SAFECO CORP
EX-10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>en0786.txt
<DESCRIPTION>EX-10.1
<TEXT>
                       SAFECO LEADERSHIP PERFORMANCE PLAN


                            Effective January 1, 2002

                       (As last amended November 2, 2004)

<PAGE>

                                TABLE OF CONTENTS
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<S>     <C>    <C>    <C>    <C>    <C>    <C>


SECTION 1: PURPOSE.......................................................................................3

SECTION 2: DEFINITIONS...................................................................................4
         2.1      Business Unit..........................................................................4
         2.2      Change in Control......................................................................4
         2.3      Committee..............................................................................4
         2.4      Company................................................................................4
         2.5      Corporate..............................................................................4
         2.6      Corporation............................................................................4
         2.7      Disability.............................................................................4
         2.8      Effective Date.........................................................................4
         2.9      Eligible Employee......................................................................4
         2.10     Employee...............................................................................5
         2.11     Incentive Award........................................................................5
         2.12     Minimum Financial Requirement..........................................................5
         2.13     Participant............................................................................5
         2.14     Performance Period.....................................................................5
         2.15     Plan...................................................................................5
         2.16     Retirement.............................................................................5
         2.17     Salary.................................................................................5
         2.18     Senior Leadership......................................................................6
         2.19     Target Award...........................................................................6

SECTION 3: PARTICIPATION.................................................................................6
         3.1      Eligible Employees.....................................................................7
         3.2      Participation Date.....................................................................7
         3.3      Rehired Eligible Employees.............................................................7

SECTION 4: INCENTIVE POOL................................................................................8
         4.1      Funding Performance Measures...........................................................8
         4.2      Incentive Pool Calculation.............................................................8

SECTION 5: INCENTIVE AWARDS.............................................................................10
         5.1      Calculation of Incentive Award........................................................10
         5.2      Condition Precedent to Payment of Incentive Award.....................................11
         5.3      Payment of Incentive Award............................................................11
         5.4      Termination of Employment.............................................................11
         5.5      Partial Year Participation............................................................12

SECTION 6: ADMINISTRATION...............................................................................13
         6.1      Activities, Duties and Responsibilities of the Committee..............................13
         6.2      Notices...............................................................................13
<PAGE>

SECTION 7: AMENDMENT AND TERMINATION....................................................................14
         7.1      Amendment and Termination of the Plan.................................................14

SECTION 8: MISCELLANEOUS................................................................................15
         8.1      Tax Withholding.......................................................................15
         8.2      Continuation of Employment............................................................15
         8.3      Products and Underwriting.............................................................15
         8.4      No Trust or Fund......................................................................15
         8.5      Governing Law; Severability...........................................................15
         8.6      Spendthrift Clause....................................................................16
         8.7      Entire Plan...........................................................................16
         8.8      Effective Date and Term...............................................................16
</TABLE>

<PAGE>




SECTION 1: PURPOSE

The purpose of the Safeco Leadership Performance Plan (the "Plan") is to provide
certain  managers  and  other  salaried   employees  of  the  Company  with  the
opportunity  to earn an  incentive  bonus  based  on  achievement  of  specified
performance goals during a Performance Period, thereby motivating  participating
employees to achieve company financial and operational objectives.


SECTION 2: DEFINITIONS

2.1       Business Unit

          "Business Unit" means the following operating  organizations of Safeco
          Corporation's subsidiaries:  Life & Investments,  Property & Casualty,
          Safeco Business Insurance, Safeco Personal Insurance, and Surety.

2.2       Change in Control

          "Change in Control" has the meaning set forth in the Safeco  Long-Term
          Incentive Plan of 1997, or any successor plan thereto.

2.3       Committee

          "Committee" means the Compensation Committee of the Safeco Corporation
          Board of Directors.

2.4       Company

          "Company" means collectively Safeco Corporation and its subsidiaries.

2.5       Corporate

          "Corporate"  means the  overall  administrative  organization  for the
          Corporation,  which  organization  supports  and is distinct  from the
          Business Units.

2.6       Corporation

          "Corporation" means the Safeco Corporation.

2.7       Disability

          "Disability"  has the  meaning  set forth in the Safeco  401(k)/Profit
          Sharing Retirement Plan or any successor plan thereto.

2.8       Effective Date

          "Effective Date" has the meaning set forth in Section 8.8.

2.9       Eligible Employee

          "Eligible   Employee"   means  an  Employee  who  has   satisfied  the
          eligibility criteria of Section 3.1.
<PAGE>

2.10      Employee

          "Employee"  means any person who is employed on a salaried basis other
          than someone who is (a) a non-union hourly Employee, (b) included in a
          unit of persons covered by a collective bargaining  agreement,  or (c)
          is a leased  employee  within the  meaning of  Internal  Revenue  Code
          section 414(n)(2).

2.11      Incentive Award

          "Incentive  Award"  means the annual  amount  awarded  to an  Eligible
          Employee under the Plan pursuant to Section 5.1.

2.12      Minimum Financial Requirement

          "Minimum  Financial  Requirement"  means an overall  financial  result
          established  for the  Corporation  by the  Committee  below  which  no
          Incentive Awards are made under the Plan,  unless at the discretion of
          the Committee.

2.13      Participant

          "Participant"   means  an  Eligible   Employee   who   qualifies   for
          participation as provided in Section 3.2 and 3.3.

2.14      Performance Period

          "Performance  Period"  means the  calendar  year period  during  which
          performance   goals  are  established   and  an  Eligible   Employee's
          performance  is measured in order to  determine  whether the  Eligible
          Employee is eligible for an Incentive Award.

2.15      Plan

          "Plan" means this Safeco Leadership Performance Plan.

2.16      Retirement

          "Retirement"  has the  meaning  set forth in the Safeco  401(k)/Profit
          Sharing Retirement Plan or any successor plan thereto.
<PAGE>

2.17      Salary

          "Salary"  means for each  Performance  Period the total of all amounts
          the Employer paid to an Employee for personal services, including:

          (a)  Base salary;

          (b)  Amounts  paid to an  Employee  while  on an  Authorized  Leave of
               Absence or short term disability; and

          (c)  Any pre-tax Employee contributions made by the Employer on behalf
               of the Employee for the Plan Year to the Safeco Flexible Benefits
               Program, the Safeco 401(k)/Profit Sharing Retirement Plan, or the
               Safeco Deferred Compensation Plan for Executives;

         but excluding:

          (d)  Amounts paid for overtime;

          (e)  All  Employer  contributions  to deferred  compensation  or other
               fringe benefit plans;

          (f)  Cash  incentives  and bonuses  paid,  accrued or earned under any
               incentive compensation plan;

          (g)  Long-term disability benefits;

          (h)  Severance pay; and

          (i)  Any other payments or benefits.

2.18      Senior Leadership Team

          "Senior  Leadership  Team" means the Senior  Leadership Team appointed
          from time to time by the Corporation's Chief Executive Officer.

2.19      Target Award

          "Target Award" means the value, stated as a percentage of Salary or as
          a dollar amount,  which represents the expected payment for a position
          when Corporate, Business Unit and personal goals are achieved.

          In the event of an  Employee's  position  change  during a Performance
          Period (e.g.  promotion,  reclassification,  or transfer),  the Target
          Award for that Performance  Period may be adjusted.  If the Employee's
          position change results in a move from one Target Award to another, or
          from  another  company-sponsored  incentive  plan  to  the  Plan,  the
          Employee's Target Award will be blended ("Blended Target Award").  The
          Blended  Target Award is based on the number of calendar days spent at
          each Target  Award level.  The Blended  Target Award is applied to the
          Employee's total Salary for the Performance Period. Where an incentive
          plan does not have a defined target award, the target award will be 0%
          for the purpose of the Blended Target Award calculation.
<PAGE>

SECTION 3: PARTICIPATION

3.1       Eligible Employees

          An  Employee of the Company  shall be eligible to  participate  in the
          Plan if he or she:

          (a)  is  a  key  management  employee,  or a  non-management  employee
               holding a key leadership  position with the Company as determined
               at the discretion of the Corporation's Chief Executive Officer or
               a Business Unit President;

          (b)  occupies a position  that is  assigned to a  leadership  job band
               within the Corporation's compensation structure; and

          (c)  is not eligible to participate concurrently in the Safeco Success
               Sharing  Plan  or any  other  Company-sponsored  variable  pay or
               incentive bonus plan.  Provided  however,  that the Committee may
               extend  participation  in the  Plan to any  Employee  in its sole
               discretion.



3.2       Participation Date

          An Eligible Employee shall commence participation on the later of:

          (a)  the Effective Date;

          (b)  the date when transferred or promoted from an ineligible position
               into a Plan-eligible position;

          (c)  if hired  by the  Company  after  September  30 in a  Performance
               Period, January 1 of the next following Performance Period.

3.3       Rehired Eligible Employees

          An individual who terminates employment and is rehired during the same
          Performance  Period and who  satisfies  the  eligibility  criteria  of
          Section  3.1 shall be  eligible  to  participate  in the Plan for such
          Performance Period only if he or she has been employed for at least 90
          consecutive days during such Performance Period.
<PAGE>


SECTION 4: INCENTIVE POOL

4.1       Funding Performance Measures

          (a)  The Committee shall establish Corporate and Business Unit funding
               performance  measures  ("Funding  Performance  Measures")  and  a
               Corporation  Minimum  Financial  Requirement for each Performance
               Period  on the  basis of such  criteria  and to  accomplish  such
               objectives as the Committee may from time to time select. Funding
               Performance  Measures  may include  performance  criteria for the
               Corporation,  a subsidiary,  a Business Unit, an operating group,
               or a division of the Company or a subsidiary.

          (b)  During  any  Performance  Period,  the  Committee  may adjust the
               Funding  Performance  Measures for such Performance  Period 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.

          (c)  The  Funding   Performance   Measures  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 Funding Performance Measures 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.

          (d)  The Committee will establish Funding Performance Measures and the
               Minimum  Financial  Requirement  not later than 90 days after the
               beginning of the Performance Period.

4.2       Incentive Pool Calculation

          For each  Performance  Period,  the Committee shall establish a target
          incentive  pool based on the sum of Target  Awards and Blended  Target
          Awards for all Corporate  Participants.  The  Committee  shall further
          establish  Business  Unit target  incentive  pools based on the sum of
          Target  Awards  and  Blended  Target  Awards  for  all  Business  Unit
          Participants.  The target incentive  pools,  Target Awards and Blended
          Target Awards shall then be adjusted as follows:

          (a)  for  Corporate,  the target  incentive  pool,  Target  Awards and
               Blended  Target  Awards  shall be  adjusted  based  on  Corporate
               performance  results  relative to Corporate  Funding  Performance
               Measures established under Section 4.1; and
<PAGE>


          (b)  for Business Units, the target incentive pool,  Target Awards and
               Blended Target Awards shall be adjusted based on a combination of
               Corporate and relevant  Business Unit results relative to Funding
               Performance Measures established under Section 4.1.

          (c)  Target  Awards and Blended  Target  Awards  adjusted  pursuant to
               Section  4.2 (a) and (b) shall be  defined  as  "Modified  Target
               Awards."

          (d)  in no event may any incentive  pool be adjusted in excess of 200%
               of the target incentive pool.

          After such  adjustments,  the incentive pools shall be allocated among
          Corporate  and the  Business  Units in order  to  calculate  Incentive
          Awards to Participants.
<PAGE>



SECTION 5: INCENTIVE AWARDS

5.1       Calculation of Incentive Award

          (a)  The Participant's  Incentive Award for a Performance Period shall
               be based on (1) the amount of the incentive pool (if any) for the
               relevant   Corporate  or  Business  Unit   assignment,   (2)  the
               Participant's paid Salary during the Performance  Period, (3) the
               Participant's  Target  Award,  and  (4)  individual   performance
               measures.

               In the event that a  Participant  moves from one target  award to
               another or from another  company-sponsored  incentive plan to the
               Plan,  providing  that  the  Employee  meets  the  definition  of
               Participant  in the Plan,  the  Employee's  Target  Award will be
               blended as indicated in Section 2.19. The Participant's Incentive
               Award for the Performance Period shall be based on (1) the amount
               of the  incentive  pool (if any) for the  relevant  Corporate  or
               Business Unit assignment as of the last day as a Participant,  or
               the last day of employment for eligible terminated employees, (2)
               the  Participant's  total  paid  Salary  during  the  Performance
               Period,  (3) the  Participant's  Blended  Target  Award,  and (4)
               individual performance.

               As soon as practical after the end of a Performance  Period,  the
               Participant's  management shall assess individual  performance by
               measuring  results  attributable to performance goals established
               for the Performance  Period. Such performance goals may represent
               any combination and weighting of Business Unit,  operating group,
               division,  unit or individual  objectives.  Assessment of results
               shall occur through application of  Company-approved  performance
               evaluation  tools.

          (b)  In the event that the performance of Corporate or a Business Unit
               does not meet the threshold level of performance to result in the
               funding of an  incentive  pool under  Section  4.2, an  Incentive
               Award may  nonetheless be paid to a Participant in the discretion
               of the Committee or the  Corporation's  Chief Executive  Officer;
               provided,  however, that the Incentive Award shall not exceed 25%
               of the  Participant's  Target Award.  No Incentive  Awards may be
               granted under the Plan unless the Corporation's Minimum Financial
               Requirement has been satisfied.

          (c)  In no event may the Participant's  Incentive Award exceed 200% of
               his or her Modified  Target  Award,  as indicated in Section 4.2,
               without the approval of the Committee.
<PAGE>

5.2       Condition Precedent to Payment of Incentive Award

          To receive an Incentive  Award under Section 5.1,  except as stated in
          Sections 5.4 and 5.5, a written performance evaluation must have first
          been completed for the  Participant  and the Employee must have been a
          Participant  as of the last day of the  Performance  Period and remain
          continuously employed with the Company through the date of the payment
          of the Incentive Award.

5.3       Payment of Incentive Award

          Subject to the conditions set forth below,  Incentive  Awards shall be
          paid  to  Participants  in a lump  sum  as  soon  as  administratively
          feasible after the close of the Performance Period. Such payment shall
          consist of 100% cash; provided, however:

          (a)  The Committee may direct that selected  Participants  receive all
               or a  portion  of their  respective  Incentive  Awards as a grant
               under  the  Safeco  Long-Term  Incentive  Plan  of  1997  or  any
               successor plan thereto. The actual amount of such a grant will be
               determined  pursuant to any reasonable  methodology chosen by the
               Committee. The Committee, in accordance with the Safeco Long-Term
               Incentive  Plan of 1997,  shall have full and final  authority to
               establish the terms,  conditions and definitions that govern such
               grants.

          (b)  The  Committee   may  permit   deferral  of  some  or  all  of  a
               Participant's Incentive Award to the Safeco Deferred Compensation
               Plan for Executives in accordance with such plan's terms.

5.4       Termination of Employment

          If an Employee's  employment with the Company  terminates prior to the
          date of the  payment of the  Incentive  Award,  he or she shall not be
          entitled to an Incentive Award; provided, however:

          (a)  in the  event  the  Participant's  employment  with  the  Company
               terminates during the Performance Period, or following the end of
               the  Performance  Period but before the payment of the  Incentive
               Award is made, on account of Retirement, death or Disability, the
               Participant (or his or her estate) will be entitled to receive an
               Incentive Award based on (1) the Modified  Target Award,  and (2)
               his/her  Salary for the portion of the  Performance  Period(s) in
               which the  Participant  was actively  employed  with the Company.
               Individual performance measures are not a factor.

          (b)  In the event the  Participant's  employment  with the  Company is
               involuntarily  terminated  by the Company  due to a reduction  in
               force,  office closure or other  organizational  change,  and the
               Participant is entitled to severance under the Safeco  Employees'
               Severance  Plan and meets the  criteria for  participation  under
               that  plan,  the  Participant  will be  entitled  to  receive  an
               Incentive Award based on (1) the Modified  Target Award,  and (2)
               his/her  Salary for the portion of the  Performance  Period(s) in
               which the  Participant  was actively  employed  with the Company.
               Individual performance measures are not a factor.
<PAGE>


          (c)  In the event the  employment of a Participant  who has executed a
               Change in Control Severance Agreement is terminated without cause
               (as determined in the sole  discretion of the  Committee)  during
               the Performance Period by the Company (or an acquirer corporation
               or  affiliate  thereof)  following  a  Change  in  Control,   the
               Participant  shall be eligible to receive an Incentive  Award for
               the entire Performance Period,  calculated and paid in accordance
               with Section 6.1(c) of the Change in Control Agreement.

5.5       Partial Year Participation

          If an Employee who has been a Participant  in the Plan for any portion
          of the  Performance  Period  terminates  from  the  Plan  and  remains
          continuously employed with the Company through the date of the payment
          of the Incentive Award, such Employee shall be entitled to a pro-rated
          Incentive Award for such Performance  Period,  calculated  pursuant to
          Sections  2.19 and 5.1,  with the exception of Employees who move from
          the Plan to the Success Sharing Plan (SSP). These Employees' incentive
          award, if any, will be calculated pursuant to Safeco's Success Sharing
          Plan.
<PAGE>


SECTION 6: ADMINISTRATION

6.1       Activities, Duties and Responsibilities of the Committee

          This Plan shall be administered by the Committee.  The Committee shall
          have exclusive authority, in its discretion,  to determine all matters
          relating to Incentive  Awards under the Plan. The Committee shall also
          have  exclusive  authority to interpret  the Plan and may from time to
          time adopt and change rules and regulations of general application for
          the Plan's administration.  The Committee's interpretation of the Plan
          and  its   rules  and   regulations,   and  all   actions   taken  and
          determinations  made by the Committee  pursuant to the Plan,  shall be
          conclusive  and  binding on all  parties  involved  or  affected.  The
          Committee may delegate administrative duties to the Company's officers
          or managers.

6.2       Notices

          All notices and  communications  to the Committee in  connection  with
          this Plan shall be in writing, shall be delivered by first class mail,
          by courier or by hand,  shall be  addressed  to the  Committee  at the
          following address: Safeco Leadership Performance Plan, Attn: Corporate
          Compensation  and Benefits,  Safeco  Corporation,  Safeco Plaza,  4333
          Brooklyn  N.E.,  Seattle,  WA 98185,  and shall be deemed to have been
          given and delivered  only upon actual  receipt by the  Committee.  All
          notices and communications to an Eligible Employee shall be in writing
          and shall be delivered via paper or electronic  media as determined by
          the Company.
<PAGE>


SECTION 7: AMENDMENT AND TERMINATION

7.1       Amendment and Termination of the Plan

          The Committee shall each have the right to amend or terminate the Plan
          at any time and to discontinue (either temporarily or permanently) the
          distribution of Incentive Awards; provided, however, that no amendment
          or  termination  of  the  Plan  shall  adversely  affect  an  Eligible
          Employee's  right to payment of an Incentive Award that was earned and
          awarded prior to the date of the amendment or termination.
<PAGE>


SECTION 8: MISCELLANEOUS

8.1       Tax Withholding

          The Company shall withhold from Incentive Awards all amounts necessary
          to  satisfy  applicable  federal,  state  and  local  withholding  tax
          requirements.

8.2       Continuation of Employment

          The existence of the Plan does not create any employment contract, any
          guarantee of continued employment, or any right or assurance as to any
          minimum length of employment. An Eligible Employee's employment may be
          terminated  at any time,  with or  without  reason and with or without
          prior notice, at the option of the Company or the Eligible Employee.

8.3       Products and Underwriting

          The Company  reserves  the right to withdraw  existing  products  from
          distribution,  reassign  distribution of specific  products,  make new
          products  available,  adjust  production  credit,  revise its business
          plans and strategies and modify its  underwriting,  reserves,  claims,
          employment  and other  practices  and  policies  without the  Eligible
          Employee's consent and without adjusting the performance measures.

8.4       No Trust or Fund

          The  Plan is  intended  to  constitute  an  "unfunded"  plan.  Nothing
          contained  herein shall require the Company to segregate any monies or
          other  property,  or to create any trusts,  and no  Eligible  Employee
          shall  have  any  rights  that are  greater  than  those of a  general
          unsecured creditor of the Company.

8.5       Governing Law; Severability

          The Plan  shall be  governed  by the laws of the State of  Washington,
          without regard to its choice of law or conflict of law provisions. The
          federal  and  state  courts in King  County,  Washington,  shall  have
          exclusive  jurisdiction and venue to resolve issues that may arise out
          of or relate to the Plan.  If any  provision of the Plan is held to be
          invalid or unenforceable, such invalidity or unenforceability shall in
          no way  affect  the  validity  or  enforceability  of any  other  Plan
          provision.

<PAGE>




8.6       Spendthrift Clause

          Except as may be  otherwise  provided by law,  no benefit,  payment or
          distribution  under  the Plan,  or right to  receive  such a  benefit,
          payment or  distribution,  shall be subject either to the claim of any
          creditor of an Eligible Employee or to attachment,  garnishment, levy,
          execution or other legal or equitable  process by any creditor of such
          person.  No  Eligible  Employee  shall  have any  right  to  alienate,
          commute,  anticipate  or assign  (either in law or equity)  all or any
          portion of any benefit, payment or distribution under the Plan.

8.7       Entire Plan

          The Plan  contains the entire  understanding  and  undertaking  of the
          Company  with  respect  to the  provision  of an  incentive  plan  for
          Eligible  Employees  and, as to that subject,  supersedes  any and all
          prior and contemporaneous  undertakings,  agreements,  understandings,
          practices,  policies,  inducements or conditions,  whether  express or
          implied, oral or written, except as herein contained.

8.8       Effective Date and Term

          The  effective  date of the Plan is January  1,  2002.  The Plan shall
          continue from year to year until terminated in accordance with Section
          7.


</TEXT>
</DOCUMENT>
