay or failure by either party in
exercising, protecting or enforcing any of its or his rights, titles, interests or remedies under this Agreement, and no course of dealing or 

  

 -10- 

 
performance with respect thereto, shall constitute a waiver. The express waiver by a party of any right, title, interest or remedy in a particular instance
or circumstance shall not constitute a waiver thereof in any other instance or circumstance. All rights and remedies shall be cumulative and not exclusive of any other rights or remedies. 
  
 13. ARBITRATION 
  

Subject to the provisions of Section 7.7 of this Agreement, any controversies or claims arising out of or relating to this Agreement shall be fully and
finally settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect (the “AAA Rules”), conducted by one arbitrator either mutually agreed upon by Safeco and
Employee or chosen in accordance with the AAA Rules, except that the parties thereto shall have any right to discovery as would be permitted by the Federal Rules of Civil Procedure for a period of 90 days following the commencement of such
arbitration and the arbitrator thereof shall resolve any dispute which arises in connection with such discovery. The prevailing party shall be entitled to costs, expenses and reasonable attorneys’ fees, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. 
  
 14. AMENDMENTS IN WRITING 
  
 No
amendment, modification, waiver, termination or discharge of any provision of this Agreement, nor consent to any departure therefrom by either party, shall in any event be effective unless the same shall be in writing, specifically identifying this
Agreement and the provision intended to be amended, modified, waived, terminated or discharged and signed by Safeco and Employee, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific
instance and for the specific purpose for which given. No provision of this Agreement shall be varied, contradicted or explained by any oral agreement, course of dealing or performance or any other matter not set forth in an agreement in writing and
signed by Safeco and Employee. 
  
 15. APPLICABLE
LAW 
  
 This Agreement shall in all respects, including all
matters of construction, validity and performance, be governed by, and construed and enforced in accordance with, the laws of the state of Washington, without regard to any rules governing conflicts of laws. 
  
 16. SEVERABILITY 
  
 If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without limitation, the duration of such provision, its geographical scope or the extent of the activities prohibited or required by it, then, to the full extent permitted by law (a) all
other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intent of the parties hereto as nearly as may be possible, (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of any other provision hereof, and (c) any court or arbitrator having jurisdiction thereover shall have the power to reform such provision to the extent necessary for such
provision to be enforceable under applicable law. 
  

 -11- 

 17. HEADINGS 
  
 All headings used are for convenience only and shall not in any way affect the construction of, or be taken into
consideration in interpreting, this Agreement. 
  
 18. COUNTERPARTS 
  
 This Agreement, and any amendment
or modification entered into pursuant to Section 14 hereof, may be executed in any number of counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together,
shall constitute one and the same instrument. 
  
 19. ENTIRE AGREEMENT 
  
 This Agreement on and as of the
date hereof constitutes the entire agreement between Safeco and Employee with respect to the subject matter hereof and all prior or contemporaneous oral or written communications, understandings or agreements between Safeco and Employee with respect
to such subject matter are hereby superseded and nullified in their entireties. 
  
 IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on the date set forth above. 
  

			
	 /s/ Michael S. McGavick

	Michael S. McGavick
	
	Safeco Corporation
		
	By	 	 /s/ Robert S. Cline

	 	 	Robert S. Cline
	 	 	Lead Director

  

 -12- 

 SCHEDULE 1 
  
 None.

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