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EXHIBIT NO. 10(B)
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FORM OF NON-QUALIFIED STOCK OPTION
AGREEMENT UNDER THE PROGRESSIVE
CORPORATION 1989 INCENTIVE PLAN
(SINGLE AWARD)
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NON-QUALIFIED STOCK OPTION AGREEMENT
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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.
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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 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;
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(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;
(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.
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(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.
(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.
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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.
THE PROGRESSIVE CORPORATION
DATE OF GRANT: _________, 19____ BY:
_____________________________________
TITLE:
_____________________________________
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ACCEPTANCE OF AGREEMENT
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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____