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EXHIBIT 10(R)
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement (the "Agreement") is made as of the _____ day of _______________,
19_____, between The Progressive Corporation, an Ohio corporation (the
"Company"), and (NAME) (the "Optionee"). The Company hereby grants Optionee an
option (the "Option") to purchase (TOTAL_SHARES) Common Shares, $1.00 par value,
(the "Common Shares") of the Company for a per share purchase price of
$_________ (the "Option Price"). The Option has been granted pursuant to The
Progressive Corporation 1989 Incentive Plan (as amended and restated) (the
"Plan") and shall include and be subject to all provisions of the Plan, which
are hereby incorporated herein by reference, and shall be subject to the
following provisions of this Agreement:
1. TERM. The Option shall become exercisable on _______________ (the "Vesting
Date") and may be exercised, in whole or in part, at any time thereafter until
_______________ (the "Expiration Date"), on which date the Option shall expire
and no longer be exercisable.
2. METHOD OF EXERCISE. Subject to Section 1 above, the Option shall be
exercisable from time to time by written notice (in form approved or furnished
by the Company) to the Committee which shall:
(a) state that the Option is thereby being exercised, the number of Common
Shares with respect to which the Option is being exercised, each person in
whose name any certificates for the Common Shares should be registered and
his or her address and social security number;
(b) be signed by the person or persons entitled to exercise the Option and,
if the Option is being exercised by anyone other than the Optionee, be
accompanied by proof satisfactory to counsel for the Company of the right of
such person or persons to exercise the Option under the Plan and all
applicable laws and regulations; and
(c) be accompanied by such representations, warranties and agreements, in
form and substance satisfactory to counsel for the Company, with respect to
the investment intent of such person or persons exercising the Option as the
Company may request.
3. PAYMENT OF PRICE. Upon exercise of the Option, the Company shall deliver a
certificate or certificates for the Common Shares purchased thereunder to the
specified person or persons at the specified time upon receipt of the full
purchase price for such Common Shares: (a) by certified or bank cashier's check,
or (b) by any other method of payment or combination thereof authorized by the
Plan.
4. TRANSFERABILITY. The Option shall not be transferable by the Optionee other
than by will or by the laws of descent and distribution. Subject to the
following sentence, during the lifetime of the Optionee, the Option shall be
exercisable (subject to any other applicable restrictions on exercise) only by
the Optionee for his or her own account. Upon the death or disability of the
Optionee, the Option shall be exercisable (subject to any other applicable
restrictions on
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exercise) only by the Optionee's estate (acting through its fiduciary) or by the
Optionee's duly authorized legal representative, during the period and to the
extent authorized in the Plan.
5. TERMINATION OF EMPLOYMENT. If the employment of the Optionee by the Company
(or any of its Subsidiaries or Affiliates) terminates:
(a) due to involuntary termination without cause or due to retirement (with
the employer's approval, but subject to Section 5(e) below), the Option may
be exercised to the extent exercisable at the date of such termination,
during the lesser of (i) two months after such date, or (ii) the balance of
the Option's term;
(b) due to death or disability, the provisions of Section 5(b)(6) or 5(b)(7)
of the Plan, as applicable, shall apply;
(c) due to resignation by the Optionee (other than by reason of a Qualified
Retirement, as provided at Section 5(e) below), the Optionee may exercise the
Option, to the extent of the lesser of (A) the number of Common Shares as to
which the Option is exercisable on the date the Optionee ceases to be an
employee or (B) the number of Common Shares as to which the Option was
exercisable ninety days prior to such date, reduced by any Common Shares
acquired by exercise of the Option within such ninety day period, at any time
within two (2) months after the date that the Optionee ceases to be an
employee (but in no event after expiration of the original term of the
Option) and the Option shall not be or become exercisable as to any
additional Common Shares after the date that the Optionee ceases to be an
employee;
(d) due to termination for cause, the Option and all rights to purchase
Common Shares thereunder shall immediately terminate; and
(e) due to a Qualified Retirement (as defined below), the following
provisions shall apply (subject in all cases to Section 5(e)(v) hereof):
(i) if the Option has vested and is exercisable as of the Qualified
Retirement Date (as defined below), the Option shall not terminate upon
the retirement of the Optionee, and, to the extent that it has not been
previously exercised, may be exercised by the Optionee, in whole or in
part, at any time between the Qualified Retirement Date and the Expiration
Date;
(ii) subject to Section 5(e)(iii) hereof, if the Option is not vested and
exercisable as of the Qualified Retirement Date, the Option shall not
terminate in its entirety upon the retirement of the Optionee; instead,
the Option (A) shall remain in effect with respect to fifty percent (50%)
of the Common Shares which are subject to the Option as of the Qualified
Retirement Date and, as to such Common Shares, shall vest and become
exercisable on the Vesting Date and may be exercised by the Optionee, in
whole or in part, at any time between the Vesting Date and the Expiration
Date, and (B) shall terminate, effective as of the Qualified Retirement
Date, with respect to the remaining fifty percent (50%) of the Common
Shares that are subject to the Option as of the Qualified Retirement Date;
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(iii) notwithstanding Section 5(e)(ii) above, if the Option is not vested
and exercisable as of the Qualified Retirement Date, but has a Vesting
Date which is no later than four (4) months after the Qualified Retirement
Date, then, notwithstanding the Optionee's retirement, the full Option
(or, if the Option is subject to installment vesting, that portion thereof
which is scheduled to vest on such Vesting Date) shall remain in effect,
shall vest on such Vesting Date and may be exercised by the Optionee, in
whole or in part, at any time between such Vesting Date and the Expiration
Date;
(iv) if the Optionee dies after the date of his or her retirement and has
not exercised the Option, in whole or in part, prior to his or her death,
the Optionee's estate shall have the right to exercise the Option as to
(A) all Common Shares, if any, as to which the Option has vested and is
exercisable as of the date of the Optionee's death, plus (B) the
additional Common Shares, if any, as to which the Option would have become
exercisable within one (1) year from the date of the Optionee's death
pursuant to Section 5(e)(ii) and/or (iii) hereof, as applicable, but for
the death of the Optionee, at any time during the one (1) year period
beginning on the date of the Optionee's death (or such other period as the
Committee may specify), and the balance of the Option shall terminate as
of the date of the Optionee's death;
(v) if the Committee determines that the Optionee is or has engaged in any
Disqualifying Activity (as defined below), then (1) to the extent that the
Option has vested and is exercisable as of the Disqualification Date (as
defined below), the Optionee shall have the right to exercise the Option
during the lesser of two months from the Disqualification Date or the
balance of the Option's term and (2) to the extent that the Option is not
vested and exercisable as of the Disqualification Date, the Option shall
terminate as of such date. Any determination by the Committee, which may
act upon the recommendation of the Chief Executive Officer or other senior
officer of the Company, that the Optionee is or has engaged in any
Disqualifying Activity, and as to the Disqualification Date, shall be
final and conclusive.
(vi) As used in this Section 5(e), the following terms are defined as
follows:
(A) QUALIFIED RETIREMENT - any termination of the Optionee's
employment with the Company or its Subsidiaries for any reason
(other than death, Disability or an involuntary termination for
Cause) if, at or immediately prior to the date of such termination,
the Optionee satisfies both of the following conditions:
(1) the Optionee shall be 55 years of age or older; and
(2) the sum of the Optionee's age and completed years of service
as an employee of the Company or its Subsidiaries (disregarding
fractions, in both cases) shall total 70 or more.
(B) QUALIFIED RETIREMENT DATE - the date as of which the Optionee's
employment with the Company or its Subsidiaries shall terminate
pursuant to a Qualified Retirement.
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(C) DISQUALIFYING ACTIVITY - means and includes each of the
following acts or activities:
(1) directly or indirectly serving as a principal, shareholder,
partner, director, officer, employee or agent of, or as a
consultant, advisor or in any other capacity to, any business or
entity which competes with the Company or its Subsidiaries in
any business or activity then conducted by the Company or its
Subsidiaries to an extent deemed material by the Committee; or
(2) any disclosure by the Optionee, or any use by the Optionee
for his or her own benefit or for the benefit of any other
person or entity (other than the Company or its Subsidiaries),
of any confidential information or trade secret of the Company
or its Subsidiaries to an extent deemed material by the
Committee; or
(3) any material violation of any of the provisions of the
Company's Code of Conduct or any agreement between the Optionee
and the Company; or
(4) making any other disclosure or taking any other action which
is determined by the Committee to be materially detrimental to
the business, prospects or reputation of the Company or its
Subsidiaries. The ownership of less than 2% of the outstanding
voting shares of a publicly traded corporation which competes
with the Company or its Subsidiaries shall not constitute a
Disqualifying Activity.
(D) DISQUALIFICATION DATE - the date of any determination by the
Committee that the Optionee is or has engaged in any Disqualifying
Activity.
6. RESTRICTIONS ON EXERCISE. The Option is subject to all restrictions set forth
in this Agreement or in the Plan. As a condition to any exercise of the Option,
the Company may require the Optionee or his successor to make any representation
and warranty to comply with any applicable law or regulation or to confirm any
factual matters requested by counsel for the Company.
7. TAXES. The Optionee hereby agrees that he or she shall pay to the Company, in
cash, any federal, state and local taxes of any kind required by law to be
withheld with respect to the Option granted to him or her hereunder or the
exercise thereof. If the Optionee does not make such payment to the Company, the
Company shall have the right to deduct from any payment of any kind otherwise
due to the Optionee from the Company (or from any Subsidiary or Affiliate of the
Company), any federal, state and local taxes of any kind required by law to be
withheld with respect to the Option, the exercise thereof or the Common Shares
to be purchased by the Optionee under this Agreement. The Option shall not be
treated as an incentive stock option under Section 422 or any successor Section
thereto of the Internal Revenue Code of 1986, as amended.
8. DEFINITIONS. Unless otherwise defined in this Agreement, capitalized terms
will have the same meanings given them in the Plan.
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THE PROGRESSIVE CORPORATION
DATE OF GRANT: _________, 19____
BY: _____________________________________
TITLE: __________________________________
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ACCEPTANCE OF AGREEMENT
The Optionee hereby: (a) acknowledges receiving a copy of the Plan Description
dated _______________ (the "Plan Description") relating to the Plan, and
represents that he or she is familiar with all of the material provisions of the
Plan, as set forth in the Plan Description; (b) accepts this Agreement and the
Option granted to him or her under this Agreement subject to all provisions of
the Plan and this Agreement; and (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee relating to the Plan,
this Agreement or the Option granted hereunder.
Optionee: _________________________________________
Date: _______________________________, 19____
