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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE PROGRESSIVE CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DAVID M. SCHNEIDER, GENERAL COUNSEL AND SECRETARY
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
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[INSERT PROGRESSIVE LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1994
Notice is hereby given that the Annual Meeting of Shareholders of The
Progressive Corporation will be held at 6671 Beta Drive, Mayfield Village, Ohio,
on Friday, April 22, 1994, at 10:00 a.m., Cleveland time, for the following
purposes:
1. To elect seven directors, each to serve for a term of one year;
2. To approve the Company's 1994 Executive Bonus Plan as it applies to
certain executive officers; and
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on February 24, 1994,
will be entitled to notice of and to vote at said meeting or any adjournment
thereof.
By Order of the Board of Directors.
DAVID M. SCHNEIDER, Secretary
March 18, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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THE PROGRESSIVE CORPORATION
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Shareholders of The Progressive Corporation, an
Ohio corporation (the "Company"), to be held at 10:00 a.m., Cleveland time, on
Friday, April 22, 1994, at 6671 Beta Drive, Mayfield Village, Ohio 44143, and at
any adjournment thereof. This statement and the accompanying proxy, together
with the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1993, will first be sent to shareholders on or about March 21,
1994.
The close of business on February 24, 1994, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. At that date, the Company had outstanding 72,160,372 Common Shares,
each of which will be entitled to one vote.
ITEM 1: ELECTION OF DIRECTORS
The Company's Code of Regulations provides that in no case shall the number
of directors be less than five or more than twelve. The number of directors has
been fixed at eight. At the meeting, the shares represented by proxies, unless
otherwise specified, will be voted for the election as directors of the seven
nominees hereinafter named, to serve until the next Annual Meeting of
Shareholders and until their respective successors are duly elected and
qualified. One vacancy will remain on the Board. If, by reason of death or other
unexpected occurrence, any one or more of the nominees hereinafter named should
not be available for election, the proxies will be voted for such substitute
nominee(s), if any, as the Board of Directors may propose.
No decision has been made to fill the vacancy on the Board, nor have any
candidates been considered and approved by the Board. However, the Board
believes that it is desirable to have this vacancy available, so that it could
be filled by action of the Board should a person who could make a valuable
contribution as a director of the Company be identified during the year. Proxies
cannot be voted at the Annual Meeting for a greater number of persons than the
seven nominees named in this proxy statement, although persons in addition to
those nominees may be nominated by the shareholders at the meeting.
If notice in writing is given by any shareholder to the President or
Secretary not less than 48 hours before the time fixed for holding the meeting
that such shareholder desires that the voting for election of directors shall be
cumulative, and if an announcement of the giving of such notice is made upon the
convening of such meeting by the Chairman or Secretary or by or on behalf of the
shareholder giving such notice, each shareholder shall have the right to
cumulate his or her voting power at such election and to give one nominee a
number of votes equal to the number of directors to be elected multiplied by the
number of shares he or she holds, or to distribute such votes on the same basis
among two or more nominees, as such shareholder sees fit. If voting for the
election of directors is cumulative, the persons named in the enclosed proxy
will vote the
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shares represented thereby and by other proxies held by them so as to elect as
many of the seven nominees named below as possible.
The following information is set forth with respect to each person
nominated for election as a director, each of whom is currently a director of
the Company:
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AGE LAST FIVE YEARS' BUSINESS EXPERIENCE SINCE
- - - ---------------------------- --- ---------------------------------------------- --------
Milton N. Allen (1) 66 Director of various companies; Chairman of the 1978
Board, MDSS, Inc., Cleveland, Ohio (computer
software company) until July 1990
B. Charles Ames (2) 68 Principal, Clayton, Dubilier & Rice, Inc., New 1983
York, New York (investment banking) since May
1990; Chairman and Chief Executive Officer,
Uniroyal Goodrich Tire Company, Akron, Ohio
(manufacturing) from January 1988 to May 1990
Stephen R. Hardis (3) 58 Chief Financial and Administrative Officer, 1988
Vice Chairman and a director of Eaton
Corporation, Cleveland, Ohio (manufacturing)
Peter B. Lewis (4) 60 President and Chief Executive Officer of the 1965
Company; Chairman of the Board of the Company
since April 1993; Chairman of the Board,
President and Chief Executive Officer of Pro-
gressive Casualty Insurance Company
Norman S. Matthews (5) 61 Consultant, New York, New York 1981
Donald B. Shackelford (6) 61 Chairman of the Board, State Savings Bank, 1976
Columbus, Ohio (savings and loan)
Paul B. Sigler 60 Professor, Yale University and Investigator in 1981
the Howard Hughes Medical Institute
- - - ---------------
(1) Mr. Allen is also a director of AGA Gas, Inc., which is publicly held, and
Actron Manufacturing Company and The Bradford Group, Inc., which are
privately held.
(2) Mr. Ames is also a director of Diamond Shamrock R & M, Inc., M.A. Hanna
Company and Warner-Lambert Company, which are publicly held, and Homeland
Holding, Inc. and Lexmark Holding, Inc., which are privately held.
(3) Mr. Hardis is also a director of Nordson Corporation and Society Corporation
and a trustee of First Union Realty Investment Trust, all of which, as well
as Eaton Corporation, are publicly held.
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(4) Mr. Peter B. Lewis is also an officer and director of other subsidiaries of
the Company. Mr. Daniel R. Lewis, an executive officer of the Company, is
the brother of Mr. Peter B. Lewis.
(5) Mr. Matthews is also a director of Lechters, Inc., Hills Stores Company and
Lamont's Apparel, Inc., which are publicly held, and Loehmann's, Inc., Eye
Care Centers of America and Finlay Fine Jewelry, Inc., which are privately
held.
(6) Mr. Shackelford is also a director of The Limited, Inc. and Worthington
Foods, Inc., which are publicly held.
Six meetings of the Board of Directors were held during 1993.
The Board has named an Executive Committee, an Audit Committee and an
Executive Compensation Committee, as described below. The Board has not
designated a nominating committee.
Messrs. Allen, Hardis and Lewis are the current members of the Board's
Executive Committee, which exercises all powers of the Board between Board
meetings, except the power to fill vacancies on the Board or its committees.
During 1993, the Executive Committee adopted resolutions by written action
pursuant to Ohio corporation law on four occasions.
Messrs. Allen, Hardis, Shackelford and Sigler are the current members of
the Board's Audit Committee, which ensures that organization, policies, controls
and systems are in place to monitor performance; provides an independent channel
to receive appropriate communications from employees, auditors, counsel, bankers
and consultants; and monitors the public release of financial information. The
Audit Committee met three times during 1993.
Messrs. Allen, Matthews and Shackelford are the current members of the
Board's Executive Compensation Committee, which monitors and directs the
administration of the Company's executive compensation program, including the
various cash and stock incentive programs in which officers and employees of the
Company participate. During 1993, the Executive Compensation Committee met three
times and adopted resolutions by written action pursuant to Ohio corporation law
on one occasion.
CERTAIN RELATED TRANSACTIONS
In January 1991, the Company purchased 4,851,000 shares (adjusted for the
2-for-1 stock split paid February 12, 1993), or 4.9%, of the common stock of
MBNA Corporation in connection with MBNA Corporation's initial public offering
at a per share price of $10.615 (split-adjusted), for an aggregate purchase
price of $51,493,365. At the time of the transaction, Mr. Alfred Lerner was the
Company's Chairman and chief investment officer, as well as Chairman of the
Board and Chief Executive Officer of MBNA Corporation, and owned 10% of MBNA
Corporation's common stock. Mr. Lerner served as the Company's Chairman from
April 1988 through April 1993 and its chief investment officer from April 1988
until February 1993. During 1993, the Company sold its entire holding of MBNA
Corporation, realizing gains of $74,325,754.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. The following information
is set forth with respect to persons known to management to be the beneficial
owners, as of February 11, 1994, of more than five percent of the Company's
Common Shares:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
---------------------------------------------------------------------- --------
Peter B. Lewis................................. 10,155,411(2) 14.1%
6300 Wilson Mills Road
Mayfield Village, Ohio 44143
Oppenheimer Group, Inc......................... 6,459,264(3) 9.0%
Oppenheimer Tower
World Financial Center
New York, New York 10281
Janus Capital Corporation...................... 5,581,400(4) 7.7%
100 Fillmore Street, Suite 300
Denver, Colorado 80206-4923
Ruane, Cunniff & Co., Inc...................... 4,431,535(5) 6.1%
767 Fifth Avenue
Suite 4701
New York, New York 10153
The Equitable Life Assurance Society........... 4,138,848(6) 5.7%
787 Seventh Avenue
New York, New York 10019
- - - ---------------
(1) Except as otherwise indicated, the persons listed as beneficial owners of
the Common Shares have sole voting and investment power with respect to
those shares. Certain of the information contained in this table, and the
related footnotes, is based on the Schedule 13G filings made by the
beneficial owners identified herein.
(2) Includes 185,382 Common Shares held of record by Mr. Lewis as trustee for an
adult child, 13,257 Common Shares held for Mr. Lewis by a nominee under the
Company's Long-Term Savings Plan, 337,500 Common Shares held by Mr. Lewis as
trustee of a trust established for his brother and 99,976 shares held by a
charitable corporation of which Mr. Lewis serves as a trustee and an
officer. The amount does not include 1,759,329 Common Shares held of record
by National City Bank as trustee of a trust established by Mr. Lewis for the
benefit of his adult children, as to which shares he disclaims any
beneficial interest.
(3) The Common Shares are held in investment accounts maintained with
Oppenheimer Group, Inc. or affiliates and they disclaim any beneficial
interest in such shares. Oppenheimer
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Group, Inc. has advised that it has shared voting and investment power as to
all of these shares.
(4) The Common Shares are held by mutual funds managed by or investment accounts
maintained with Janus Capital Corporation or affiliates and they disclaim
any beneficial interest in such shares. Janus Capital Corporation has
advised that it has shared voting and investment power as to all of these
shares.
(5) The Common Shares are held in investment accounts maintained with Ruane,
Cunniff & Co., Inc. and it disclaims any beneficial interest in such shares.
Ruane, Cunniff & Co., Inc. has advised that it has sole voting power as to
2,221,200 of these shares, no voting power as to the balance of these
shares, sole investment power as to 2,210,335 of these shares and shared
investment power as to 2,221,200 of these shares.
(6) The Common Shares are held in investment accounts maintained with The
Equitable Life Assurance Society or affiliates and they disclaim any
beneficial interest in such shares. The Equitable Life Assurance Society has
advised that it has sole voting power as to 2,382,582 of these shares,
shared voting power as to 191,200 of these shares, no voting power as to the
balance of these shares and sole investment power as to all of these shares.
Security Ownership of Management. The following information is set forth
with respect to the Company's Common Shares beneficially owned as of February
11, 1994, by all directors and nominees for election as directors of the
Company, each of the named executive officers and by all directors and executive
officers of the Company as a group:
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP(1) OF CLASS
---------------------------------------------------------------------- --------
Milton N. Allen................................ 49,703(2) *
B. Charles Ames................................ 30,005(3) *
Charles B. Chokel.............................. 70,683(4) *
Allan W. Ditchfield............................ 47,433(5) *
Stephen R. Hardis.............................. 25,808(3) *
Peter B. Lewis................................. 10,155,411(6) 14.1%
Bruce W. Marlow................................ 44,317 *
Norman S. Matthews............................. 37,338(3) *
Michael C. Murr................................ 616,890(7) *
Donald B. Shackelford.......................... 78,671(3) *
Paul B. Sigler................................. 10,409(8) *
All 14 Executive Officers
and Directors as a Group..................... 13,309,515(9) 18.2%
- - - ---------------
* Less than one percent of the outstanding Common Shares of the Company.
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(1) Includes Common Shares held for executive officers under The Progressive
Corporation Long-Term Savings Plan and currently exercisable stock options
held by directors and executive officers under various plans. Beneficial
ownership of the Common Shares held by the directors and executive officers
listed in the table is comprised of both sole voting power and sole
investment power, or voting power and investment power that is shared with
the spouse and/or minor children of the director or executive officer.
(2) Includes 2,400 Common Shares owned by Mr. Allen's wife, as to which shares
he disclaims any beneficial interest, and 20,000 Common Shares subject to
currently exercisable stock options.
(3) Includes 20,000 Common Shares subject to currently exercisable stock
options.
(4) Includes 1,447 Common Shares held as custodian for his minor children, as to
which shares he disclaims any beneficial interest.
(5) Includes 30,000 Common Shares subject to currently exercisable stock
options.
(6) See footnote 2 on page 4.
(7) Includes 150,000 Common Shares owned by Eva Murr, Mr. Murr's wife, as to
which shares he disclaims any beneficial interest, and 464,998 Common Shares
subject to currently exercisable stock options.
(8) Includes 8,000 Common Shares subject to currently exercisable stock options.
(9) Includes 838,498 Common Shares subject to currently exercisable stock
options.
Section 16(a) Reporting. Under the Federal securities laws, the directors
and certain officers of the Company, and holders of 10% or more of the Company's
Common Shares, are required to report their ownership of the Company's Common
Shares, and any changes in such ownership, to the Securities and Exchange
Commission and New York Stock Exchange within specified time frames. The Company
is required to report in this proxy statement any failure on the part of any
such individual to timely file any such report. The Form 5 filed for Daniel R.
Lewis for 1992 inadvertently omitted to disclose two gifts totalling 100 of the
Company's Common Shares received by his two minor children in January 1992. A
supplemental filing was made with the Securities and Exchange Commission and the
New York Stock Exchange promptly after this oversight was discovered. Norman S.
Matthews' Form 5 for 1993, reporting charitable gifts totalling 250 Common
Shares, was filed 29 days late. The total of all charitable gifts reported for
David M. Schneider on his December 1993 Form 4 inadvertently omitted 4 Common
Shares. An amended Form 4 was filed promptly after this omission was discovered.
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EXECUTIVE COMPENSATION
The following information is set forth with respect to the Company's Chief
Executive Officer and the other four most highly compensated executive officers,
each of whom was serving as an executive officer at December 31, 1993 (the
"named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
--------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
------------------------------------------------ SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
NAME AND SALARY BONUS COMPENSATION STOCK OPTIONS
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS(1) (#)
- - - ----------------------------- ----- ---------- ---------- ------------------ ------------- ---------
Peter B. Lewis 1993 $1,000,000 $1,400,000 $127,646(2) -- 67,100
Chairman, President 1992 1,023,077 946,000 162,703(2) -- 137,400
and Chief Executive 1991 1,198,077 -- 124,900(2) -- 75,000
Officer
Michael C. Murr 1993 1,001,226 892,800 -- -- 37,500
Chief Investment 1992 473,523 -- -- -- --
Officer (hired 7/1/92) 1991 -- -- -- -- --
Bruce W. Marlow 1993 558,040 892,800 -- -- 37,500
Chief Operating 1992 551,286 465,300 -- -- 72,000
Officer 1991 549,712 150,000 -- -- 45,000
Charles B. Chokel 1993 275,000 385,000 -- -- 11,500
Chief Financial 1992 261,539 252,120 -- -- 16,500
Officer 1991 249,712 70,000 -- -- 30,000
Allan W. Ditchfield 1993 400,000 200,000 -- -- 10,500
Chief Information 1992 400,000 118,300 -- -- 16,500
Officer (hired 3/6/91) 1991 320,000 100,000 -- -- 150,000
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)
- - - ----------------------------- ------------------
Peter B. Lewis $ --
Chairman, President --
and Chief Executive --
Officer
Michael C. Murr 4,861(3)
Chief Investment 7,162
Officer (hired 7/1/92) --
Bruce W. Marlow 6,704(4)
Chief Operating 5,305
Officer 6,025
Charles B. Chokel 6,558(5)
Chief Financial 6,806
Officer 62,598(6)
Allan W. Ditchfield 6,923(5)
Chief Information 6,200
Officer (hired 3/6/91) 116,212(7)
- - - ---------------
(1) No restricted stock awards were granted to the named executive officers
during the last three years. As of December 31, 1993, there were no unvested
restricted stock holdings.
During 1993, the named executive officers became vested in restricted stock
as follows: Mr. Lewis, 45,000 shares which had a net realized value at date
of vesting of $1,822,500; Mr. Marlow, 32,172 shares which had a net realized
value at date of vesting of $1,302,966; and Mr. Chokel, 12,000 shares which
had a net realized value at date of vesting of $486,000.
(2) Other Annual Compensation includes $96,588, $130,523 and $67,484 in the form
of personal use of corporate aircraft in 1993, 1992 and 1991, respectively.
(3) Represents $4,112 of employer matching contributions paid during 1993 under
the Company's Long-Term Savings Plan and $749 of employer contributions paid
during 1993 under the Company's Supplemental Retirement Plan.
(4) Represents $6,439 employer matching contributions paid during 1993 under the
Company's Long-Term Savings Plan and $265 as an anniversary award for 15
years of employment with the Company.
(5) Represents employer matching contributions paid during 1993 under the
Company's Long-Term Savings Plan.
(6) Represents a $22,833 relocation bonus, $34,634 reimbursement of moving
expenses and $5,131 of employer matching contributions paid during 1991
under the Company's Long-Term Savings Plan.
(7) Represents an $83,333 relocation bonus, $28,725 reimbursement for moving
expenses and $4,154 of employer matching contributions paid during 1991
under the Company's Long-Term Savings Plan.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- - - ---------------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS TERM
OPTIONS GRANTED TO EXERCISE -------------------------
GRANTED EMPLOYEES PRICE EXPIRATION 5% 10%
NAME (#) IN 1993 ($/SHARE) DATE ($) ($)
- - - ------------------------- ---------- ---------- --------- ----------- ---------- ----------
Peter B. Lewis 67,100(1) 9.7% $29.625 12/31/2002 $1,173,244 $2,933,948
Michael C. Murr 37,500(1) 5.4 29.625 12/31/2002 655,688 1,639,688
Bruce W. Marlow 37,500(1) 5.4 29.625 12/31/2002 655,688 1,639,688
Charles B. Chokel 11,500(1) 1.7 29.625 12/31/2002 201,078 502,838
Allan W. Ditchfield 10,500(1) 1.5 29.625 12/31/2002 183,593 459,113
------------------
(1) Options become exercisable 1/1/98.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT 12/31/93 OPTIONS AT 12/31/93
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- - - ---------------------------- ------------ ----------- --------------------- ------------------------
Peter B. Lewis -- -- Exercisable 0 Exercisable $ 0
Unexercisable 354,500 Unexercisable 8,008,083
Michael C. Murr -- -- Exercisable 464,998 Exercisable 15,105,844
Unexercisable 77,502 Unexercisable 1,533,713
Bruce W. Marlow -- -- Exercisable 0 Exercisable 0
Unexercisable 199,500 Unexercisable 4,513,397
Charles B. Chokel -- -- Exercisable 0 Exercisable 0
Unexercisable 88,000 Unexercisable 2,073,296
Allan W. Ditchfield 60,000 $1,362,540 Exercisable 30,000 Exercisable 625,020
Unexercisable 87,000 Unexercisable 1,867,421
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PENSION PLANS
Messrs. Peter B. Lewis, Marlow and Chokel, as well as substantially all
other full-time employees of the Company and its subsidiaries who were hired
before January 1, 1989 and satisfy certain other requirements, are eligible to
participate in The Progressive Pension Plan (the "Pension Plan"). The Pension
Plan is a defined benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), is a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
is subject to the minimum funding standards of Section 412 of the Code.
Benefits payable under the Pension Plan are determined pursuant to a
formula based upon a participant's years of service with the Company and its
subsidiaries, the participant's average annual compensation not in excess of the
Social Security taxable wage base during such years of service ("Average
Earnings") and Social Security benefits. For purposes of determining Average
Earnings, the Pension Plan recognizes base salary, overtime earnings, cash
bonuses and commissions. The benefit formula is: 2% of Average Earnings times
years of service minus 50% of primary Social Security benefit for years of
service through December 31, 1988, plus 1.3% of Average Earnings times years of
service after that date.
Participants accrue benefits under the Pension Plan formula over their
years of service with the Company and its subsidiaries, and become fully vested
in their accrued benefits under the Pension Plan upon (i) completion of 5 years
of service (subject to certain break-in-service rules); (ii) attainment of age
65; or (iii) retirement on account of permanent and total disability.
The estimated net annual pensions (expressed as a life and 120-month
certain annuity) payable upon retirement at normal retirement age (65) under the
Pension Plan for each of the three named executive officers who participate in
the Pension Plan are as follows: Mr. Lewis, $10,188; Mr. Marlow, $8,983; and Mr.
Chokel, $9,042.
Messrs. Ditchfield and Murr, as well as substantially all other full-time
employees who were hired on or after January 1, 1989 and satisfy certain other
requirements, participate in The Progressive Corporation Supplemental Retirement
Plan, a defined contribution plan within the meaning of ERISA and a qualified
plan under the Code. The contributions made by the Company in 1993 for Mr. Murr
is included in "All Other Compensation" in the Summary Compensation Table on
page 7. No contribution was made by the Company for Mr. Ditchfield during 1993.
As of December 31, 1993, all benefit accruals under the Pension Plan were
frozen. Effective January 1, 1994, the Supplemental Retirement Plan was amended
to include all employees who previously participated in the Pension Plan and who
meet requirements as to age and length of service. As a result, all named
executive officers now participate in the Supplemental Retirement Plan. Under
the amended plan, contributions vary from one percent to five percent of
compensation up to the Social Security wage base, based on years of eligible
service.
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SEPARATION PLANS
The named executive officers, as well as substantially all other regular,
non-temporary employees of the Company and its subsidiaries, are eligible to
participate in The Progressive Corporation Separation Allowance Plan (the
"Separation Plan"). The Separation Plan provides payments to eligible employees
whose employment is involuntarily terminated as a result of a reduction in force
or a reorganization, as defined in the Separation Plan. Payments are based on
compensation in effect immediately prior to termination and years of service and
cannot exceed an aggregate of two years of compensation. The Separation Plan is
a welfare benefit plan within the meaning of ERISA. All payments under the
Separation Plan are made from the general assets of the Company and its
subsidiaries. Individual employment or separation arrangements may supplement or
supersede the Separation Plan in whole or in part.
The Company has entered into a separate arrangement with Mr. Ditchfield,
pursuant to which he would be entitled to receive one year's salary plus a
prorated bonus, if the Company were to terminate his employment prior to January
1, 1995 without just cause. These payments would be in lieu of any payments
otherwise payable to him under the Separation Plan upon any termination of
employment.
DIRECTORS' FEES AND PLANS
Each member of the Board of Directors who is not an employee of the Company
currently receives an annual director's fee of $8,000 ("Retainer Fee"). In
addition, each such director receives fees for attendance at meetings of the
Board and those committees of the Board of which he is a member ("Meeting Fee").
Directors currently receive $3,000 for attendance at each of the four regular
meetings of the Board and $1,000 for attendance at each special meeting, unless
attendance is by telephone, in which case the fee is $500. Each member of a
Board committee receives $750 for attendance at each meeting of the committee,
except that the committee chairman receives $1,000 for attendance at each such
meeting.
Each director of the Company who is not an employee of the Company
participates in The Progressive Corporation Directors Deferral Plan, as amended
(the "Directors Deferral Plan"). Each participant in the Directors Deferral Plan
may elect, annually, to defer receipt of all or a portion of his Meeting Fees
for the following year until the earlier of the date designated by the director
in accordance with the Directors Deferral Plan or the date of his death. A
participating director may elect to have such deferred fees credited to or
allocated between (a) a cash account which will bear interest at a rate equal to
the rate of interest on new 3-month certificates of deposit, and (b) a stock
account under which the deferred fees are converted into units equivalent in
value and dividend rights to the Company's Common Shares. All such accounts will
be distributed in cash, in a lump sum or installments, when and as designated by
the participating director at the time of election. All directors' Retainer Fees
are deferred, credited to a stock account and distributed in cash on any date
designated by the participating director which is on or after the later of (a)
the date of the expiration of the director's then current term or (b) the date
which is six months and one day after the date such fees are credited to the
director's stock account ("Minimum Deferral Date") or, if no such designation is
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made, the first day of the calendar quarter immediately following the Minimum
Deferral Date. All account balances of a director will be distributed to his
beneficiary, if he dies. However, if any director ceases to serve as such for
any reason other than death, disability or removal without cause prior to the
expiration of his term, all Retainer Fees credited to his stock account during
such term are forfeited.
Each director who is not an employee of the Company is eligible to be
granted awards under The Progressive Corporation 1990 Directors' Stock Option
Plan, as amended (the "Directors' Stock Plan"). The Directors' Stock Plan
authorizes the issuance of up to 450,000 Common Shares, subject to adjustment
for stock splits and similar events. Promptly after each Annual Meeting of
Shareholders, each participating director receives an option to purchase 2,000
Common Shares at an exercise price equal to the fair market value of the Common
Shares on the day of such Annual Meeting. The term of each such stock option is
ten years commencing on the date of grant. Options become exercisable six months
and one day following the date of grant and are not transferable. Upon death, to
the extent then otherwise exercisable, a stock option may be exercised for a
period of one year. During 1993, the Company granted stock options under this
plan covering an aggregate of 12,000 shares to six directors.
EXECUTIVE COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION POLICY
The Company's executive compensation program is administered under the
direction of the Executive Compensation Committee of the Board of Directors (the
"Committee"). The Committee is comprised of three independent, nonemployee
directors. The executive compensation program is designed to promote the
following objectives:
- Attract, retain and motivate executives who can significantly contribute
to the success of the Company.
- Reward the achievement of corporate objectives that have been approved by
the Board.
- Provide a fair, rational and competitive executive compensation system.
The Committee believes that if these objectives are consistently achieved,
shareholder value will be enhanced over time.
EXECUTIVE COMPENSATION PROGRAM
For 1993, the Company's executive compensation program was designed to base
compensation on corporate, division and individual performance. Performance
objectives and related measurements, as well as the compensation awards that
would result from various levels of performance, were clearly defined in
advance.
The executive compensation program consists of three components: salary,
annual bonus and long-term incentives through equity-based awards. Variable
compensation (consisting of annual bonus and long-term incentive awards) is a
larger component of total compensation at
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more senior levels in the organization. For each executive officer, a target
amount is established for each component of variable compensation. Target
amounts are determined primarily by reference to data contained in published
national compensation surveys. These surveys include compensation data for a
broad range of public companies in a variety of industries. Since the Company
competes for executive level personnel on a nationwide basis with companies in a
variety of industries, the compensation data utilized are not limited to
companies included in the P/C Group referred to on page 16. The Company's policy
is to pay its officers and employees competitive salaries (i.e. within 20% of
the midpoint of the market range of salaries for their respective positions) and
to provide variable compensation which can take total direct compensation to or
above the high end of the market range when the Company, division and individual
meet or exceed challenging performance goals.
A phase-out of most officer perquisites, such as company cars and extended
health care coverage, began in early 1992. In addition to the executive
compensation program, executive officers participate in the Company's health and
retirement plans which are available to all regular employees of the Company on
the same basis.
Salary Component
Executive officers receive a salary based on their responsibilities and
potential at market levels indicated by compensation survey data. The Company's
objective is to set executive salaries to be within 20% of the midpoint of the
market range of salaries for comparable positions. Salaries are reviewed
annually and adjusted for changes in those factors.
Annual Bonus Component
In 1993, the named executive officers and approximately 265 other
management employees of the Company participated in the Management Bonus Plan,
which was designed to reward participants appropriately for current corporate,
division and individual performance.
Under the Management Bonus Plan, a target annual bonus amount, which varied
by position, was established for each executive. For Messrs. Lewis, Marlow and
Chokel, the target annual bonus amount for 1993 equaled 80% of salary. For the
other named executive officers, the target annual bonus amount equaled various
amounts up to 45% of salary. Actual awards could range from 0% to 200% of the
target annual bonus amount, depending on performance.
The 1993 annual bonus award was determined by both quantitative and
qualitative criteria. For the named executive officers, the quantitative
component comprised 60% or more of the annual bonus opportunity for 1993. This
component was determined by using a performance matrix ("Management Performance
Matrix") which assigned a performance score to various combinations of
profitability and growth outcomes. Profitability was measured by the combined
ratio ("COR") for continuing operations, determined in accordance with generally
accepted accounting principles ("GAAP"). Growth was measured in terms of the
year-to-year increase in net premiums written. For executives assigned to a
specific division, the performance of both the Company as a whole and the
particular division was taken into account. A performance
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score of 1.0 resulted if designated profitability and growth goals were met.
Higher rates of profitability and growth resulted in higher scores on the
Management Performance Matrix and, thus, in larger awards for the quantitative
component of the annual bonus. Lower rates of profitability and growth would
result in lower performance scores and awards for this component.
For the named executive officers, the qualitative component comprised up to
40% of the annual bonus opportunity for 1993. This component was based on an
assessment of the individual executive's performance during the year. Each such
executive had specific performance objectives for the year and, at year end, his
performance was evaluated against those objectives. Consideration was also given
to the impact on the Company of the executive's initiatives and contributions
made by the executive beyond the scope of his defined performance objectives.
The Management Bonus Plan was terminated on December 31, 1993 and, for
certain senior executives, was replaced by the 1994 Executive Bonus Plan, a
description of which is contained on pages 16 through 21 hereof. Messrs. Chokel,
Lewis, Marlow and Murr will participate in the 1994 Executive Bonus Plan, if the
proposal set forth at Item 2 is approved by shareholders. Two other executive
officers currently participate in such Plan, but their participation is not
subject to a shareholder approval requirement. All other officers and regular
employees of the Company, including Mr. Ditchfield and one other executive
officer, participate in the Company's 1994 Gainsharing Plan. The 1994
Gainsharing Plan is substantially similar to the 1994 Executive Bonus Plan, but
does not include performance criteria for Return on Average Shareholders' Equity
or Investment Performance.
Long-Term Incentive Component
In 1993, the executive compensation program included long-term incentives
through the grant of nonqualified stock options. This component is designed to
encourage the long-term retention of key executives and to align executive
compensation directly with the long-term enhancement of shareholder value. Stock
option grants are intended to focus the executive on managing the Company from
the perspective of an owner. The named executive officers and approximately 195
other management employees of the Company currently participate in the long-term
incentive program.
The value of a stock option depends directly on the future performance of
the Company's Common Shares, since it has value to the recipient only if and to
the extent that the price of the Company's Common Shares increases above the
exercise price. Stock option awards are normally made annually. A target award
value, which varies by position, is established for each executive officer in
order to bring total targeted compensation to the 90th percentile of the market.
In 1993, for the executive officers, these target award values ranged from
31%-80% of salary, depending on job classification. The target award value is
then divided by a value per share developed through the Black-Scholes pricing
model, to determine the number of option shares to be awarded. In 1993, the
pricing model valued the stock options at $11.914 per share, which is 40.21% of
the per share exercise price of $29.625. The following assumptions were
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used to derive the ratio: 10-year option term, .20 annualized volatility rate,
6.00% risk free rate of return and 1.10% dividend yield. The stock options
generally have an exercise price which is equal to the market price of the
Company's Common Shares on the date of grant, contain provisions which defer
vesting of the options for five years and may be exercised at any time during
the five years following vesting.
CHIEF EXECUTIVE OFFICER COMPENSATION
Peter B. Lewis, the Company's Chief Executive Officer, received cash
compensation in the amount of $2,400,000 for 1993, consisting of a salary of
$1,000,000 and an annual bonus award of $1,400,000, in addition to the non-cash
compensation disclosed in the Summary Compensation Table and related footnotes
on page 7.
Mr. Lewis' annual bonus target for 1993 was $800,000, an amount equal to
80% of his salary. For Mr. Lewis, the quantitative component comprised 75% of
the bonus opportunity and the qualitative component comprised 25%. In 1993, the
Company's continuing operations achieved a COR of 89, with 24.5% premium growth,
as compared to 95 and 6.3% respectively, in 1992, resulting in a performance
score of 2.0 on the Management Performance Matrix. Mr. Lewis therefore earned
200% of target, or $1,200,000, for the quantitative component of his annual
bonus opportunity. With respect to the qualitative component, the Committee
determined that Mr. Lewis' performance for 1993 met expectations in relation to
his performance objectives. He therefore was awarded $200,000, or 100% of
target, for the qualitative component of his annual bonus opportunity. In
reaching this determination, the Committee specifically noted continued progress
in reducing expenses, controlled experimentation in the auto product line,
improving service and actions taken to resolve the role of the Company's
diversified businesses.
For the long-term incentive component of his compensation, on June 18,
1993, Mr. Lewis was awarded stock options to purchase 67,100 of the Company's
Common Shares at an exercise price of $29.625 per share. This award vests on
January 1, 1998, and was determined in accordance with the stock option formula
described above.
45,000 Common Shares previously awarded to Mr. Lewis under the 1985
Restricted Stock Plan vested in 1993. This award, which was made during 1988,
was subject to restriction until December 31, 1993. When this award was made,
the Company's Common Shares had a value, adjusted to reflect the 3-for-1 stock
split effected on December 8, 1992, of $10.08 per share.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
In 1993, the Internal Revenue Code was amended by the Omnibus Budget
Reconciliation Act of 1993 ("Budget Reconciliation Act"), which limits to $1
million per year the deduction allowed for Federal income tax purposes for
compensation paid to the chief executive officer and the four other most highly
compensated executive officers of a public company ("Deduction Limit"). This
Deduction Limit, which is effective beginning in 1994, does not apply to
compensation paid under a plan that meets certain requirements for
"performance-based compensation". To qualify for this exception, (a) the
compensation must be payable on account of the
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attainment of one or more pre-established objective performance goals; (b) the
performance goals must be established by a compensation committee of the board
of directors that is comprised solely of two or more "outside directors"; (c)
the material terms of the compensation and the performance goals must be
disclosed to and approved by shareholders before payment; and (d) the
compensation committee must certify in writing that the performance goals have
been satisfied before payment. It is the Company's policy to structure its
incentive compensation programs to satisfy the requirements for the
"performance-based compensation" exception to the Deduction Limit and, thus, to
preserve the full deductibility of all compensation paid thereunder, to the
extent practicable. Salaries and any perquisites are subject to approval of the
Committee, but will not be submitted to a vote of shareholders, and thus will
not be deductible if and to the extent that such compensation exceeds $1 million
per year for any such executive.
SUMMARY
The Committee believes that management compensation should be directly
linked to changes in shareholder value. The Company's executive compensation
program thus includes significant long-term incentives, through equity-based
awards, which are tied to the long-term performance of the Company's Common
Shares. The Committee recognizes, however, that while stock prices may reflect
management performance over the long term, other factors, such as general
economic conditions and varying investors' attitudes toward the stock market in
general, and specific industries in particular, may significantly affect stock
prices at any point in time. Accordingly, the annual cash components of the
program, consisting of salary and annual bonus, emphasize individual performance
and the realization of defined business objectives, which are independent of
short-range fluctuations in the stock price.
The executive compensation program thus has been designed to align
executive compensation with both the Company's business goals and long-term
shareholder interests. The Committee believes that the program, as implemented,
is balanced and consistent with these objectives. The Committee will continue to
monitor the operation of the program and cause the program to be adjusted and
refined, as necessary, to ensure that it continues to support both corporate and
shareholder goals.
EXECUTIVE COMPENSATION COMMITTEE
Donald B. Shackelford, Chairman
Milton N. Allen
Norman S. Matthews
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PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Shares ("PGR") to the Standard & Poor's 500 Index ("S&P Index") and the
Value Line Property/Casualty Industry Group ("P/C Group") for the last five
years.
CUMULATIVE FIVE-YEAR TOTAL RETURNS*
PGR, S&P INDEX, P/C GROUP
(PERFORMANCE RESULTS THROUGH 12/31/93)
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PGR S&P INDEX P/C GROUP
1988 100.00 100.00 100.00
1989 169.63 131.49 144.67
1990 228.30 127.32 144.43
1991 242.92 166.21 182.32
1992 396.76 179.30 232.49
1993 554.70 197.23 225.83
Assumes $100 invested at the close of trading on December 31, 1988 in PGR, S&P
Index and P/C Group.
*Assumes reinvestment of dividends.
Source: Value Line, Inc.
ITEM 2: PROPOSAL TO APPROVE THE PROGRESSIVE CORPORATION 1994
EXECUTIVE BONUS PLAN AS IT APPLIES TO CERTAIN EXECUTIVE
OFFICERS
GENERAL
The Executive Compensation Committee of the Board of Directors approved The
Progressive Corporation 1994 Executive Bonus Plan as of March 18, 1994, and has
directed that the 1994 Executive Bonus Plan, as it applies to Charles B. Chokel,
Peter B. Lewis, Bruce W. Marlow and Michael C. Murr (the "Plan"), be submitted
to the Company's shareholders for approval. Messrs. Chokel, Lewis, Marlow and
Murr are referred to herein as the "senior participants". The
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description herein is a summary of the Plan and is subject to and qualified by
the complete text of the Plan.
The Company has designed an executive compensation program consisting of
the following components: salary, annual bonus and stock options or other
equity-based awards. The program is structured to reflect the market for
executive compensation and to promote both the achievement of corporate goals,
as approved by the Board, and performance that is in the long-term interests of
shareholders. While stock options or other equity-based awards reflect the
long-term value created for shareholders, the annual bonus component focuses on
current operating and investment results. If approved by shareholders, the Plan
will provide the annual bonus component of total compensation for the senior
participants.
The Plan is being submitted to the Company's shareholders for approval
pursuant to the requirements of the Budget Reconciliation Act. The Budget
Reconciliation Act amended the Internal Revenue Code by adding a new Section
162(m), which limits to $1 million per year the deduction allowed for Federal
income tax purposes for compensation paid to a "covered employee" of a public
company ("Deduction Limit"). Under Section 162(m), the term "covered employee"
includes the chief executive officer and the four other most highly compensated
executive officers. The Deduction Limit, which is effective beginning in 1994,
applies to compensation which does not qualify for any of the limited number of
exceptions provided for in Section 162(m) ("nonqualified compensation").
Under Section 162(m), the Deduction Limit does not apply to compensation
paid under a plan that meets certain requirements for "performance-based
compensation". To qualify for this exception, the following requirements must be
met: (a) the compensation must be payable on account of the attainment of one or
more pre-established objective performance goals; (b) the performance goals must
be established by a compensation committee of the board of directors that is
comprised solely of two or more "outside directors"; (c) the material terms of
the compensation and performance goals must be disclosed to and approved by
shareholders before payment; and (d) the compensation committee must certify in
writing that the performance goals have been satisfied prior to payment.
It is the Company's policy to structure its incentive compensation programs
to satisfy the requirements for the "performance-based compensation" exception
to the Deduction Limit and, thus, to preserve the full deductibility of all
compensation paid thereunder, to the extent practicable. As a consequence, the
Committee has directed that the Plan be submitted to the Company's shareholders
for approval in accordance with the requirements for the "performance-based
compensation" exception to the Deduction Limit. If the Plan is approved by
shareholders, the senior participants will be entitled to participate in the
Plan and compensation paid to such participants under the Plan will not be
subject to the Deduction Limit. If the shareholders fail to approve the Plan,
the senior participants will not be entitled to participate therein or to
receive any payments thereunder. However, if the shareholders fail to approve
the Plan, the Committee may consider adopting an alternative bonus program
without shareholder approval, even though some or all of the payments made
thereunder may be subject to the
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Deduction Limit, in order to maintain the competitiveness of the Company's
executive compensation program.
Two other executive officers of the Company currently participate in the
1994 Executive Bonus Plan; however, their right to participate in that plan is
not being submitted to shareholders for approval since it is not anticipated
that the total nonqualified compensation of either of those officers will exceed
the Deduction Limit in the near future.
ADMINISTRATION
The Plan is administered by the Executive Compensation Committee of the
Board of Directors, which consists of three Board members, all of whom are
"outside directors", as defined under Section 162(m). The Committee has full
authority to determine the manner in which the Plan will operate, to interpret
the provisions of the Plan and to make all determinations thereunder. In
addition, the Committee has authority to adopt, amend and repeal such rules,
guidelines, procedures and practices governing the Plan as it shall, from time
to time, deem advisable.
ELIGIBILITY
Participation in the 1994 Executive Bonus Plan is limited to executive
officers of the Company. The Committee has authority to select those executive
officers who will participate in such plan, subject to a possible shareholder
approval requirement in the case of executive officers whose total nonqualified
compensation may exceed the Deduction Limit. There are currently eight executive
officers of the Company. Six executive officers, including the four senior
participants, currently participate in the 1994 Executive Bonus Plan.
PLAN OPERATION
The Plan has been designed to link pay directly to performance. Annual
bonuses paid under the Plan ("Annual Bonuses") will be determined by application
of the following formula:
Annual Bonus = Salary Paid X Target Percentage X Performance Factor
Salaries are established by the Committee prior to commencement of the Plan
year (or prior to April 1, 1994, with respect to the 1994 Plan year) and are
determined by market analysis, based on data reported in published national
compensation surveys.
For each participant, a Target Percentage is selected based on market data
and is intended to bring cash compensation to the 90th percentile of the market
when specified performance goals are met. Total cash compensation can exceed the
market range if the specified performance goals are exceeded. For 1994, the
Target Percentages for the senior participants range from 80% to 167%. The
Target Percentages may be changed from year to year by the Committee, consistent
with the provisions of Section 162(m) and the regulations promulgated
thereunder.
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Under the Plan, the performance of each participant is measured by selected
performance criteria, which may include Core Business Gainsharing, Return on
Average Shareholders' Equity ("ROE") and Investment Performance, as described
below ("Bonus Components"). For each participant, an appropriate combination of
Bonus Components is selected based on the nature and scope of such participant's
assigned responsibilities.
The selected Bonus Components are assigned various weights by the
Committee, which may vary among participants and may be changed from year to
year by the Committee. The sum of the weighted performance scores for each of
the Bonus Components assigned to a given participant equals the Performance
Factor for that participant. The Performance Factor will equal 1.0 if specified
performance goals are met, and can vary from 0 to 2.0 based on actual
performance versus the pre-established objectives.
The Core Business Gainsharing Component consists of a Profitability and
Growth Factor and a Cost Structure Improvement Factor and measures overall
operating performance for the Company's core personal and commercial automobile
insurance business ("Core Business") for the Plan year. For purposes of this
Bonus Component, operating performance is measured by a Gainsharing Matrix, as
established by the Committee for the Plan year, which assigns a performance
score to various combinations of profitability and growth outcomes. Under the
Gainsharing Matrix, profitability is measured by the GAAP combined ratio and
growth is measured by the year-to-year change in market share. The Cost
Structure Improvement Factor measures success in achieving cost structure
improvement by comparing the sum of the GAAP underwriting expense ratio and the
loss adjustment expense ratio achieved for the Company's Core Business during a
given Plan year against expense targets which have been pre-established by the
Committee. For purposes of determining a performance score for the Core Business
Gainsharing Component, each such Factor is assigned a different weight by the
Committee. For 1994, the Profitability and Growth Factor is weighted 70% and the
Cost Structure Improvement Factor is weighted 30%. The relative weighting of
such Factors may be changed from year to year by the Committee.
The Plan contains a ROE Component, which measures the actual return on
average shareholders' equity achieved by the Company for a given Plan year, net
of inflation, against a series of pre-established performance scores. For 1994,
an inflation adjusted ROE of 15% is necessary to achieve a performance score of
1.0; a higher (or lower) ROE will result in a higher (or lower) performance
score for this Bonus Component. ROE performance targets and resulting scores for
the ROE Component may be revised from year to year by the Committee.
The Investment Performance Component measures overall performance for the
Company's investment activities. Initially, investment results for the
individual segments of the Company's investment portfolio are compared against
pre-established benchmarks. The resulting performance scores for the various
segments are weighted by the amounts invested from time to time in each of the
respective segments and the weighted performance scores are combined to produce
an Investment Performance Score that reflects the overall investment performance
of the portfolio. Segment classifications and benchmarks may be changed from
year to year by the Committee.
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The Annual Bonus payable to any participant under the Plan with respect to
any Plan year may not exceed $2,000,000.00.
For 1994, the maximum amount of benefits that may be paid to the senior
participants, and to all participating executives as a group, under the 1994
Executive Bonus Plan are as follows:
NEW PLAN BENEFITS
THE PROGRESSIVE CORPORATION 1994 EXECUTIVE BONUS PLAN
MAXIMUM BENEFIT
NAME AND POSITION FOR 1994 ($)
--------------------------------------------------------------- ---------------
Peter B. Lewis
Chairman, President and Chief
Executive Officer............................................ $ 1,440,000
Michael C. Murr
Chief Investment Officer..................................... 1,878,750
Bruce W. Marlow
Chief Operating Officer...................................... 892,864
Charles B. Chokel
Chief Financial Officer...................................... 440,800
Executive Group,
consisting of six participants............................... 5,107,954
AMENDMENTS AND TERMINATION
The Committee, in its sole discretion, may at any time terminate, amend or
revise the Plan in whole or in part; provided that any amendment or revision to
the Plan which requires shareholder approval pursuant to Section 162(m) of the
Code shall be subject to approval by the Company's shareholders. The Committee,
without shareholder approval, may modify or change the performance targets for
any Bonus Component, and the relative weighting of Bonus Components, from year
to year.
OTHER MATERIAL PROVISIONS
The Annual Bonus shall be paid in two installments. The first installment,
in an amount equal to 90% of the Annual Bonus, calculated as described above,
will be paid to participants as soon as practicable after the Committee has
certified performance results for the Plan year, but no later than the March 31
immediately following the end of the Plan year. The second installment, in an
amount equal to 10% of the Annual Bonus, will be paid to participants on the
September 30 immediately following the end of the Plan year.
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Unless otherwise determined by the Committee, in order to be entitled to
receive any installment of the Annual Bonus for any Plan year, the participant
must be employed by the Company on the date designated for the payment thereof.
The right to an Annual Bonus shall not be transferred, assigned or
encumbered by any participant.
The Plan has been adopted, and will be effective, as of January 1, 1994,
subject to shareholder approval. If approved by shareholders, the Plan will be
effective for 1994 and for each calendar year thereafter unless and until
terminated by the Committee.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Effective January 1, 1994, the Company will not be entitled to deduct
annual compensation in excess of $1 million paid to any "covered employee"
unless such compensation meets the requirements for "performance-based
compensation," as specified in Section 162(m) of the Code and the regulations
promulgated thereunder. To meet such requirements, the compensation must be
payable because of the attainment of objective performance goals established by
a compensation committee of the board of directors that is comprised solely of
two or more "outside directors" and approved by the shareholders after
disclosure to them of the material terms of the performance goals and the
compensation payable under the plan. Further, before payment, the compensation
committee must certify in writing that the performance goals have been
satisfied.
The Plan was established by the Committee, which is comprised solely of
three "outside directors," and is being submitted to shareholders for approval
as it pertains to the senior participants. If the shareholders approve the Plan
as it pertains to such participants and the Committee subsequently certifies the
attainment of the performance goals applicable to any participant, the Company's
deduction of payments made to such participant under the Plan will not be
subject to the Deduction Limit.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares voting on this proposal,
with abstentions and broker non-votes not counting as voting, is required for
approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
INDEPENDENT ACCOUNTANTS
At the meeting of the Board of Directors of the Company held February 5,
1994, the Board selected Coopers & Lybrand to serve as the independent
accountants for the Company and its subsidiaries for the year 1994.
Representatives of Coopers & Lybrand are expected to be present at the Annual
Meeting with the opportunity to make a statement about the Company's financial
condition, if they desire to do so, and to respond to appropriate questions.
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SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the 1995 Annual
Meeting of Shareholders for inclusion in the proxy statement and form of proxy
relating to that meeting is advised that the proposal must be received by the
Company at its principal executive offices located at 6300 Wilson Mills Road,
Mayfield Village, Ohio 44143, not later than November 22, 1994. The Company will
not be required to include in its proxy statement or form of proxy any
shareholder proposal which is received after that date or which otherwise fails
to meet requirements for shareholder proposals established by regulations of the
Securities and Exchange Commission.
SHAREHOLDER VOTE TABULATION
Votes will be tabulated by or under the direction of Inspectors of Election
who will certify the results at the Annual Meeting. Generally, under Ohio
corporation law, those director nominees who receive the greatest number of
votes at a shareholder meeting at which a quorum exists will be elected
directors. The Proposal set forth in Item 2 will be adopted if approved by the
affirmative vote of a majority of the votes cast on such Proposal, in person or
by proxy, at a meeting at which a quorum exists. For such purpose, abstentions
and broker non-votes are not counted as voting. Accordingly, abstentions and
broker non-votes will be counted in determining the number of shares present or
represented at the Annual Meeting for purposes of determining whether a quorum
exists, but assuming a quorum exists, will not affect the outcome of the vote on
either the election of directors or the Proposal set forth in Item 2.
OTHER MATTERS
The solicitation of proxies is made by and on behalf of the Board of
Directors. The cost of the solicitation, including the reasonable expenses of
brokerage firms or other nominees for forwarding proxy materials to beneficial
owners, will be borne by the Company. In addition to solicitation by mail,
proxies may be solicited by telephone, telegraph or personally. The Company has
engaged the firm of Morrow & Co., New York, New York, to assist it in the
solicitation of proxies at an estimated cost of $13,000. Proxies may be
solicited by directors, officers and employees of the Company without additional
compensation.
If the enclosed proxy is executed and returned, the shares represented
thereby will be voted in accordance with any specifications made therein by the
shareholder. In the absence of any such specifications, the proxies will be
voted (a) to elect the seven nominees named under "Election of Directors" above;
and (b) FOR the proposal to approve the Company's 1994 Executive Bonus Plan as
it applies to certain executive officers.
The presence of any shareholder at the meeting will not operate to revoke
his proxy. A proxy may be revoked at any time insofar as it has not been
exercised by giving written notice to the Company or in open meeting.
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If any other matters shall properly come before the meeting, the persons
named in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board of Directors does not know at this time of any other
matters which will be presented for action at the meeting.
AVAILABLE INFORMATION
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO EACH PERSON TO WHOM A PROXY
STATEMENT IS DELIVERED, UPON ORAL OR WRITTEN REQUEST, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR 1993 (OTHER THAN CERTAIN EXHIBITS). REQUESTS FOR
SUCH DOCUMENTS SHOULD BE SUBMITTED IN WRITING TO CHARLES B. CHOKEL, CHIEF
FINANCIAL OFFICER, THE PROGRESSIVE CORPORATION, 6300 WILSON MILLS ROAD, MAYFIELD
VILLAGE, OH 44143 OR BY TELEPHONE AT (216) 446-7260.
By Order of the Board of Directors.
DAVID M. SCHNEIDER, Secretary
March 18, 1994
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THE PROGRESSIVE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS
The undersigned hereby appoints Charles B. Chokel, David M.
Schneider and Dane A. Shrallow, and each of them, with full power of
substitution, as proxies for the undersigned to attend the Annual
Meeting of Shareholders of The Progressive Corporation, to be held at
6671 Beta Drive, Mayfield Village, Ohio, at 10:00 a.m., Cleveland
time, on April 22, 1994, and thereat, and at any adjournment thereof,
to vote and act with respect to all Common Shares of the Company which
the undersigned would be entitled to vote, with all power the
undersigned would possess if present in person, as follows:
1. / / WITH or / / WITHOUT authority to vote (except as marked to the
contrary below) for the election as directors of all seven
nominees listed below for a term of one year.
Milton N. Allen, B. Charles Ames, Stephen R. Hardis, Peter B. Lewis,
Norman S. Matthews,
Donald B. Shackelford and Paul B. Sigler
(INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name in the space
provided below.)
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2. Proposal to approve the Company's 1994 Executive Bonus Plan as it
applies to certain executive officers.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, to vote upon such other business as may
properly come before the meeting.
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY
THE SHAREHOLDER. IF NO SPECIFICATIONS ARE MADE, THIS PROXY WILL BE
VOTED TO ELECT THE NOMINEES IDENTIFIED IN ITEM 1 ABOVE AND TO APPROVE
THE PROPOSAL DESCRIBED IN ITEM 2 ABOVE.
Receipt of Notice of Annual Meeting of Shareholders and the
related Proxy Statement dated March 18, 1994, is hereby acknowledged.
Date: , 1994
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Signature of Shareholder(s)
PLEASE SIGN AS YOUR NAME OR NAMES
APPEAR HEREON. IF SHARES ARE HELD
JOINTLY, ALL HOLDERS MUST SIGN.
WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE YOUR FULL
TITLE. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
Proxy Card