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EXHIBIT NO. 10(A)
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THE PROGRESSIVE CORPORATION
1996 PROCESS
MANAGEMENT BONUS PLAN
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THE PROGRESSIVE CORPORATION
1996 PROCESS MANAGEMENT BONUS PLAN
1. The Progressive Corporation and its subsidiaries
("Progressive") have created the 1996 Process Management Bonus
Plan (the "Plan") to provide Process Leaders with incentives to
foster teamwork, and provide strong leadership and performance,
in the pursuit of Progressive's process improvement objectives.
2. The Plan will be administered by or under the direction of the
Executive Compensation Committee (the "Committee") of the Board
of Directors. Progressive's Process Leaders are eligible to be
selected for participation in the Plan. Progressive's Chief
Executive Officer ("CEO") will select the individuals who will
participate in the Plan with respect to each Plan year
("participants"). Plan years shall coincide with Progressive's
fiscal years. The individuals who have been selected to
participate in the Plan for 1996 are identified on Exhibit A
hereto.
3. Subject to the following sentence, the amount of the process
management bonus earned by any participant under the Plan for
any Plan year ("Process Management Bonus") will be determined
by application of the following formula:
Process Management Bonus = Paid Salary x Target Percentage x
Performance Factor
The Process Management Bonus payable to any participant with
respect to any Plan year may not exceed $300,000.00.
4. The salary rate of each Plan participant for any Plan year
shall be as established or approved by the Committee (or by the
CEO with respect to any participants who are not executive
officers) no later than ninety (90) days after commencement of
such Plan year. For purposes of the Plan, "salary" and "Paid
Salary" shall include (a) regular, vacation, sick, holiday and
funeral pay received by the participant during the Plan year
for work or services performed by the participant as an officer
or employee of Progressive; (b) merit cash awards based on
performance that "exceeds" expectations that are paid during
the Plan year and (c) retroactive payments of any of the
foregoing items paid during the same Plan year.
For purposes of the Plan, "salary" and "Paid Salary" shall not
include any (a) short-term or long-term disability payments,
(b) discretionary bonus payments or (c) the earnings
replacement component of any worker's compensation award.
Notwithstanding the foregoing, if the sum of the regular, vacation,
sick, holiday and funeral pay received by a participant during
a Plan year exceeds his/her salary range maximum for that Plan
year, then his/her Paid Salary for that Plan year shall equal
his/her salary range maximum, plus any merit cash awards
received by such participant during that Plan year.
5. The Target Percentage for all participants in the Plan shall be
forty percent (40%) for the 1996 Plan year and for each Plan year
thereafter until otherwise determined by the Committee.
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6. The Performance Factor
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A. General
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The Performance Factor, which measures process
management performance, shall be determined annually for
each participant by evaluating (a) the contribution made
by such participant, in terms of leadership, performance
and teamwork, as a member of his/her assigned Process
Team and Progressive's Policy Team, and (b) the
performance of such participant's Process Team (or other
function assigned for purposes of this Plan) in meeting
its assigned objectives for the Plan year, as approved
by the Policy Team.
B. Basis of Evaluation
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For purposes of the Plan, and in accordance with the
Process Management Bonus Matrix set forth below, process
management performance for a given Plan year will be
evaluated as follows:
(1) The Policy Team will evaluate the results
of each Process Team for that Plan year
against criteria and by a process
mutually developed and agreed to by all
Policy Team members.
(2) The Policy Team, through a peer review
process, will evaluate the process
management contribution of each Process
Leader, as well as his/her overall
contributions to the Policy Team.
Process Leaders are expected to demonstrate leadership,
teamwork and innovation within their respective process
areas and with respect to specific areas of cost
reduction and/or service improvement and as a member of
the Policy Team. A participant that demonstrates the
expected level of leadership, teamwork, innovation and
achievement of assigned process performance objectives
will earn a Performance Management Bonus Matrix score of
1.0. Such score can vary from 0 to 2.0, depending on
performance.
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C. Process Management Bonus Matrix
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Process management performance results will be measured by the following
Bonus Matrix:
Process Team
Performance:
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Exceeds 0 .75 1.25 1.50 2.0
Meet/Exceeds 0 .675 1.125 1.25 1.75
Meets 0 .50 1.00 1.125 1.50
Meets/DNM 0 .25 .50 .675 1.0
Does Not Meet 0 0 0 0 0
No Some Sustained Extraordinary World Class
Significant Significant Significant Process/Team Profit/Volume
Individual Process/Team Process/Team Process/Team Leadership & producing break-
Contribution: Contribution Contributions Contributions Innovation throughs
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Process Team performance is expected to at least "meet" objectives,
while individual participants are expected to make at least "sustained
significant contributions" to their assigned Process Teams.
The Process Management Bonus Matrix may be changed or adjusted from year
to year by the CEO, subject to Paragraph 3 hereof.
7. The Process Management Bonus earned for any Plan year shall be
paid to participants as soon as practicable after the results
for the Plan year have been determined, but no later than March
1 of the immediately following year. The provisions of this
Paragraph shall be subject to Paragraph 8 hereof.
Process Management Bonuses payable under this Plan may not be
deferred under The Progressive Corporation Executive Deferred
Compensation Plan.
8. Unless otherwise determined by the Committee, in order to be
entitled to receive a Process Management Bonus for any Plan
year, the participant must be employed by Progressive on the
date designated for payment thereof. Process Management Bonus
payments made to participants will be net of any legally
required deductions for federal, state and local taxes and
other items.
9. The right to any Process Management Bonus hereunder shall not be
transferred, assigned or encumbered by any participant. Nothing
herein shall prevent any participant's interest hereunder from
being subject to involuntary attachment, levy or other legal
process.
10. The Plan shall be administered by or under the direction of the
Committee. The Committee shall have the authority to adopt,
alter and repeal such rules, guidelines, procedures and
practices governing the Plan as it shall, from time to time, in
its sole discretion deem advisable.
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The Committee shall have full authority to determine the
manner in which the Plan will operate. Subject to the
foregoing, the CEO shall have full authority to interpret the
provisions of the Plan and to make all determinations
thereunder. All such interpretations and determinations shall
be final and binding on Progressive, all Plan participants and
all other parties. No such interpretation or determination
shall be relied on as a precedent for any similar action or
decision.
11. The Plan may be terminated, amended or revised, in whole or in
part, at any time and from time to time by the Committee, in
its sole discretion.
12. The Plan will be unfunded and all payments due under the Plan
shall be made from Progressive's general assets.
13. Nothing in the Plan shall be construed as conferring upon any
person the right to become or remain a participant in the Plan
or to remain employed by Progressive, nor shall the Plan limit
Progressive's right to discipline or discharge any of its
officers or employees or change their job duties or
compensation.
14. Progressive shall have the unrestricted right to set off
against or recover out of any bonuses or other sums owed to any
participant under the Plan any amounts owed by such participant
to Progressive.
15. This Plan shall be effective for 1996 and for each year
thereafter, unless and until terminated by or with the approval
of the Committee.
16. This Plan shall be interpreted and construed in accordance with
the laws of the State of Ohio.
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1996 Process Management Bonus Plan Participants
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Process Leaders
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Alan Bauer
Tom Forrester
Willy Graves
Bob McMillan
Glenn Renwick
EXHIBIT A