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                                                                    Exhibit 10.5

                                CHANGE IN CONTROL
                               SEVERANCE AGREEMENT

THIS AGREEMENT, effective November 7, 2001, is made by and between SAFECO
Corporation, a Washington corporation ("SAFECO"), and Name (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.

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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
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.

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        (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:

        (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

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Benefit Commencement Date"), and the number of equal consecutive monthly
installments (not to exceed 120) that the Deferred Benefit is to be paid in. In
no event shall the Deferred Benefit Commencement Date be subsequent to the first
day of January of the year immediately following the Executive's sixty-fifth
birthday. In the event such an election is made:

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

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

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deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason, if (i) the Executive's
employment is terminated by the Company without Cause prior to a Change in
Control and such termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which would
constitute a Change in Control, (ii) the Executive terminates his employment
with Good Reason prior to a Change in Control and the circumstance or event
which constitutes Good Reason occurs at the request or direction of such Person,
or (iii) the Executive's employment is terminated by the Company without Cause
prior to a Change in Control and the Executive reasonably demonstrates that such
termination is otherwise in connection with or in anticipation 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

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by dividing the number of full months and any fractional portion of a month
during such performance award period through the Date of Termination by the
total number of months contained in such performance award period.

        6.2 "Gross-Up Payment."

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

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

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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 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

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Agreement.

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

9. Successors; Binding Agreement.

        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

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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 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.

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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.

        (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

                                       12
<PAGE>

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 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.

                                       13
<PAGE>

        (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 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

                                       14
<PAGE>

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 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.

                                       15
<PAGE>

        (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;

        (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 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).

                                       16
<PAGE>

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

SAFECO CORPORATION

By:
   ---------------------------       -------------------------------------------
                                     Name
                                     Such address as may appear on the personnel
                                     records of SAFECO or such other address as
                                     Name may specify in writing

                                       17<PAGE>
                                                                    Exhibit 10.6
                     SAFECO LONG-TERM INCENTIVE PLAN OF 1997
                    AS AMENDED AND RESTATED FEBRUARY 7, 2001

1. PURPOSE

The purpose of the SAFECO Long-Term Incentive Plan of 1997 (the "Plan") is to
enhance the long-term profitability and shareholder value of SAFECO Corporation
(the "Company") by offering incentives and rewards to non-employee directors of
the Company and selected eligible employees of the Company and its Subsidiaries
(as defined in Section 2) who are key to the Company's growth and success as an
inducement to them to remain in the service of the Company and to acquire and
maintain stock ownership in the Company.

2. DEFINITIONS

        (a)    "Affiliate" means a person controlling, controlled by or under
               common control with the Company.

        (b)    "Award" shall mean any award or grant made pursuant to the Plan,
               including, without limitation, awards or grants of stock options,
               stock appreciation rights, restricted stock rights, performance
               stock rights or any combination of the foregoing. Awards may be
               granted singly, in combination, or in tandem so that the
               settlement or payment of one automatically reduces or cancels the
               other.

        (c)    "Award Agreement" means a written agreement between the Company
               and a Plan participant evidencing an Award.

        (d)    "Beneficial Owner" has the meaning set forth in Rule 13d-3 under
               the Securities Exchange Act of 1934, as amended (the "Exchange
               Act").

        (e)    "Change in Control" shall be deemed to have occurred if the event
               set forth in any one of the following paragraphs has occurred:

                (i)     Any Person is or becomes the Beneficial Owner, directly
                        or indirectly, of securities of the Company (not
                        including in the securities beneficially owned by such
                        Person any securities acquired directly from the Company
                        or its Affiliates) representing 25% or more of the
                        combined voting power of the Company's then outstanding
                        securities, excluding any Person who becomes such a
                        Beneficial Owner in connection with a transaction
                        described in clause (x) of paragraph (iii) of this
                        Section 2(e); 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 the Plan is
                        adopted by the Company's shareholders, constitute the
                        Board of Directors of the Company 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

<PAGE>

                        election of directors of the Company) whose appointment
                        or election by the Board of Directors or nomination for
                        election by the Company's shareholders was approved by a
                        vote of at least two-thirds 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 the
                        Company or any Subsidiary with any other corporation,
                        other than (x) a merger or consolidation which would
                        result in the voting securities of the Company
                        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 the Company or any Subsidiary
                        at least 75% of the combined voting power of the
                        securities of the Company or such surviving entity or
                        any parent thereof outstanding immediately after such
                        merger or consolidation, or (y) a merger or
                        consolidation effected to implement a recapitalization
                        of the Company (or similar transaction) in which no
                        Person is or becomes the Beneficial Owner, directly or
                        indirectly, of securities of the Company (not including
                        in the securities beneficially owned by such Person any
                        securities acquired directly from the Company or its
                        Affiliates other than in connection with the acquisition
                        by the Company or its Affiliates of a business)
                        representing 25% or more of the combined voting power of
                        the Company's then outstanding securities; or

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

        (f)     "Committee" shall mean the Company's Board of Directors or a
                committee or sub-committee described in Section 3 selected by
                the Company's Board of Directors to administer the Plan.

                                        2
<PAGE>

        (g)     "Fair Market Value" shall mean, with respect to the Company's
                common stock, the price at which the last trade of the Company's
                common stock was made prior to 1:00 p.m. West Coast time on the
                Nasdaq National Market on the date in question.

        (h)     "Person" for purposes of Section 2(e) means any person (as
                defined in Section 2(a)(9) of the Exchange Act, as such term is
                modified in Section 13(d) and 14(d) of the Exchange Act) other
                than (i) any employee plan established by the Company, (ii) the
                Company or any of its affiliates (as defined in Rule 12b-2
                promulgated under the Exchange Act), (iii) an underwriter
                temporarily holding securities pursuant to an offering of such
                securities, or (iv) a corporation owned, directly or indirectly,
                by shareholders of the Company in substantially the same
                proportions as their ownership of the Company.

        (i)     "Retirement" shall mean a termination of employment with the
                Company or a Subsidiary occurring on or after an individual
                attains age 65, or such other termination of employment as the
                Committee may approve as a retirement from time to time for
                purposes of the Plan.

        (j)     "Subsidiary" shall mean any corporation of which more than 50%
                of the total combined voting power of all classes of stock
                entitled to vote is directly or indirectly owned by the Company.

3. ADMINISTRATION

        (a)     The Plan shall be administered by a Committee to be appointed
                from time to time by the Company's Board of Directors and shall
                consist of at least two members of the Board, each of whom is an
                "outside director" as defined in regulations promulgated under
                Section 162(m) of the Internal Revenue Code of 1986, as amended
                (the "Code"). In addition, if the Committee does not also
                consist solely of "non-employee directors" as defined in Rule
                16b-3 under the Exchange Act, the Plan shall be administered
                with respect to officers subject to Section 16 of the Exchange
                Act by a sub-committee of the Committee to be appointed from
                time to time by the Company's Board of Directors and consisting
                of at least two members of the Board, each of whom is a
                "non-employee director."

        (b)     Except for the terms and conditions explicitly set forth in the
                Plan, the Committee shall have the exclusive authority to
                determine, in its sole discretion, all matters relating to
                Awards under the Plan, including the selection of individuals to
                be granted Awards; the type of Awards; the number of shares of
                common stock subject to an Award; all terms, conditions,
                restrictions and limitations, if any, of an Award; and the terms
                of any instrument that evidences the Award. The Committee may,
                in its discretion, accelerate the exercisability of or waive any
                or all of the restrictions and conditions applicable to any
                Award and may, with the consent of the holder, modify any
                agreement governing an Award. The Committee may permit or
                require the deferral of any Award payment, subject to such rules
                and procedures as it may establish, which may include provisions
                for the payment or crediting of interest or dividend equivalents
                on the deferred payment. Any deferred payment

                                        3
<PAGE>

                may require the payment to be forfeited under certain
                circumstances in accordance with Section 15. The Committee shall
                also have exclusive authority to interpret the Plan and may
                adopt, amend and rescind rules and procedures relating to the
                Plan. The Committee may delegate administrative duties to such
                of the Company's officers as it so determines; provided,
                however, that decisions concerning the terms and conditions of
                an Award and the selection of recipients of Awards shall not be
                delegated.

        (c)     The Board of Directors shall designate one member of the
                Committee as its Chair, and the Committee shall hold its
                meetings at such times and places as it shall deem advisable. At
                least one-half of its members shall constitute a quorum for the
                conduct of business, and any decision or determination approved
                by a majority of members present at any meeting in which a
                quorum exists shall be deemed to have been made by the
                Committee. In addition, any decision or determination reduced to
                writing and signed by all of the members shall be deemed to have
                been made by the Committee. The Committee may appoint a
                secretary, shall keep minutes of its meetings, and may make such
                rules and regulations for the conduct of its business and for
                the carrying out of the Plan as it deems appropriate.

        (d)     The interpretation and construction by the Committee of any
                provisions of the Plan and of Awards thereunder and all actions
                taken and determinations made by the Committee pursuant to the
                Plan shall be final and conclusive on all persons having any
                interest therein.

        (e)     Notwithstanding anything in the Plan to the contrary, the
                Committee, in its absolute discretion, may bifurcate the Plan so
                as to restrict, limit or condition the use of any provision of
                the Plan to participants who are subject to Section 16 of the
                Exchange Act without so restricting, limiting or conditioning
                the Plan with respect to other participants in the Plan.

4. SHARES SUBJECT TO PLAN

        (a)     Subject to the provisions of Section 21 (relating to adjustments
                due to changes in capital structure), a maximum of 6,000,000
                shares of the Company's common stock shall be available for
                issuance pursuant to Awards under the Plan. No more than
                3,000,000 shares may be issued in connection with restricted
                stock rights and performance stock rights granted under the
                provisions of Sections 12 and 13.

        (b)     Any shares of the Company's common stock that have been made
                subject to an Award and that subsequently cease to be subject to
                the Award (other than by reason of exercise or payment of the
                Award to the extent it is exercised for or settled in shares of
                common stock) shall again be available for issuance in
                connection with future grants of Awards under the Plan;
                provided, however, that for purposes of Section 4(c), any such
                shares shall be counted in accordance with the requirements of
                Section 162(m) of the Code.

                                        4
<PAGE>

        (c)     Subject to the provisions of Section 21 (relating to adjustments
                due to changes in capital structure), the maximum number of
                shares with respect to which options may be granted under the
                Plan to any individual during any calendar year is 500,000, and
                the maximum number of shares payable under a performance stock
                right for any Performance Cycle (as defined in Section 13(a)) is
                500,000 shares, or in the event the performance stock right is
                paid in cash, the equivalent cash value on the date the
                performance stock right would otherwise be settled in shares,
                such limitations to be applied in a manner consistent with the
                requirements of, and only to the extent required for compliance
                with, the exclusion from the limitation on deductibility of
                compensation under Section 162(m) of the Code.

5. ELIGIBILITY

Awards may be granted only to non-employee directors of the Company and salaried
key management employees of the Company or a Subsidiary (including salaried
employees who are also directors) who, in the judgment of the Committee, will
perform services of special importance in the management, operation and
development of the business of the Company or the businesses of one or more of
its Subsidiaries, provided the grant date for options and performance stock
rights for an employee shall not occur during or after the calendar year in
which the employee reaches the age of 65.

6. PRICE AND TERM OF OPTIONS

        (a)     The exercise price for shares purchased under each option will
                be determined by the Committee but shall not be less than 100%
                of the Fair Market Value of the shares of stock covered by the
                option on the date of grant of the option.

        (b)     The term of each option shall be as determined by the Committee,
                but not in excess of ten years from the date it is granted. An
                option granted for an initial term of less than ten years may be
                extended by amendment for a period of up to ten years from the
                date of the initial grant, provided that no such amendment of an
                incentive stock option shall be made without the prior consent
                of the optionee.

7. LIMITATIONS ON EXERCISE OF OPTIONS

        (a)     Any minimum period during which an optionee must provide
                services or be continuously employed prior to an option becoming
                exercisable and the increments in which an option will become
                exercisable shall be set forth in the Award Agreement evidencing
                the option. Such provisions may be waived or modified by the
                Committee at any time. Absence on leave shall not be deemed an
                interruption of employment or services for purposes of the Plan,
                except that with respect to incentive stock options a leave of
                absence shall be subject to any requirements of Section 422 of
                the Code.

        (b)     Incentive stock options shall be granted to employees only. To
                the extent the aggregate Fair Market Value (determined at the
                time the options are granted) of the stock with respect to which
                any individual employee's incentive stock options are

                                        5
<PAGE>

                exercisable for the first time during any calendar year exceeds
                $100,000, the portion in excess of $100,000 shall be treated as
                a nonqualified stock option. For purposes of this determination,
                incentive stock options granted under the Plan shall be
                aggregated with those granted under any other stock option plan
                of the Company.

8. METHOD OF EXERCISE

Each exercise of an option granted hereunder, whether in whole or in part, shall
be by written notice to the Chief Executive Officer of the Company designating
the number of shares as to which the option is exercised, and shall be
accompanied by payment in full for the number of shares so designated. Stock to
be purchased under an option may be paid for in cash, in shares of the Company's
common stock (either through physical delivery or by attestation) at their Fair
Market Value on the date of exercise, or in a combination thereof, or in such
other consideration as the Committee in its discretion may permit. Fractional
shares may not be purchased under an option, and fractional shares may not be
delivered to the Company for payment of the option price.

9. FORM OF OPTION AGREEMENT

Each Award Agreement evidencing an option shall contain the essential terms of
the option and such other provisions as the Committee shall from time to time
determine, but such Award Agreements need not be identical. If the option is an
incentive stock option, the Award Agreement shall contain such terms and
provisions relating to exercise and otherwise as may be necessary to render it
an incentive stock option under the applicable provisions of the Code (presently
Section 422 thereof), and the regulations thereunder.

10. FINANCING OF OPTIONS

The Company declares its belief that the purposes of the Plan can be fully
achieved only if those employees to whom options are granted hereunder are able
financially to purchase the stock covered by their options should they wish to
do so. Thus, within the limits of and in compliance with applicable statutes and
regulations, the Company and its Subsidiaries may extend credit, arrange credit,
guarantee obligations, and otherwise aid such employees in needed financing of
their purchases of stock pursuant to options.

11. STOCK APPRECIATION RIGHTS

        (a)     In connection with the grant of any stock option, the Committee
                may grant a stock appreciation right ("SAR") pursuant to which
                the optionee shall have the right to surrender all or part of
                such stock option and to exercise the SAR and thereby obtain
                payment of an amount equal to the difference between the
                aggregate option price of the shares so surrendered and the Fair
                Market Value of such shares on the date of surrender. In all
                other respects, a SAR will have the same terms and provisions as
                the related option.

        (b)     The exercise of a SAR shall be by written notice to the Chief
                Executive Officer of the Company designating the number of
                shares as to which the SAR is exercised

                                        6
<PAGE>

                and shall be subject to such limitations as the Committee may
                deem appropriate. Payment to the holder upon the call of a SAR
                may be made in shares of the Company's common stock (at their
                Fair Market Value on the date of exercise), in cash, or partly
                in shares and partly in cash, at the discretion of the
                Committee.

12. RESTRICTED STOCK RIGHTS

        (a)     The Committee may grant any eligible employee restricted stock
                rights ("RSRs") which entitle such employee to receive a stated
                number of shares of the Company's common stock if the employee
                for a stated period remains continuously employed by the Company
                or a Subsidiary or, following the employee's Retirement, serves
                on the Board of Directors of the Company or in another capacity
                approved by the Committee (the "Restricted Period"). At the time
                an RSR is issued, the Committee shall designate the length of
                the Restricted Period and the service that will qualify under
                the Restricted Period; provided, however, in no event may the
                Restricted Period extend beyond the fifth anniversary date of
                the employee's termination of employment. The Committee shall
                also have full and final authority to select the employees who
                receive RSRs, to specify the number of shares of stock subject
                to each RSR, and to establish the other terms, conditions and
                definitions that govern RSRs.

        (b)     The Company shall pay to each holder of an unexpired RSR during
                the Restricted Period, as additional compensation, an amount of
                cash equal to the dividends that would have been payable to the
                holder of the RSR during the Restricted Period if the holder had
                owned the stock subject to the RSR. Such amount shall be paid as
                near in time as reasonably practical to the applicable dividend
                payment dates.

        (c)     At the expiration of each Restricted Period and provided all
                conditions relating to an RSR have been met, the Company shall
                issue to the holder the shares of stock which relate to such
                Restricted Period or, at the request of the holder, make a
                payment of an amount equal to the Fair Market Value of such
                shares (or any portion thereof) determined as of the settlement
                date or, alternatively, over such period as may be established
                by the Committee at the time of grant.

        (d)     Upon grant of an RSR, the Company shall deliver to the recipient
                an Award Agreement which sets forth the terms and conditions of
                the RSR.

13. PERFORMANCE STOCK RIGHTS

        (a)     The Committee may grant to an eligible employee performance
                stock rights ("PSRs") which entitle such employee to receive a
                stated number of shares of the Company's common stock if the
                employee attains certain specified performance goals
                ("Performance Goals") within a stated three-year performance
                period (the "Performance Cycle"). The Committee shall have full
                and final authority to select the employees who receive PSRs, to
                specify the number of shares of stock subject to each such
                right, to establish the Performance Goals, to establish the
                Performance Cycle and to establish the terms, conditions and
                definitions that govern such rights.

                                        7
<PAGE>

        (b)     The Committee shall establish Performance Goals for each
                Performance Cycle on the basis of such criteria and to
                accomplish such objectives as the Committee may from time to
                time select. Performance Goals selected by the Committee may
                include performance criteria for the Company, a Subsidiary, or
                an operating group, division, or unit of the Company or a
                Subsidiary. During any Performance Cycle, the Committee may
                adjust the Performance Goals for such Performance Cycle as it
                deems equitable in recognition of unusual or nonrecurring events
                affecting the Company, changes in applicable tax laws or
                accounting principles, or such other factors as the Committee
                may determine; provided, however, that the Committee may not
                adjust Performance Goals for any participant who is a covered
                employee for purposes of Section 162(m) of the Code for the year
                in which such PSR (or any portion thereof) is settled in such a
                manner as would increase the amount of compensation otherwise
                payable to such covered employee.

        (c)     As soon as practical after the end of a Performance Cycle (or
                any interim measurement period within the Performance Cycle),
                the Committee shall determine the extent to which a PSR has been
                earned on the basis of performance in relation to the
                established Performance Goals. To the extent that the
                Performance Goals of a PSR are satisfied, the Company shall
                settle the earned portion of the PSR by the issuance and
                delivery of unrestricted shares equal to the number of earned
                shares, by the payment of cash equal to the Fair Market Value of
                the earned shares on the date the PSR would otherwise be settled
                in shares, or by a combination of cash and shares, as requested
                by the holder. If the Performance Goals are not met by the
                expiration of the Performance Cycle, the PSR shall expire and
                the holder thereof shall have no further rights thereunder.

        (d)     Upon granting a PSR, the Company shall issue to the recipient an
                Award Agreement which sets forth the terms and conditions of the
                PSR.

        (e)     The Performance Goals shall be any one or a combination of net
                income, earnings per share, return on equity, return on assets,
                stock price appreciation, total shareholder return, cash flow,
                revenues, item count, market share, assets, assets under
                management, any profit-related ratio or calculation, or any
                growth, concentration-of-business or market-share ratio or
                calculation. Such Performance Goals may be measured on an
                absolute basis or relative to a group of peer companies selected
                by the Committee, relative to internal goals, or relative to
                levels attained in prior years. The Committee will establish
                specific Performance Goals for each PSR not later than 90 days
                after the beginning of the Performance Cycle for the Award.

        (f)     The Company shall not make dividend equivalent payments with
                respect to shares subject to PSRs.

14. TERMINATION OF EMPLOYMENT, RETIREMENT, DISABILITY AND DEATH

        (a)     In the event the employment of a Plan participant by the Company
                or a Subsidiary terminates, then unless otherwise provided in
                the Award Agreement, any

                                        8
<PAGE>

                unexercised option or SAR granted to such participant may be
                exercised, but only to the extent exercisable on the date of
                termination of employment, at any time within three months
                following such termination of employment, except that:

                (i)     If the participant's termination of employment is on
                        account of Retirement, then the option or SAR, to the
                        extent exercisable at the date of termination of
                        employment, may be exercised at any time prior to the
                        expiration of its stated term, but in no event later
                        than the fifth anniversary date of the participant's
                        termination of employment.

                (ii)    If the participant's termination of employment is on
                        account of a permanent and total disability within the
                        meaning of Section 22(e)(3) of the Code, then the option
                        or SAR, to the extent exercisable at the date of
                        termination of employment, may be exercised at any time
                        within one year after the date of termination.

                (iii)   If the participant's termination of employment is caused
                        by the death of the participant, then the option or SAR
                        may be exercised at any time prior to the expiration of
                        the term stated in the Award Agreement by the person(s)
                        to whom the participant's rights pass by will or by
                        operation of law without regard to any requirements
                        related to continued employment or installment vesting.

                (iv)    If the participant dies following termination of
                        employment and during the period in which the option or
                        SAR is exercisable under paragraph (i) or (ii) of this
                        Section 14(a), then, to the extent the option or SAR was
                        vested at the date of the participant's termination of
                        employment, the option or SAR may be exercised at any
                        time prior to the expiration of the term stated in the
                        Award Agreement by the person(s) to whom the
                        participant's rights pass by will or by operation of
                        law.

        (b)     Any portion of an option or SAR that is not exercisable on the
                date of termination of the participant's employment shall
                terminate on such date, unless the Committee determines
                otherwise.

        (c)     To the extent that the option or SAR of any deceased or disabled
                participant or of any participant whose employment has
                terminated shall not have been exercised within the time periods
                provided above, all further rights to exercise such option or
                SAR shall terminate at the expiration of the applicable period.

        (d)     In the event a holder of an RSR issued under the provisions of
                Section 12 fails to satisfy the employment or service
                requirements of the RSR, such holder shall lose the right to
                receive stock or cash under the provisions of the RSR, except
                that in the event a holder of an RSR is unable to satisfy such
                requirements because of death or disability within the meaning
                of Section 22(e)(3) of the Code, then as soon as practical
                following the date of death or the date of determination of
                disability (the "Disability Determination Date"), the holder or
                the personal representative of the

                                        9
<PAGE>

                holder's estate, as the case may be, shall be issued shares of
                the Company's common stock equal in number to the total number
                of unissued shares covered by such RSR or, in lieu thereof, at
                the request of such holder or personal representative, receive a
                cash payment equal to the Fair Market Value of such shares (or
                any portion thereof) at the date of death or the Disability
                Determination Date, as the case may be. Such shares shall be
                issued or payment made without regard to any employment or other
                service requirement stated in the RSR.

        (e)     Except as provided in Section 22, in the event the employment of
                an employee who holds a PSR granted under the provisions of
                Section 13 terminates for any reason prior to the expiration of
                the Performance Cycle specified in the PSR, then, except to the
                extent the Committee may decide otherwise in select situations,
                such employee shall lose all rights to thereafter receive any
                stock or payment under such PSR.

        (f)     If a corporation ceases to be a Subsidiary of the Company, then,
                except to the extent the Committee determines otherwise,
                employees of such corporation shall be deemed to have terminated
                their employment with the Company or a Subsidiary of the Company
                for purposes of this Section 14 as of the date such
                corporation's status as a Subsidiary terminates.

15. FORFEITURE

Subject to the Committee's discretion, the grant of any Award under the Plan may
be conditioned on the participant's agreement to forfeit unexercised Awards and
pay the value of previously exercised or settled Awards to the Company in the
event that the participant engages in any activity in competition with the
Company or otherwise contrary to the Company's interests while employed by the
Company or a Subsidiary or within a specified period following termination of
employment or exercise or settlement of an Award.

16. TRANSFERABILITY

Except as otherwise provided in this Section 16, Awards shall not be
transferable other than by will or the laws of descent and distribution and
shall be exercisable during the lifetime of a participant only by the
participant or, in the event the participant becomes legally incompetent, by the
participant's guardian or legal representative. Notwithstanding the foregoing,
and to the extent permitted by Section 422 of the Code, the Committee, in its
discretion, may provide in any Award Agreement or otherwise that the Award is
transferable, without payment of consideration, (i) to immediate family members
(including grandchildren) of the participant or (ii) to a trust or trusts for
the benefit of such family members or (iii) to a partnership or similar
organization composed of such family members ("Permitted Family Transferees").
Any Award assigned or transferred to Permitted Family Transferees shall be
subject to all the same terms and conditions contained in the Award Agreement,
and the events of termination of employment stated in Section 14 shall continue
to be applied with respect to the original Award recipient, following which
termination the Award shall be exercisable by the transferee only to the extent
and for the periods specified in Section 14.

                                       10
<PAGE>

17. WITHHOLDING

The Company may require the holder of an Award to pay to the Company the amount
of any taxes that the Company is required to withhold with respect to the grant,
exercise, payment or settlement of an Award. The Company shall have the right to
withhold from any Award or any shares of stock issuable pursuant to an Award an
amount equal to such taxes.

18. RIGHTS AS SHAREHOLDER

Neither a person to whom an Award is granted, nor such person's legal
representative, heir, legatee, distributee or Permitted Family Transferee shall
be deemed to be the holder of, or to have any rights of a holder with respect
to, any shares subject to such Award until after the shares are issued.

19. AMENDMENTS TO THE PLAN

The Company's Board of Directors may from time to time make such amendments to
the Plan as it may deem proper and in the best interests of the Company or a
Subsidiary, provided that:

        (a)    No amendment shall be made which would impair, without the
               consent of the applicable participant, any Award previously
               granted under the Plan or deprive any participant of any shares
               of stock of the Company that the participant may have acquired
               through or as a result of the Plan.

        (b)    Any such amendment which would (i) increase the number of
               securities which may be issued under the Plan or (ii) materially
               modify the requirements as to eligibility for participation in
               the Plan shall be submitted to the shareholders of the Company
               for their approval at the next annual or special meeting after
               adoption by the Board of Directors, and if such shareholder
               approval is not obtained, the amendment, together with any
               actions taken under the Plan on the necessary authority of such
               amendment, shall be null and void.

20. TERMINATION OF THE PLAN

The Plan shall remain in effect until Awards have been granted covering all the
shares of the Company's common stock authorized under Section 4(a) or until the
Plan is otherwise terminated by the Company's Board of Directors; provided,
however, that no incentive stock option shall be granted more than ten years
after the date on which the Plan is approved by the shareholders of the Company,
i.e., the effective date of the Plan. Termination of the Plan shall not affect
outstanding Awards.

21. CHANGES IN CAPITAL STRUCTURE

Except as otherwise provided in Section 22, in the event the outstanding shares
of common stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split,
spin-off, combination of shares, dividend payable in shares, rights offering,
change in the corporate structure

                                       11
<PAGE>

of the Company, or otherwise, then the Committee shall make proportional
adjustments to the maximum number and class of shares subject to the Plan and to
the maximum number and class of shares with respect to which Awards may be
granted or paid to any individual participant as set forth in Sections 4(a) and
(c). In addition, the Committee shall make an appropriate adjustment to the
number and class of shares as to which outstanding Awards, or portions thereof
then unexercised, shall be exercisable or settled and the per share price of
such shares, to the end that the participant's proportionate interest shall be
maintained as before the occurrence of such event, without any change in the
total price applicable to the unexercised portion of any Award. Any such
adjustment made by the Committee shall be conclusive.

22. CHANGE IN CONTROL

        (a)    Notwithstanding any other provision of the Plan to the contrary,
               if, while any Awards remain outstanding under the Plan, a Change
               in Control of the Company shall occur, then:

               (i)    All options and SARs granted under the Plan that are
                      outstanding at the time of such Change in Control shall
                      become exercisable in full immediately prior to the Change
                      in Control;

               (ii)   To the extent deemed earned, each outstanding PSR shall
                      become immediately payable in cash, 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:

                      (1)    The number of shares of the Company's common stock
                             determined by the Committee based on the extent to
                             which the Performance Goals specified in the Award
                             Agreement have been achieved during the portion of
                             the Performance Cycle ending on the last day of the
                             last fiscal quarter of the Company ending on or
                             before the date of the Change in Control; or

                      (2)    The number of shares of the Company's common stock
                             equal to the product of the target shares
                             identified in the Award Agreement multiplied by a
                             fraction with a numerator equal to the whole number
                             of calendar months beginning with the month in
                             which the Award 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 Cycle specified in the Award Agreement,
                             less any shares previously issued under the Award
                             Agreement.

               (iii)  All restrictions with respect to RSRs shall lapse and all
                      outstanding RSRs shall be settled by a payment in cash to
                      each holder of such Award; and

               (iv)   All other restrictions with respect to outstanding Awards
                      not described in paragraphs (i) through (iii) of this
                      Section 22(a) shall lapse, and such Awards shall be fully
                      vested and nonforfeitable.

                                       12
<PAGE>

        (b)    For purposes of this Section 22, with respect to determining the
               cash equivalent value of an RSR or PSR or the spread payable upon
               exercise of a 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.

        (c)    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 holder of an Award to take all steps reasonably
               necessary to exercise all options and SARs and take any actions
               with respect to the shares of stock underlying Awards of any
               nature 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.

23. APPROVALS

The obligations of the Company under the Plan shall be subject to the approval
of such state or federal authorities or agencies, if any, as may have
jurisdiction in the matter. Shares shall not be issued with respect to an Award
unless the exercise and the issuance and delivery of the shares comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
Code, the respective rules and regulations promulgated thereunder, and the
requirements of any stock exchange or market on which the shares may then be
listed or traded, and shall be further subject to the approval of counsel for
the Company with respect to such compliance. Inability of the Company to obtain
from any regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any shares
hereunder shall relieve the Company of any liability for the nonissuance or sale
of such shares. The Board of Directors may require any action or agreement by a
holder of an Award as may from time to time be necessary to comply with the
federal and state securities laws. The Company shall not be obliged to register
stock issued under the Plan or options or any other rights to acquire stock
granted under the Plan.

24. EMPLOYMENT RIGHTS

Nothing in this Plan or any Award granted pursuant hereto shall confer upon any
employee any right to be continued in the employment of the Company or any
Subsidiary of the Company or to interfere in any way with the right of the
Company, in its sole discretion, to terminate such employee's employment at any
time.

25. EFFECTIVE DATE OF THE PLAN

The effective date of this Plan is May 7, 1997.

                                       13

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