EXECUTIVE TRANSITION SERVICES AGREEMENT SAFECO CORPORATION

Exhibit 10.1

EXECUTIVE TRANSITION SERVICES AGREEMENT

SAFECO CORPORATION

and

CHRISTINE B. MEAD

Dated as of August 11, 2005

EXECUTIVE TRANSITION SERVICES AGREEMENT

This Executive Transition Services Agreement (this “Agreement”), dated as of August 11, 2005 (“Effective Date”), is made between Safeco Corporation, a Washington corporation (“Safeco”), and Christine B. Mead (“Executive”).

Recitals

A. Executive has been and is currently employed as Safeco’s Executive Vice President and Chief Financial Officer and is Co-President of the Safeco insurance companies. Executive has notified Safeco of her desire to voluntarily resign from her positions effective December 31, 2005.

B. Executive and Safeco have voluntarily agreed to enter into this Agreement, which sets forth the complete understanding between Executive and Safeco regarding Executive’s voluntary resignation effective December 31, 2005 and the commitments and obligations arising out of the termination of the employment relationship between Executive and Safeco.

Agreement

In consideration of the foregoing premises and for other good and valuable consideration, the sufficiency and receipt of which are acknowledged, Safeco and Executive agree as follows:

Executive and Safeco agree that Executive shall serve in her existing role as Chief Financial Officer until the earlier of December 31, 2005 or a replacement is named and shall serve in her position as Co-President of the Safeco insurance subsidiaries until December 31, 2005.

Until the earlier of December 31, 2005 or a successor is appointed, Executive will serve as the Chief Financial Officer of Safeco and will perform the duties and have the responsibilities customarily performed by the Chief Financial Officer of a corporation that is, in all respects, similar to Safeco. Furthermore, until December 31, 2005, Executive will perform the duties and have the responsibilities customarily performed by a president of a corporation that is, in all respects, similar to Safeco and such other duties as may be assigned from time to time by the Board of Directors of Safeco, which relate to the business of Safeco, its subsidiaries, or any business ventures in which Safeco or its subsidiaries may participate.

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Until December 31, 2005, Safeco agrees to pay or cause to be paid to Executive, and Executive agrees to accept in exchange for the services rendered by her, the following compensation:

3.1 Base Salary

Executive’s annual base salary will remain unchanged at the current rate of $600,000 before all customary payroll deductions. Such annual base salary will be paid in substantially equal installments and at the same intervals as other officers of Safeco are paid.

3.2 Bonus

Executive will also be eligible to receive, in addition to the base salary described above, an annual bonus in an amount to be determined by the Board of Directors of Safeco or under the Board’s delegated authority by the Compensation Committee of the Board (the “Committee”), in its or their sole discretion. Executive’s bonus will be based on (i) a smooth and orderly transition of the responsibilities of the Chief Financial Officer, (ii) the Executive’s commitment to remain employed with Safeco until December 31, 2005, (iii) the performance of Executive’s duties as described in Section 2 above, and (iv) Safeco’s financial and operating performance for fiscal year 2005.

3.3 Equity Grants

(a) Vested Options . Executive shall be considered an “employee” of Safeco through December 31, 2005 for compensation purposes and under all employee benefit plans, programs, and arrangements, including without limitation the Safeco Long-Term Incentive Plan of 1997, as amended (the “LTIP”). All stock options granted to Executive under the LTIP, which are fully vested and non-forfeitable as of December 31, 2005, will be exercisable for three (3) months from December 31, 2005.

(b) Unvested Equity Awards . To the extent Executive remains employed by Safeco and performs the duties described in Section 2 above, Safeco shall accelerate and fully vest, on December 31, 2005, the following equity awards (the “Awards”):

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The terms and conditions of the LTIP and Executive’s award agreements, pursuant to which the Awards were granted, will continue to govern such Awards. Except for the Awards, all equity awards that are granted to Executive that are not fully vested on December 31, 2005 shall be deemed to have expired without vesting.

Executive acknowledges that accelerated stock options may not qualify for preferential income tax treatment as an incentive stock option under the Internal Revenue Code.

4.1 Retirement and Savings Plans

Until December 31, 2005, Executive shall be entitled to continue to participate in all defined contribution plans and defined benefit plans, including excess benefit or supplemental retirement plans or agreements, maintained by Safeco, as now or hereinafter in effect, that are applicable to Safeco’s employees generally or to its executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans, programs and arrangements. Benefits payable under such plans shall commence pursuant to the terms of such plans.

4.2 Other Benefit Programs

Until December 31, 2005, Executive will be entitled to continue to participate, subject to and in accordance with applicable eligibility requirements, in all other employee benefit plans, programs and arrangements of Safeco, as now or hereinafter in effect, that are applicable to Safeco’s employees generally or to its executive officers, as the case may be, subject to and on a basis consistent with the terms, conditions and overall administration of such plans, programs and arrangements, and subject to Section 4.1.

4.3 Housing Loan

In connection with Executive’s relocation to Seattle in 2002 Safeco provided Executive with a home purchase loan in an amount of $900,000. The principal amount will be due one (1) year after December 31, 2005. This is consistent with the original loan terms and nothing contained in this Agreement or otherwise amends this loan in any manner.

4.4 Vacation and Other Leaves

Executive shall be entitled to use any accrued but unused vacation and other paid absences during this calendar year and for unused vacation carried over from the previous calendar year, whether for holidays, illness, or any similar purposes, in accordance with policies applicable generally to executive officers of Safeco. Earned but unused vacation will be paid upon termination of Executive’s employment. After December 31, 2005, no vacation or other paid absences shall accrue.

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4.5 Expenses

Executive shall be entitled to receive reimbursement for all reasonable and customary expenses incurred by her in performing services under this Agreement, including all expenses of travel and accommodations while away from her residence on business or at the request of and in the service of Safeco; provided, however, that such expenses are incurred, accounted for and approved in accordance with the policies and procedures established from time-to-time by Safeco.

This Agreement and Executive’s employment hereunder shall terminate automatically upon the death or total disability of Executive. The term “ total disability ” as used herein shall mean Executive’s inability to perform the duties set forth in Section 2 hereof for a period of sixty (60) consecutive days as a result of physical or mental illness, loss of legal capacity or any other cause beyond Executive’s control. Executive and Safeco acknowledge that Executive’s ability to perform the duties specified in Section 2 is of the essence of this Agreement. Termination hereunder shall be deemed to be effective (a) on the day Executive’s death occurs or (b) immediately upon a determination by the Board of Directors of Safeco of Executive’s total disability, as defined herein. At December 31, 2005, all compensation and benefits set forth in this Agreement shall cease.

In consideration of the acceleration of the Awards pursuant to Section 3.3(b) and other consideration and benefits provided to Executive under this Agreement, Executive agrees to sign a general release and settlement agreement on December 31, 2005 in a form that is satisfactory to Safeco.

7.1 Applicability

This Section 7 shall survive the termination of Executive’s employment with Safeco.

7.2 Scope of Competition

Executive agrees that she will not, directly or indirectly, during her employment and for a period of two (2) years from December 31, 2005, be employed by, consult with or otherwise perform services for, own, manage, operate, join, control or participate in the ownership, management, operation or control of or be connected with, in any manner, any Competitor. A “ Competitor ” shall include any entity which, directly or indirectly, competes with Safeco or produces, markets, distributes or otherwise derives benefit from the production, marketing or distribution of products or services which compete with products then produced or services then being provided or marketed, by Safeco or the feasibility for production of which Safeco is then actually studying, or which is preparing to market or is developing products or services that will be in competition with the p