SAFECO CORP
EX-10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>en0427b.txt
<DESCRIPTION>EX-10.1
<TEXT>
                              SEPARATION AGREEMENT

This Separation Agreement is made and entered into this 31 day of July, 2002 by
and between H. Paul Lowber ("Lowber") and SAFECO Corporation (the "Company").

                                    RECITALS

A.       Lowber is employed as a Vice President, Controller and Principal
Accounting Officer of the Company.

B. This Agreement sets forth the complete understanding between Lowber and the
Company regarding Lowber's resignation as an officer of the Company and its
affiliates effective July 8, 2002 and his resignation as an employee effective
December 31, 2002, and the commitments and obligations arising out of the
termination of the employment relationship between Lowber and the Company.

                                    AGREEMENT

1.       Continued Employment.

     1.1  Employment  Transition  Period.  Under the terms  and  subject  to the
conditions of this Agreement,  Lowber's employment status with the Company shall
continue  through  December 31, 2002.  During the period from and after July 22,
2002 Lowber  shall not be required  to report  regularly  to the Company for any
work and shall be  considered  an  "employee"  of the  Company  for the  limited
purposes of the employee  benefit plan  coverages  available to employees of the
Company and under the SAFECO  Incentive Stock Option Plan of 1987 and the SAFECO
Long-Term Incentive Plan of 1997.

     1.2 Group Benefits Coverage. The Company shall continue to provide coverage
under any group  benefits  plan under which Lowber  and/or his  dependents  were
covered on the date hereof,  through and  including  December  31, 2002.  Lowber
shall  be  responsible  to pay  any  amounts  chargeable  as  "employee  premium
contribution" amounts with respect to any such coverage.  From and after January
1, 2003,  the Company  shall  provide  Lowber  and/or his  dependents  with such
benefits  continuation  or  conversion  coverage as may be available or required
under the terms of the Company's  benefits plans or policies,  or required under
the  group  health  plan   provisions  of  the   Consolidated   Omnibus   Budget
Reconciliation Act of 1985, as subsequently amended (COBRA), or other applicable
federal or state law.

     1.3 Payment for Accrued Sick Leave and Vacation Units. On or before January
15,  2003,  the  Company  shall pay Lowber for any vested  sick leave  units and
vacation  pay accrued but unused at December  31,  2002,  but only to the extent
compensable  under the  Company's  normal sick leave and  vacation  policies and
procedures.
<PAGE>

     1.4 Reimbursement for Expenses Incurred. The Company shall reimburse Lowber
for reasonable and necessary business expenses incurred by him on or before July
22,  2002,  but not  submitted  for  reimbursement  at such date,  to the extent
reimbursable  under the  Company's  normal  expense  reimbursement  policies and
procedures and submitted for payment by July 31, 2002.

     1.5 Stock Options and  Restricted  Stock Rights.  Lowber  acknowledges  and
agrees that as a  consequence  of his SAFECO  employment  ending on December 31,
2002,  and  pursuant  to the terms of each stock  option for SAFECO  Corporation
common  stock  ("Stock  Option")  that has been  granted to him under either the
SAFECO Incentive Plan of 1987 or the SAFECO Long-Term Incentive Plan of 1997, he
will have  through  March 31,  2003 or, if sooner,  the stated term of any stock
option, to exercise each Stock Option to the extent each Stock Option was vested
on December  31,  2002,  and after March 31, 2003 he will lose all rights  under
each such Stock Option. Contingent upon Lowber's execution of this Agreement and
the  expiration  of the  Revocation  Period  stated  in  Section  13.3  of  this
Agreement, the Company shall agree to vest each of Lowber's outstanding unvested
stock  options  such that each such stock option  shall be fully  vested,  fully
exercisable,  and wholly non-forfeitable as of December 31, 2002 and to agree to
amend the terms of all Company  unvested stock options that have been granted to
Lowber to so provide.  Lowber acknowledges and agrees that pursuant to the terms
of each  restricted  stock  right  granted  to him  under the  SAFECO  Long-Term
Incentive  Plan of 1997 shall  expire as of December  31, 2002 and that he shall
not be entitled to any payment as respects any RSR that remains unvested at such
date.

2.       Payments; Contributions.

     2.1 Severance  and Release  Payments.  As  compensation  to Lowber,  and in
consideration of his resignation as an employee and resignation as an officer of
the  Company  and its  affiliates,  his  release  granted in Section 5 and other
agreements  made herein,  in addition to the benefits  provided  under Section 1
above and the further consideration  provided under Section 3 below, the Company
agrees to pay  Lowber a total sum of  $95,000.00  plus an amount  equal to 1,235
multiplied  by the closing  price of SAFECO  common  stock on December  31, 2002
("Calculated Amount") in severance and release payments as follows:

     (a)  $70,000.00  of such amount  shall be  allocated  and paid as severance
benefits ("Severance Pay") for lost wages. All Severance Pay shall be subject to
withholding and deduction for payroll taxes and other deductions as are required
by  federal  and  state  law.  The  Severance  Pay  shall  be paid in two  equal
semi-monthly  installment  payments of  $35,000.00  each,  made on the Company's
normal payroll dates beginning January 15, 2003 and ending January 31, 2003.
<PAGE>

     (b) $25,000.00 of such amount shall be allocated and paid as  consideration
for Lowber's  release of claims as set forth in Section 5 of this Agreement (the
"Release  Payment") and shall be paid on or about January 15, 2003.  The Release
Payment  shall be subject to  withholding  and  deduction  for payroll taxes and
other  deductions  as are  required  by federal  and state  law.  Lowber and the
Company agree that the Release Payment represents  sufficient  consideration for
the potential claims being released.

     (c) The Calculated  Amount shall be allocated and paid as  consideration in
consideration of the agreements stated in Section 8 and shall be paid on January
15, 2003.  The Calculated  Amount  payment shall be subject to  withholding  and
deduction for payroll taxes and other  deductions as are required by federal and
state law.

     2.2 Benefit Plan Contributions.  Lowber shall continue to be eligible as an
"employee" of the Company through  December 31, 2002 for employer  contributions
paid under the Company's  employee  benefit  plans.  Lowber shall be eligible to
participate  in  and  shall  receive  pro  rata   contributions  to  the  SAFECO
401(k)/Profit  Sharing  Retirement  Plan,  as the same may be available to other
employees of the Company.  Lowber  acknowledges that any employer  contributions
to, or interest or other  income  credited  to, any of the SAFECO  401(k)/Profit
Sharing  Retirement  Plan or  SAFECO  Employees'  Cash  Balance  Plan  shall  be
additional  compensation  to him in  excess of the total  Severance  Pay  amount
described above.

3. Further  Consideration.  As further  consideration  to Lowber for the release
granted under Section 5 of this Agreement,  the Company agrees to provide Lowber
the following:

     3.1 Outplacement  Services.  The Company agrees to provide Lowber up to six
months' outplacement  services through either Lee Hecht Harrison or David Nelson
Associates, as Lowber chooses, at the Company's expense.

     3.2 Attorney's Fees. The Company agrees to pay up to $500 of the attorney's
fees incurred by Lowber for a review of this Agreement.

     3.3 COBRA Benefit.  The Company  agrees to pay on Lowber's  behalf the full
cost  plus the  administrative  fee for the  first six (6)  months  that  Lowber
receives coverage under applicable group benefit plans provided that the Company
receives  notice from Lowber of his  decision to continue  coverage  under COBRA
within 60 days of Lowber's termination date.

4.       Resignation.

     4.1 Resignation.  In  consideration of the payments and other  compensation
described above, Lowber tenders his resignation as an officer of the Company and
its affiliates  effective  July 8, 2002,  and agrees that his  employment  shall
terminate December 31, 2002.

     4.2 No Authority To Act. From and after July 8, 2002,  Lowber shall neither
have  authority to bind the Company to any contract or agreement,  nor to act on
behalf of the Company.  The Company shall have no obligation to reimburse Lowber
for any expenses  incurred by him on or after July 22, 2002, except as expressly
stated in this Agreement.
<PAGE>

     4.3  Return  of  Materials.  By July 31,  2002,  Lowber  shall  return  all
equipment,  devices  and  materials,  including  but not  limited to any and all
documents (whether existing in paper or electronic/digital media),  compilations
of data, files, manuals, letters,  notebooks,  reports,  diskettes and all other
materials  and  records  of any  kind,  and any  copies  or other  reproductions
thereof, owned by the Company or its affiliates and used by Lowber in the course
of his employment.

5.       Release and Settlement.

     5.1 Release Payment.  For the purposes of this Agreement  "Release Payment"
means the payment by the Company of the amounts  referenced in paragraph  2.1(b)
above.

     5.2 Release.  In  consideration  of the  Company's  delivery of the Release
Payment to Lowber under the terms of this Agreement,  Lowber hereby releases the
Company and its  affiliated  companies,  and the  employees,  agents,  officers,
directors and shareholders of any of them, from all claims, demands,  actions or
causes of action of any kind or nature  whatsoever  which Lowber may now have or
may ever have had against any of them, whether such claims are known or unknown,
and  including  but not limited to the Claims  described in paragraph 5.3 below.
However,  nothing in this Separation  Agreement shall create or imply any waiver
by Lowber of any claims (a) with respect to his entitlement to compensation  for
vested benefits arising under any Company pension, retirement or welfare benefit
plan, program or agreement,  in accordance with the terms and conditions of such
plans,  (b) arising  under any insurance or investor  account or similar  client
relationship,  (c) with respect to any breach by the Company of its  obligations
under this  Agreement,  all of which rights shall be preserved and unaffected by
this  release,  or (d) with respect to  indemnification  by the Company,  to the
extent  that such  indemnification  rights  may arise or be  provided  under the
Company's  articles of  incorporation  or bylaws,  in  connection  with Lowber's
official  actions (or  omissions) on behalf of the Company  during the period he
served as an officer of the Company.

     5.3 The Claims. For the purposes of this Agreement, "Claims" shall mean and
include  claims with  respect to any of the  following:  (i) breach of contract;
(ii) discrimination,  retaliation,  or constructive or wrongful discharge; (iii)
lost wages, lost employee benefits, physical and personal injury, stress, mental
distress,   or  impaired   reputation;   (iv)  claims   arising  under  the  Age
Discrimination  in Employment  Act ("ADEA"),  Title VII of the Civil Rights Act,
the Equal Pay Act,  or any other  federal,  state or local  laws or  regulations
prohibiting employment  discrimination;  (v) attorneys' fees; and (vi) any other
claim arising from or relating to Lowber's  employment  with the Company  and/or
his  separation  from  service,  including  claims with respect to the Severance
Agreement  dated  November 7, 2001,  which the Parties  agree is  terminated  by
mutual  consent  as of the date of the  expiration  of the seven day  revocation
period described in Section 13.3 of this Agreement;  provided, however, that the
term  "Claims"  shall not  include  any claims  reserved  by Lowber  pursuant to
Section 5.2 of this Agreement.
<PAGE>

     5.4  Consideration  for  Release.   The  Company  represents,   and  Lowber
acknowledges,  that the Release Payment and the further consideration  described
in Section 3 exceed any amount the Company may arguably be required to pay under
any agreement or arrangement to which Lowber is a party or under which he claims
some benefit, or under the standard policies and procedures of the Company,  and
represents  valuable  consideration to him for the release of his ADEA and other
claims described above.

6.       Confidential Information.

     6.1 Possession of Non-Public Information.  Lowber recognizes that by virtue
of his  employment by the Company,  Lowber has acquired  significant  non-public
information with respect to the Company and its affiliated companies,  and their
operations (the "Confidential Information").  Lowber recognizes and acknowledges
that the  Confidential  Information  constitutes  valuable,  special  and unique
assets of the Company and its affiliates,  access to and knowledge of which were
essential to the performance of Lowber's duties during his employment.

     6.2 Non-Disclosure.  Lowber agrees to hold the Confidential  Information in
trust and  confidence.  Lowber agrees not to (i) directly or indirectly make use
of the Confidential Information, (ii) reveal any Confidential Information to any
other  party,  or (iii)  divulge  or use any  Confidential  Information  for any
purpose  other  than for the  benefit of the  Company,  except and to the extent
Lowber may be required  to  disclose  by lawful  order or process of a court (in
which event Lowber will provide  reasonable advance notice of such disclosure to
the Company and will cooperate with the Company's  efforts to obtain  protective
treatment for such information).

     6.3 Materials. Unless the Company otherwise agrees, Lowber shall not remove
from the Company's premises or possession any documents, compilations of data or
other files or records of any nature, or any copy or reproduction  thereof, that
contain Confidential Information or that belong to the Company.

7. No Admission. Lowber understands and acknowledges that neither the Release
Payment nor the execution and delivery of this Agreement by the Company
constitutes an admission by the Company to (i) any breach of an agreement with
Lowber, (ii) any violation of a federal, state or local statute, regulation or
ordinance, or (iii) any other wrongdoing.

8. No Competing Employment; No Solicitation of Employees; Non-Disparagement.

     8.1 No Competing Employment. Lowber agrees that until July 1, 2003, without
the prior  written  consent of the chief  executive  officer of the Company,  he
shall not work for, or consult with any person or entity that competes  directly
and materially with the Company.
<PAGE>

     8.2 No Solicitation of Employees. Lowber agrees that until July 1,
2003, without the prior written consent of the chief executive officer of the
Company, he shall not solicit, directly or indirectly, any individual who he
knows is then an employee of the Company or any of its affiliates to leave such
employment and/or to become an employee, officer or consultant of or to any
other enterprise. Anything to the contrary notwithstanding, the Company agrees
that neither (a) Lowber's responding to an unsolicited request from an employee
of the Company or any of its affiliates nor (b) Lowber responding to an
unsolicited request for an employment reference regarding an employee of the
Company or any of its affiliates from such employee, or from a third party, by
providing a reference setting forth his personal views about such employee,
shall be deemed a violation of this Section 8.2.

     8.3  Non-Disparagement.  Lowber agrees that he shall not make any statement
that is intended to criticize or disparage the Company, its affiliates or any of
its or their  directors,  officers or  employees.  This Section 8.3 shall not be
construed  to prohibit  Lowber from  responding  publicly  to  incorrect  public
statements or from making truthful statements when required by law or order of a
court or other person or body having jurisdiction.

9.       Legal Action.

     9.1 No Action on Released  Claims.  Lowber  agrees not to sue or pursue any
court or administrative action against the Company or any of its affiliates,  or
any of their employees, agents, officers,  directors or shareholders,  regarding
any Claims  released herein or otherwise  arising from Lowber's  employment with
the Company or his separation from service, except with respect to any breach by
the Company of its obligations under this Agreement.

     9.2 Liability for Defense Costs. If, notwithstanding this Agreement,
Lowber should file any lawsuit or other proceeding based on legal claims that
Lowber has released herein, Lowber agrees that he will pay or reimburse the
Company for all reasonable costs which it, or its employees, agents, officers or
directors, incur in defending against Lowber's claims. This paragraph shall not
apply to any claimed breach by the Company of any of the terms or conditions of
this Agreement.

10.      Arbitration.

     10.1 Notice and Selection of Arbitrator. The parties agree that any dispute
arising  under  this  Agreement,  other  than an action by the  Company  to seek
injunctive  relief against breaches of Sections 6 or 8 of this Agreement,  shall
be submitted  to  arbitration  in Seattle,  Washington,  before a  disinterested
arbitrator.  Arbitration shall be commenced by service on the other party to the
dispute by a written request for arbitration,  containing a brief description of
the matter at issue and the names and addresses of three arbitrators  acceptable
to the  petitioner.  The other party  shall  within  thirty (30) days  following
receipt of such notice either select one of the proposed  arbitrators or provide
the names and addresses of three other  arbitrators  acceptable to the proposing
party.  If the parties are unable to select an arbitrator  from those  proposed,
or, if they are  unable to select a third  arbitrator,  an  arbitrator  shall be
chosen impartially by the American Arbitration Association.
<PAGE>

     10.2 Rules of Proceeding. Arbitration proceedings shall be conducted
under the commercial rules then prevailing of the American Arbitration
Association. The arbitrator shall not be bound to any formal rules of evidence
or procedure, and may consider such matters as a reasonable business person
would take into account in decision-making.

     10.3 Decision Final and Binding.  The decision of the  arbitrator  shall be
final and binding on the  parties,  and may be entered and enforced in any court
of competent jurisdiction.

     10.4  Expenses.  Each  party  shall  share  equally  the  expenses  of  the
arbitrator and other arbitration expenses. Attorney fees, witness fees and other
expenses  incurred  by  a  party  in  preparing  for  the  arbitration  are  not
"arbitration expenses" and shall be paid by the party incurring them.

11.      Agreement Confidential.

     11.1 Terms of Agreement.  Lowber and the Company agree that neither of them
shall publicize the existence of this Agreement or its terms,  including but not
limited to the amount of the Severance Pay or the Release Payment,  except under
compulsion  of law  or as  required  under  the  rules  and  regulations  of the
Securities and Exchange Commission  ("SEC").  Lowber acknowledges that a copy of
this  Agreement will be filed as an exhibit to a filing made by the Company with
the SEC. Further,  the parties agree that they shall not discuss with or make to
the public at large or to any individual  person or persons any statements  with
regard to this Agreement, or matters relating to its terms.  Notwithstanding the
provisions  of this  paragraph  11.1,  the parties may discuss the existence and
terms  of this  Agreement  with  their  respective  attorneys,  accountants  and
financial  advisors to the extent  necessary to obtain their counsel and advice.
Lowber may also disclose the terms of this Agreement in confidence to his spouse
and may discuss the Agreement in confidence with any prospective employer.

     11.2 Employment  References.  In the event a prospective  employer contacts
the Company for an  employment  reference  with  respect to Lowber,  the Company
shall not provide any information  relating to Lowber or his employment  history
or  performance  with the Company  except for Lowber's  dates of employment  and
title and salary at December 31, 2002.

12.  Costs.  Except for the  Company's  agreement  to pay a portion of  Lowber's
attorney's  fees, as stated and limited in paragraph  3.2, each party shall bear
its own costs and expenses  incurred in connection  with the negotiation of this
Agreement and the preparation of this Agreement.

13.      Acknowledgment.

     13.1  Informed  Agreement.  Lowber  declares  that he has  read  and  fully
understands the terms of this Agreement,  and its  significance and consequence.
Lowber  further  declares  that this  Agreement  is the  product  of good  faith
negotiations  between himself and the Company,  and that he voluntarily  accepts
the  same  for  the  purpose  of  resolving  arrangements  with  respect  to his
separation from service.  Lowber  understands and acknowledges  that,  except as
specifically  reserved herein, in exchange for the Release Payment he is waiving
and  giving up every  possible  claim  arising  out of his  employment  with the
Company and/or his separation from service.

     13.2  Attorney.  Lowber  acknowledges  that the  Company has advised him to
review the terms of this Agreement with an attorney of his own choosing and that
he has done so or knowingly waived his right to do so.

     13.3 Review and Revocation  Periods.  Lowber  acknowledges that the Company
has given him at least 21 days during which to consider this Agreement  prior to
signing,  and  understands  that he has seven days after signing in which he may
revoke this Agreement.  This Agreement shall not become effective or enforceable
until such seven-day period has expired.  Lowber  understands that he may revoke
this  Agreement by delivering a written notice to Allie Mysliwy at 4333 Brooklyn
Avenue  N.E.,  SAFECO  Plaza,  Seattle,  WA  98185,  no later  than the close of
business on the seventh day after he signs this  Agreement.  Lowber  understands
and  acknowledges  that if he revokes this Agreement it will not be effective or
enforceable and he will not receive the payments described herein.

14.  Entire  Agreement.  This is the  entire  agreement  between  Lowber and the
Company.  Neither the Company nor any  affiliate has made any promises to Lowber
other than those included within this Agreement.

15. Governing Law. The parties acknowledge that this Settlement  Agreement shall
be interpreted  under and enforced by and consistent  with the laws of the State
of Washington.


/s/ Paul Lowber
H. Paul Lowber

SAFECO Corporation

By /s/ Michael McGavick
     Michael S. McGavick, President


</TEXT>
</DOCUMENT>
