-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QBe9jlmDSEPLtl1EW32ElIQ5ql11hDXleMIhrT7eBIH3nOnRiZVPtOYcwDl+q9c2 cq+VaB98+xW/62735atlAw== /in/edgar/work/0000950152-00-005273/0000950152-00-005273.txt : 20000713 0000950152-00-005273.hdr.sgml : 20000713 ACCESSION NUMBER: 0000950152-00-005273 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20000712 EFFECTIVENESS DATE: 20000712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROGRESSIVE CORP/OH/ CENTRAL INDEX KEY: 0000080661 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] IRS NUMBER: 340963169 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-41238 FILM NUMBER: 671786 BUSINESS ADDRESS: STREET 1: 6300 WILSON MILLS RD CITY: MAYFIELD VILLAGE STATE: OH ZIP: 44143 BUSINESS PHONE: 4404615000 MAIL ADDRESS: STREET 1: 6300 WILSON MILLS RD CITY: MAYFIELD VILLAGE STATE: OH ZIP: 44143 S-8 1 s-8.txt THE PROGRESSIVE CORPORATION S-8 1 As filed with the Securities and Exchange Commission on July 12, 2000 Registration No.333- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-8 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 THE PROGRESSIVE CORPORATION (Exact name of registrant as specified in its charter) OHIO 34-0963169 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 (Address of Principal Executive Offices) (Zip Code) THE PROGRESSIVE RETIREMENT SECURITY PROGRAM (Full title of the plan) R. Steven Kestner, Secretary The Progressive Corporation 6300 Wilson Mills Road Mayfield Village, Ohio 44143 (Name and address of agent for service) (440) 461-5000 (Telephone number, including area code, of agent for service) CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------- Title of Proposed maximum Proposed maximum securities to be Amount to be offering price per aggregate offering Amount of registered registered(1,2) share(3) price(3) registration fee(3) - ----------------------------------------------------------------------------------------------------------------------- Common Shares, $1.00 1,000,000 $78.5625 $78,562,500 $20,740.50 par value - -----------------------------------------------------------------------------------------------------------------------
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this Registration Statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein. (2) Pursuant to Rule 416(a), the amount of securities registered under this Registration Statement shall include an indeterminate number of additional Common Shares that may become issuable as a result of stock splits, stock dividends or similar transactions pursuant to the anti-dilution provisions of the employee benefit plan described herein. (3) The registration fee has been calculated pursuant to Rule 457(c) and (h) based on the average of the high and low prices of such Common Shares reported in the consolidated reporting system on July 10, 2000. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE. - ------- --------------------------------------- The following documents filed with the Securities and Exchange Commission (the "Commission") by the Registrant are incorporated by reference into this Registration Statement: (1) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, filed with the Commission on March 30, 2000; (2) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") since the end of the fiscal year covered by the report referred to in (1) above; (3) The Plan's Annual Report on Form 11-K for the fiscal year ended December 31, 1999, filed with the Commission on June 27, 2000; and (4) The description of the Common Shares contained in the Registrant's Registration Statement filed on Form 10 under the 1934 Act on file with the Commission and any amendment or report filed for the purpose of updating such description. All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act subsequent to the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereunder have been sold, or which de-registers all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. - ------- ----------------------------------------- Article VI of the Code of Regulations of the Registrant provides for indemnification of any director, officer or employee in certain instances, as permitted under Section 1701.13(E) of the Ohio Revised Code, against any expenses, judgments, decrees, fines, penalties or amounts paid in settlement in connection with the defense of any action, suit or proceeding, criminal or civil, to which he was, is or may be a party by reason of his status as such director, officer or employee. A director, officer or employee is only entitled to indemnification if he is successful on the merits or otherwise in the defense of any such action, suit or proceeding or if a determination is made pursuant to Article VI of the Registrant's Code of Regulations (i) by the directors of the Registrant acting at a meeting at which a quorum consisting of directors who neither were nor are parties to or threatened with any such action, suit or proceeding is present, or (ii) by the shareholders of the Registrant at a meeting held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Registrant on such proposal or without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on such proposal, that such director, officer or employee (a) was not, and has not been adjudicated to have been, negligent or guilty of misconduct in the performance of his duty to the Registrant, (b) acted in good faith and in a manner he reasonably believed to be in the best interest of the Registrant and (c) in any matter the subject of a criminal action, suit or proceeding, had no reasonable cause to believe that his conduct was unlawful. The expenses of each director, officer or employee incurred in defending any such action, suit or proceeding may be paid by the Registrant as they are incurred in advance of the final disposition of such action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by the director, officer or employee to repay such expenses unless it shall ultimately be determined that he is entitled to be indemnified by the Registrant. Additionally, Section 1701.13(E)(5)(a) of the Ohio Revised Code provides that, unless prohibited by specific reference in a corporation's articles of incorporation or code of regulations (which prohibition is not contained in the Registrant's Articles of Incorporation or Code of Regulations), a corporation shall pay a director's expenses, including attorney's fees, II-1 3 as such expenses are incurred, in defending an action, suit or proceeding brought against him in such capacity, whether such action, suit or proceeding is brought by a third party or by or in the right of the corporation; provided the director delivers to the corporation an undertaking to (a) repay such amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act was undertaken with deliberate intent to injure the corporation or with reckless disregard for the best interests of the corporation and (b) reasonably cooperate with the corporation in such action, suit or proceeding. Section 1701.13(E)(7) of the Ohio Revised Code provides that a corporation may purchase insurance or furnish similar protection for any director, officer or employee against any liability asserted against him in any such capacity, whether or not the corporation would have power to indemnify him under Ohio law. Such insurance may be purchased from or maintained with a person in which the corporation has a financial interest. The Registrant maintains directors and officers liability insurance in the amount of $20,000,000 under a policy issued by a wholly-owned subsidiary of the Registrant. The risks covered by such policy include certain liabilities under the securities laws. Item 8. EXHIBITS. --------- 4(a) The Progressive Retirement Security Program (1999 Amendment and Restatement), as further amended as of August 1, 1999 4(b) Trust Agreement dated as of January 1, 1999 between the Registrant and American Express Trust Company, as amended on March 11, 1999 4(c) Amended Articles of Incorporation, as amended, of the Registrant (incorporated by reference to Registration No. 333-51613, filed with the Commission on May 1, 1998; see Exhibit 4(c) therein) 4(d) Code of Regulations of the Registrant 5 Opinion of Baker & Hostetler LLP 23(a) Consent of PricewaterhouseCoopers L.L.P., Independent Accountants 23(b) Consent of Baker & Hostetler LLP (included in Exhibit 5) 24(a) Powers of Attorney 24(b) Resolutions of the Board of Directors of the Registrant as to Power of Attorney, certified by Secretary of the Registrant The undersigned Registrant hereby undertakes that it will submit or has submitted the Plan and all amendments thereto to the Internal Revenue Service ("IRS") in a timely manner and has made or will make all changes thereto required by the IRS in order to qualify the Plan under Section 401 of the Internal Revenue Code. Item 9. UNDERTAKINGS. ------------ A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered II-2 4 would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 5 SIGNATURES The Registrant. Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Mayfield Village, Ohio, on July 12, 2000.
THE PROGRESSIVE CORPORATION By: /s/ R. Steven Kestner --------------------------------------------- R. Steven Kestner, Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on July 12, 2000. Signature Title --------- ----- Peter B. Lewis* Chairman, President, Director and - ------------------------------------ Principal Executive Officer Peter B. Lewis Charles B. Chokel* Chief Executive Officer - Investments and Capital Management and a - ------------------------------------ Director Charles B. Chokel Glenn M. Renwick* Chief Executive Officer -Insurance Operations and a Director - ------------------------------------ Glenn M. Renwick W. Thomas Forrester, II* Treasurer and Principal Financial Officer - ------------------------------------ W. Thomas Forrester, II Jeffrey W. Basch* Principal Accounting Officer - ------------------------------------ Jeffrey W. Basch Milton N. Allen* Director - ------------------------------------ Milton N. Allen B. Charles Ames* Director - ------------------------------------ B. Charles Ames James E. Bennett, III* Director - ------------------------------------ James E. Bennett, III Charles A. Davis* Director - ------------------------------------ Charles A. Davis
II-4 6 Stephen R. Hardis* Director - ------------------------------------ Stephen R. Hardis Janet Hill* Director - ------------------------------------ Janet Hill Director - ------------------------------------ Jeffrey D. Kelly Norman S. Matthews* Director - ------------------------------------ Norman S. Matthews Director - ------------------------------------ Donald B. Shackelford * R. Steven Kestner, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed as an exhibit to this Registration Statement. /s/ R. Steven Kestner R. Steven Kestner Attorney-in-fact THE PLAN. Pursuant to the requirements of the Securities Act of 1933, the undersigned Plan Administrator has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Mayfield Village, Ohio, on July 12, 2000. Progressive Casualty Insurance Company, as Administrator of The Progressive Retirement Security Program By: /s/ Dane A. Shrallow --------------------------------------- Dane A. Shrallow Secretary II-5 7 EXHIBIT INDEX EXHIBIT DESCRIPTION ------- ----------- 4(a) The Progressive Retirement Security Program (1999 Amendment and Restatement), as further amended on August 1, 1999 4(b) Trust Agreement dated as of January 1, 1999 between the Registrant and American Express Trust Company, as amended on March 11, 1999 4(c) Amended Articles of Incorporation, as amended, of the Registrant (incorporated by reference to Registration Statement No. 333-51613, filed with the Commission on May 1, 1998; see Exhibit 4(c) therein) 4(d) Code of Regulations of the Registrant 5 Opinion of Baker & Hostetler LLP 23(a) Consent of PricewaterhouseCoopers L.L.P., Independent Accountants 23(b) Consent of Baker & Hostetler LLP (included in Exhibit 5) 24(a) Powers of Attorney 24(b) Resolutions of the Board of Directors of the Registrant as to Power of Attorney, certified by Secretary of the Registrant EX-4.A 2 ex4-a.txt EXHIBIT 4(A) 1 EXHIBIT 4(a) ------------ The Progressive Retirement Security Program (1999 Amendment and Restatement), as further amended on August 1, 1999 2 THE PROGRESSIVE RETIREMENT SECURITY PROGRAM ------------------------------------------- (1999 Amendment and Restatement) 3
TABLE OF CONTENTS ----------------- PAGE NO ---- ARTICLE 1 --------- INTRODUCTION ------------ 1.1 NAME OF PLAN 1 1.2 EFFECTIVE DATE 1 1.3 TYPE AND PURPOSE OF PLAN 1 ARTICLE 2 DEFINITIONS ----------- 2.1 ACCOUNT 1 2.2 ACTIVE LTSP PARTICIPANT 1 2.3 ACTIVE SDRP PARTICIPANT 1 2.4 ADMINISTRATOR 1 2.5 AFFILIATED COMPANY 1 2.6 ANNIVERSARY SHARES 1 2.7 ARTICLE 1 2.8 BENEFICIARY 1 2.9 BOARD 2 2.9A BROKERAGE ACCOUNT 2 2.10 CODE OR IRC 2 2.11 COMPANY 2 2.12 COMPANY STOCK FUND 2 2.13 COMPENSATION 2 2.14 COMPENSATION DEFERRAL AGREEMENT 2 2.15 CONTRIBUTIONS 2 2.16 COVERED EMPLOYEE 2 2.17 COVERED EMPLOYMENT 2 2.18 DISABILITY OR DISABLED 2 2.19 EFFECTIVE DATE 2 2.20 ELIGIBLE COMPENSATION 3 2.21 EMPLOYEE 3 2.22 EMPLOYER 3 2.23 EMPLOYER FORFEITURE ACCOUNT 3 2.24 EMPLOYER MATCHED CONTRIBUTIONS 3 2.25 EMPLOYER SDRP CONTRIBUTIONS 3 2.26 EMPLOYMENT 3 2.27 ENTRY DATE 3 2.28 ERISA 3 2.29 EXCESS ADP CONTRIBUTIONS 3 2.30 EXCESS AGGREGATE CONTRIBUTIONS 3 2.31 EXCESS DEFERRAL 3 2.32 FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT 3 2.33 FORMER PARTICIPANT 3 2.34 FORMER PAYSOP ACCOUNT 3 2.35 FUND 3 2.36 HARDSHIP 3 2.37 HIGHLY COMPENSATED EMPLOYEE 4 2.38 INACTIVE LTSP PARTICIPANT 4 2.39 INACTIVE SDRP PARTICIPANT 4 2.40 INVESTMENT FUNDS 4
2 4 2.41 MATERNITY OR PATERNITY ABSENCE 5 2.42 MERGER 5 2.43 NON-HIGHLY COMPENSATED EMPLOYEE 5 2.44 NORMAL RETIREMENT AGE 5 2.45 NORMAL RETIREMENT DATE 5 2.46 PARTICIPANT 5 2.47 PARTNERSHIP SHARE 5 2.48 PAYROLL DEDUCTION AGREEMENT 5 2.49 PLAN 5 2.50 PLAN YEAR 5 2.51 POST-TAX CONTRIBUTIONS 5 2.52 PRE-TAX CONTRIBUTIONS 5 2.53 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) 5 2.54 RETIREMENT 5 2.55 SECTION 5 2.56 SERVICE, HOUR OF SERVICE and YEAR OF SERVICE 5 2.57 SPOUSE 5 2.58 STOCK 5 2.59 TERMINATION OF EMPLOYMENT 5 2.60 TRUST 5 2.61 TRUST AGREEMENT 6 2.62 TRUSTEE 6 2.63 VALUATION DATE 6 ARTICLE 3 --------- PARTICIPATION ------------- 3.1 ELIGIBILITY FOR PARTICIPATION 6 3.2 COMMENCEMENT OF PARTICIPATION 6 3.3 TRANSFERS OF EMPLOYMENT 6 3.4 SUSPENSION OF CONTRIBUTIONS 7 3.5 FORMER PARTICIPANTS AND RE-PARTICIPATION 7 ARTICLE 4 --------- DEPOSITS AND CONTRIBUTIONS -------------------------- 4.1 PRE-TAX CONTRIBUTIONS 7 4.2 POST-TAX CONTRIBUTIONS 7 4.3 EMPLOYER MATCHED CONTRIBUTIONS 7 4.3A SDRP CONTRIBUTIONS 8 4.4 CHANGE IN AMOUNT OF CONTRIBUTIONS 8 4.5 SUSPENSION OF CONTRIBUTIONS 8 4.6 REMITTANCE OF CONTRIBUTIONS 9 4.7 RETURN OF CONTRIBUTIONS 9 ARTICLE 5 --------- MAXIMUM CONTRIBUTIONS --------------------- 5.1 LIMITATIONS ON PRE-TAX CONTRIBUTIONS 9 5.2 LIMITATIONS ON POST-TAX CONTRIBUTIONS AND EMPLOYER MATCHED CONTRIBUTIONS 12 5.3 PROCEDURE IF MULTIPLE USE LIMITATION IS EXCEEDED 15
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ARTICLE 6 --------- ACCOUNTS -------- 6.1 ACCOUNTS 15 6.2 ACCOUNTS REPRESENT UNDIVIDED INTERESTS 16 6.3 ACCOUNT VALUES 16 6.4 VALUATION OF INVESTMENT FUNDS 16 6.5 ALLOCATION OF NET GAIN OR LOSS OF INVESTMENT FUNDS TO ACCOUNTS 16 6.6 BASIS OF VALUATION 16 6.7 ADMINISTRATION OF PRE-TAX CONTRIBUTION ACCOUNT 17 6.8 ADMINISTRATION OF POST-TAX CONTRIBUTION ACCOUNT 17 6.9 ADMINISTRATION OF EMPLOYER MATCHED CONTRIBUTION ACCOUNT 17 6.9A ADMINISTRATION OF EMPLOYER SDRP CONTRIBUTION ACCOUNT 17 6.10 ADMINISTRATION OF FORMER PAYSOP ACCOUNT 17 6.11 ADMINISTRATION OF THE FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT 17 6.12 ADMINISTRATION OF THE SUSPENSE ACCOUNT 17 6.13 ADMINISTRATION OF THE EMPLOYER FORFEITURE ACCOUNT 18 6.14 CREDITING OF CONTRIBUTIONS 18 6.15 EMPLOYEE CONTRIBUTION RECORDS 18 6.16 UNIT ACCOUNTING 18 ARTICLE 7 --------- RETIREMENT, DISABILITY OR DEATH ------------------------------- 7.1 BENEFIT AT RETIREMENT 18 7.2 DISABILITY BENEFIT 19 7.3 DEATH BENEFIT 19 ARTICLE 8 --------- VESTING AND TERMINATIONS ------------------------ 8.1 VESTING 19 8.2 TERMINATION OF EMPLOYMENT 20 8.3 FORFEITURES 20 8.4 REEMPLOYMENT 20 ARTICLE 9 --------- PAYMENT OF BENEFITS ------------------- 9.1 APPLICATION FOR PAYMENT 21 9.2 TIME OF PAYMENT 21 9.3 FORM OF PAYMENT 22 9.4 DETERMINATION OF VALUE OF PAYMENT 22 9.5 CLAIMS PROCEDURE 22 9.6 FACILITY OF PAYMENT 23 ARTICLE 10 ---------- WITHDRAWALS AND LOANS DURING EMPLOYMENT --------------------------------------- 10.1 IN-SERVICE WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT 23 10.2 IN-SERVICE WITHDRAWALS FROM POST-TAX CONTRIBUTION ACCOUNT 24 10.3 IN-SERVICE WITHDRAWALS FROM EMPLOYER MATCHED CONTRIBUTION ACCOUNT 24 10.4 NO WITHDRAWALS AVAILABLE FROM OTHER ACCOUNTS 24 10.5 PAYMENT OF WITHDRAWALS 25 10.6 LOANS TO PARTICIPANTS 25
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ARTICLE 11 ---------- SERVICE ------- 11.1 SERVICE 27 11.2 PRIOR SERVICE REINSTATED 28 11.3 YEAR OF SERVICE 28 ARTICLE 12 ---------- PLAN OPERATION AND ADMINISTRATION --------------------------------- 12.1 POWERS OF ADMINISTRATOR 29 12.2 NONDISCRIMINATORY EXERCISE OF AUTHORITY 29 12.3 RELIANCE ON TABLES, ETC. 29 12.4 NAMED FIDUCIARY 29 12.5 INDEMNIFICATION 29 12.6 NOTICES TO ADMINISTRATOR 30 ARTICLE 13 ---------- AMENDMENT AND TERMINATION OF THE PLAN ------------------------------------- 13.1 AMENDMENT 30 13.2 TERMINATION 31 13.3 LIQUIDATION OF THE FUND 31 ARTICLE 14 ---------- ADOPTION OF THE PLAN BY OTHER EMPLOYERS --------------------------------------- 14.1 ADOPTION WITH APPROVAL 31 14.2 PROCEDURE FOR ADOPTION 31 14.3 EFFECT OF ADOPTION 31 14.4 TERMINATION OF ADOPTION 32 ARTICLE 15 ---------- LIMITATIONS OF ANNUAL ADDITIONS ------------------------------- 15.1 GENERAL LIMITATIONS 32 15.2 EXCESS AMOUNT 32 15.3 AGGREGATION OF PLANS OF THE EMPLOYER 33 15.4 DEFINITIONS 33 15.5 TOP-HEAVY PLAN REQUIREMENTS 34 ARTICLE 16 ---------- INVESTMENT OF CONTRIBUTIONS --------------------------- 16.1 INVESTMENT FUNDS 38 16.2 ADMINISTRATION OF COMPANY STOCK FUND 38 16.3 DEPOSIT OF CONTRIBUTIONS 39 16.4 INVESTMENT ELECTIONS OF PARTICIPANTS 39 16.5 ELECTION TO TRANSFER INTEREST BETWEEN INVESTMENT FUNDS 39 16.6 OTHER PROVISIONS CONCERNING INVESTMENT ELECTIONS AND TRANSFERS 39 16.7 FORMER PAYSOP ACCOUNTS 40
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ARTICLE 17 ---------- MISCELLANEOUS PROVISIONS ------------------------ 17.1 HEADINGS 40 17.2 PLAN NOT CONTRACT OF EMPLOYMENT 40 17.3 VESTED RIGHTS 40 17.4 SEVERABILITY 40 17.5 GENERAL UNDERTAKING 40 17.6 ACTION BY COMPANY 40 17.7 NO RESPONSIBILITY FOR ACTS OF AN INSURER 40 17.8 SPENDTHRIFT 40 17.9 NUMBER AND GENDER 41 17.10 GOVERNING LAW 41 17.11 MERGER, CONSOLIDATION, AND TRANSFER OF ASSETS 41 17.12 RECEIPT OF ASSETS FROM QUALIFIED PLANS 41 17.13 INTERPRETATION OF PLAN 41 17.14 SATISFACTION OF CLAIMS 42 17.15 SERVICE OF PROCESS 42 17.16 WARRANTIES 42 17.17 LEASED EMPLOYEES 42 17.18 DIRECT ROLLOVER DISTRIBUTIONS 42 17.19 PLAN ADDENDA 43 17.20 ADJUSTMENT 43 17.21 USERRA MODEL AMENDMENT 43 17.22 ELECTRONIC COMMUNICATIONS 43
6 8 ARTICLE 1 --------- INTRODUCTION ------------ 1.1 NAME OF PLAN This Plan shall be known as The Progressive Retirement Security Program. Prior to July 1, 1994, this Plan was known as The Progressive Corporation Long-Term Savings Plan. 1.2 EFFECTIVE DATE Except as otherwise expressly provided herein, this Plan, as amended and restated, shall be effective as of April 1, 1999. 1.3 TYPE AND PURPOSE OF PLAN Pursuant to Section 401(a)(27) of the Code, the Plan is hereby designated as a profit-sharing plan. The primary purpose of the Plan is to encourage Employee savings, to facilitate Employee Stock ownership and to provide benefits upon a Participant's or Former Participant's Retirement, death, Disability or Termination of Employment. ARTICLE 2 --------- DEFINITIONS ----------- The following terms, when used herein with initial capital letters, shall have the meaning given to them in this Article 2. 2.1 ACCOUNT shall mean one of several records maintained pursuant to Section 6 to record a Participant's, Former Participant's, or Beneficiary's interest in the Investment Funds. 2.2 ACTIVE LTSP PARTICIPANT shall have the meaning set forth in Article 3. 2.3 ACTIVE SDRP PARTICIPANT shall have the meaning set forth in Article 3. 2.4 ADMINISTRATOR, which is the administrator for purposes of ERISA and the plan administrator for purposes of the Code, shall mean Progressive Casualty Insurance Company, an Ohio corporation, or its successors. 2.5 AFFILIATED COMPANY shall mean any corporation, trade or business if it and the Company are members of a controlled group of corporations, or are under common control, or are members of an affiliated service group, within the meaning of Code Sections 414(b), 414(c), and 414(m), respectively; provided, however, that for purposes of Code Section 415, the definitions prescribed by Code Sections 414(b) and 414(c) shall be modified as provided by Code Section 415(h) by substituting "more than 50%" common control for "at least 80%" common control. This term shall also include any entity required to be treated as an Affiliated Company under Code Section 414(o). 2.6 ANNIVERSARY SHARES shall mean such shares of Stock, if any, as may be awarded on or before February 28, 1992 to Employees by the Company upon completion of five (5) year increments of Years of Service. 2.7 ARTICLE shall mean an Article of this Plan. 2.8 BENEFICIARY as to a Participant or Former Participant who is married at the time of his death, shall mean his Spouse or such other person(s) as he has designated with the consent of his Spouse, and, as to a Participant or Former Participant who is not married at the time of his death, shall be such person(s) as he has designated. A Participant or Former Participant may change his Beneficiary designation at any time, provided that no such change shall be effective as to any married Participant or Former Participant who predeceases his Spouse, unless the Spouse has consented to the change. Each consent of a Spouse shall be irrevocable, but shall be effective only with respect to the particular Beneficiary designation to which it pertains. All Beneficiary designations (including changes) and consents of a 1 9 Spouse shall be made in writing on such forms as the Administrator shall prescribe, and shall become effective only when received by the Administrator; provided, however, that a Beneficiary designation (including a change) or a consent of a Spouse received by the Administrator after the designating Participant's death shall be disregarded. In the absence of a Beneficiary designation, or if the designated Beneficiary is no longer living or in existence at the time of the Participant's or Former Participant's death, all benefits due from the Plan upon the Participant's or Former Participant's death shall be paid to the Participant's or Former Participant's (i) Spouse, if the Participant or Former Participant was married at the time of his/her death or (ii) estate, if the Participant or Former Participant was not married at the time of his/her death. Notwithstanding the foregoing, consent of a Spouse shall not be required if the Participant or Former Participant and his/her Spouse are legally separated or the Spouse cannot be located. 2.9 BOARD shall mean the Board of Directors of the Company. 2.9A BROKERAGE ACCOUNT as to each Participant shall mean a Participant's interest in an Investment Fund consisting of Participant-managed brokerage accounts. 2.10 CODE OR IRC shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. 2.11 COMPANY shall mean The Progressive Corporation or its successor(s). 2.12 COMPANY STOCK FUND shall mean an Investment Fund consisting principally of Stock. 2.13 COMPENSATION of a Participant or Former Participant for a Plan Year shall mean all amounts that are received by him/her during such Plan Year from the Employer that are reported as wages on IRS Form W-2 for such Plan Year, plus (i) the amount contributed by the Employer to the Trustee pursuant to a Compensation Deferral Agreement reduced by amounts required by Section 5.1(c), and (ii) amounts of pay reduced in accordance with an arrangement established by the Employer which qualifies under Section 125 of the Code. However, the maximum annual dollar amount that will be recognized as Compensation is $150,000 in all cases. Such $150,000 limit shall be automatically adjusted in accordance with regulations under Section 401(a)(17) of the Code. If, as a result of the application of the rules of Section 414(q)(6) of the Code, the adjusted $150,000 limit is exceeded, then the limit shall be prorated among the affected individuals in proportion to each such individual's Compensation, as determined under this Section 2.13 prior to the application of the limit. In applying the rules of Section 414(q)(6) of the Code, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. 2.14 COMPENSATION DEFERRAL AGREEMENT shall mean an arrangement pursuant to which the Employee agrees to reduce his Eligible Compensation, pursuant to Section 4.1 hereof, and the Employer agrees to contribute to the Plan the amount equal to the amount reduced as a Pre-Tax Contribution. The Compensation Deferral Agreement shall also serve to provide such other information about the Participant as the Administrator shall require. 2.15 CONTRIBUTIONS shall mean a Participant's Pre-Tax Contributions and Post-Tax Contributions. 2.16 COVERED EMPLOYEE shall mean an Employee of the Employer, earning Eligible Compensation, excluding (i) any such Employee whose terms and conditions of Employment are negotiated with the Employer by or through a certified or recognized collective bargaining organization unless such negotiation provides for his/her inclusion, (ii) those Employees classified by the Employer as temporary under its personnel policies and procedures, and (iii), effective January 1, 1999, Employees who are not residents of the United States. Notwithstanding the provisions of clause (ii) above, an Employee who has been classified by the Employer as temporary under its personnel policies and procedures and who performs at least one thousand (1,000) Hours of Service during any twelve (12) consecutive month period beginning on his/her date of hire (or any anniversary thereof) shall be considered a Covered Employee effective as of the first day following such twelve (12) consecutive month period. 2 10 2.17 COVERED EMPLOYMENT shall mean the period or periods during which an Employee is a Covered Employee. 2.18 DISABILITY OR DISABLED shall mean that a Participant shall be totally disabled (as defined in the Long-Term Disability Plan coverage provided by the Company, whether or not such Participant is eligible for such coverage) for a period of twelve (12) consecutive calendar months beginning on the first day of disability absence. 2.19 EFFECTIVE DATE shall mean July 1, 1994. 2.20 ELIGIBLE COMPENSATION of a Participant shall mean his base salary, straight time hourly wages, overtime pay, vacation pay, holiday pay, jury duty pay, taxable sick pay, military pay, funeral pay, lump sum salary adjustments and retroactive payments of any of the foregoing items pursuant to any back pay award (but only to the extent such retroactive payments are actually paid in periods during which a Compensation Deferral Agreement is in effect). However, the maximum annual dollar amount that will be recognized as Eligible Compensation is $150,000 per year in all cases. Such $150,000 limit shall be automatically adjusted in accordance with regulations under Section 401(a)(17) of the Code. 2.21 EMPLOYEE shall mean any person who renders services to an Employer or Affiliated Company as a common law employee (including any common law employee who is employed as an officer). 2.22 EMPLOYER shall mean the Company. The term Employer shall also include any Affiliated Company which adopts the Plan pursuant to Article 14, but only for such period as such company continues in its adoption of the Plan. 2.23 EMPLOYER FORFEITURE ACCOUNT shall mean the Account maintained and administered in accordance with Section 6.13 hereof. 2.24 EMPLOYER MATCHED CONTRIBUTIONS shall mean those amounts contributed by the Employer pursuant to Section 4.3 hereof. 2.25 EMPLOYER SDRP CONTRIBUTIONS shall mean those amounts contributed by the Employer pursuant to Section 4.3A. 2.26 EMPLOYMENT shall mean the period or periods during which an individual is an Employee. 2.27 ENTRY DATE shall mean the first day of the pay period coincident with or immediately following the date on which a Participant satisfies the requirements for participation contained in Section 3.1(b). 2.28 ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time hereafter. 2.29 EXCESS ADP CONTRIBUTIONS shall mean the amount of the Pre-Tax Contributions of the Highly Compensated Employees for the Plan Year above the maximum amount permitted under Section 5.1. 2.30 EXCESS AGGREGATE CONTRIBUTIONS shall mean the amount of the Post-Tax Contributions and Employer Matching Contributions of the Highly Compensated Employees for the Plan Year above the maximum amount of such Post-Tax Contributions and Employer Matching Contributions permitted under Section 5.2(d). 2.31 EXCESS DEFERRAL shall mean a Pre-Tax Contribution in excess of the permitted maximum deferral amount set forth in Section 5.1(d), or an amount designated as such by the Employee where the excess is generated by aggregation of pre-tax contributions to plans other than this Plan. 2.32 FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT, as to each Participant shall mean the Account derived from the Employer Supplemental Contributions (within the meaning of the Plan as previously in effect), if any, made in respect of the Participant during periods that the Plan provided for such contributions. 3 11 2.33 FORMER PARTICIPANT shall mean a Participant who has terminated Employment but who has one or more Accounts remaining in the Plan. 2.34 FORMER PAYSOP ACCOUNT shall mean the Account described in Section 6.10. 2.35 FUND shall mean the assets held by the Trustee in accordance with the provisions of the Plan and the Trust Agreement. 2.36 HARDSHIP shall mean an immediate and heavy financial need of a Participant arising from any of the following items: (a) Expenses for medical care described in Code Section 213(d) previously incurred by the Participant or his/her Spouse or dependents (as defined in Code Section 152). (b) Purchase (excluding mortgage payments) of a principal residence for the Participant. (c) Payment of tuition, related educational fees, and room and board expenses, for the next twelve months of post-secondary education for the Participant or his/her Spouse or dependents. (d) Prevention of the eviction of the Participant from his principal residence or the foreclosure on the mortgage of the Participant's principal residence. 2.37 HIGHLY COMPENSATED EMPLOYEE shall mean any Employee or former Employee who, during the Plan Year or the preceding Plan Year: (a) was at any time a five percent owner; or (b) received annual Compensation from the Employer in excess of $80,000, as adjusted for increases in the cost of living; In determining which Employees are Highly Compensated Employees, an Employee not described in paragraph [b] above for the preceding year will not be treated as falling under the category described in paragraph [b] for the current year. The Employer may adopt any reasonable, nondiscriminatory tie-breaking or rounding rules necessary to determine which Employees are Highly Compensated Employees, provided that such rules are uniformly and consistently applied. In determining an individual's Compensation under this section, Compensation from each Employer required to be aggregated under Code Sections 414(b), (c), (m) and (o) will be taken into account. For purposes of this section, the determination of Compensation will be made without regard to Code Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant to a salary reduction agreement, without regard to Code Section 403(b). A former Employee will be treated as a Highly Compensated Employee if such Employee separated from service (or was deemed to have separated) prior to the Plan Year, performs no service for the Employer during the Plan Year, and was a Highly Compensated Employee for either the separation year or any Plan Year ending on or after the Employee's 55th birthday. The determination of who is a Highly Compensated Employee will be made in accordance with Code Section 414(q). 2.38 INACTIVE LTSP PARTICIPANT shall have the meaning set forth in Article 3. 2.39 INACTIVE SDRP PARTICIPANT shall have the meaning set forth in Article 3. 2.40 INVESTMENT FUNDS shall mean the funds established from time to time by the Trustee pursuant to Section 16.1. 2.41 MATERNITY OR PATERNITY ABSENCE shall mean an absence from work by an Employee for any period (a) By reason of pregnancy of the Employee, 4 12 (b) By reason of the birth of a child of the Employee, (c) By reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) For purposes of caring for such child for a period immediately following such birth or placement. An absence will not be considered a "Maternity or Paternity Absence" unless the Employee provides the Administrator with information within 5 working days demonstrating that the absence is for one of the four permitted reasons outlined above. Nothing in this Plan shall require the Employer to grant a paid or unpaid leave of absence to any Employee. 2.42 MERGER shall mean the merger of The Progressive Corporation Supplemental Retirement Plan into this Plan, effective July 1, 1994. 2.43 NON-HIGHLY COMPENSATED EMPLOYEE means an Employee not considered a Highly Compensated Employee under Section 2.37. 2.44 NORMAL RETIREMENT AGE shall mean attainment by the Participant of age 65. 2.45 NORMAL RETIREMENT DATE shall mean the first of the month following the date on which a Participant attains Normal Retirement Age. 2.46 PARTICIPANT shall mean a Covered Employee who has satisfied and continues to satisfy the requirements set forth in Section 3.1(a) and/or 3.1(b) for participation and shall include an Active LTSP Participant, Active SDRP Participant, Inactive LTSP Participant and Inactive SDRP Participant. 2.47 PARTNERSHIP SHARE shall mean the share of Stock awarded on or before October 30, 1991 to all Employees upon completion of 30 calendar days from his or her date of employment. 2.48 PAYROLL DEDUCTION AGREEMENT shall mean an arrangement pursuant to which an Employee agrees, pursuant to Section 4.2 hereof, to have a stipulated percentage of his Eligible Compensation deducted from such Eligible Compensation and deposited in the Fund as a Post-Tax Contribution. The Payroll Deduction Agreement shall also serve to provide such other information about the Participant as the Administrator shall require. 2.49 PLAN shall mean The Progressive Retirement Security Program, as set forth in this document, as the same may be amended or restated from time to time hereafter. 2.50 PLAN YEAR shall mean a calendar year. 2.51 POST-TAX CONTRIBUTIONS shall mean those amounts contributed by the Participant pursuant to a Payroll Deduction Agreement and to Section 4.2 hereof. These may have been formerly known as Optional Employee Contributions, but hereafter shall be Post-Tax Contributions. 2.52 PRE-TAX CONTRIBUTIONS shall mean those amounts which the Employer is obligated to contribute to the Plan pursuant to a Compensation Deferral Agreement and to Section 4.1 hereof. These may have been formerly known as Deferred Income Contributions, but hereafter shall be Pre-Tax Contributions. 2.53 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) shall mean any judgment, decree or order as defined in Section 414(p) of the Code. 2.54 RETIREMENT shall mean a Participant's or Former Participant's Termination of Employment on or after his/her Normal Retirement Date. 2.55 SECTION shall mean a Section of this Plan. 5 13 2.56 SERVICE, HOUR OF SERVICE and YEAR OF SERVICE for purposes of this Plan are defined in Article 11 hereof, except that, for purposes of Article 3 Year of Service shall mean any 12 consecutive month period beginning on the date an Employee first performs on Hour of Service (or any anniversary thereof) during which the Employee completes at least 1,000 Hours of Service. However, an Employee who is exempt under the provisions of the Fair Labor Standards Act shall be credited with forty-five (45) hours of service for each week that such Employee would have earned at least one (1) hour of service as defined in subparagraphs (a)(i) through (iii) of Section 11.1 during such week. 2.57 SPOUSE shall mean the legal spouse of a Participant or Former Participant on the date of his/her death. 2.58 STOCK means the Common Stock, $1.00 par value, of the Company. 2.59 TERMINATION OF EMPLOYMENT shall mean the earlier of (i) the last day worked after which an Employee quits, retires, is discharged, or dies, or (ii) the first anniversary of the first date of continuous absence from employment for any other reason. 2.60 TRUST shall mean the Trust created and maintained by the Trust Agreement and known as The Progressive Retirement Security Program Trust. 2.61 TRUST AGREEMENT shall mean the agreement of trust between the Company and Trustee executed in furtherance of the Plan, as the same may be amended from time to time hereafter. 2.62 TRUSTEE shall mean the person (or persons), bank or trust company selected from time to time by the Company to serve as Trustee (or co-Trustees) under the Plan. 2.63 VALUATION DATE shall mean such date or dates as shall be established from time to time by the Administrator for the purpose of valuing the Investment Funds and adjusting Accounts hereunder, which dates need not be uniform with respect to each Investment Fund or Account; provided, however, that each Investment Fund shall be valued, and each Account shall be adjusted no less often than quarterly. ARTICLE 3 --------- PARTICIPATION ------------- 3.1 ELIGIBILITY FOR PARTICIPATION (a) Each Covered Employee shall be eligible to become an LTSP Participant in the Plan (pursuant to Section 3.2), after the later of (i) thirty (30) calendar days from his/her date of employment or (ii) the date he/she becomes a Covered Employee. (b) Each Covered Employee shall be eligible to become an SDRP Participant in the Plan as of the Entry Date coincident with or immediately following the date such Covered Employee both attains age twenty-one (21) and has completed a Year of Service, provided that such Covered Employee is a Covered Employee on such Entry Date. 3.2 COMMENCEMENT OF PARTICIPATION (a) A Covered Employee who meets the eligibility provisions of Section 3.1(a) hereof may become an Active LTSP Participant by filing a Compensation Deferral Agreement or a Payroll Deduction Agreement with the Administrator and providing such other information as the Administrator shall require. The Compensation Deferral Agreement will stipulate the amount of the Participant's Pre-Tax Contributions. The Payroll Deduction Agreement will stipulate the amount of the Participant's Post-Tax Contributions. Such Participant's Pre-Tax Contributions and Post-Tax Contributions shall be effective as of the first payroll period next following receipt and processing of the Participant's Compensation Deferral Agreement or Payroll Deduction Agreement (as applicable) by the Administrator. (b) A covered Employee who meets the eligibility provisions of Section 3.1(b) shall automatically become an Active SDRP Participant on the Entry Date referred to in Section 3.1(b). 6 14 3.3 TRANSFERS OF EMPLOYMENT (a) An Active LTSP Participant who transfers from Covered Employment to Employment other than Covered Employment shall become an Inactive LTSP Participant and his/her Contributions, if applicable, shall be suspended in accordance with Section 4.5 hereof. (b) An Active SDRP Participant who transfers from Covered Employment to Employment other than Covered Employment shall become an Inactive SDRP Participant and his/her SDRP Contributions shall cease automatically. (c) An Inactive LTSP Participant who transfers from Employment other than Covered Employment to Covered Employment will become an Active LTSP Participant on the date such Employee resumes Covered Employment. Should such Active LTSP Participant elect to make Pre-Tax Contributions or Post-Tax Contributions hereunder, such Contributions will be effective with the first payroll period next following receipt and processing of the Active Participant's Compensation Deferral Agreement or Payroll Deduction Agreement (as applicable) by the Administrator. (d) An Inactive SDRP Participant who transfers from Employment other than Covered Employment to Covered Employment will become an Active SDRP Participant on the date such Employee resumes Covered Employment. 3.4 SUSPENSION OF CONTRIBUTIONS An Active LTSP Participant whose Contributions are suspended pursuant to Section 4.5 at his/her option shall continue to be considered an Inactive LTSP Participant. 3.5 FORMER PARTICIPANTS AND RE-PARTICIPATION (a) Termination of Employment shall cause an Active Participant or Inactive Participant to become and remain a Former Participant until such time he/she has no remaining Accounts under the Plan. (b) A Former Participant who returns to Employment other than Covered Employment shall become an Inactive Participant. (c) Any individual who ceases to be an Active LTSP Participant or Inactive LTSP Participant (including Former Participants) because of a Termination of Employment and who subsequently returns to Covered Employment will become an Active LTSP Participant on the date such Employee resumes Covered Employment. Should such Active LTSP Participant elect to make Pre-Tax Contributions or Post-Tax Contributions hereunder, such Contributions will be effective with the first payroll period next following receipt and processing of the Active LTSP Participant's Compensation Deferral Agreement or Payroll Deduction Agreement (as applicable) by the Administrator. (d) Any individual who ceases to be an Active SDRP Participant or Inactive SDRP Participant (including Former Participants) because of a Termination of Employment and who subsequently returns to Covered Employment will become an Active SDRP Participant on the date such Employee resumes Covered Employment. ARTICLE 4 --------- DEPOSITS AND CONTRIBUTIONS -------------------------- 4.1 PRE-TAX CONTRIBUTIONS Each Active LTSP Participant may, pursuant to a Compensation Deferral Agreement, have the Employer contribute on his or her behalf an amount to the Plan known as Pre-Tax Contributions (as defined in Section 2.52) of not less than one percent (1%) or more than eighteen percent (18%) (in any percentage 7 15 to one tenth of a percent) of his/her Eligible Compensation subject to the limitations of Sections 5.1 and Article 15. The percentage contributed under this Section 4.1, when combined with the percentage contributed under Section 4.2, cannot exceed eighteen percent (18%) of the Active LTSP Participant's Eligible Compensation in the aggregate. 4.2 POST-TAX CONTRIBUTIONS Each Active LTSP Participant may elect, pursuant to a Payroll Deduction Agreement, to contribute an amount of not less than one percent (1%) or more than eighteen percent (18%) (in any percentage to one tenth of a percent) of his/her Eligible Compensation, subject to limitations of Section 5.2 and Article 15. The percentage contributed under this Section 4.2, when combined with the percentage contributed under Section 4.1, cannot exceed eighteen percent (18%) of the Active LTSP Participant's Eligible Compensation in the aggregate. 4.3 EMPLOYER MATCHED CONTRIBUTIONS The Employer shall contribute in respect of each Active LTSP Participant Employer Matched Contributions equal to one hundred percent (100%) on the first one percent and fifty percent (50%) on up to the next four percent of such Active LTSP Participant's Pre-Tax Contributions and/or Post-Tax Contributions. For purposes of determining the amount of Employer Matched Contributions to be allocated to each Active LTSP Participant for a particular payroll period, only Pre-Tax Contributions and Post-Tax Contributions attributable to such payroll period, both of which in the aggregate do not exceed five percent (5%) of Eligible Compensation for such payroll period, will be taken into consideration. The Employer Matched Contribution will first be attributable to Pre-Tax Contributions, if any, and then to Post-Tax Contributions, if any. The Employer, with the approval of its Board of Directors, may increase or decrease the amount of Employer Matched Contributions at any time and from time to time for any reason. 4.3A SDRP CONTRIBUTIONS Each pay period the Employer shall contribute a percentage of the FICA Taxable Compensation paid to each Active SDRP Participant during such pay period determined in accordance with the following table, based on such Active SDRP Participant's Years of Service, as defined in Section 2.56, as of the first day of such pay period: CONTRIBUTION YEARS OF SERVICE PERCENTAGE ---------------- ---------- Less than 5 years 1% At least 5 years but less than 10 years 2% At least 10 years but less than 15 years 3% At least 15 years but less than 20 years 4% 20 years or more 5% Each Employer SDRP Contribution shall be promptly allocated to such Active SDRP Participant's Account as soon as practicable after it is made. For purposes of this Section, an Active SDRP Participant's "FICA Taxable Compensation" for a given Plan Year shall consist of that portion of his or her Eligible Compensation which is not in excess of the dollar amount specified as the maximum contribution and benefit base applicable to old-age, survivors, and disability insurance under Title II of the Social Security Act, as in effect on the first day of such Plan Year (the "Taxable Wage Base"). 8 16 4.4 CHANGE IN AMOUNT OF CONTRIBUTIONS (a) The percentage of Eligible Compensation designated by a Participant as his/her Pre-Tax Contributions and/or Post-Tax Contributions shall continue in effect, notwithstanding any change in his/her Eligible Compensation, until he/she elects to change such percentage. (b) An Active LTSP Participant may elect to change his/her percentage of Pre-Tax Contributions and/or Post-Tax Contributions by filing an election with the Administrator in such manner as the Administrator shall specify. Any such change shall become effective with the first payroll period next following receipt and processing of the Participant's revised Compensation Deferral Agreement or Payroll Deduction Agreement (as applicable) by the Administrator. 4.5 SUSPENSION OF CONTRIBUTIONS (a) An Active LTSP Participant may elect to suspend all of his/her Pre-Tax Contributions and/or Post Tax Contributions by filing a written election with the Administrator on such forms as the Administrator shall specify. Such suspension shall become effective with the first payroll period next following receipt and processing of the suspension request by the Administrator. (b) The Pre-Tax and Post-Tax Contributions of a Participant who becomes an Inactive LTSP Participant pursuant to Section 3.3(a) (Transfers of Employment) shall be suspended automatically beginning with the first payroll period thereafter, and may not be resumed until he/she becomes an Active LTSP Participant pursuant to Article 3. (c) All suspensions of Pre-Tax and Post-Tax Contributions shall be indefinite in duration and a Participant shall not be permitted to make up such suspended Contributions. (d) An Active LTSP Participant who has elected to suspend all of his/her Pre-Tax Contributions and/or Post-Tax Contributions shall be eligible to resume making such Contributions as of the first payroll period next following receipt and processing of a new Compensation Deferral Agreement or Payroll Deduction Agreement (as applicable) by the Administrator. 4.6 REMITTANCE OF CONTRIBUTIONS It is the Company's intent to remit Contributions to the Trustee as soon as practical after the close of the payroll period for which they are attributable. In no event, however, will Contributions be remitted to the Trustee later than ninety (90) days following the date they are deducted from the Participant's Eligible Compensation. In no event will Employer Matched Contributions and Employer SDRP Contributions be remitted to the Trustee later than ninety (90) days following the close of the month in which they are granted. 4.7 RETURN OF CONTRIBUTIONS Except as provided in Section 15.2, in Section 6.13 regarding forfeitures, and in this Section 4.7, the assets of the Plan shall never revert to or be used by the Employer. Contributions made by the Employer to the Trust by reason of a mistake of fact may be returned to the Employer within one year after the payment of the contribution. Furthermore, contributions made by the Employer to the Trust are conditioned upon the deductibility of the contribution under Code Section 404 and, to the extent the deduction is disallowed, may be returned to the Employer within one year after disallowance of the deduction. Any amount returned to the Employer by reason of this Section 4.7 shall not include earnings attributable thereto and shall be reduced by any losses attributable thereto. 9 17 ARTICLE 5 --------- MAXIMUM CONTRIBUTIONS --------------------- 5.1 LIMITATIONS ON PRE-TAX CONTRIBUTIONS (a) For purposes of determining the maximum Pre-Tax Contribution, contributions by the Employer designated as Pre-Tax Contributions shall be expressed as a percentage of Compensation for each Participant and each Covered Employee who is eligible to be, but who is not, a Participant. (b) The Actual Deferral Percentage for each Participant and Covered Employee for the Plan Year shall be determined in accordance with Code Section 401(k) and the regulations thereunder. The Actual Deferral Percentage for eligible Highly Compensated Employees for the Plan Year shall be the average of the ratios of the eligible Highly Compensated Employees. This will be compared to the Actual Deferral Percentage for the Non-highly Compensated Employees for the Plan Year, which will be the average of the ratios of the eligible Non-highly Compensated Employees. The Actual Deferral Percentage for any Plan Year for eligible Highly Compensated Employees shall not exceed the greater of either (i) or (ii) below: (i) One hundred and twenty-five percent (125%) of the Actual Deferral Percentage of the eligible Non-highly Compensated Employees, or (ii) The lesser of the amounts determined under (A) or (B) following (or such other amount as may be prescribed in applicable regulations under the Code to prevent multiple use of the alternative limitation set forth in this clause (ii)): (A) Two hundred percent (200%) of the Actual Deferral Percentage of eligible Non-highly Compensated Employees, or (B) The Actual Deferral Percentage of the eligible Non-highly Compensated Employees plus two percentage points (2%). Notwithstanding any other provision of this Plan, the Pre-Tax Contributions shall be limited to the extent necessary to meet this test. Effective for Plan Years beginning on or after January 1, 1999, the following provisions shall apply in lieu of the preceding provisions of this Section 5.1(b): The Actual Deferral Percentage for each Participant and Covered Employee for the Plan Year shall be determined in accordance with Code Section 401(k) and the regulations thereunder. The Actual Deferral Percentage for eligible Highly Compensated Employees for a Plan Year shall be the average of the ratios of the eligible Highly Compensated Employees for that Plan Year. This will be compared to the Actual Deferral Percentage for the Non-highly Compensated Employees for the prior Plan Year, which will be the average of the ratios of the eligible Non-highly Compensated Employees for the prior Plan Year. The Actual Deferral Percentage for any Plan Year for eligible Highly Compensated Employees shall not exceed the greater of either (i) or (ii) below: (i) One hundred and twenty-five percent (125%) of the Actual Deferral Percentage of the eligible Non-highly Compensated Employees for the prior Plan Year, or (ii) The lesser of the amounts determined under (A) or (B) following (or such other amount as may be prescribed in applicable regulations under the Code to prevent multiple use of the alternative limitation set forth in this clause (ii)): 10 18 (A) Two hundred percent (200%) of the Actual Deferral Percentage of eligible Non-highly Compensated Employees for the prior Plan Year, or (B) The Actual Deferral Percentage of the eligible Non-highly Compensated Employees for the prior Plan Year plus two percentage points (2%). Notwithstanding any other provision of this Plan, the Pre-Tax Contributions shall be limited to the extent necessary to meet this test. (c) PROCEDURE TO LIMIT PRE-TAX CONTRIBUTIONS (i) PRIOR TO THE END OF THE PLAN YEAR The Administrator may determine prior to the end of the Plan Year whether there is a reasonable expectation that the Actual Deferral Percentage results satisfy the test contained in Section 5.1(b). In the event that the test described in Section 5.1(b) will not be satisfied, the following procedure will be followed: (A) The future Pre-Tax Contributions, previously authorized, for each Highly Compensated Employee whose Pre-Tax Contributions are at the highest dollar amount shall be reduced by a uniform amount, not to exceed one dollar ($1.00) such that the Actual Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.1(b). If the test is still not satisfied after the adjustments in the immediately preceding sentence have been made, then similar adjustments shall be made to the Pre-Tax Contributions for each Highly Compensated Active Participant whose Pre-Tax Contributions are at the next highest dollar amount until such time as the Actual Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.1(b). The process shall continue until such time as a test in Section 5.1(b) is satisfied, or the reduction has eliminated all future contributions. (B) Any such reduction of future, previously authorized Pre-Tax Contributions shall remain in force until the January 1 immediately following. (C) The amount resulting from a reduction in a Participant's future Pre-Tax Contribution in Section 5.1(c)(i)(B) shall be treated as taxable income to the Employee for the month in which the reduction occurs and subsequent months through the end of the Plan Year. The Employer shall withhold those taxes required by law on such increase in taxable income. (ii) SUBSEQUENT TO END OF PLAN YEAR (A) If it is determined subsequent to the end of the Plan Year that the test in Section 5.1(b) has not been met, the Excess ADP Contributions and the income allocable thereto for the Highly Compensated Employees must be calculated. (1) AMOUNT The amount of Excess ADP Contributions for each Highly Compensated Employee is determined using the leveling method as set forth in Section 5.1(c)(i)(A). (2) DESIGNATION AND DISTRIBUTION Such Excess ADP Contributions are to be designated as such by the Company and must be distributed to the appropriate Highly Compensated 11 19 Employee within twelve months of the close of the Plan Year, reduced by Excess Deferrals previously distributed, if any. Any Employer Matched Contributions relating to such Excess ADP Contributions shall be considered to have been made in respect of the Highly Compensated Employee's Post-Tax Contributions to the extent possible, and otherwise shall be forfeited and applied in accordance with Section 6.13. (3) CALCULATION OF INCOME FOR PLAN YEAR The income allocable to the Excess ADP Contribution must also be distributed within twelve months of the close of the Plan Year. The determination of allocable income for the Plan Year is made by multiplying the net gain (as set forth in Article 6) for the Plan Year allocable to Pre-Tax Contributions by a fraction, the numerator of which is the Excess ADP Contribution for the Highly Compensated Employee for the Plan Year and the denominator of which is the sum of (i) such Employee's total Pre-Tax Contribution Account balance as of the beginning of the Plan Year, plus (ii) such Employee's Pre-Tax Contributions for the Plan Year. (d) MAXIMUM DEFERRAL (i) The maximum annual amount of any Participant's Pre-Tax Contributions beginning in the calendar year 1987 is $7,000. Such $7,000 amount shall be automatically adjusted in subsequent years in the same manner as the $90,000 amount is adjusted under Code Section 415(d). (ii) (A) If the maximum deferral set forth in Section 5.1(d)(i) above is exceeded for a Non-highly Compensated Employee, such amount may not be considered when performing the test in Section 5.1(b). (B) If a Highly Compensated Employee has an Excess Deferral, regardless of distribution after the close of the Plan Year as set forth in (v) below, it must be taken into account in the performance of the test in Section 5.1(b). (iii) CORRECTIVE DISTRIBUTION DURING PLAN YEAR If there has been an Excess Deferral, a corrective distribution may be made to the Employee DURING THE PLAN YEAR IF: (A) The Employee requests such distribution and designates in writing the distribution as an Excess Deferral, and (B) The correcting distribution is made after the Plan received the amount of the Excess Deferral, and (C) The Plan designates in writing the distribution as a distribution of an Excess Deferral. (D) CALCULATION OF INCOME DURING PLAN YEAR The income allocable to the Excess Deferral is to be distributed with the Excess Deferral. The determination of allocable income during the Plan Year is made by multiplying the income allocable to Pre-Tax Contributions for the period from the beginning of the Plan Year to the date on which the distribution is made by a fraction, the numerator of which is the amount of Excess Deferral made by the Employee for the Plan Year, and the denominator of which is the sum of (i) such Employee's total Pre-Tax Contribution Account balance as of the beginning of the Plan Year plus (ii) such Employee's Pre-Tax Contributions for such Plan Year through the date of distribution. 12 20 (iv) CORRECTIVE DISTRIBUTION AFTER THE END OF THE PLAN YEAR (A) If the Employee notifies the Plan of the amount of Excess Deferrals not later than March 15 following the close of the Plan Year, then not later than April 15 following the close of the Plan Year, the Plan may distribute the Excess Deferrals and any income allocable to such amount. (B) CALCULATION OF INCOME FOR THE PLAN YEAR The income allocable to the Excess Deferral must also be distributed by the April 15 following the close of the Plan Year. The determination of allocable income for the Plan Year is made by multiplying the net gain (as set forth in Article 6) for the Plan Year allocable to Pre-Tax Contributions by a fraction, the numerator of which is the amount of Excess Deferrals made by the Employee in the Plan Year, and the denominator of which is the sum of (i) such Employee's total Pre-Tax Contribution Account balance as of the beginning of the Plan Year, plus (ii) such Employee's Pre-Tax Contributions for the Plan Year. (v) No corrective distribution of Excess Deferrals will be permitted after the April 15 following the close of the Plan Year for which there was a Pre-Tax Contribution. (vi) Any Excess Deferral remaining in the Plan shall be subject to the Pre-Tax Contribution withdrawal restrictions found in Section 9.1 and shall be includable in the Employee's gross income when distributed from the Plan. (e) A Participant's Pre-Tax Contributions may also be limited under Article 15. 5.2 LIMITATIONS ON POST-TAX CONTRIBUTIONS AND EMPLOYER MATCHED CONTRIBUTIONS (a) For purposes of determining the maximum Post-Tax Contribution and Employer Matched Contribution, a Contribution Deferral Percentage shall be determined for each Participant and each Employee who is eligible to be, but who is not, a Participant. (b) The Contribution Deferral Percentage for each Participant and Covered Employee shall be determined in accordance with Code Section 401 (m) and the regulations thereunder. The Contribution Deferral Percentage for eligible Highly Compensated Employees for the Plan Year shall be the average of the ratios of the eligible Highly Compensated Employees. This will be compared to the Contribution Deferral Percentage for the Non-highly Compensated Employees for the Plan Year, which will be the average of the ratios of the eligible Non-highly Compensated Employees. Effective for Plan Years beginning on or after January 1, 1999, the following provisions shall apply in lieu of the preceding provisions of this Section 5.2(b): The Contribution Deferral Percentage for each Participant and Covered Employee shall be determined in accordance with Code Section 401(m) and the regulations thereunder. The Contribution Deferral Percentage for eligible Highly Compensated Employees for a Plan Year shall be the average of the ratios of the eligible Highly Compensated Employees for that Plan Year. This will be compared to the Contribution Deferral Percentage for the Non-highly Compensated Employees for the prior Plan Year, which will be the average of the ratios of the eligible Non- highly Compensated Employees for the prior Plan Year. (c) The Contribution Deferral Percentage for any Plan Year for eligible Highly Compensated Employees shall not exceed the greater of either (i) or (ii) below: (i) One hundred and twenty-five percent (125%) of the Contribution Deferral Percentage of the eligible Non-highly Compensated Employees, or 13 21 (ii) The lesser of the amounts determined under (A) or (B) following (or such other amount as may be prescribed in applicable regulations under the Code to prevent multiple use of the alternative limitation set forth in this clause (ii)): (A) Two hundred percent (200%) of the Contribution Deferral Percentage of eligible Non-highly Compensated Employees, or (B) The Contribution Deferral Percentage of the eligible Non-highly Compensated Employees plus two percentage points (2%). Effective for Plan Years beginning on or after January 1, 1999, the following provisions shall apply in lieu of the preceding provisions of this Section 5.2(c): The Contribution Deferral Percentage for any Plan Year for eligible Highly Compensated Employees shall not exceed the greater of either (i) or (ii) below: (i) One hundred and twenty-five percent (125%) of the Contribution Deferral Percentage of the eligible Non-highly Compensated Employees for the prior Plan Year, or (ii) The lesser of the amounts determined under (A) or (B) following (or such other amount as may be prescribed in applicable regulations under the Code to prevent multiple use of the alternative limitation set forth in this clause (ii)): (A) Two hundred percent (200%) of the Contribution Deferral Percentage of eligible Non-highly Compensated Employees for the prior Plan Year, or (B) The Contribution Deferral Percentage of the eligible Non-highly Compensated Employees for the prior Plan Year plus two percentage points (2%). (d) PROCEDURE TO LIMIT POST-TAX AND EMPLOYER MATCHED CONTRIBUTION (i) PRIOR TO THE END OF THE PLAN YEAR The Administrator may determine prior to the end of the Plan Year whether there is a reasonable expectation that the Contribution Deferral Percentage results satisfy either of the tests contained in Section 5.2(c). In the event that neither of the tests described in Section 5.2 will be satisfied, the following procedure will be followed: (A) The future unmatched Post-Tax Contributions, previously authorized, for each Highly Compensated Employee whose unmatched Post-Tax Contributions are at the highest dollar amount shall be reduced by a uniform amount, not to exceed one dollar ($1.00) such that the Contribution Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.2(c). If a test in Section 5.2(c) is still not satisfied after the adjustments in the immediately preceding sentence have been made, then similar adjustments shall be made to the unmatched Post-Tax Contributions for each Highly Compensated Active Participant whose unmatched Post-Tax Contributions are at the next highest dollar amount until such time as the Contribution Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.2(c). This process shall continue until one of the tests is satisfied, or there are no further unmatched Post-Tax Contributions to reduce, or the Contribution Deferral Percentage would be reduced below the highest level attributable to a Highly Compensated Employee. (B) In the event that none of the tests described in Section 5.2(c) will be satisfied under (A) above, the future matched Post-Tax Contributions and the Employer Matched Contributions attributable to them for each Highly Compensated Employee whose matched Post-Tax Contributions and Employer Matched Contributions attributable to them are at the highest dollar amount shall be 14 22 reduced by a uniform amount, not to exceed one dollar ($1.00), such that the Contribution Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.2(c). If a test in Section 5.2(c) is still not satisfied after the adjustments in the immediately preceding sentence have been made, then similar adjustments shall be made to the matched Post-Tax Contributions and attributable Employer Matched Contributions for each Highly Compensated Active Participant whose matched Post-Tax Contributions and Employer Matched Contributions attributable to them are at the next highest dollar amount until such time as the Contribution Deferral Percentage for the Highly Compensated Employees will satisfy a test in Section 5.2(c). This process shall continue until such time as a test in Section 5.2(c) is satisfied. (C) Any such reduction of future Post-Tax Contributions or Employer Matched Contributions shall remain in force until the January 1 immediately following. (D) The amount resulting from a reduction in an Active Participant's future Post-Tax Contribution in Section 5.2 will not be considered a Contribution and no future Employer Matched Contributions will be made relating to such. (ii) SUBSEQUENT TO THE END OF THE PLAN YEAR (A) If it is determined subsequent to the end of the Plan Year that the tests in Section 5.2(c) have not been met, the Excess Aggregate Contributions and the income allocable thereto for the Highly Compensated Employees must be calculated. (1) AMOUNT The amount of Excess Aggregate Contributions for each Highly Compensated Employee is determined using the leveling method as set forth in Sections 5.2(d)(i)(A) and 5.2(d)(i)(B). (2) DESIGNATION AND DISTRIBUTION Such Excess Aggregate Contributions are to be designated as such by the Company and to the extent consisting of Post-Tax Contributions, must be distributed to the appropriate Highly Compensated Employee within twelve months of the close of the Plan Year, and, to the extent consisting of Employer Matched Contributions, shall be forfeited and applied in accordance with Section 6.13. (3) CALCULATION OF INCOME FOR PLAN YEAR The income allocable to the Excess Aggregate Contribution must also be distributed within twelve months of the close of the Plan Year. The determination of allocable income for the Plan Year is made by multiplying the net gain (as set forth in Article 6) for the Plan Year allocable to Post-Tax Contributions and Employer Matched Contributions by a fraction, the numerator of which is the Excess Aggregate Contribution for the Highly Compensated Employee for the Plan Year and the denominator of which is the sum of (i) such Employee's total Post-Tax Contribution Account balance plus Employer Matched Contribution Account balance as of the beginning of the Plan Year plus (ii) such Employee's Post- Tax Contributions and Employer Matched Contributions for the Plan Year. 15 23 (e) A Participant's Post-Tax and Employer Matched Contributions may also be limited under Article 15. 5.3 PROCEDURE IF MULTIPLE USE LIMITATION IS EXCEEDED (a) If it is determined subsequent to the performance of the tests in Sections 5.1 and 5.2 and subsequent to the end of the Plan Year, that there has been an impermissible multiple use of the alternative limitations set forth in Sections 5.1(b)(ii) and 5.2(c)(ii), the Contribution Deferral Percentage for each Highly Compensated Employee must be reduced in the same manner as set forth in Section 5.2(d) so that there is no multiple use of the alternative limitation. The required reduction shall be treated as an Excess Aggregate Contribution, in the same manner as set forth in Section 5.2(d)(ii). (b) If the reduction in (a) above is not sufficient, then the Actual Deferral Percentage for each Highly Compensated Employee must be reduced in the same manner as set forth in Section 5.1(c) so that there is no multiple use of the alternative limitation. The required reduction shall be treated as an Excess ADP Contribution, in the same manner as set forth in Section 5.1(c)(ii). ARTICLE 6 --------- ACCOUNTS -------- 6.1 ACCOUNTS The Administrator shall maintain in the name of each Participant or Former Participant such of the following Accounts as shall be applicable: (a) A Pre-Tax Contribution Account; (b) A Post-Tax Contribution Account; (c) An Employer Matched Contribution Account; (d) An Employer SDRP Contribution Account; (e) A Former PAYSOP Account; and (f) A Former Employer Supplemental Contribution Account; Such Accounts shall be administered in the manner hereinafter provided. 6.2 ACCOUNTS REPRESENT UNDIVIDED INTERESTS The portion of balances standing to the credit of the Pre-Tax Contribution Account, the Post-Tax Contribution Account, the Employer Matched Contribution Account, the Employer SDRP Contribution Account, the Former PAYSOP Account, the Former Employer Supplemental Contribution Account, the Employer Forfeiture Account and the suspense account referred to in Section 6.12 that is invested in one of the Investment Funds shall represent an undivided interest in such fund. 6.3 ACCOUNT VALUES The value of an Account on any date shall be its value determined on the coinciding or immediately preceding Valuation Date plus any contributions and other amounts subsequently credited thereto, and less any distributions and other amounts subsequently charged thereto. 6.4 VALUATION OF INVESTMENT FUNDS As of each Valuation Date, the Trustee shall compute the value of each Investment Fund from which shall be determined the net gain and loss of such Fund since the immediately preceding Valuation Date. 16 24 The net gain or loss shall include any unrealized and realized profits or losses, and any dividends, interest, or other income and any expenses which are due or accrued, but shall not include contributions made by the Employer or a Participant and distributions made to a Participant, Former Participant or Beneficiary. The cost basis for shares of Company Stock purchased since the prior Valuation Date shall be the average cost per share; such average based on all purchase and sale prices in the Fund since the prior Valuation Date. 6.5 ALLOCATION OF NET GAIN OR LOSS OF INVESTMENT FUNDS TO ACCOUNTS (a) As of each Valuation Date, the net gain or loss of each Investment Fund shall be allocated among the appropriate Accounts in proportion to the ratio of: (i) The value of the portion of each such Account that is, and has been continuously, invested in such Investment Fund as of the immediately preceding Valuation Date; to (ii) The aggregate of the amounts computed under clause (i) above for all Accounts that are invested in such Investment Fund as of such immediately preceding Valuation Date. (b) The Administrator may, however, adopt such procedures as it considers equitable to establish a proportionate crediting of the net gain or loss of the Investment Fund or Investment Funds for contributions made since the last Valuation Date. (c) In determining the value of the appropriate Accounts under Section 6.5 as of the immediately preceding Valuation Date, there shall be excluded any amounts forfeited in accordance with Section 8.3 since such date. 6.6 BASIS OF VALUATION In determining the value of any Investment Fund pursuant to the provisions of Section 6.4, the Trustee shall use the following values: securities listed on any nationally recognized securities exchange shall be valued at the closing price reported on any such exchange on the Valuation Date, or, if there were no sales on the Valuation Date, then at the quoted bid price on the Valuation Date. Securities not listed on a recognized stock exchange shall be valued at the quoted closing bid price on the Valuation Date. A unit of participation in a common trust fund maintained by the Trustee or a share in a mutual fund shall be valued at the unit value, or share price respectively, in effect on the Valuation Date. Securities with respect to which there were no available sale prices or bid prices on the Valuation Date, and any other investments, shall be valued at prices deemed by the Trustee to represent the fair market value thereof on the Valuation Date. 6.7 ADMINISTRATION OF PRE-TAX CONTRIBUTION ACCOUNT (a) There shall be credited to the Pre-Tax Contribution Account of a Participant all Pre-Tax Contributions made pursuant to Section 4.1 and all Qualified Plan Rollover Contributions made pursuant to Section 17.12 on behalf of such Participant. (b) There shall be charged against such Account withdrawals by the Participant pursuant to Section 10.1 hereof. 6.8 ADMINISTRATION OF POST-TAX CONTRIBUTION ACCOUNT (a) There shall be credited to the Post-Tax Contribution Account of a Participant all Post-Tax Contributions made by such Participant under this Plan. (b) There shall be charged against such Account withdrawals by the Participant in accordance with Section 10.2 hereof. 17 25 6.9 ADMINISTRATION OF EMPLOYER MATCHED CONTRIBUTION ACCOUNT (a) There shall be credited to the Employer Matched Contribution Account of a Participant all Employer Matched Contributions made on behalf of such Participant under this Plan. (b) There shall be charged against such Account withdrawals by the Active Participant in accordance with Section 10.3 hereof. 6.9A ADMINISTRATION OF EMPLOYER SDRP CONTRIBUTION ACCOUNT There shall be credited to the Employer SDRP Contribution Account of a Participant all Employer SDRP Contributions made on behalf of such Participant under this Plan. No withdrawals or loans are permitted from such Account. 6.10 ADMINISTRATION OF FORMER PAYSOP ACCOUNT No further amounts shall be credited to the Former PAYSOP Account. Such Account shall consist of stock and funds of the Participant's or Former Participant's former PAYSOP and former Supplemental PAYSOP Account (as such contributions ceased, effective December 31,1987). No withdrawals or loans are permitted from such Account. 6.11 ADMINISTRATION OF THE FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT No amounts attributable to Plan Years after 1988 shall be credited to the Former Employer Supplemental Contribution Account of a Participant or Former Participant (as such provision ceased to be effective as of December 31, 1988). No withdrawals or loans are permitted from such Account. 6.12 ADMINISTRATION OF THE SUSPENSE ACCOUNT (a) There shall be credited to a suspense account the amount of any Contributions, Employer Matched Contributions and Employer SDRP Contributions for a Participant which are in excess of the amount permitted under Article 15 hereof. (b) The balance in such suspense account at the close of such Plan Year shall be accounted for as follows: (i) The Post-Tax Contributions considered as excess under (a) above, including gains or less losses, shall be returned to the Participant before the end of the next Plan Year. (ii) All such other Contributions, Employer Matched Contributions and Employer SDRP Contributions that are considered as excess under (a) above shall remain credited to this suspense account and reallocated in the following Plan Year as Employer Matched Contributions and Employer SDRP Contributions for such Plan Year (and succeeding Plan Years if necessary). 6.13 ADMINISTRATION OF THE EMPLOYER FORFEITURE ACCOUNT (a) There shall be credited to the Employer Forfeiture Account all funds creditable to such Account as provided in Section 8.3 hereof. (b) There shall be charged against such Account all amounts withdrawn from time to time and reallocated as Employer Matched Contributions or Employer SDRP Contributions. 6.14 CREDITING OF CONTRIBUTIONS Pre-Tax Contributions and Post-Tax Contributions shall be credited to the appropriate Account or Accounts of such Participants no later than the end of the quarter for which such contributions are attributable or as soon thereafter as administratively possible. Employer Matched Contributions and Employer SDRP Contributions made for the benefit of Participants with respect to a particular Plan Year 18 26 shall be credited to the appropriate Accounts of such Participants no later than the end of the quarter for which such Contributions are attributable or as soon thereafter as administratively possible. 6.15 EMPLOYEE CONTRIBUTION RECORDS The Administrator shall maintain a Pre-Tax Contribution record in the name of each Participant or Former Participant, in which shall be entered, in dollars and cents, the amount of each Pre-Tax Contribution made on behalf of such Participant; and a Post-Tax Contribution record in which shall be entered, in dollars and cents, the amount of each Post-Tax Contribution made by such Participant. Each such record shall at all times carry a current cumulative balance as of the preceding Valuation Date plus Contributions, distributions and withdrawals made in the interim since such Valuation Date. 6.16 UNIT ACCOUNTING The Administrator may, for administrative purposes, establish unit values for one or more Investment Funds or any portion thereof and maintain the Accounts setting forth each Participant's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as the Administrator shall deem to be fair, equitable and administratively practicable. In the event that unit accounting is thus established for any Investment Fund (or any portion thereof) the value of a Participant's interest in that Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Participant. ARTICLE 7 --------- RETIREMENT, DISABILITY OR DEATH ------------------------------- 7.1 BENEFIT AT RETIREMENT Upon attaining his/her Normal Retirement Age hereunder, a Participant shall be one hundred percent (100%) vested in and eligible to receive upon separation from service the value of his/her Pre-Tax Contribution Account, Post-Tax Contribution Account, Employer Matched Contribution Account, Employer SDRP Contribution Account, Former PAYSOP Account, and Former Employer Supplemental Contribution Account in the manner provided in Article 9 hereof. 7.2 DISABILITY BENEFIT A Participant who is Disabled shall be one hundred percent (100%) vested in and eligible to receive the value of his/her Pre-Tax Contribution Account, Post-Tax Contribution Account, Employer Matched Contribution Account, Employer SDRP Contribution Account, Former PAYSOP Account, and Former Employer Supplemental Contribution Account in the manner provided in Article 9 hereof. 7.3 DEATH BENEFIT Upon the death of a Participant, his/her Beneficiary shall be eligible to receive one hundred percent (100%) of the value of his/her Pre-Tax Contribution Account, Post-Tax Contribution Account, Employer Matched Contribution Account, Employer SDRP Contribution Account, Former PAYSOP Account, and Former Employer Supplemental Contribution Account in the manner provided in Article 9 hereof. Notwithstanding anything in the Plan to the contrary, as to each Participant for whom funds were transferred to an Employer SDRP Contribution Account as a result of the Merger, such Participant's Beneficiary shall not be entitled to receive the value of such Participant's Employer SDRP Contribution Account, unless such Beneficiary is named in a single written designation that expressly applies to both the Long-Term Savings Plan portion and the Self-Directed Retirement Plan portion of The Progressive Retirement Security Program. In the absence of such a designation, such Participant's Employer SDRP Contribution Account shall be paid upon such Participant's death to such Participant's "Beneficiary" under and within the meaning of The Progressive Corporation Supplemental Retirement Plan, as in effect immediately prior to the Merger. 19 27 ARTICLE 8 --------- VESTING AND TERMINATIONS ------------------------ 8.1 VESTING A Participant is vested in his/her Accounts as follows: (a) PARTICIPANT ACCOUNTS Each Participant and Former Participant is one hundred percent (100%) vested in his/her Pre-Tax Contribution Account, Post-Tax Contribution Account, and Former PAYSOP Account. (b) EMPLOYER MATCHED CONTRIBUTION ACCOUNT (i) Each Participant and Former Participant shall be vested in his/her Employer Matched Contribution Account in accordance with the following schedule: Vested YEARS OF SERVICE PERCENTAGE Less than 1 0% 1 but less than 2 25% 2 but less than 3 50% 3 but less than 4 75% 4 or more 100% (ii) Notwithstanding (i) above, and due to the fact that class year vesting was eliminated effective December 31,1988, this transitional vesting section shall apply to any Participant for whom it produces a greater vested benefit than (i) above. A Participant's vested benefit in his/her Employer Matched Contribution Account as of December 31,1988 will be frozen (for calculation purposes only) and the amount maintained separately. To calculate the vested percentage of a Participant's Employer Matched Contribution Account, the frozen December 31,1988 balance will be added to the subsequent Employer Matched Contributions. This sum will be multiplied by the appropriate vested percentage corresponding to the Participant's Years of Service as determined in (i) above. (c) FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT AND EMPLOYER SDRP CONTRIBUTION ACCOUNT Each Participant or Former Participant shall be vested in his/her Former Employer Supplemental Contribution Account and Employer SDRP Contribution Account in accordance with the following schedule: Vested YEARS OF SERVICE PERCENTAGE ---------------- ---------- Less than 5 0% 5 or more 100% (d) SPECIAL VESTING PROVISIONS FOR MIDLAND EMPLOYEES Effective June 30, 1998, and notwithstanding anything to the contrary set forth in the Addendum attached hereto entitled "Addendum to The Progressive Retirement Security Program ("Plan") Re: Former Participants Under The Midland Companies' Employee Savings Plan" ("Midland Addendum"), each Participant shall be fully vested in the balance of his/her Midland Matching Contribution Account, as defined in the Midland Addendum. 20 28 8.2 TERMINATION OF EMPLOYMENT The final vesting status of a Participant who terminates his/her Employment for any reason other than Retirement, Disability or death shall be determined as of his/her Termination of Employment, taking into consideration the provisions of Section 11.1. Such Participant shall become a Former Participant and shall be eligible to receive the value of his/her Pre-Tax Contribution Account, Post-Tax Contribution Account, Former PAYSOP Account, and the vested portion of his/her Employer Matched Contribution Account, the vested portion of his/her Employer SDRP Contribution Account and the vested portion of his/her Former Employer Supplemental Contribution Account as provided in Article 9 hereof. 8.3 FORFEITURES If a Former Participant who terminated Employment for reasons other than Retirement, Disability or death does not return to Employment during the Plan Year in which his/her Termination of Employment occurs, or if he/she dies after his/her Termination of Employment during that Plan Year, then the following provisions shall apply to the non-vested portion of his/her Employer Matched Contribution Account, Employer SDRP Contribution Account and Former Employer Supplemental Contribution Account: a) If he/she is 0% vested in his/her Employer SDRP Contribution Account and/or his/her Former Employer Supplemental Contribution Account, he/she shall be deemed to have received a distribution of $0.00 Dollars from such Employer SDRP Contribution Account, and/or Former Employer Supplemental Contribution Account, as the case may be, and the balance of such Account(s) shall be provisionally forfeited and such forfeiture shall be applied in accordance with Section 6.13 hereof. b) If he/she is less than 100% vested in his/her Employer Matched Contribution Account, the non-vested portion of such Account shall be provisionally forfeited and such forfeiture shall be applied in accordance with Section 6.13 hereof as of the earlier of (i) the date he/she receives a distribution of the vested portion of such Account, (ii) the fifth anniversary of the date of his/her Termination of Employment or (iii) the date he/she dies. 8.4 REEMPLOYMENT If a Participant who ceased to be an Employee returns to active Employment, an amount equal to the value of the provisionally forfeited non-vested portion of his/her Employer Matched Contribution Account, Employer SDRP Contribution Account and Former Employer Supplemental Contribution Account, determined as of the Valuation Date coincident with or next following the date he/she last ceased to be an Employee, will be reinstated by crediting such amounts to the Employee's respective Employer Matched Contribution Account, Employer SDRP Contribution Account and Former Employer Supplemental Contribution Account. The amounts so reinstated will be made from any unapplied forfeitures then available under the Plan, provided, however, that if unapplied forfeitures are less than the amount to be reinstated, the Employer will make a supplemental contribution to eliminate such insufficiency. ARTICLE 9 --------- PAYMENT OF BENEFITS ------------------- 9.1 APPLICATION FOR PAYMENT Application for distribution of benefits under this Plan shall be made by a Participant or Former Participant (or other claimant) in accordance with Section 9.5 hereof and approved by the Administrator before payment commences. 21 29 9.2 TIME OF PAYMENT (a) Distribution of benefits to a Participant (or Former Participant) on account of Retirement shall be made as soon as practicable after the Valuation Date coincident with or next following his/her Retirement. (b) Distribution of benefits to a Participant on account of Disability shall be made as soon as practicable after the Valuation Date coincident with or next following the Disabled Participant's application pursuant to Section 9.1. (c) In no event, however, will benefit payments to a Participant (or Former Participant) commence later than April 1 of the calendar year next following the later of (i) the calendar year in which such Participant (or Former Participant) attains age seventy and one-half (70-1/2) or (ii) the calendar year in which the Participant (or former Participant) terminates employment. Notwithstanding the foregoing, benefit payments to a Participant who is a 5% Owner shall commence no later than April 1 of the calendar year next following the calendar year in which the Participant attains age seventy and one-half (70-1/2). For purposes of this provision, the term "5% Owner" shall have the meaning set forth in Section 15.5(h) (iii) of the Plan. Any individual who receives a distribution of benefits prior to age fifty-nine and one-half (59-1/2) shall be advised by the Administrator that an additional federal income tax penalty may be imposed on all or a portion of such distribution unless made on account of death or Disability. (d) In the case of a Participant (or Former Participant) who dies before benefit payments have commenced all benefits in respect of such Participant (or Former Participant) shall be paid to his or her Beneficiary in a lump sum as soon as practicable after the Valuation Date coincident with or next following his or her death. (e) Subject to Section 9.2(h), distribution of benefits to a Participant who terminates Employment for reasons other than Retirement, Disability or death shall be made as soon as practicable after the Valuation Date coincident with or next following the date of his/her Termination of Employment where the Participant (or Former Participant) has made proper application. (f) If proper application has been made, distribution shall be made, in any event, not later than sixty (60) days after the close of the Plan Year in which the Participant or Former Participant attains age sixty-five (65) or terminates his/her Employment, whichever is later. Where the amount to be distributed cannot be determined, distribution may be delayed, but in no event beyond sixty (60) days after such amount is determined. (g) Notwithstanding anything to the contrary in this Section 9.2, while such Participant is in the employ of the Employer, no distribution from the Former PAYSOP Account may be made from a Participant's Account before the end of the eighty-fourth month beginning after the month in which it was allocated. In fact, no withdrawals are permitted from the Former PAYSOP Account pursuant to Section 10.4. (h) Notwithstanding anything provided in this Section 9.2 to the contrary, if the lump sum value of a Participant's Accounts does not exceed Five Thousand Dollars ($5,000), as determined quarterly by the Administrator, the Administrator, shall direct that the lump sum value of such Accounts be paid in total, in cash (unless the Employee elects Company Stock from his/her Former PAYSOP Account or Company Stock Fund pursuant to Section 9.4), as soon as administratively feasible following the Participant's Termination of Employment, whether or not application for payment has been made in accordance with Section 9.1. Distribution will not be made without the Participant's consent if the lump sum value of the Participant's Accounts is $5,000 or more at the time of proposed distribution or at the time of any prior distribution. Such Five Thousand Dollar ($5,000) amount shall be automatically adjusted in subsequent years in accordance with regulations under the Code. (i) No distribution shall be made to any Participant before his Normal Retirement Date unless: 22 30 (i) his prior written consent has been obtained by the Administrator; or (ii) the aggregate balance of his Accounts, determined as of the Valuation Date coinciding with or immediately preceding the proposed date of distribution, does not exceed $5,000. If the Participant's consent is required under this Section 9.2(i), but is not obtained by the Administrator prior to the time the distribution is to be made under Section 9.2, the distribution shall be made as soon as reasonably practicable following the earlier of (1) the Participant's Normal Retirement Date, (2) the date the Administrator receives satisfactory evidence of the Participant's death, or (3) the date the Administrator obtains the Participant's written consent. (j) All distributions under the Plan will comply with code Section 401(a)(9) and the regulations thereunder. 9.3 FORM OF PAYMENT A Participant, Former Participant or Beneficiary shall receive the value of his/her Accounts payable in cash or shares of Company Stock (if invested in Company Stock Fund at Termination) as elected by the Participant in the form of a lump sum payment. However, a Participant may elect to receive in-kind distributions of securities held in his Brokerage Account. However, if a Participant's entire Account consists of only the Partnership Share, the distribution shall be in cash (due to the small value of such an Account). 9.4 DETERMINATION OF VALUE OF PAYMENT The value of the Accounts to be distributed to a Participant, Former Participant or Beneficiary shall be determined as of the earliest Valuation Date that is at least seven (7) days after receipt of a written request for such distribution. 9.5 CLAIMS PROCEDURE (a) The Administrator shall establish reasonable procedures under which a claimant, who may be a Participant, Former Participant or Beneficiary, may present a claim for benefits under this Plan. (b) Unless such claim is allowed in full by the Administrator, written notice of the denial shall be furnished to the claimant within ninety (90) days (which may be extended by a period not to exceed an additional ninety (90) days if special circumstances so require and proper written notice to the claimant is given prior to the expiration of the initial ninety (90) day period) setting forth the following in a manner calculated to be understood by the claimant: (i) The specific reason(s) for the denial; (ii) Specific reference(s) to any pertinent provision(s) of the Plan or rules promulgated pursuant thereto on which the denial is based; (iii) A description of any additional information or material as may be necessary to perfect the claim, together with an explanation of why it is necessary; and (iv) An explanation of the steps to be taken if the claimant wishes to resubmit his/her claim for review. (c) Within a reasonable period of time after the denial of the claim, but in any event, not to be more than sixty (60) days, the claimant or his/her duly authorized representative may make written application to the Administrator for a review of such denial. The claimant or his/her representative, may review documents held by the Administrator and pertinent to the denial of such claim, and may submit a written statement of issues and comments. 23 31 (d) If an appeal is timely filed, the Administrator shall conduct a full and fair review of the claim and mail or deliver to the claimant its written decision within sixty (60) days after the claimant's request for review (which may be extended by a period not to exceed an additional sixty (60) days if special circumstances or a hearing so require and proper written notice to the claimant is given prior to the expiration of the initial sixty (60) day period). Such decision shall: (i) Be written in a manner calculated to be understandable by the claimant; (ii) State the specific reason(s) for the decision; and (iii) Make specific reference to pertinent provision(s) of the Plan. 9.6 FACILITY OF PAYMENT If the Administrator determines that a Participant, Former Participant or Beneficiary entitled to receive benefits under this Plan is (at the time such benefit is payable) a minor or physically, mentally or legally incompetent to receive such benefit and that another person or an institution has legal custody of such minor or incompetent individual, the Administrator may cause payment to be made to such person or institution having custody of such Participant, Former Participant or Beneficiary. Such payment, to the extent made, shall operate as a complete discharge of obligation by the Administrator, the Employer, the Trustee and the Fund. ARTICLE 10 ---------- WITHDRAWALS AND LOANS DURING EMPLOYMENT --------------------------------------- 10.1 IN-SERVICE WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT (a) If a Participant has attained age 59-1/2, such Participant may at any time, by filing written application with the Administrator, make an in-service withdrawal from his/her Pre-Tax Contribution Account. (b) (i) If a Participant has not attained age 59-1/2, such Participant may make an in-service withdrawal of not less than $250.00 from his/her Pre-Tax Contribution Account only in the event of Hardship and only to the extent that such in-service withdrawal is necessary to satisfy the Hardship. The Participant must request the withdrawal in writing from the Administrator. (ii) SAFE-HARBOR A request for an in-service withdrawal will be deemed to be necessary to satisfy a Hardship only if all of the following requirements are met: (A) The amount of the withdrawal does not exceed the amount of the Hardship plus amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal, and (B) The Participant has obtained all withdrawals (other than Hardship withdrawals) and all nontaxable loans available under this Plan and any other plan maintained by the Employer, and (C) The Participant certifies in writing that the amount of the requested Hardship withdrawal is necessary to satisfy an immediate and heavy financial need and that such need cannot reasonably be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of assets, (iii) by discontinuing Plan contributions, (iv) by other distributions or non-taxable loans from any other plans maintained by Progressive or any other current or former employer of the Participant or (v) by borrowing from commercial sources on reasonable commercial terms. 24 32 (c) The amount of the Pre-Tax Contribution Account available for withdrawal shall include: (i) The Pre-Tax Contributions and earnings as of December 31, 1988, and (ii) The Pre-Tax Contributions made on or after January 1, 1989, but shall not include any income on such Account subsequent to that date. 10.2 IN-SERVICE WITHDRAWALS FROM POST-TAX CONTRIBUTION ACCOUNT (a) A Participant may at any time file a written application with the Administrator to make a voluntary withdrawal of not less than $250.00 from his/her Post-Tax Contribution Account for any reason. (b) The entire Post-Tax Contribution Account balance including income attributable to such Account, is available for withdrawal. Any withdrawal will be processed as follows: (i) First, from the pre-1987 Post-Tax Contribution Account balance, (ii) Next, from income on the pre-1987 Post-Tax Contribution Account balance together with Contributions (and income thereon) made to the post-1986 Post-Tax Contribution Account. Such amount shall be on a pro rata basis between Contributions and income thereon, pursuant to Code Section 72. 10.3 IN-SERVICE WITHDRAWALS FROM EMPLOYER MATCHED CONTRIBUTION ACCOUNT (a) An Active Participant may file a written application with the Administrator to make a withdrawal from his/her vested Employer Matched Contribution Account balance not to exceed the following: (i) if the Active Participant has been a Participant in the Plan for less than five (5) years, an amount equal to the sum of all Employer Matched Contributions made in respect to such Participant at least two (2) years prior to the date of the withdrawal; or (ii) if the Active Participant has been a Participant in the Plan for at least five (5) years, the entire vested balance of such Participant's Employer Matched Contribution Account. An Active Participant may make such a withdrawal no more frequently than once per Plan Year. (b) An in-service withdrawal from an Active Participant's Employer Matched Contribution Account is not available unless the Active Participant has filed an application and is eligible to receive a withdrawal of Contributions pursuant to either 10.1 or 10.2, subject to the further requirement that a withdrawal of all available Post-Tax Contributions pursuant to 10.2 must first occur. 10.4 NO WITHDRAWALS AVAILABLE FROM OTHER ACCOUNTS (a) No withdrawals under any circumstances shall be available from: (i) The non-vested portion of the Employer Matched Contribution Account, (ii) The Former PAYSOP Account, (iii) The Former Employer Supplemental Contribution Account, or (iv) The Employer SDRP Contribution Account. (b) No withdrawals are available to anyone other than an Active Participant and Inactive Participants as specifically noted in Sections 10.1 and 10.2; that is, no Former Participants or 25 33 Beneficiaries are eligible to make withdrawals from any Accounts, as they may request distribution pursuant to Section 9.1. 10.5 PAYMENT OF WITHDRAWALS (a) Withdrawals shall be processed not less frequently than bi-weekly. Withdrawals shall be distributed as soon as practicable after the date the Participant's application for withdrawal is received, provided full documentation is enclosed. (b) The amount of the withdrawal shall be based upon the value of the Participant's Pre-Tax Contribution Account, Post-Tax Contribution Account, and Employer Matched Contribution Account (as restricted by Section 10.3) as applicable, determined as of the Valuation Date coincident with or immediately preceding the Administrator's receipt of a request for such withdrawal; provided, however, all Stock shall be valued using the closing price on the business day immediately preceding the date the withdrawal is processed. (c) Unless the Participant otherwise directs in writing, each withdrawal shall be charged to each of the Investment Funds (other than the Brokerage Account) in which any portion of his/her Accounts are invested in the proportion that the balance held in such Investment Fund bears to the aggregate balance held in all such Investment Funds. Notwithstanding anything in this Plan to the contrary, no withdrawals shall be made from any Participant's Brokerage Account. 10.6 LOANS TO PARTICIPANTS (a) As approved by the Administrator, a Participant may at any time borrow an amount as set forth in Section 10.6(b) under the terms and conditions of this Section 10.6. (b) The Administrator shall investigate each application for a loan. In addition to such rules and regulations as the Administrator may adopt, all loans shall comply with the following terms and conditions: (i) An application for a loan by a Participant shall be made to the Administrator in such manner as the Administrator shall prescribe. The loan application will include a promissory note executed by the borrowing Participant obligating the Participant to repay the loan through payroll deduction of substantially level payments made no less frequently than quarterly within the term described in Section 10.6(b)(vi). (ii) No loans will be available for the purchase of a primary residence. (iii) Each loan shall be secured by the borrower's entire right, title and interest in and to the trust fund (not to exceed the amount of the loan), evidenced by the Participant's collateral promissory note for the amount of the loan, including interest, payable to the order of the Trustee. (iv) The minimum loan amount shall be one thousand dollars ($1,000). (v) The loan amount requested must be a multiple of $100. The outstanding balance of each loan amount (plus the highest outstanding balance of all other loans made from this Plan within the immediately preceding twelve-month period) shall not exceed the lesser of: (A) $50,000; or (B) Fifty percent (50%) of the Participant's vested Account(s) based on the Participant's Pre-Tax Contribution Account, Post-Tax Contribution Account, and Employer Matched Contribution Account. (vi) Effective January 1, 1999, the period of repayment of any loan shall not exceed four (4) years. 26 34 (vii) Repayment Options: A loan may be prepaid without penalty by paying the balance of the loan plus accrued interest in a lump sum payment. (viii) Each loan shall bear interest at a rate to be set and reviewed periodically by the Administrator and, in determining the interest rate, the Administrator shall take into consideration commercial interest rates currently being charged by persons in the business of lending money for loans which would be made under similar circumstances. The Administrator shall not discriminate among Participants in the matter of interest rates. To the extent permitted by law, the interest rate on any loan will not be adjusted. (ix) Effective January 1, 1999, no application for a loan by the Participant will be approved if it would cause the Participant to have more than two (2) loans outstanding. (x) Effective January 1, 1999, the Administrator may deduct from the proceeds of each loan any fee, not to exceed $50.00, imposed by any third party administrator for processing loans. (c) (i) Loans shall be processed not less frequently than bi-weekly. For all purposes relating to loans, the value of the Participant's Account shall be determined as of the Valuation Date coinciding with or immediately following receipt of a loan application by the Administrator; provided, however, all Stock shall be valued using the closing price on the business day immediately preceding the date the withdrawal is processed. (d) A Participant whose Employment terminates shall have 30 days from the date of termination to repay the loan. Repayment must be made by check or money order in a lump sum for the remaining loan balance plus accrued interest. However, a Participant whose active Employment terminates as a result of a leave of absence approved by his or her Employer may continue to repay his or her loan in installments payable in the amounts and at the times that payroll deduction payments would have been made had he continued in active Employment. (e) In the event of a default on any loan the entire outstanding principal balance of the loan plus all accrued interest shall be immediately due and payable and the Administrator is authorized (to the extent permitted by law) to take any and all actions necessary or appropriate to collect such sums. However, foreclosure on and reduction of a Participant's Plan benefits in repayment of a loan shall not occur until an event has occurred which would entitle the Participant or his/her Beneficiary to receive a distribution of his/her Plan benefits, provided that the amount of such distribution shall be reduced by the outstanding principal amount of the loan plus all accrued interest. For purposes of the preceding provisions, "default" means any of the following events: (i) failure of any Participant whose Employment has terminated to repay the entire outstanding principal balance of the loan plus accrued interest within the time specified in Section 10.6(d); or (ii) any other failure of a Participant to make any required payment of principal or interest on any loan within thirty (30) days following the date such payment was due. (f) Anything in this Section 10.6 to the contrary notwithstanding, all loans will comply with the terms of Code Section 72(p). (g) The source of funds for each loan shall be those Trust assets comprising first, the Participant's Post-Tax Contribution Account, followed by the Participant's Pre-Tax Contribution Account, and finally, the vested portion of the Participant's Employer Matched Contribution Account. Within each such Account funds for the Participant's loan shall be withdrawn from each Investment Fund (other than the Brokerage Account) in which any portion of such Account is invested in the proportion that the balance held in such Investment Fund bears to the aggregate balance held in all such Investment Funds, unless the Participant elects otherwise in writing. Notwithstanding anything in this Plan to the contrary, funds invested in a Brokerage Account shall not be available for loans to any Participant. 27 35 (h) Funds paid by a Participant in repayment of a loan shall be invested in the same manner as the Participant has elected for Pre-Tax and/or Post-Tax Contributions, as applicable. (i) Notwithstanding the foregoing, no loan shall be made to a Participant during the period in which the Administrator is making a determination of whether a domestic relations order affecting the Participant's Account is a Qualified Domestic Relations Order. Further, if the Administrator is in receipt of a Qualified Domestic Relations Order with respect to any Participant's Account, it may prohibit such Participant from obtaining a loan until the alternate payee's rights under such order are satisfied. (j) In the event that a payment is required to be made to a Beneficiary upon the death of a Participant or an alternate payee pursuant to a Qualified Domestic Relations Order, while the Participant whose Account is the subject of such order has a loan outstanding, the Administrator, in its discretion, may direct that the Participant's promissory note be transferred to such Beneficiary or alternate payee, as applicable. ARTICLE 11 ---------- SERVICE ------- 11.1 SERVICE An Employee's eligibility for benefits under the Plan shall be based on his Period of Service. For purposes of this Article 11, the following terms shall have the meanings shown. (a) HOUR OF SERVICE shall mean each hour credited to an Employee in accordance with the following provisions: (i) An Employee shall be credited with one Hour of Service for each hour for which such Employee is paid, or entitled to payment, by an Employer for the performance of duties during the applicable computation period, with such Hours of Service being credited for the Plan Year in which the duties were performed. (ii) An Employee shall be credited with an Hour of Service for each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by an Employer for the performance of services during a Plan Year, with such Hours of Service being credited for the Plan Year or Plan Years to which the award or agreement pertains (rather than the Plan Year or Plan Years in which the award, agreement, or payment is made). (iii) An Employee also shall be credited with one Hour of Service for each hour for which he is paid, or entitled to payment, by an Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence but excluding payments for reimbursement for medical or medically related expenses and payments under a plan maintained solely for the purpose of complying with applicable workmen's compensation or unemployment compensation and disability insurance laws; provided, however, that not more than 501 Hours of Service shall be credited to an Employee under this paragraph (c), on account of any single continuous period during which the Employee performs no duties for an Employer (whether or not such period occurs in a single computation period). A payment shall be deemed to be made by or due from an Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund, or insurer, to which the Employer contributes or pays premiums. Such Hours of Service shall be 28 36 credited for the Plan Year or, on a ratable basis, for the Plan Years with respect to which the payments are made. (b) PERIOD OF SEVERANCE shall mean the period of time which begins on an Employee's Termination of Employment date and which ends if he/she again completes an Hour of Service. (c) PERIOD OF SERVICE shall include the periods described in (i) and (ii) below. (i) Period of Service shall include each period of time beginning on an Employee's date of employment or re-employment, as applicable, and ending on his/her next succeeding Termination of Employment. (ii) Period of Service shall include the Period of Severance following an Employee's Termination of Employment date which resulted from his/her having quit, retired, or been discharged, if he/she again performs an Hour of Service before the first anniversary of the earlier of: (A) The date on which he/she quit, retired, or was discharged, or (B) The date on which he/she began an absence during which he/she quit, retired, or was discharged. (iii) An Employee's Period of Service shall be determined by aggregating all the periods required to be taken into account under this Section 11.1(c) with less than whole years aggregated on the basis that twelve (12) months equals one (1) year and where any beginning or final fraction of a month shall equal one twelfth (1/12th) of a Year of Service. If the final month of employment includes the annual anniversary of their first date of employment, the Employee must work through such anniversary date in order to receive that month of Service. (d) DETERMINATION OF TERMINATION OF EMPLOYMENT (i) A Termination of Employment shall be deemed not to have occurred when an Employee is or has been absent from his employment either with or without pay due to: (A) A leave of absence granted by the Employer, provided the Employee resumes his employment promptly on the termination of such leave. The decision of the Employer on all questions of leaves of absence shall be final and conclusive. (B) Service in the Armed Forces of the United States, including the Merchant Marine, to the extent the Employee retains reemployment rights with the Employer by law. Should an Employee fail to report for employment within the time required by law, or should he/she take employment elsewhere following military service before resuming employment with the Company, his/her Termination of Employment date shall be deemed to be the day he/she loses his reemployment rights with the Company under the law. (ii) The Termination of Employment for a Maternity or Paternity Absence shall be the first anniversary of the first day of absence from employment due to a Maternity or Paternity Absence. 11.2 PRIOR SERVICE REINSTATED Upon reemployment of an Employee whose Termination of Employment under Section 11.1 occurred on or after the Effective Date as defined in Section 2.19, whether or not distribution has been made, any pre-break Period of Service shall be restored as of the date of his employment. 29 37 11.3 YEAR OF SERVICE An Employee shall be credited with one Year of Service for each full year in his/her Period of Service. ARTICLE 12 ---------- PLAN OPERATION AND ADMINISTRATION --------------------------------- 12.1 POWERS OF ADMINISTRATOR The Administrator will have full power to administer the Plan in all its details. Such power includes, but is not limited to, the following authority: (a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (b) to interpret the Plan and to decide all matters arising thereunder, including the right to resolve or remedy any ambiguities, inconsistencies or omissions. All such interpretations shall be final and binding; (c) to compute the amount of benefits which will be payable to any Participant, Former Participant, Beneficiary or other person in accordance with the provisions of the Plan; (d) to authorize disbursements from the Trust; (e) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under ERISA, the Code or other applicable law; (f) to appoint such agents, counsel, accountants and consultants as may be desirable to assist in administering the Plan; (g) To exercise the other powers that are expressly granted to it herein, or that are impliedly necessary for it to carry out any of its responsibilities hereunder; and (h) by written instrument, to delegate any of the foregoing powers and fiduciary responsibilities in accordance with Section 405 of ERISA. 12.2 NONDISCRIMINATORY EXERCISE OF AUTHORITY The Administrator shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment. 12.3 RELIANCE ON TABLES, ETC. The Administrator will be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any accountant, Trustee, counsel or other expert who is retained by the Administrator to assist it in administering the Plan. 12.4 NAMED FIDUCIARY The Administrator will be a "named fiduciary" for purposes of ERISA with authority to control and manage the operation and administration of the Plan, and will be responsible for complying with all of the reporting and disclosure requirements of ERISA. 12.5 INDEMNIFICATION In addition to whatever rights of indemnification to which employees, officers and directors of the Company and of the other Employers may be entitled under the articles of incorporation, regulations, or bylaws of the Company or such Employers, under any provision of law, or under any other agreement, the Company shall satisfy any liability actually and reasonably incurred by any such employee, officer or 30 38 director, including expenses, attorney's fees, judgments, fines and amounts paid in settlement, in connection with any threatened, pending, or completed action, suit, or proceeding which is related to the exercise or failure to exercise by such person or persons of any of the powers, authority, responsibilities, or discretion of the Company, the Employers or the Administrator provided under the Plan or the Trust Agreement, or reasonably believed by such person or persons to be provided thereunder, and any action taken by such person or persons in connection therewith. 12.6 NOTICES TO ADMINISTRATOR The Administrator shall designate one or more addresses where notices and other communications to the Administrator shall be sent. No notice or other communication shall be considered to have been given to or received by the Administrator until it has been delivered to the Administrator's attention at one of such designated addresses. ARTICLE 13 ---------- AMENDMENT AND TERMINATION OF THE PLAN ------------------------------------- 13.1 AMENDMENT The Company may amend the Plan and Trust Agreement in any respect at any time, for any reason and as to all Employers by action of the Company's Board of Directors, provided, however, that any amendment that is required by law or that will not require any Employer to increase the contributions it must make to the Plan may be approved by the Company's Chairman, President or Chief Executive Officer, or the holder of any similar successor office, which approval shall be conclusively evidenced by such officer's execution of such amendment, and further provided that the Company may not: (a) amend the Plan or Trust Agreement in such manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than for the exclusive benefit of Participants, Former Participants and their Beneficiaries (except as permitted herein), unless such amendment is permitted by law, governmental regulation or ruling; (b) amend the Plan or Trust Agreement retroactively in such a manner as would deprive any Participant or Former Participant of any benefit to which he/she was entitled under the Plan by reason of Contributions made prior to the amendment, unless such amendment is necessary to conform the Plan or Trust Agreement to, or satisfy the conditions of, any law, governmental regulation or ruling, or to permit the Trust and the Plan to meet the requirements of Sections 401(a) and 501(a) of the Code; (c) to amend the Plan or Trust Agreement in such manner as would increase the duties or liabilities of the Trustee or reduce its fee for services thereunder, unless the Trustee consents thereto in writing; (d) amend the Plan to reduce a Participant's vesting percentage determined as of the later of the date such amendment is effective or adopted; or (e) amend the Plan to revise the vesting schedule unless: (i) Each Participant's vesting percentage under such amendment is not less at any time than the vesting percentage determined without regard to such amendment; or (ii) Each Participant who has completed three or more Years of Service (whether or not consecutive) is permitted to make an election to have his/her vesting percentage determined without respect to such amendment; such an election shall be irrevocable and shall be made within the period beginning with the date on which such amendment is adopted and ending no later than the latest of the following: (A) Sixty (60) days after the day such amendment is adopted; 31 39 (B) Sixty (60) days after the date such amendment becomes effective; or (C) Sixty (60) days after the day the Participant is issued written notice of the amendment. 13.2 TERMINATION The Company has established the Plan with the bona fide intention and expectation that contributions will be continued indefinitely, but the Company will have no obligation or liability whatsoever to maintain the Plan for any given length of time and may discontinue contributions under the Plan, terminate the Plan or permit any Employer to withdraw from the Plan at any time for any reason by action of the Company's Board of Directors without any liability whatsoever for any such discontinuance, termination or withdrawal. In the event of the termination or partial termination of the Plan or the complete discontinuance of contributions under the Plan, the balance of each affected Participant's Accounts shall be nonforfeitable. Upon termination of the Plan, the Trustee will distribute to each Participant, Former Participant or Beneficiary, as the case may be, the value of the Participant's, Former Participant's or Beneficiary's Accounts, determined as of the Valuation Date coinciding with or immediately following the date of termination, in a single lump sum cash payment. However, if a successor plan is established within the meaning of, and within the time limits prescribed by, Section 401(k)(2)(B)(i)(II) of the Code or applicable regulations thereunder, distributions shall be made to Participants and Former Participants only in accordance with Articles 7 and 10. Upon the completion of distributions to all Participants, Former Participants or Beneficiaries, as the case may be, no Participant, Former Participant, Beneficiary or person claiming under or through them, will have any claims in respect of the Plan. 13.3 LIQUIDATION OF THE FUND The Trust and the Fund shall continue in existence after the termination of the Plan for such period of time as may be required to complete the liquidation thereof in accordance with the terms of this Article 13. ARTICLE 14 ---------- ADOPTION OF THE PLAN BY OTHER EMPLOYERS --------------------------------------- 14.1 ADOPTION WITH APPROVAL Any Affiliated Company or corporation (hereinafter referred to as "Participating Employer") may adopt and become a party to this Plan with the consent of the Company and subject to such terms and conditions as the Company may require or approve. 14.2 PROCEDURE FOR ADOPTION A Participating Employer may adopt the Plan and become an Employer hereunder by executing an instrument in writing evidencing such adoption on the order of its Board of Directors and filing a copy thereof with the Company. Upon approval of the Participating Employer's adoption of the Plan by the Company and the delivery of the instruments evidencing the Participating Employer's adoption of the Plan and the Company's approval thereof to the Trustee, the Participating Employer's adoption of the Plan shall be effective as of the date specified in said instruments. 14.3 EFFECT OF ADOPTION (a) If there is more than one Employer hereunder, the costs and expenses in connection with the Plan and Fund each year shall be shared by all Employers. (b) Each Participating Employer shall also pay for that portion of the Contribution of the Employers attributable to Pre-Tax Contributions made under the Plan by its Covered Employees but the Contributions of Employers included in an affiliated group under the Code with the Company may be paid by the Company on behalf of itself and the other Participating Employers or may be 32 40 allocated among such Participating Employers by the Company as will permit the deduction for purposes of Federal taxes. (c) Each Participating Employer, as a condition of continued participation in this Plan, delegates to the Company the sole power and authority to administer and operate the Plan, including the power and authority to: (i) Appoint and remove the Trustee; (ii) Consent to the adoption of this Plan by other Participating Employers; (iii) Amend or terminate the Plan or Trust; and (iv) Determine the amount of Employer contributions. 14.4 TERMINATION OF ADOPTION (a) Each Participating Employer may elect separately to withdraw from the Plan, but amendments may be made only by the Company. Any such withdrawal shall be expressed in an instrument in writing executed by the withdrawing Participating Employer on order of its Board of Directors and filed with the Company and the Trustee. (b) Upon withdrawal from the Plan by a Participating Employer, and subject to the provisions of ERISA, the Code, and other applicable law, the portion of the Fund attributable to the proportionate interests of the Participants affected by said termination of participation may, in the discretion of the Company: (i) Be retained in the Fund and benefits paid in accordance with the terms of the Plan in effect at the time the Participating Employer terminated its participation in the Plan; (ii) Be transferred (along with the liability for the payment of benefits) to another qualified retirement plan maintained by the Participating Employer terminating participation in the Plan; or (iii) Be dealt with in any other manner consistent with the provisions of ERISA, the Code, or other applicable law. In the event the portion of the Fund attributable to the proportionate interests of the Participants and Former Participants affected by the termination of participation of a Participating Employer is retained in the Fund, the Administrator may direct the Trustee to segregate such portion of the Fund. ARTICLE 15 ---------- LIMITATIONS OF ANNUAL ADDITIONS ------------------------------- 15.1 GENERAL LIMITATIONS Notwithstanding anything provided herein to the contrary, the maximum annual addition, as defined in Section 15.4, credited to the Accounts of a Participant for any Plan Year shall not exceed the lesser of: (a) Twenty-five percent (25%) of the Participant's compensation as defined in Code Section 415(c)(3) for that Plan Year; or (b) Thirty thousand dollars ($30,000) (or, if greater, one fourth of the dollar limitation in effect under Code Section 415(b)(1)(A)), provided that as of January 1 of each Plan Year, the dollar limitation as adjusted by the Commissioner of Internal Revenue for such Plan Year shall be substituted for the dollar amount specified in this Section 15.1(b). 33 41 15.2 EXCESS AMOUNT (a) Prior to the determination of a Participant's actual compensation for a Plan Year, the maximum annual addition for a Participant may be determined on the basis of a reasonable estimation of his/her compensation for a Plan Year with Contributions then appropriately limited. (b) If such additions exceed the maximum due to a reasonable error in estimating a Participant's annual Compensation or under other limited facts and circumstances which the Commissioner of Internal Revenue finds justifiable, such excess Post-Tax Contributions and Income shall be returned to Employees pursuant to Section 5.2 (except that the Employer Match attributable to any such Post-Tax Contributions shall be deposited in a suspense account as described below). Should an excess remain (Pre-Tax Contributions, Employer Matched Contributions, Employer SDRP Contributions), a suspense account shall be established to hold such excess and such excess shall be allocated in the succeeding Plan Year (and subsequent Plan Years as necessary) as the Employer Matched Contribution and/or Employer SDRP Contribution for all Plan Participants. 15.3 AGGREGATION OF PLANS OF THE EMPLOYER (a) If the Employer is or becomes a member of a group of employers which constitute a controlled group of corporations (within the meaning of Code Section 414(b) as modified by Code Section 415(h)) or which constitute trades or businesses under common control (within the meaning of Code Section 414(c) as modified by Code Section 415(h)) or which constitute an affiliated service group (within the meaning of Code Section 414(m)), such group of employers shall be treated as one employer for purposes of this Article 15. (b) For purposes of applying the limitation of this Article 15, all defined benefit plans (whether or not terminated) of the Employer shall be treated as one defined benefit plan and all defined contribution plans (whether or not terminated) shall be treated as one defined contribution plan. However, multi-employer plans shall not be aggregated with multi-employer plans. If an Employer maintains both a plan which is not a multi-employer plan and a plan which is a multi-employer plan, the plan which is not a multi-employer plan shall be aggregated with the multi-employer plan only to the extent that the benefits provided under the multi-employer plan are provided by such Employer with respect to the Participant. (c) If an excess amount results from the aggregation of annual additions under this Plan and under any other defined contribution plan sponsored by the Employer: (i) The excess amount shall be attributable to the plan under which annual additions were last allocated; or (ii) If annual additions were allocated on a date under this Plan which coincides with an allocation date of the other defined contribution plan, the excess amount attributable to this Plan shall be a pro rata portion of the excess amount determined by the ratio of the annual additions that would have been allocated to the Participant under this Plan to the total annual additions that would have been allocated to the Participant under all such defined contribution plans (with the ratio being determined without regard to the limitations imposed by this Article 15). 15.4 DEFINITIONS For purposes of this Article 15: (a) (i) ANNUAL ADDITION means the sum of the following amounts allocated on behalf of a Participant for a Plan Year: (A) Employer Matched Contributions; (B) Forfeitures; 34 42 (C) Pre-Tax Contributions; (D) Post-Tax Contributions; (E) Employer SDRP Contributions; (F) Partnership Share Contribution, if applicable; (G) Anniversary Share Contributions, if applicable; and (H) Amounts allocated to separate medical accounts under Code Section 415(I) and 419A(d)(2). (ii) Annual additions shall not include: (A) The forfeitures and/or Employer contributions which are used to restore a Participant's (or Beneficiary's) benefit under Section 8.4 hereof, (B) Loan repayments, or (C) Transfers of Funds from another qualified plan. (b) COMPENSATION shall be as defined in Code Section 415(c)(3). (c) DEFINED BENEFIT PLAN means a qualified plan as defined in Code Section 414(j). (d) DEFINED CONTRIBUTION PLAN means a qualified plan as defined in Code Section 414(i). (e) EXCESS AMOUNT means the excess of the Participant's annual addition for the Plan Year over the maximum annual addition permitted under this Article 15 for the Plan Year. (f) MULTI-EMPLOYER PLAN means a multi-employer plan as defined in Code Section 414(f). 15.5 TOP-HEAVY PLAN REQUIREMENTS (a) GENERAL RULE. For any Plan Year for which this Plan is a top-heavy plan as defined in Section 15.5(g) below, any other provisions of this Plan to the contrary notwithstanding, this Plan shall be subject to the following provisions: (i) The vesting provisions of Section 15.5(b) below: (ii) The minimum Contribution provisions of Section 15.5(c) below; (iii) The limitation on Compensation set by Section 15.5(c) below; and (iv) The limitation on Contributions set by Section 15.5(e) below. (b) VESTING PROVISIONS. Each Participant who has completed at least three Years of Service and has completed an Hour of Service during any Plan Year in which the Plan is a top-heavy plan shall have a nonforfeitable right to the benefit accrued under this Plan. Each Participant's nonforfeitable accrued benefit shall not be less than his/her nonforfeitable accrued benefit determined as of the last day of the last Plan Year in which the Plan was a top-heavy plan. If the Plan ceases to be top heavy, each Participant with three or more years of service, whether or not consecutive, shall have his/her nonforfeitable accrued benefit determined in accordance with this Article 15 and separately in accordance with the terms of Article 8, and such will be considered an amendment to the vesting schedule to be governed by Section 13.1(e). 35 43 (c) MINIMUM CONTRIBUTION PROVISIONS (i) Each Covered Employee who is a Non-key employee (as defined in Section 15.5(i) below) and who has not separated from service as of the last day of the Plan Year shall be entitled to have a contribution made on his/her behalf by the Employer of not less than the lesser of: (A) Three percent (3%) (the "Minimum Contribution Percentage") of the Covered Employee's Compensation for such Plan Year, or (B) The largest percentage of Compensation allocated to the Account of any Key Employee for such Plan Year. Such allocations shall include all Pre-Tax Contributions made pursuant to Section 4.1 of the Plan during such Plan Year. The contribution required by this Section 15.5(c)(i) shall be made regardless of the Non-key employee's level of compensation or whether he/she has earned credit for a 1,000 Hours of Service in the Plan Year. (ii) Where Section 15.5(c)(i) is found to apply after calculation of the amounts to be allocated has been made, Section 15.5(c)(i) shall be implemented by first reducing the Forfeitures to be allocated among the Accounts of Key Employees to the extent necessary; then by the Employer contributing an additional amount of current or accumulated profits to the extent necessary; and finally by reducing the contribution allocated to the Accounts of Key Employees and reallocating it to Non-key Employees to the extent necessary. (iii) For purposes of this Section 15.5, Compensation shall be as defined in Section 2.13 of the Plan; however, excluding any Pre-Tax Contributions made pursuant to Section 4.1. (d) LIMITATION ON COMPENSATION. Compensation taken into account under this Section 15.5 and Eligible Compensation under Article 4 for purposes of computing contributions under this Plan shall not exceed the first two hundred thousand dollars ($200,000) for any Plan Year in which the Plan is deemed to be top heavy. Such amount shall be adjusted automatically for each Plan Year to the amount prescribed by the Secretary of the Treasury or his/her delegate pursuant to regulations for the calendar year in which such Plan Year commences. (e) LIMITATION ON CONTRIBUTIONS. In the event that the Employer also maintains a defined benefit plan providing benefits on behalf of Participants in this Plan, one of the two following provisions shall apply: (i) If, for the Plan Year, this Plan would not be a top-heavy plan as defined in Section 15.5(g) below if "ninety percent (90%)" were substituted for "sixty percent (60%)," then Section 15.5(c) shall apply for such Plan Year as if amended so that "four percent (4%)" were substituted for "three percent (3%)." (ii) If, for the Plan Year, this Plan would continue to be a top-heavy plan as defined in Section 15.5(g) below if "ninety percent (90%)" were substituted for "sixty percent (60%)," then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set forth in Section 15.4 hereof for the limitation year ending in such Plan Year by substituting "1.0" for "1.25" in each place such figure appears, except with respect to any individual for whom there are no Employer contributions or accruals for such individual under the defined benefit plan. (f) COORDINATION WITH OTHER PLANS. In the event that the Employer maintains a top-heavy defined benefit plan under which contributions are provided on behalf of participants under this plan, the amount of contributions and forfeitures allocated hereunder to the account of each Non-key Employee also covered under the defined benefit plan shall be at least 5% of average annual compensation for years in the testing period. 36 44 If the plan is subject to Section 15.5(e)(ii) but the employer does not substitute "1.0" for "1.25" as required by Section 15.5(e)(ii), the amount of contributions and forfeitures allocated hereunder to such participant shall be 7-1/2% of average annual compensation during the testing period. (g) TOP-HEAVY PLAN DEFINITION. This Plan shall be a top-heavy plan for any Plan Year if, as of the determination date (as defined in Section 15.5(g)(i) below), the present value aggregate of the Accounts under the Plan for Participants (including Former Participants) who are Key Employees (as defined in Section 15.5(h) below) exceeds sixty percent (60%) of the present value of the aggregate of the Accounts of all Employees or if this Plan is required to be in an aggregation group (as defined in Section 15.5(g)(iii) below) which for such Plan Year is a top- heavy group (as defined in Section 15.5(g)(iv) below). (i) DETERMINATION DATE means for any Plan Year the last day of the immediately preceding Plan Year (except that for the first Plan Year of this Plan the determination date means the last day of such Plan Year). (ii) The present value of the aggregate of the Accounts shall be the sum of the Account balances determined as of the most recent Valuation Date that is within the 12- month period ending on the determination date, and the adjustment for contributions due as of the determination date, and as described in the Regulations under the Code, as amended. (iii) AGGREGATION GROUP means the group of plans, if any, that includes both the group of plans that are required to be aggregated and the group of plans that are permitted to be aggregated. (A) The group of plans that are required to be aggregated (the required aggregation group) includes: (1) Each plan of the Employer for a Plan Year containing the Determination Date or any of the four preceding years in which a Key Employee is a participant, including collectively bargained plans and terminated plans maintained at any time within the last five years ending on the applicable termination date; and (2) Each other plan of the Employer, including collectively bargained plans of the Employer, which enables a plan in which a Key Employee is a participant to meet the requirements of either Code Section 401(a)(4) or Code Section 410 prohibiting discrimination as to contributions or benefits in favor of Employees who are officers, shareholders, or the highly compensated, or prescribing the minimum participation standards. (B) The group of plans that are permitted to be aggregated (the permissive aggregation group) includes the required aggregation group plus any plan that is not part of the required aggregation group that the Administrator certifies as constituting a plan within the permissive aggregation group. Such plans may be added to the permissive aggregation group only if, after the addition, the aggregation group as a whole continues to meet the requirements of both Code Sections 401(a)(4) and 410. (iv) TOP-HEAVY GROUP means the aggregation group, if as of the applicable determination date, the sum of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the aggregation group plus the aggregate of the accounts of Key Employees under all defined contribution plans included in the aggregation group exceeds sixty percent (60%) of the sum of the present value of the cumulative accrued benefits for all Employees, excluding former Key Employees under all such defined benefit plans plus the aggregate accounts for all Employees, excluding former Key Employees under such defined contribution 37 45 plans. If the aggregation group that is a top-heavy group is a required aggregation group, each plan in the group will be top-heavy. If the aggregation group that is a top-heavy group is a permissive aggregation group, only those plans that are part of the required aggregation group will be treated as top heavy. If the aggregation group is not a top-heavy group, no plan within such group will be top heavy. (v) In determining whether this Plan constitutes a top-heavy plan, the Committee (or its agent) shall make the following adjustments in connection therewith: (A) When more than one plan is aggregated, the Administrator shall determine separately for each plan as of each plan's determination date the present value of the accrued benefits or account balance. The results shall then be aggregated by adding the results of each plan as of the determination dates for such plans that fall within the same calendar year. (B) In determining the present value of the cumulative accrued benefit or the amount of the account of any Employee, such present value or account shall include the amount in dollar value of the aggregate distributions made to such Employee under the applicable plan during the five-year period ending on the determination date unless reflected in the value of the accrued benefit or account balance as of the most recent Valuation Date. Such amounts shall include distributions to such Employees which represented the entire amount credited to their accounts under the applicable plan. (C) Further, in making such determination, such present value or such account shall include any rollover contribution (or similar transfer) as follows: (1) If the rollover contribution (or similar transfer) is initiated by the Employee and made to or from a plan maintained by another Employer, the plan providing the distribution shall include such distribution in the present value or such account. (2) If the rollover contribution (or similar transfer) is not initiated by the Employee or made from a plan maintained by another Employer, the plan accepting the distribution shall include such distribution in the present value or such account. The plan making the distribution shall not include the distribution in the present value or such account. (D) Further, in making such determination, in any case where an individual is a Non-key Employee, as defined in Section 15.5(i) below, with respect to an applicable plan, but was a Key Employee with respect to such plan for any prior Plan Year, any accrued benefit and any account of such Employee shall be altogether disregarded. For this purpose, to the extent that a Key Employee is deemed to be a Key Employee if he/she met the definition of Key Employee within any of the four preceding Plan Years, this provision shall apply following the end of such period of time. (E) If any individual has not performed any services for any Employer maintaining the Plan at any time during the five-year period ending on the determination date, any accrued benefit and Account of such individual shall not be taken into account. (h) KEY EMPLOYEE means any Employee, former Employee or Beneficiary of an Employee or former Employee under this Plan who, at any time during the Plan Year of the determination date or during any of the four preceding Plan Years, is or was one of the following: (i) An officer of the Employer having an annual Compensation greater than fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) for any such Plan Year. Whether an individual is an officer shall be determined by the Committee on the basis 38 46 of all the facts and circumstances, such as an individual's authority, duties and terms of office, not on the mere fact that the individual has the title of an officer. For any such Plan Year, there shall be treated as officers no more than the lesser of: (A) Fifty (50) Employees; or (B) Ten percent (10%) of the Employees or, if greater than ten percent (10%), three Employees. For this purpose, the highest paid officers shall be selected and business organizations other than corporations shall be deemed to have no officers. (ii) One of the ten Employees having annual Compensation from the Employer of more than the limitation in affect under Code Section 415(c)(1)(A) and owning (or considered as owning, in accordance with applicable principles, such as Code Section 318 or a successor provision) the largest interests in the Employer. If two Employees have the same interest in the Employer, the Employee having the greater annual Compensation from the Employer shall be treated as having a larger interest. An Employee who has some ownership interest is considered to be one of the top ten owners unless at least ten other Employees own a greater interest than that Employee. However, an Employee will not be considered a top ten owner for a Plan Year if the Employee earns less than the maximum dollar limitation on contributions and other annual additions to a Participant's Account in a defined contribution Plan under the Code, as amended, as in effect for the calendar year in which the determination date falls. (iii) Any person who owns (or is considered as owning, in accordance with applicable principles, such as Code Section 318 or a successor provision) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the combined total voting power of all stock of the Employer. (iv) Any person who owns (or is considered as owning, in accordance with applicable principles, such as Code Section 318 or a successor provision) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the combined total voting power of all stock of the Employer and receives annual Compensation from the Employer of more than one hundred and fifty thousand dollars ($150,000). For purposes of this subsection, Compensation means all items includable as compensation for purposes of applying the limitations on contributions and other annual additions to a Participant's account in a defined contribution plan and the maximum benefit payable under a defined benefit plan under the Code. (i) NON-KEY EMPLOYEE means any Employee (and any Beneficiary of an Employee) who is not a Key Employee as defined in this Section 15.5. (j) COLLECTIVE BARGAINING RULES. The provisions of Sections 15.5(b), 15.5(c) and 15.5(d) do not apply with respect to any Employee included in a unit of Employees covered by a collective bargaining agreement unless retirement benefits were the subject of good faith bargaining. ARTICLE 16 ---------- INVESTMENT OF CONTRIBUTIONS --------------------------- 16.1 INVESTMENT FUNDS The Trustee shall establish and maintain the Company Stock Fund and such other Investment Funds as are specified from time to time by the Company. In this regard, the Company may choose to offer as 39 47 Investment Funds any investment vehicles, including: (i) securities issued by investment companies advised by affiliates of the Trustee, (ii) guaranteed investment contracts chosen by the Trustee, (iii) collective investment trusts maintained by the Trustee for qualified plans and (iv) participant-managed brokerage accounts.. Each such Investment Fund shall be held and administered by the Trustee as a separate, common fund within the Trust Fund. The interest of each Participant or Former Participant under the Plan in any such Investment Fund shall be an undivided interest. Any dividends, interest, or other income received by the Trustee in respect of any Investment Fund shall be reinvested by the Trustee in that Investment Fund. 16.2 ADMINISTRATION OF COMPANY STOCK FUND Stock to be held in the Company Stock Fund shall be purchased at fair market value on the open market or from the Company through the sale of treasury Stock or the issuance of authorized but previously unissued shares at the option of the Company. Such Stock may also be obtained through the exercise of stock rights. The Trustee shall vote the shares of Stock allocated to the Accounts of each Participant or Former Participant in accordance with such Participant's or Former Participant's written instructions. If a Participant's or Former Participant's voting instructions are not received by the Trustee by the tenth day prior to any meeting of shareholders of the Company, the Trustee shall vote the shares of stock allocated to such Participant's or Former Participant's Accounts in the same proportion as those shares for which voting instructions are received by the Trustee. The Trustee shall vote the shares of Stock held in the Company Stock Fund which have not been allocated to Participants' or Former Participants' Accounts as of the record date of any meeting of shareholders of the Company in the same proportion as those allocated shares for which voting instructions are received by the Trustee. 16.2A ADMINISTRATION OF BROKERAGE ACCOUNTS The Administrator shall determine the terms, conditions, procedures and limitations applicable to Brokerage Accounts including, without limitation, (i) limitations on the types of investments which may be purchased and held in such accounts, (ii) procedures for engaging in investment transactions in such accounts, (iii) procedures for effectuating transfers to and from such accounts and other Investment Funds, (iv) the minimum balance required to open such accounts and (v) any fees to be charged with respect to such accounts. All such terms, conditions, procedures and limitations shall apply uniformly to similarly situated Participants. 16.3 DEPOSIT OF CONTRIBUTIONS All Employer Matched Contributions, Partnership Shares, Anniversary Shares, and contributions to Former PAYSOP Account shall be invested by the Trustee in the Company Stock Fund at all times. However, effective January 1, 1999, any Participant who is 100% vested in his/her Employer Matched Contribution Account may elect to transfer any portion of such Account to or from any of the Investment Funds available under the Plan in accordance with Section 16.5. All Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP Contributions and Qualified Plan Rollover Contributions and contributions to the Former Employer Supplemental Contribution Account made hereunder in respect of a Participant shall be invested by the Trustee in such Investment Funds as the Administrator shall direct based on the Participant's investment election made in accordance with Section 16.4 (or, in the case of a Participant who fails to make such an investment election, in such Investment Fund as the Administrator shall specify from time to time) and shall be credited to the Participant's Accounts in accordance with Article 6. 16.4 INVESTMENT ELECTIONS OF PARTICIPANTS Each Participant shall make an investment election in the manner prescribed by the Administrator, directing the manner in which his Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP Contributions, Qualified Plan Rollover Contributions and contributions to the Former Employer Supplemental Contribution Account shall be invested by the Trustee. Such investment election shall specify that such Pre-Tax Contributions, Post Tax Contributions, Employer SDRP Contributions, 40 48 Qualified Plan Rollover Contributions and contributions to the Former Employer Supplemental Contribution Account shall be deposited in one or more of the Investment Funds in percentages that are each an integral multiple of 1% and that in the aggregate equal 100%. Each Participant's investment election shall remain in effect until he changes it in accordance with such procedures and limitations as are prescribed by the Administrator. Each investment election change made by a Participant pursuant to this Section 16.4 shall apply only to Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP Contributions, Qualified Plan Rollover Contributions and contributions to the Former Employer Supplemental Contribution Account received by the Trustee after the change is made. Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP Contributions, Qualified Plan Rollover Contributions and contributions to the Former Employer Supplemental Contribution Account deposited in an Investment Fund pursuant to this Section 16.4 may be transferred to another Investment Fund only in accordance with Section 16.5. 16.5 ELECTION TO TRANSFER INTEREST BETWEEN INVESTMENT FUNDS Subject to Section 16.3, a Participant who has an interest in any Investment Fund may elect to transfer all or a portion of such interest to any of the other Investment Funds in accordance with such procedures and limitations as are prescribed by the Administrator. 16.6 OTHER PROVISIONS CONCERNING INVESTMENT ELECTIONS AND TRANSFERS The procedures and limitations prescribed by the Administrator pursuant to Sections 16.4 and 16.5 may include, without limitation, provisions which (i) limit transfers to specified dollar amounts or percentages (ii) limit to not less than four the number of transfers that each Participant may make each Plan Year (iii) limit to not less than four the number of investment election changes that each Participant may make each Plan Year (iv) limit the dates as of which transfers and investment election changes may become effective and (v) impose waiting periods or other restrictions in connection with multiple transfers in and out of the same Investment Fund. All such procedures and limitations shall apply uniformly to similarly situated Participants. Each investment election and investment election change made in accordance with this Article 16 and with the procedures and limitations established by the Administrator shall be given effect as soon as practicable following the date the investment election or investment election change is received by the Administrator. Each transfer request made in accordance with this Article 16 and with the procedures and limitations established by the Administrator shall be given effect within one week following the Administrator's receipt of the request. 16.7 FORMER PAYSOP ACCOUNTS Notwithstanding the first sentence of Section 16.3, a Participant who has held a Former PAYSOP Account for at least ten (10) years and who has attained age 55, may elect to transfer all or any portion of the balance of his Former PAYSOP Account from the Company Stock Fund to any of the other Investment Funds at any time. ARTICLE 17 ---------- MISCELLANEOUS PROVISIONS ------------------------ 17.1 HEADINGS The headings of the Plan have been inserted for convenience of reference only and are not to be deemed controlling in any constructions of the provisions herein (other than with respect to defined terms). 17.2 PLAN NOT CONTRACT OF EMPLOYMENT The existence of the Plan shall not create or change any contract of Employment between the Employer and its Employees, whether Participants or Former Participants hereunder or not. The right of the Employer to take corrective, disciplinary or other action with respect to its Employees, including terminating their respective Employment at any time for any reason, shall not be affected by any 41 49 provision of this Plan, and the Employer will not be deemed responsible to provide continuing Employment for any reason, at any time solely by reason of this Plan. 17.3 VESTED RIGHTS No person shall have any vested rights under the Plan except to the extent that such rights may accrue to him/her as provided under the Plan. Furthermore, any person with vested rights under the Plan shall look solely to the Plan and the assets thereunder for satisfaction of such vested rights. 17.4 SEVERABILITY If any provision of the Plan shall be invalid, such provision shall be fully severable, and the remainder of the Plan and the application thereof shall not be affected thereby. 17.5 GENERAL UNDERTAKING All parties to this Plan and any persons claiming any interest whatsoever hereunder shall perform all and any acts that may be necessary for carrying out its terms. This Plan and the acts and decisions of the parties hereto, shall be binding upon the heirs, executors, administrators, successors, and assignees of any party hereto or any persons claiming any benefit hereunder. 17.6 ACTION BY COMPANY Whenever, under the terms of the Plan or Trust Agreement, the Company is required or permitted to take action, such action may be taken, unless otherwise provided by the Plan or Trust Agreement or by action of the Board, by any officer of the Company. 17.7 NO RESPONSIBILITY FOR ACTS OF AN INSURER Neither the Employer, the Company, the Administrator nor the Trustee shall be responsible for any action or inaction of an insurer, nor shall they be required to institute legal action in connection with the same. 17.8 SPENDTHRIFT Benefits and interests under this Plan shall not be anticipated, assigned (in law or in equity), alienated, subjected to attachment, garnishment, levy, execution, or other legal or equitable process, or be otherwise subject to the claim of creditors, except under the terms of a Qualified Domestic Relations Order. 17.9 NUMBER AND GENDER Any use of the singular shall be interpreted to include the plural and the plural the singular. Any use of the masculine, feminine or neuter shall be interpreted to include the masculine, feminine and neuter, as the context shall require. 17.10 GOVERNING LAW To the extent not preempted by Federal law, the provisions of the Plan shall be construed, regulated and administered under the laws of the State of Ohio. 17.11 MERGER, CONSOLIDATION, AND TRANSFER OF ASSETS Before this Plan can be merged or consolidated with any other plan, or its assets or liabilities transferred to another plan, each Participant in the Plan must be entitled to receive a benefit immediately after the merger, transfer or consolidation (as if the Plan had then terminated) which is equal to or greater than the benefit he/she would have been entitled to receive immediately before the merger, consolidation or transfer (as if the Plan had then terminated). 42 50 17.12 RECEIPT OF ASSETS FROM QUALIFIED PLANS An Employee (whether or not otherwise a Participant) may make a rollover contribution to the Plan at any time consisting of a "Qualified Plan Rollover Contribution" or an "Individual Retirement Account Rollover Contribution" (each defined below). Any rollover contribution shall be held in the Participant's Pre-Tax Contribution Account, shall be invested in accordance with the direction of the Participant pursuant to Article 16 and shall be distributed as provided in Articles 7 and 9. "Qualified Plan Rollover Contribution" means an "eligible rollover distribution" within the meaning of Section 402(c)(4) of the Code. The Employee may transfer any portion of the cash he receives in such distribution ( or the cash proceeds of the sale of other property received in such distribution) to the trust under this Plan provided that the Administrator receives such amounts from the Employee on or before the 45th day after the day on which he received the property distributed. The maximum amount which may be transferred shall not exceed the fair market value of all the property received in the distribution reduced by (a) the sum of (i) the amount of the Employee's own contributions under such Plan and (ii) any other amounts considered as contributed by him (determined by applying Section 72(f) of the Code) less (b) any amounts previously distributed to him from such other plan and not includable in his gross income. The amount so transferred must consist of cash distributed from such other plan or any portion of the cash proceeds from the sale of distributed property other than case, to the extent permitted by Section 402(c) of the Code. "Individual Retirement Account Rollover Contribution" means the entire amount received by an Employee from an individual retirement account representing the entire amount in the account (the "qualifying amount") if no part of the amount in the account is attributable to any source other than a rollover contribution from (i) an employee's trust described in Section 401(a) of the Code, which is exempt from tax under Section 501(a) of the Code, or (ii) a qualified annuity plan meeting the requirements of Section 403(a) and any earnings on such sums. An Individual Retirement Account Rollover Contribution will be accepted only if the entire qualifying amount was received by the Employee in cash and only such cash amount is included in the Individual Retirement Account Rollover Contribution. 17.13 INTERPRETATION OF PLAN It is the intent of the Company that this Plan shall qualify under Code Section 401(a) and Code Section 501 and meet all applicable requirements of ERISA. Accordingly, the Plan and Trust Agreement shall be construed and interpreted in such manner as to give effect to this intent and shall be administered at all times and in all respects in a nondiscriminatory manner. 17.14 SATISFACTION OF CLAIMS Any payment to any Participant, Former Participant or Beneficiary in accordance with the terms of the Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder, whether they be against the Employer, the Company, the Administrator, or the Trustee, any of whom may require the Participant, Former Participant or Beneficiary (or legal representative), as a condition precedent to such payment to execute a release and receipt therefor. 17.15 SERVICE OF PROCESS The Administrator shall be the designated agent of the Plan for the service of process in connection with all matters affecting the Plan. 17.16 WARRANTIES Neither the Company, any Employer, the Administrator, nor the Trustee warrant against any loss or diminution in the value of Accounts. 43 51 17.17 LEASED EMPLOYEES Notwithstanding anything herein to the contrary, any person who, with respect to any Employer or Affiliated Company, is a leased employee shall be treated as an Employee for all Plan purposes, except eligibility to participate, entitlement to Contributions and Employer Matched Contributions and Crediting of Service. For purposes of the preceding sentence, "leased employee" means any person who provides services to a recipient, but who is not an employee of the recipient, if (i) such services are provided pursuant to an agreement between the recipient and any other person ("leasing organization") (ii) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least one (1) year and (iii) such services are of a type historically performed, in the business field of the recipient, by employees, excluding, however, any such person who (i) is covered by a plan which is maintained by the leasing organization and which 1) is a money purchase pension plan with a non-integrated employer contribution rate for each participant of at least 10% of compensation 2) is a plan that provides full and immediate vesting and 3), is a plan that permits each employee of the leasing organization (other than employees who perform substantially all of their services for the leasing organization) to immediately participate in such plan and (ii) performs services for a recipient as to which leased employees (determined without regard to the preceding provisions) do not constitute more than 20% of the recipient's non-highly compensated work force. However, if any such leased employee becomes an Employee, he shall be credited with Service for all periods that he was, with respect to any Employer or Affiliated Company, a leased employee, in accordance with and subject to the provisions and limitations of Article 11 of the Plan, as if he had been an Employee during such periods. 17.18 DIRECT ROLLOVER DISTRIBUTIONS (a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (b) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (d) Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (e) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 44 52 17.19 PLAN ADDENDA The Addendum attached hereto entitled "Addendum to The Progressive Retirement Security Program (formerly known as The Progressive Corporation Long-Term Savings Plan) ("Plan") Re: Former Participants Under The Progressive Corporation Supplemental Retirement Plan" is hereby incorporated herein by reference and made a part hereof. The Addendum attached hereto entitled "Addendum to The Progressive Retirement Security Program ("Plan") Re: Former Participants Under The Midland Companies' Employee Savings Plan" is hereby incorporated herein by reference and made a part hereof. 17.20 ADJUSTMENT In the event of any merger, reorganization, consolidation, recapitalization, share dividend, share split, combination of shares or other change in corporate structure of the Company affecting the Stock, such substitution or adjustment shall be made in the aggregate number of shares of Stock available for issuance under the Plan, and the number of shares of Stock held in the Plan, as may be approved by the Company, in its sole discretion. 17.21 USERRA MODEL AMENDMENT Notwithstanding any provision of this plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code. Loan repayments will be suspended under this plan as permitted under section 414(u) of the Internal Revenue Code. 17.22 ELECTRONIC COMMUNICATIONS Notwithstanding any provision in this Plan to the contrary, Compensation Deferral Agreements and cancellations or amendments thereto, investment elections, changes or transfers, loans, withdrawal elections, and any other decision or election by a Participant (or Beneficiary) under this Plan may be accomplished by electronic or telephonic means which are not otherwise prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Administrator or its delegates. IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers as of this 1st day of December, 1998. THE PROGRESSIVE CORPORATION By: /s/ DAVID M. SCHNEIDER --------------------------- David M. Schneider Title: Secretary --------------------------- 45 53 FIRST AMENDMENT TO THE PROGRESSIVE RETIREMENT SECURITY PROGRAM (1999 AMENDMENT AND RESTATEMENT) WHEREAS, The Progressive Retirement Security Program is currently maintained pursuant to a 1999 Amendment and Restatement ("Plan") and WHEREAS, it is deemed desirable to amend the Plan further; NOW, THEREFORE, the Plan is hereby amended in the respects hereinafter set forth: 1. Effective August 1, 1999, the following is hereby added to Section 2.16 of the Plan: "Notwithstanding anything in the Plan to the contrary, Covered Employees shall not include any person classified by an Employer or any Affiliated Company as an independent contractor or as an employee of an entity other than an Employer or Affiliated Company." IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this Amendment to be executed by its duly authorized representative, effective as of the date set forth above. THE PROGRESSIVE CORPORATION By: /s/ DAVID M. SCHNEIDER ------------------------------ Title: Secretary ------------------------------ EX-4.B 3 ex4-b.txt EXHIBIT 4(B) 1 EXHIBIT 4(b) ------------ Trust Agreement dated January 1, 1999 between the Registrant and American Express Trust Company, as amended on March 11, 1999 2 TRUST AGREEMENT BETWEEN THE PROGRESSIVE CORPORATION AND AMERICAN EXPRESS TRUST COMPANY FOR THE PROGRESSIVE RETIREMENT SECURITY PROGRAM TRUST DATED AS OF JANUARY 1, 1999 3
TABLE OF CONTENTS ----------------- SECTION PAGE - ------- ---- 1. Trust ...................................................................... 1 2. Exclusive Benefit and Reversion of Sponsor Contribution ..................................................... 2 3. Contributions to and Distributions from the Trust .......................... 2 4. Investment of Trust ........................................................ 2-7 5. Recordkeeping and Reports .................................................. 7 6. Agents, Attorneys, Actuaries, Accountants and Brokers; Trustee Compensation and Expenses; Taxes ........................ 7-8 7. Directions ................................................................. 8-9 8. Resignation or Removal of Trustee .......................................... 9 9. Successor Trustee .......................................................... 9 10. Termination ................................................................ 9 11. Continuing Assistance ...................................................... 10 12. Notices .................................................................... 10 13. Duration ................................................................... 10 14. Amendment or Modification .................................................. 10 15. Loans to Participants. ..................................................... 10 16. General .................................................................... 11 17. Governing Law. ............................................................. 11 18. Transferred Assets; Administration of Transferred Assets; Powers and Duties of Trustee ............................................. 11-12
4 TRUST AGREEMENT, dated as of the 1st day of January, 1999, between The Progressive Corporation, an Ohio corporation, having an office at 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 (the "Sponsor"), and American Express Trust Company, having an office at 1200 Northstar West, P.O. Box 534, Minneapolis, Minnesota 55440-0534 (the "Trustee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Sponsor is the sponsor (within the meaning of Section 3(16)(B) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and a fiduciary of The Progressive Retirement Security Program (the "Plan"); and WHEREAS, Progressive Casualty Insurance Company ("Administrator") has been designated as administrator (within the meaning of Section 3(16)(A) of ERISA) of the Plan; and WHEREAS, Administrator has retained American Express Trust Company to provide certain administrative services with respect to the Plan pursuant to an Administrative Services Agreement dated January 1, 1999 (the "Services Agreement"); and WHEREAS, American Express Trust Company, in its capacity as a provider of services under the Services Agreement, is referred to hereinafter in this Agreement as the "Contract Administrator"; and WHEREAS, the Sponsor wishes to establish a trust to hold and invest contributions under the Plan for the exclusive benefit of Participants in the Plan and their Beneficiaries; and WHEREAS, the Trustee is willing to hold and invest the aforesaid contributions in trust; NOW, THEREFORE, Trustee and Sponsor hereby agree as follows: SECTION 1. TRUST. The Sponsor hereby establishes a trust (the "Trust") with the Trustee. The Trust shall consist of an initial transfer of assets from the prior trustee of the Plan, such additional sums of money as shall from time to time be delivered to the Trustee under the Plan, all investments made therewith and proceeds thereof, and all earnings and profits thereon, less the payments that are made by the Trustee as provided herein. The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement. In accepting this Trust, the Trustee shall be accountable for the assets received by it, subject to the terms and conditions of this Agreement. The Sponsor and the Trustee acknowledge and agree that each is a fiduciary of the Plan to the extent provided under Section 3(21) of ERISA. Except as otherwise expressly provided herein, all capitalized terms used in this Agreement shall have the meanings ascribed to them in the Plan, as in effect from time to time. 1 5 SECTION 2. EXCLUSIVE BENEFIT AND REVERSION OF SPONSOR CONTRIBUTIONS. (a) Except as provided in the Plan and as permitted under ERISA, no part of the Trust may be used for, or diverted to, purposes other than (i) the exclusive benefit of the Participants in the Plan or their Beneficiaries and (ii) payment of reasonable expenses of administering the Plan. SECTION 3. CONTRIBUTIONS TO AND DISTRIBUTIONS FROM THE TRUST. (a) RECEIPT OF CONTRIBUTIONS. The Trustee shall receive and hold as part of the Trust such assets of the Plan as may be transferred to it from time to time and any contributions to the Plan made to the Trust from time to time. The Trustee shall not be required to determine that any contributions are in compliance with the Plan, ERISA or the Code, and shall be accountable only for the funds actually received by it. In the case of assets transferred from another trustee or any other fiduciary, the Trustee shall not be responsible for any actions or inactions of such trustee or other fiduciary either prior to or after the transfer of Trust assets. Company represents that any assets, from time to time so transferred, were part of a qualified trust at the time of the transfer. (b) DISTRIBUTIONS TO PARTICIPANTS. The Trustee shall make distributions from the Trust to such persons, in such manner, in such amounts (but not exceeding the then value of the Trust), for such purposes and subject to such tax withholding and other deductions as may be specified in the Services Agreement. The Trustee shall not be liable for making any distribution, failing to make any distribution, or discontinuing any distribution to the extent required by the Services Agreement. The Trustee shall not be required to determine or make any investigation to determine the identity or mailing address of any person entitled to benefits under the Plan, and shall be discharged of any obligation in that respect when the Trustee shall have sent checks and other papers by regular mail, postage prepaid, to such persons and at such addresses as may be furnished to the Trustee, provided that the Trustee shall promptly advise the Administrator of all returned checks and correspondence. In addition, the Trustee will promptly notify the Administrator of each uncashed check that is at least six (6) months old. (c) If the Trustee makes a duplicate disbursement in distributing Stock or cash from the Trust and such error is not the result of a force majeure or Act of God or duplicate instructions from the Administrator, the Trustee shall promptly correct the error at its expense and shall promptly reimburse the Trust for any overpayment. SECTION 4. INVESTMENT OF TRUST. (a) The Trustee is vested with title to all the assets of the Trust and shall have full power and authority to do all acts necessary to carry out its duties hereunder. Participants and Beneficiaries shall not have any right or interest in the Trust except as provided in the Plan. Prior to the time of distribution, neither a Participant nor a Beneficiary (nor a legal representative of a Participant or a Beneficiary) shall have any right, by way of anticipation or otherwise, to assign, encumber, or in any manner dispose of any interest in the Trust except as permitted under the Plan or as required by applicable law or directed by a court of competent jurisdiction. 2 6 (b) The Sponsor will direct the Trustee as to the Investment Funds to be established for investment of Trust assets in accordance with the provisions of the Plan. The Trustee does not have any duty to question any such direction, to review any Investment Fund, or to make any suggestions in connection therewith. The Trustee will promptly comply with any direction given by the Administrator. (c) The Trustee shall invest in the Investment Funds in accordance with investment directions given by the Participants and Beneficiaries for whose accounts such assets are held, to the extent so provided for in the Plan. All such directions by the Participants or Beneficiaries to the Trustee will be made in writing or by telephone or in such other manner as is mutually agreed by the Sponsor and the Trustee. Participants and Beneficiaries will be deemed fiduciaries for purposes of such investment selection. (d) Where a Participant, a Beneficiary or an Investment Manager (except the Trustee as Investment Manager of any assets as provided herein), has the power and authority to direct the investment of any assets of the Trust, the Trustee does not have any duty to question any direction, to review any securities or other property, or to make any suggestions in connection therewith. The Trustee will promptly comply with any direction given by a Participant, a Beneficiary or an Investment Manager. (e) The Trustee will not be liable in any manner or for any reason for any loss or other unfavorable investment results arising from its compliance with direction under this Section, nor be liable for failing to invest any assets of the Trust under the management and control of a Participant, a Beneficiary or an Investment Manager in the absence of investment directions regarding such assets. SECTION 4A. INVESTMENT MANAGERS. (a) The Sponsor has the power and authority to appoint one or more Investment Managers as defined in and subject to the requirements of ERISA. Each Investment Manager so appointed will have the power and authority to invest, acquire, manage or dispose of the assets of the Trust under its management and to direct the Trustee with respect to the investment, reinvestment and sale of such assets. (b) If the Sponsor elects to delegate investment authority for the assets of all or any portion of the Trust to an Investment Manager pursuant to subsection (a), the Sponsor will inform the Trustee in writing of such designation and such written notice shall describe the portion of the Trust affected. Upon receipt of such notice, the Trustee will be obligated to follow the investment directions of the Investment Manager with respect to the assets of the specified portion of the Trust until the Trustee receives written notice that such Investment Manager has resigned or has been removed or replaced by the Sponsor. The Trustee will not be a party to any agreement between the Sponsor and an Investment Manager, and will have no responsibility with respect to the terms and conditions of such agreement. (c) In exercising its authority to delegate investment authority to an Investment Manager, the Sponsor shall have the duty, responsibility and power to (i) examine and analyze the performance of prospective Investment Managers; (ii) select an Investment Manager or 3 7 Managers; (iii) determine the portion of the Trust that will be under the management of each Investment Manager; (iv) issue appropriate instructions to the Trustee and to each Investment Manager regarding the allocation of investment authority; (v) review the performance of each Investment Manager at periodic intervals; and (vi) remove any Investment Manager when the Sponsor deems such removal to be necessary or appropriate. (d) All directions by an Investment Manager to the Trustee concerning the investment, reinvestment, sale or management of assets of the Trust will be made in writing or in such other manner as is acceptable to the Trustee, by such person or persons as the Investment Manager designates in writing to the Trustee from time to time. (e) An Investment Manager who engages any investment advisor or investment counselor that it deems necessary or appropriate, may provide that directions concerning the investment and reinvestment of the assets of the Trust under its management and control to be made directly to the Trustee by such advisor or counselor as the Investment Manager's agent; provided, however, that prior to any such direction by the investment advisor or investment counselor, the Trustee receives written notice from the Investment Manager that the directions of such agent will be considered the directions of the Investment Manager and that the Investment Manager will be responsible for the directions of such agent. (f) If an Investment Manager resigns or is removed by the Sponsor, the Sponsor will notify the Trustee in writing of such resignation or removal. Upon actual receipt of such notice, the power and authority to invest and reinvest the assets of the Trust formerly under the control and management of the Investment Manager will return to the Sponsor unless the Sponsor indicates that a successor Investment Manager has been appointed with respect to such assets. (g) The fees and expenses of each Investment Manager, except to the extent paid by the Sponsor, shall be paid from the Trust, provided that no fees not expressly provided for in this Agreement shall be paid to the Trustee with respect to its activities as an Investment Manager under Section 4C. SECTION 4B. INVESTMENT IN COLLECTIVE FUNDS. When so directed by the Administrator or pursuant to investment directions given by Participants or Beneficiaries pursuant to Section 4, the Trustee shall invest and reinvest all or a portion of the Trust through any common or collective trust fund or pooled investment fund, including collective investment funds maintained by American Express Trust Company or its successor, for the collective investment of funds held by it in a fiduciary capacity. The 1998 Amended and Restated Declaration of Trust creating the American Express Trust Collective Investment Funds for Employee Benefit Trusts ("Declaration of Trust") is hereby incorporated by reference and made a part of this Agreement. Notwithstanding any other provision of this Agreement, the Trustee may commingle the designated assets from the Trust with the money of trusts created by others, by causing such assets to be invested as a part of any one or more of the collective funds created by the Declaration of Trust and assets of this Trust so added to any of the collective funds at any time shall be subject to all of the provisions of the Declaration of Trust as it is amended from time to time. Notwithstanding the foregoing, the provisions of this Section shall apply only as long as such collective or pooled investment fund remains exempt from 4 8 taxation under Section 501(a) of the Code and the qualified status of the Plan and the tax exempt status of the Trust are not thereby affected adversely. SECTION 4C. TRUSTEE AS INVESTMENT MANAGER The Sponsor hereby appoints Trustee to serve as Investment Manager with respect to the Investment Funds set forth in Exhibit A, which Exhibit may be amended from time to time by mutual agreement of the parties (said Investment Funds hereinafter referred to as the "Account"): Trustee shall have full discretionary authority to formulate and execute an investment program for the management and investment of the Account, including the authority to: (a) buy, sell, exchange, convert or otherwise trade in any stocks, bonds and other investments including money market instruments and investment contracts; and (b) place orders for the execution of such investment transactions with or through such brokers, dealers or issuers as Trustee may select; and (c) request the issuance of average price confirmations by participating brokers. Such authority shall be subject to the terms and conditions of this Agreement, the provisions of the Declaration of Trust with respect to any assets in the collective funds as provided in Section 4B. of this Trust Agreement and any written investment objectives and guidelines that are executed by the Sponsor and accepted by the Trustee. Such guidelines are incorporated herein by reference. To the extent the Trustee is an Investment Manager, it shall invest and reinvest the principal and income of the Account with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. SECTION 4D. OTHER INVESTMENT PROVISIONS. (a) Purchases and sales of Company Stock may be made to, from or through any source, provided that such purchases from, or sales to, a party in interest (as defined in Section 3(14) of ERISA) shall comply with the requirements of Section 408(c) of ERISA. Rights, options or warrants offered to purchase Company Stock shall be exercised by the Trustee to the extent that there is cash available for the investment; to the extent cash is not available, the same shall be sold on the open market. (b) Neither the Trustee, the Sponsor nor the Administrator shall be liable for any loss which arises from any Participant's directions, investment elections, investment election changes, transfers or exercise or non-exercise of rights under the Plan pertaining to the assets in the Participant's Accounts. (c) The Trustee shall have the following powers and authority: 5 9 (i) Subject to the preceding provisions of this Agreement, to sell, exchange, convey, transfer, or otherwise dispose of any property held in the Trust, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or other property delivered to the Trustee or to inquire into the validity, expediency, or propriety of any such sale or other disposition. (ii) To cause any securities or other property held as part of the Trust to be registered in the Trustee's own name, in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are, and such investments shall at all times be, part of the Trust. (iii) To make, execute, acknowledge and deliver any and all documents of transfer or conveyance necessary to carry out the powers herein granted. (iv) With the Sponsor's prior written consent (which shall not be unreasonably withheld) (1) to settle, compromise or submit to arbitration any claims, debts or damages due to or arising from the Trust, (2) to commence or defend suits or legal or administrative proceedings, (3) to represent the Trust in all suits and legal and administrative hearings, and (4) to pay all reasonable expenses arising from any such action from the Trust, if not paid by the Sponsor; provided that the Trustee has given the Sponsor prompt notice of all such matters and has permitted the Sponsor to participate in all related activities. Notwithstanding the foregoing provisions of this Section 4D(e)(v), where the Trustee must take an action with respect to a claim, suit, or other legal, administrative or regulatory proceeding in order to fulfill its fiduciary responsibilities under ERISA, the Trustee need not obtain the Sponsor's prior written consent as provided above, but the Trustee shall give the Sponsor as much prior notice of the Trustee's proposed actions as circumstances permit. (v) To borrow money from any lender to cover temporary overdrafts to the extent such overdrafts are necessary to facilitate transfers among, or distributions from, any of these Investment Funds. (vi) To hold any part of the Trust assets in cash without liability for interest, pending the payment of expenses or making of distributions therewith, notwithstanding the Trustee's receipt of "float" from such uninvested cash. (vii) To do all other acts although not specifically mentioned herein, as the Trustee may deem necessary to carry out any of the foregoing powers and the purposes of the Trust. (d) The Administrator has assigned to the Participants the right to vote proxies or exercise other rights of ownership with respect to all Investment Funds except Investment Funds for which American Express Trust Company is the Investment Manager. Unless otherwise agreed in writing: (i) the Administrator shall be responsible for distributing proxies and proxy related materials to the Participants and (ii) the Trustee shall deliver or cause to be delivered to the Administrator or the designated Investment Manager, all notices, prospectuses and finance statements relating to investments held hereunder. Except for those Trust assets for which American Express Trust Company is the Investment Manager, the Trustee shall not vote any proxy or tender offer election, participate in any voting trust, exercise any option, or subscription 6 10 right or join in, dissent from or oppose any merger, reorganization, consolidation, liquidation or sale with respect to any asset held hereunder except in accordance with the timely written instructions of the Participants. Solely for this purpose, each Participant shall act as the Named Fiduciary, as defined in ERISA, in providing direction to the Trustee. Unless contrary to the terms of the Plan, and to the extent practicable, all unallocated assets or investments held hereunder, and all assets or investments for which the Trustee has not received instructions, shall, solely for the purposes of this Section be allocated to the account of each Participant who has issued instructions to the Trustee, in the same proportion as such Participant's allocated proportion of assets or investments bear to the aggregate of all like assets or investments for which instructions have been issued by the Participant to the Trustee. SECTION 5. RECORDKEEPING AND REPORTS. (a) The Trustee shall keep accurate accounts of all investments, receipts, disbursements and other transactions hereunder. All records generated by the Trustee shall be open to inspection and audit, during the Trustee's regular business hours prior to the termination of this Agreement, by the Sponsor, the Administrator or any person designated by the Sponsor. If the Sponsor or the Administrator becomes aware of any errors or discrepancies in such records, it will promptly advise the Trustee. (b) Except as otherwise required by law, the Contract Administrator shall be responsible for the preparation and filing of all returns, reports and information required of the Trust or Plan by law. The Trustee promptly shall provide the Contract Administrator with such information in the Trustee's possession or control as the Contract Administrator may reasonably request to make these filings. SECTION 6. AGENTS, ATTORNEYS, ACTUARIES, ACCOUNTANTS AND BROKERS; TRUSTEE COMPENSATION AND EXPENSES; TAXES. (a) The Trustee, the Sponsor and the Administrator are empowered to employ such agents, attorneys (including attorneys who may be counsel for the Sponsor), actuaries, accountants and brokers as they, or any of them, may deem necessary or proper in connection with the maintenance and administration of the Trust. The Trustee shall pay out of the Trust the reasonable compensation and expenses of such agents, attorneys, actuaries, accountants and brokers, except to the extent such compensation and expenses are paid by the Sponsor or the Administrator; provided that the Trustee, the Sponsor and the Administrator shall be responsible for their own attorneys fees and expenses incurred in the negotiation and preparation of this Agreement and further provided that, in the case of agents, attorneys, actuaries, accountants and brokers employed by the Sponsor or Administrator, such payments will only be made by the Trustee as directed by the Sponsor or Administrator. (b) The Trustee shall be entitled to such reasonable compensation for its services as is provided for in the Services Agreement. The Trustee will, as part of its compensation for services provided to the Plan, receive the earnings from any uninvested cash awaiting investment into or distribution from the Trust. The Company agrees that the Trust may hold such uninvested cash without incurring any liability for the payment of earnings on such uninvested cash. 7 11 (c) As directed by the Sponsor or Administrator, the Trustee is empowered to pay out of the Trust, as a general charge thereon, any and all taxes of whatsoever nature assessed on or in respect to the Trust; provided, however, that, if the Sponsor notifies the Trustee in writing that in the opinion of the Sponsor's counsel any such tax is not lawfully assessed, the Trustee, if so requested by the Sponsor, shall contest the validity of such tax in any manner deemed appropriate by the Sponsor or its counsel. The word "taxes", as used herein, shall be deemed to include any interest or penalties assessed in respect to such taxes. Unless the Trustee first shall be indemnified to its reasonable satisfaction by the Sponsor, the Trustee shall not be required to contest the validity of any tax, to institute, maintain or defend against any other action or proceeding or to incur any other expense in connection with the Trust, except to the extent that the Trust is sufficient therefor. SECTION 7. DIRECTIONS. (a) Except as otherwise agreed in writing between the Trustee and the Sponsor or Administrator, any action under this Agreement required to be taken by the Sponsor or the Administrator shall be by written direction of any individual authorized by the Sponsor's Chairman, President, Chief Executive Officer, Chief Human Resources Officer, Chief Financial Officer or Chief Legal Officer in substantially the form of Exhibit B attached hereto, unless the Trustee has received actual written notice from any of such officer that such individual's authority has been withdrawn. The Trustee may rely on any such written direction which it reasonably believes to bear the genuine signature of the authorized individual, which writing may include a facsimile transmission. Notwithstanding anything herein to the contrary, the Sponsor or the Administrator may delegate any of its responsibilities hereunder to a representative by giving to the Trustee in writing a letter which identifies the representative and sets forth the list of the Trustee's responsibilities under this Agreement that the Trustee has authorized the representative to carry out. (b) The Sponsor shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, expense and reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon or asserted against the Trustee by reason of any claim, regulatory proceeding or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all loss, damage, penalty, liability, cost, expense, and reasonable attorneys' fees and disbursements, to the extent arising from the Trustee's negligence in performing or failing to perform any of the duties specifically allocated to the Trustee under the terms of this Agreement or from the Trustee's willful misconduct or bad faith. The Trustee agrees to indemnify and hold the Sponsor and Administrator harmless from and against any loss, damage, penalty, liability, cost and expense and reasonable attorneys' fees and disbursements incurred by the Sponsor or Administrator to the extent arising from the Trustee's negligence in performing or failing to perform any of the duties specifically allocated to the Trustee under the terms of this Agreement or from the Trustee's willful misconduct or bad faith. 8 12 (c) Notwithstanding the foregoing, nothing in this Agreement shall limit the liability of American Express Trust Company in its capacity as Contract Administrator under the Services Agreement. (d) The provisions of this Section 7 shall survive the termination of this Agreement. SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee may resign at any time upon three hundred sixty-five (365) days' notice in writing to the Sponsor, unless a shorter period of notice is agreed upon by the Sponsor. (b) The Sponsor may remove the Trustee at any time upon one hundred eighty (180) days' notice in writing to the Trustee, unless a shorter period of notice is agreed upon by the Trustee. SECTION 9. SUCCESSOR TRUSTEE. (a) If the office of Trustee becomes vacant for any reason, the Sponsor may in writing appoint a successor trustee under this Agreement. The successor trustee shall have all of the rights, powers, privileges, obligations, duties, liabilities and immunities granted to the Trustee under this Agreement. The successor trustee and predecessor trustee shall not be liable for the acts or omissions of the other with respect to the Trust. (b) When the successor trustee accepts its appointment under this Agreement, title to and possession of the Trust assets shall immediately vest in the successor trustee without any further action on the part of the predecessor trustee. The predecessor trustee shall execute all instruments and do all acts that reasonably may be necessary or reasonably may be requested in writing by the Sponsor or the successor trustee to vest title to all Trust assets in the successor trustee or to deliver all Trust assets to the successor trustee as promptly as possible. (c) Any successor of the Trustee or successor trustee, through sale or transfer of the business or trust department of the Trustee or successor trustee, or through reorganization, consolidation, or merger, or any similar transaction, shall, upon consummation of the transaction, become the successor trustee under this Agreement. SECTION 10. TERMINATION. This Agreement may be terminated at any time by the Sponsor upon sixty (60) days' notice in writing to the Trustee. On the date of the termination of this Agreement, the Trustee shall forthwith transfer and deliver to such individuals or entities as the Sponsor shall designate, all cash and assets then constituting the Trust. If, by the termination date, the Sponsor has not notified the Trustee in writing as to whom the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate action or proceeding for leave to deposit the assets and cash in a court of competent jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and expenses of the action or proceeding including, without limitation, reasonable attorneys' fees and disbursements. 9 13 SECTION 11. CONTINUING ASSISTANCE. Following the appointment of a successor trustee under Section 9 or the termination of this Agreement under Section 10, the Trustee shall provide such follow-up and transition assistance as the Sponsor may reasonably request, including, but not limited to, providing additional copies of Form 1099Rs and cashed distribution checks, related to activity occurring during the years that the Trustee was trustee, provided however, the Trustee shall not be required to produce any information, accounts or copies of Form 1099Rs or checks which are more than seven years old. SECTION 12. NOTICES. Except as otherwise expressly provided herein, all notices required or permitted to be given under this Agreement must be in writing and mailed to the party to which the notice is being given by certified or registered mail, return receipt requested, or overnight courier with next day delivery guaranteed, to the Sponsor at 6300 Wilson Mills Road, Mayfield Village, Ohio 44143, Attn: Marilyn A. Muzic, with a copy to Michael R. Uth, Progressive Casualty Insurance Company, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 and to the Trustee at 1200 Northstar West, P.O. Box 534, Minneapolis, Minnesota 55440-0534, Attn: Team for Progressive Corp., or to such other persons and addresses as the parties provided notice in the foregoing manner. SECTION 13. DURATION. This Trust shall continue in effect without limit as to time, subject, however, to the provisions of this Agreement relating to amendment, modification and termination thereof. SECTION 14. AMENDMENT OR MODIFICATION. Subject to the provisions of Section 2, this Agreement may be amended at any time and from time to time only by an instrument executed by both the Sponsor and the Trustee. Any such amendment shall be approved on behalf of the Sponsor by its Board of Directors; provided, however, that any such amendment which is required by law to be made or which will not require the Sponsor or any Employer to make contributions other than compensation reduction contributions in respect of the Plan may be approved by the Sponsor's Chairman, President or Chief Executive Officer and such officer's execution of such amendment shall be deemed to be conclusive evidence that any and all requisite approvals in respect of such amendment have been obtained. SECTION 15. LOANS TO PARTICIPANTS. Loans to Participants as provided for in the Plan shall be granted and administered by the Contract Administrator in accordance with guidelines provided from time to time by the Administrator. The Trustee shall distribute cash to such Participants who are granted loans in such amount and at such times as the Contract Administrator shall from time to time direct. Loan payments collected by the Sponsor or Contract Administrator shall be forwarded to the Trustee. The Contract Administrator shall give the Trustee instructions on how to handle loan disbursements and repayments. The Trustee shall have no responsibility to ascertain whether a loan complies with the provisions of the Plan, for the decision to grant a loan or for the collection and repayment of a loan. The Contract Administrator shall maintain the market value of the outstanding loans and the Trustee shall have no responsibility with respect thereto. 10 14 SECTION 16. GENERAL. (a) ENTIRE AGREEMENT. This Agreement contains all of the terms agreed upon between the parties with respect to the subject matter hereof. (b) WAIVER. No waiver by either party of any failure or refusal to comply with any obligation hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply. (c) SUCCESSORS AND ASSIGNS. The stipulations in this Agreement shall inure to the benefit of, and shall bind, the successors and assigns of the respective parties. (d) PARTIAL INVALIDITY. If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. (e) SECTION HEADINGS. The headings of the various sections and subsections of this Agreement have been inserted only for the purposes of convenience of reference and are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. SECTION 17. GOVERNING LAW. (a) The validity, construction, effect and administration of this Agreement shall be governed by and interpreted in accordance with the laws of the State of Minnesota, except to the extent those laws are superseded by ERISA. (b) The Trustee is not a party to the Plan and in no event shall the terms of the Plan, either expressly or by implication, be deemed to impose upon the Trustee any power or responsibility other than those set forth in this Agreement. The Trustee may assume until advised to the contrary that the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended, or under corresponding provision of subsequent federal tax laws. The Trustee shall be accountable for contributions made to the Plan and included among the assets of the Trust but shall have no duty to determine whether the contributions comply with the provisions of the Plan or of ERISA. SECTION 18. TRANSFERRED ASSETS; ADMINISTRATION OF TRANSFERRED ASSETS; POWERS AND DUTIES OF TRUSTEE. (a) There will, from time to time, subsequent to December 31, 1997, be delivered to the Trustee certain assets ("Midland Assets") previously held pursuant to the Midland Companies' Employee Savings Plan ("Midland Plan"). All such Midland Assets shall be held, administered 11 15 and disbursed by the Trustee as part of the Trust, pursuant to the provisions of this Agreement, as in effect from time to time once received by the Trustee. (b) The Trustee will have no duty to verify whether the amount of any such Midland Assets delivered to it is correct, and shall have no duty of inquiry into the prior administration of the Midland Plan or funding for the Midland Plan. (c) Such Midland Assets shall be invested in such investment funds as the Sponsor shall direct, based on each Participant's investment election then in effect pursuant to the Plan, if any, and if no investment election is then in effect as to any Participant, such Midland Assets relating to such Participant shall be invested in an investment fund consisting of guaranteed investment contracts or a similar successor investment fund until the Sponsor directs otherwise based on a subsequent investment election of the Participant. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. THE PROGRESSIVE CORPORATION By: /s/ DAVID M. SCHNEIDER ----------------------------------- Title: Secretary --------------------------------- AMERICAN EXPRESS TRUST COMPANY By: /s/ TARA L. STONEHOUSE ----------------------------------- Title: Vice President ---------------------------------- 12/17/98 12 16 EXHIBIT A Pursuant to Section 4C hereof, American Express Trust is appointed as Investment Manager of the following Funds: American Express Trust Stable Capital Fund II American Express Trust Short - Term Horizon (25:75) Fund American Express Trust Bond Index Fund II American Express Trust Medium - Term Horizon (50:50) Fund American Express Trust Long - Term Horizon (80:20) Fund American Express Trust Equity Index Fund III American Express Trust Small Cap Equity Index Fund II 17 EXHIBIT "B" _______________________________ _______________________________ _______________________________ _______________________________ Re: The Progressive Retirement Security Program Dear Mr. __________________________________ : This letter is sent to you in accordance with Section ____________ of the Trust Agreement, dated as of _________ , 1998, between The Progressive Corporation and American Express Trust Company. I hereby designate _____________, _____________, and ______________________, as the individuals who may provide directions to you pursuant to the Agreement. Only one such individual need provide any direction. The signature of each designated individual is set forth below and certified to be such. You may rely upon each designation and certification set forth in this letter until you receive a written notice of the termination of authority of a designated individual. Very truly yours, __________________________________ By:__________________________________ Title:_______________________________ [signature of designated individual] ----------------------------------- [name of designated individual] ------------------------------ [signature of designated individual] ----------------------------------- [name of designated individual] ------------------------------ [signature of designated individual] ----------------------------------- [name of designated individual] ------------------------------ 18 AMENDMENT NO. 1 TO THE TRUST AGREEMENT BETWEEN THE PROGRESSIVE CORPORATION AND AMERICAN EXPRESS TRUST COMPANY FOR THE PROGRESSIVE RETIREMENT SECURITY PROGRAM TRUST This Amendment No.1 to the Trust Agreement between The Progressive Corporation and American Express Trust Company for the Progressive Retirement Security Program Trust is made and entered into this 11 day of March 1999, by and between American Express Trust Company, a Minnesota trust company, ("American Express Trust"), and The Progressive Corporation, a corporation organized under the laws of the State of Ohio (the "Company"). WITNESSETH THAT: --------------- WHEREAS, American Express Trust and the Company are parties to Trust Agreement made effective, initially, January 1, 1999, with respect to the Progressive Retirement Security Program (the "Plan"); and WHEREAS, the Company has maintained and continues to maintain the Plan for the benefit of certain of its employees; and NOW THEREFORE, in consideration of the mutual covenants set forth in the Trust Agreement, it is agreed by the parties hereto that the Trust Agreement is hereby amended as follows, effective April 1, 1999, with all other provisions which are not herein amended, remaining in full force. FIRST: A new Section 19 is hereby added to the Trust Agreement, as follows: "SECTION 19. DIRECTED BROKERAGE ACCOUNTS (a) Notwithstanding anything to the contrary, this Section 19 supercedes any conflicting provision as it relates to a Participant's Directed Brokerage Account. (b) The Company directs the Trustee to deduct the brokerage fee and other related fees and expenses charged to each Participant from the Participant's Directed Brokerage Account. (c) In the case of a class action lawsuit, proceeds from the class action for any Participant or former Participant who no longer has an account in the Plan shall be held in the default investment fund in a segregated or separate account. 1 19 (d) The Trustee shall have no responsibility for any proxy or tender offer relating to securities held in the Directed Brokerage Account. Each Participant in a Directed Brokerage Account shall be responsible for completing the appropriate proxy or tender offer materials and returning them directly to the proxy solicitor or the entity stated in the tender offer materials respectively, for tabulation and vote submission. If no proxy or tender offer materials are timely received, such election or tender offer shall not be voted or exercised. The Trustee shall not bear any responsibility for the tabulation, voting, submission, recordation or maintenance of records relative to the proxy vote or tender offer. (e) The Trustee will not act as trustee of any assets in a Participant's Directed Brokerage Account which consist of any of the following: i) securities that do not have a stated market value, such as closely held stock; ii) debt instruments (bonds, preferred stock) of American Express Company; iii) limited partnerships; iv) assets that require an advance or loan, including but not limited to a margin account; v) securities issued by the Company or its affiliates; vi) options." SECOND: Section 3(c) is hereby deleted and replaced with the following: (c) If the Trustee makes a duplicate disbursement in distributing cash, Stock, or other securities from the Trust and such error is not the result of a force majeure or act of God or duplicate instructions from the Administrator, the Trustee shall promptly correct the error at its expense and shall promptly reimburse the Trust for any overpayment. IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the Trust Agreement between the Progressive Corporation and American Express Trust Company for the Progressive Retirement Security Program Trust as of the date first written above. THE PROGRESSIVE CORPORATION AMERICAN EXPRESS TRUST COMPANY SIGNED: /S/ DAVID M. SCHNEIDER SIGNED: /S/ TARA L. STONEHOUSE -------------------------------- ------------------------ TITLE: Secretary TITLE: Vice President --------------------------------- ------------------------ PRESIDENT DATE: 3/11/99 DATE: 4/5/99 --------------------------------- ----------------------- 2 EX-4.C 4 ex4-c.txt EXHIBIT 4(C) 1 EXHIBIT 4(c) ------------ Amended Articles of Incorporation, as amended, of the Registrant (incorporated by reference to Registration Statement No. 333-51613, filed with the Commission on May 1, 1998; see Exhibit 4(c) therein) EX-4.D 5 ex4-d.txt EXHIBIT 4(D) 1 EXHIBIT 4(d) ------------ Code of Regulations of the Registrant 2 CODE OF REGULATIONS OF THE PROGRESSIVE CORPORATION (as amended April 25, 1997) ARTICLE I Meetings of Shareholders ------------------------ Section 1. ANNUAL MEETINGS. The annual meeting of shareholders shall be held at such time and on such date in the month of April of each year (beginning in 1972) as may be fixed by the board of directors and stated in the notice of the meeting, for the election of directors the consideration of reports to be laid before such meeting and the transaction of such other business as may properly come before the meeting. Section 2. SPECIAL MEETINGS. Special meetings of the shareholders shall be called upon the written request of the president, the directors by action at a meeting, a majority of the directors acting without a meeting, or of the holders of shares entitling them to exercise twenty-five percent (25%) of the voting power of the corporation entitled to vote thereat. Calls for such meetings shall specify the time, place, and purposes thereof. No business other than that specified in the call shall be considered at any special meeting. Section 3. NOTICES OF MEETINGS. Unless waived, written notice of each annual or special meeting stating the time, place, and the purposes thereof shall be given by personal delivery or by mail to each shareholder of record entitled to vote at or entitled to notice of the meeting, not more than sixty (60) days nor less than seven (7) days before any such meeting. If mailed, such notice shall be directed to the shareholder at his address as the same appears upon the records of the corporation. Any shareholder, either before or after any meeting, may waive any notice required to be given by law or under these Regulations. Section 4. PLACE OF MEETINGS. Meetings of shareholders shall be held at the principal office of the corporation unless the board of directors determines that a meeting shall be held at some other place within or without the State of Ohio and causes the notice thereof to so state. Section 5. QUORUM. The holders of shares entitling them to exercise a majority of the voting power of the corporation entitled to vote at any meeting, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at such meeting; provided, however, that no action required by law or by the Articles of Incorporation or these Regulations to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class may be authorized or taken by a lesser proportion. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time, until a quorum shall be present. 1 3 Section 6. RECORD DATE. The board of directors may fix a record date for any lawful purpose, including, without limiting the generality of the foregoing, the determination of shareholders entitled to (i) receive notice of or to vote at any meeting, (ii) receive payment of any dividend or distribution, (iii) receive or exercise rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to any contract right with respect thereto, or (iv) participate in the execution of written consents, waivers or releases. Said record date, which shall not be a date earlier than the date on which the record date is fixed, shall not be more than sixty (60) days preceding the date of such meeting, the date fixed for the payment of any dividend or distribution or the date fixed for the receipt or the exercise of rights, as the case may be. If a record date shall not be fixed, the record date for the determination of shareholders who are entitled to notice of, or who are entitled to vote at, a meeting of shareholders, shall be the close of business on the date next preceding the day on which notice is given, or the close of business on the date next preceding the day on which the meeting is held, as the case may be. Section 7. PROXIES. A person who is entitled to attend a shareholders' meeting, to vote thereat, or to execute consents, waivers or releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of his other rights, by proxy or proxies appointed by a writing signed by such person. ARTICLE II Directors --------- Section 1. NUMBER AND CLASSIFICATION OF DIRECTORS. The number of directors of the corporation, none of whom need to be a shareholder or resident of the State of Ohio, shall be ten, and such directors shall be divided into three classes as nearly equal in number as possible, to be known as Class I, Class II and Class III. The classes shall be elected to staggered terms. The shareholders, acting by the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation on such proposal, may, from time to time, increase or decrease the number of directors, but in no case shall the number of directors be fewer than five or more than twelve nor shall any decrease in the number of directors shorten the term of any director then in office. In case of any increase in the number of directors, the directors then in office may select the class or classes to which the additional directors shall be assigned, provided that the directors shall be distributed among the several classes as nearly equally as possible. Section 2. ELECTION OF DIRECTORS. Directors shall be elected at the annual meeting of shareholders, but when the annual meeting is not held or directors are not elected thereat, they may be elected at a special meeting called and held for that purpose. Such election shall be by ballot whenever requested by any shareholder entitled to vote at such election; but, unless such request is made, the election may be conducted in any manner approved at such meeting. At each meeting of shareholders for the election of directors, the persons receiving the greatest number of votes shall be directors. Section 3. TERM OF OFFICE. The term of office for each director shall be three years and the members of one class of directors shall be elected annually to serve for such term; except that, 2 4 initially or whenever necessary, a director may be elected for a shorter term in order to provide for a proper rotation of directors. At the 1997 Annual Meeting of Shareholders, Class I directors shall be elected for a term expiring at the 1998 Annual Meeting of Shareholders, Class II directors shall be elected for a term expiring at the 1999 Annual Meeting of Shareholders and Class III directors shall be elected for a term expiring at the 2000 Annual Meeting of Shareholders. Each director shall hold office until the annual meeting of shareholders coinciding with the termination of the term of the class of directors to which he or she was elected and until his or her successor shall be elected and qualified or until his or her earlier resignation, removal from office or death. Section 4. REMOVAL. All directors, or all directors of a particular class, or any individual director may be removed from office, without assigning any cause, by the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation with respect to the election of directors, provided that unless all the directors, or all the directors of a particular class, are removed, no individual director shall be removed if the votes of a sufficient number of shares are cast against his or her removal which, if cumulatively voted at an election of all the directors, or all the directors of a particular class, as the case may be, would be sufficient to elect at least one director. In case of any such removal, a new director may be elected at the same meeting for the unexpired term of each director removed. Section 5. VACANCIES. Vacancies in the board of directors may be filled for the remainder of the unexpired term by a majority vote of the remaining directors. The directors appointed to fill such vacancies shall be assigned to such class or classes as the directors then in office shall determine, provided that the directors shall be distributed among the several classes as nearly equally as possible. Any director appointed to fill a vacancy in the board shall serve until the expiration of the term of the class of directors to which he or she has been appointed and until his or her successor shall be elected and qualified. Section 6. QUORUM AND TRANSACTION OF BUSINESS. A majority of the whole authorized number of directors shall constitute a quorum for the transaction of business, except that a majority of the directors in office shall constitute a quorum for filling a vacancy on the board. Whenever less than a quorum is present at the time and place appointed for any meeting of the board, a majority of those present may adjourn the meeting from time to time, until a quorum shall be present. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board. Section 7. ANNUAL MEETING. Annual meetings of the board of directors shall be held immediately following annual meetings of the shareholders, or as soon thereafter as is practicable. If no annual meeting of the shareholders is held, or if directors are not elected thereat, then the annual meeting of the board of directors shall be held immediately following any special meeting of the shareholders at which directors are elected, or as soon thereafter as is practicable. If such annual meeting of directors is held immediately following a meeting of the shareholders, it shall be held at the same place at which such meeting of shareholders was held. Section 8. REGULAR MEETINGS. Regular meetings of the board of directors shall be held at such times and places, within or without the State of Ohio, as the board of directors may, by resolution or by-law, from time to time, determine. The secretary shall give notice of each such resolution or bylaw to any director who was not present at the time the same was adopted, but no further notice of such regular meeting need be given. 3 5 Section 9. SPECIAL MEETINGS. Special meetings of the board of directors may be called by the chairman of the board or the president to be held at such times and places within or without the State of Ohio as the person calling such meeting shall specify. In addition, any two members of the board of directors may call special meetings of the board of directors to be held at the principal office of the corporation at such times as they may specify. Section 10. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Notice of the time and place of each annual or special meeting shall be given to each director by the secretary or by the person or persons calling such meeting. Such notice need not specify the purpose or purposes of the meeting and may be given in any manner or method and at such time so that the director receiving it may have reasonable opportunity to attend the meeting. Such notice shall, in all events, be deemed to have been properly and duly given if mailed at least forty-eight (48) hours prior to the meeting and directed to the residence of each director as shown upon the secretary's records. The giving of notice shall be deemed to have been waived by any director who shall attend and participate in such meeting and may be waived, in a writing, by any director either before or after such meeting. Section 11. COMPENSATION. The directors, as such, shall be entitled to receive such reasonable compensation for their services as may be fixed from time to time by resolution of the board, and expenses of attendance, if any, may be allowed for attendance of each annual, regular or special meeting of the board. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of the executive committee or of any standing or special committee may by resolution of the board be allowed such compensation for their services as the board may deem reasonable, and additional compensation may be allowed to directors for special services rendered. Section 12. BY-LAWS. For the government of its actions, the board of directors may adopt by-laws consistent with the Articles of Incorporation and these Regulations. Section 13. NOTIFICATION OF NOMINATIONS. Subject to the rights of the holders of any class or series of stock of the corporation having a preference over the Common Shares as to dividends or upon liquidation to elect directors under specified circumstances, nominations for the election of directors may be made only by the Board of Directors or a committee of the Board of Directors or, subject to this Section 13, by any shareholder of record entitled to vote in the election of directors generally. A shareholder of record entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting of shareholders only if written notice of such shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation and has been received by the Secretary of the corporation on or before the following dates, as applicable: (i) with respect to an election to be held at an annual meeting of shareholders, 60 days in advance of such meeting, or (ii) with respect to an election to be held at a special meeting of shareholders, the close of business on the tenth day following the date on which notice of such meeting is first given to shareholders. For purposes of this Section 13, notice shall be deemed to be first given to shareholders when disclosure of such date is first made in a press release reported by the Dow Jones News Services, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. 4 6 Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination or nominations; (b) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) the name, address and principal occupation or employment of each person to be so nominated; (d) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and (e) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, as then in effect, had the nominee been nominated, or intended to be nominated, by the Board of Directors. To be effective, each notice of intent to make a nomination given hereunder must be accompanied by the written consent of each such nominee to serve as a director of the corporation if elected. The presiding officer at the meeting may refuse to acknowledge the nomination of any person or persons not made in compliance with the provisions hereof and may declare at such meeting that any such nomination was not properly brought before the meeting and shall not be considered. ARTICLE III Committees ---------- Section 1. EXECUTIVE COMMITTEE. The board of directors may from time to time, by resolution passed by a majority of the whole board, create an executive committee of three or more directors, the members of which shall be elected by the board of directors to serve during the pleasure of the board. If the board of directors does not designate a chairman of the executive committee, the executive committee shall elect a chairman from its own number. Except as otherwise provided herein and in the resolution creating an executive committee, such committee shall, during the intervals between the meetings of the board of directors, possess and may exercise all of the powers of the board of directors in the management of the business and affairs of the corporation, other than that of filling vacancies among the directors or in any committee of the directors. The executive committee shall keep full records and accounts of its proceedings and transactions. All action by the executive committee shall be reported to the board of directors at its meeting next succeeding such action and shall be subject to control, revision and alteration by the board of directors, provided that no rights of third persons shall be prejudicially affected thereby. 5 7 Vacancies in the executive committee shall be filled by the directors, and the directors may appoint one or more directors as alternate members of the committee who may take the place of any absent member or members at any meeting. Section 2. MEETINGS OF EXECUTIVE COMMITTEE. Subject to the provisions of these Regulations, the executive committee shall fix its own rules of procedure and shall meet as provided by such rules or by resolutions of the board of directors, and it shall also meet at the call of the president, the chairman of the executive committee or any two members of the committee. Unless otherwise provided by such rules or by such resolutions, the provisions of Section 10 of Article II relating to the notice required to be given of meetings of the board of directors shall also apply to meetings of the executive committee. A majority of the executive committee shall be necessary to constitute a quorum. The executive committee may act in a writing, or by telephone with written confirmation, without a meeting, but no such action of the executive committee shall be effective unless concurred in by all members of the committee. Section 3. OTHER COMMITTEES. The board of directors may by resolution provide for such other standing or special committees as it deems desirable, and discontinue the same at pleasure. Each such committee shall have such powers and perform such duties, not inconsistent with law, as may be delegated to it by the board of directors. The provisions of Section 1 and Section 2 of this Article shall govern the appointment and action of such committees so far as consistent, unless otherwise provided by the board of directors. Vacancies in such committees shall be filled by the board of directors or as the board of directors may provide. ARTICLE IV OFFICERS Section 1. GENERAL PROVISIONS. The board of directors shall elect a president, such number of vice presidents as the board may from time to time determine, a secretary and a treasurer and, in its discretion, a chairman of the board of directors. The board of directors may from time to time create such offices and appoint such other officers, subordinate officers and assistant officers as it may determine. The president, any vice president who succeeds to the office of the president, and the chairman of the board shall be, but the other officers need not be, chosen from among the members of the board of directors. Any two of such offices, other than that of president and vice president, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity. Section 2. TERM OF OFFICE. The officers of the corporation shall hold office during the pleasure of the board of directors, and, unless sooner removed by the board of directors, until the organization meeting of the board of directors following the date of their election and until their successors are chosen and qualified. The board of directors may remove any officer at any time, with or without cause. A vacancy in any office, however created, shall be filled by the board of directors. 6 8 ARTICLE V DUTIES OF OFFICERS Section 1. CHAIRMAN OF THE BOARD. The chairman of the board, if one be elected, shall preside at all meetings of the board of directors and shall have such other powers and duties as may be prescribed by the board of directors. Section 2. PRESIDENT. The president shall be the chief executive officer of the corporation and shall exercise supervision over the business of the corporation and over its several officers, subject, however, to the control of the board of directors. He shall preside at all meetings of shareholders, and, in the absence of the chairman of the board, or if a chairman of the board shall not have been elected, shall also preside at meetings of the board of directors. He shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes, and other instruments requiring his signature; and shall have all the powers and duties prescribed by Chapter 1701 of the Revised Code of Ohio and such others as the board of directors may from time to time assign to him. Section 3. VICE PRESIDENTS. The vice presidents shall have such powers and duties as may from time to time be assigned to them by the board of directors or the president. At the request of the president, or in the case of his absence or disability, the vice president designated by the president (or in the absence of such designation, the vice president designated by the board) shall perform all the duties of the president and, when so acting, shall have all the powers of the president. The authority of vice presidents to sign in the name of the corporation certificates for shares and deeds, mortgages, bonds, agreements, notes and other instruments shall be coordinate with like authority of the president. Section 4. SECRETARY. The secretary shall keep minutes of all the proceedings of the shareholders and board of directors and shall make proper record of the same, which shall be attested by him; shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes, and other instruments executed by the corporation requiring his signature; shall give notice of meetings of shareholders and directors; shall produce on request at each meeting of shareholders a certified list of shareholders arranged in alphabetical order; shall keep such books as may be required by the board of directors; and shall have such other powers and duties as may from time to time be assigned to him by the board of directors or the president. Section 5. TREASURER. The treasurer shall have general supervision of all finances; he shall receive and have in charge all money, bills, notes, deeds, leases, mortgages and similar property belonging to the corporation, and shall do with the same as may from time to time be required by the board of directors. He shall cause to be kept adequate and correct accounts of the business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, together with such other accounts as may be required, and upon the expiration of his term of office shall turn over to his successor or to the board of directors all property, books, papers and money of the corporation in his hands; and shall have such other powers and duties as may from time to time be assigned to him by the board of directors or the president. 7 9 Section 6. ASSISTANT AND SUBORDINATE OFFICERS. The board of directors may appoint such assistant and subordinate officers as it may deem desirable. Each such officer shall hold office during the pleasure of the board of directors, and perform such duties as the board of directors or the president may prescribe. The board of directors may, from time to time, authorize any officer to appoint and remove subordinate officers, to prescribe their authority and duties, and to fix their compensation. Section 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any officer of the corporation, or for any other reason the board of directors may deem sufficient, the board of directors may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director. ARTICLE VI INDEMNIFICATION AND INSURANCE Section 1. INDEMNIFICATION. The corporation shall indemnify each director, officer and employee and each former director, officer and employee of the corporation, and each person who is serving or has served at its request as a director, officer or employee of another corporation, against expenses, judgements, decrees, fines, penalties or amounts paid in settlement in connection with the defense of any past, pending or threatened action, suit or proceeding, criminal or civil, to which he was, is or may be made a party by reason of being or having been such director, officer or employee, provided a determination is made (i) by the directors of the corporation acting at a meeting at which a quorum consisting of directors who neither were nor are parties to or threatened with any such action, suit or proceeding is present, or (ii) by the shareholders of the corporation at a meeting held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation on such proposal or without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on such proposal, that (a) such director, officer or employee was not, and has not been adjudicated to have been, negligent or guilty of misconduct in the performance of his duty to the corporation of which he is or was a director, officer or employee, (b) he acted in good faith in what he reasonably believed to be the best interest of such corporation, and (c) in any matter the subject of a criminal action, suit or proceeding, he had no reasonable cause to believe that his conduct was unlawful. Expenses of each person indemnified hereunder incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding (including all appeals) or threat thereof, may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors, whether a disinterested quorum exists or not, upon receipt of an undertaking by or on behalf of the director, officer or employee to repay such expenses unless it shall ultimately be determined that he is entitled to be indemnified by the corporation. The foregoing rights of indemnification shall not be deemed exclusive of, or in any way to limit, any other rights to which any person indemnified may be, or may become, entitled apart from the provisions of this Article VI. 8 10 Section 2. LIABILITY INSURANCE. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or designated agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or designated agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article or of Chapter 1701 of the Ohio Revised Code. ARTICLE VII CERTIFICATES FOR SHARES Section 1. FORM AND EXECUTION. Certificates for shares, certifying the number of full-paid shares owned, shall be issued to each shareholder in such form as shall be approved by the board of directors. Such certificates shall be signed by the president or a vice president and by the secretary or an assistant secretary or the treasurer or an assistant treasurer; provided however, that if such certificates are countersigned by a transfer agent and/or registrar the signatures of any of said officers and the seal of the corporation upon such certificates may be facsimiles, engraved, stamped or printed. If any officer or officers, who shall have signed, or whose facsimile signature shall have been used, printed or stamped on any certificate or certificates for shares, shall cease to be such officer or officers, because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates, if authenticated by the endorsement thereon of the signature of a transfer agent or registrar, shall nevertheless be conclusively deemed to have been adopted by the corporation by the use and delivery thereof and shall be as effective in all respects as though signed by a duly elected, qualified and authorized officer or officers, and as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be an officer or officers of the corporation. Section 2. REGISTRATION OF TRANSFER. Any certificate for shares of the corporation shall be transferable in person or by attorney upon the surrender thereof to the corporation or any transfer agent therefor (for the class of shares represented by the certificate surrendered of a certificate), properly endorsed for transfer and accompanied by such assurances as the corporation or such transfer agent may require as to the genuineness and effectiveness of each necessary endorsement. Section 3. LOST, DESTROYED OR STOLEN CERTIFICATES. A new share certificate or certificates may be issued in place of any certificate theretofore issued by the corporation which is alleged to have been lost, destroyed or wrongfully taken upon (i) the execution and delivery to the corporation by the person claiming the certificate to have been lost, destroyed or wrongfully taken of an affidavit of that fact, specifying whether or not, at the time of such alleged loss, destruction or taking, the certificate was endorsed, and (ii) the furnishing to the corporation of indemnity and other assurances satisfactory to the corporation and to all transfer agents and registrars of the class of shares represented by the certificate against any and all losses, damages, costs, expenses or liabilities to which they or any of them may be subjected by reason of the issue and delivery of such new certificate or certificates or in respect of the original certificate. Section 4. REGISTERED SHAREHOLDERS. A person in whose name shares are of record on the 9 11 books of the corporation shall conclusively be deemed the unqualified owner and holder thereof for all purposes and to have capacity to exercise all rights of ownership. Neither the corporation nor any transfer agent of the corporation shall be bound to recognize any equitable interest in or claim to such shares on the part of any other person, whether disclosed upon such certificate or otherwise, nor shall they be obliged to see to the execution of any trust or obligation. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall end on the 31st day of December in each year, or on such other date as may be fixed from time to time by the board of directors. ARTICLE IX SEAL The board of directors may provide a suitable seal containing the name of the corporation. If deemed advisable by the board of directors, duplicate seals may be provided and kept for the purposes of the corporation. ARTICLE X AMENDMENTS These Regulations may be amended or repealed at any meeting of shareholders called for that purpose by the affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power of the corporation with respect to such proposal, except that the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation with respect to any such proposal shall be required to amend, alter, change or repeal Sections 1, 3, 4, 5 or 13 of Article II or this Article X. 10 EX-5 6 ex5.txt EXHIBIT 5 1 EXHIBIT 5 --------- Opinion of Baker & Hostetler LLP 2 Exhibit 5 July 12, 2000 The Progressive Corporation 6300 Wilson Mills Road Mayfield Village, Ohio 44143 Re: The Progressive Retirement Security Program Gentlemen: We have acted as counsel to The Progressive Corporation, an Ohio corporation (the "Company"), in connection with the Company's Registration Statement on Form S-8 (the "Registration Statement") filed under the Securities Act of 1933, as amended, relating to the offering of up to 1,000,000 Common Shares, $1.00 par value (the "Common Shares"), of the Company pursuant to The Progressive Retirement Security Program (the "Plan") and interests in the Plan to be offered and sold pursuant to the Plan. We have examined the Plan and such documents, records and matters of law as we deem necessary for purposes of this opinion and, based thereon, we are of the opinion that: 1. The interests in the Plan, when offered to participants in the Plan in accordance with the terms of the Plan, will be legally issued; and 2. The Common Shares of the Company which may be issued, transferred or sold by the Company to the Plan will be, when issued, transferred or sold in accordance with the terms of the Plan, duly authorized, legally issued, fully paid and nonassessable so long as the issuance or sale of any newly issued Common Shares, or the transfer or sale of any Common Shares held as treasury shares, is duly authorized by the Company's Board of Directors prior to any such issuance, transfer or sale. We hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement on Form S-8 and to the reference to our firm under the caption "Legal Matters" in the prospectus which is a part of such Registration Statement. Very truly yours, Baker & Hostetler LLP EX-23.A 7 ex23-a.txt EXHIBIT 23(A) 1 EXHIBIT 23(a) ------------- Consent of PricewaterhouseCoopers L.L.P., Independent Accountants 2 Exhibit 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- To the Board of Directors and Shareholders, The Progressive Corporation: We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated January 25, 2000 relating to the financial statements and financial statement schedules of The Progressive Corporation which appears in The Progressive Corporation's Annual Report on Form 10-K for the year ended December 31, 1999. PRICEWATERHOUSECOOPERS LLP Cleveland, Ohio July 12, 2000 EX-23.B 8 ex23-b.txt EXHIBIT 23(B) 1 EXHIBIT 23(b) ------------- Consent of Baker & Hostetler LLP (included in Exhibit 5) EX-24.A 9 ex24-a.txt EXHIBIT 24(A) 1 EXHIBIT 24(a) ------------- Powers of Attorney 2 Powers of Attorney POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 7, 2000 /s/ Peter B. Lewis ------------------------------------ Peter B. Lewis Chairman, President, Chief Executive Officer and Director 3 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: June 29, 2000 /s/ Charles B. Chokel ----------------------------------------- Charles B. Chokel Chief Executive Officer - Investments and Capital Management and a Director 4 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 10, 2000 /s/ Glenn M. Renwick ----------------------------------- Glenn M. Renwick Chief Executive Officer - Insurance Operations and a Director 5 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 7, 2000 /s/ W. Thomas Forrester, II ------------------------------------- W. Thomas Forrester, II Treasurer and Chief Financial Officer 6 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 7, 2000 /s/ R. Steven Kestner --------------------------- R. Steven Kestner Secretary 7 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 7, 2000 /s/ Jeffrey W. Basch --------------------------- Jeffrey W. Basch Chief Accounting Officer 8 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: June 29, 2000 /s/ Milton N. Allen --------------------------- Milton N. Allen Director 9 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 5, 2000 /s/ B. Charles Ames --------------------------- B. Charles Ames Director 10 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 4, 2000 /s/ James E. Bennett, III -------------------------- James E. Bennett, III Director 11 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 5, 2000 /s/ Charles A. Davis -------------------------- Charles A. Davis Director 12 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: July 5, 2000 /s/ Stephen R. Hardis --------------------------- Stephen R. Hardis Director 13 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for her and in her name, place and stead, in any and all capacities, as attorney-in-fact and agent, her signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as she might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: June 29, 2000 /s/ Janet Hill --------------------------- Janet Hill Director 14 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS THAT: The undersigned officer and/or director of The Progressive Corporation, an Ohio corporation (the "Company"), has made, constituted and appointed, and by this instrument does make, constitute and appoint, Jeffrey W. Basch, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and Michael R. Uth, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to affix for him and in his name, place and stead, in any and all capacities, as attorney-in-fact and agent, his signature to a Registration Statement on Form S-8 or other form in order to register under the Securities Act of 1933, as amended, up to 1,000,000 of the Company's Common Shares, $1.00 par value, issuable under The Progressive Retirement Security Program, and to any and all amendments, post-effective amendments and exhibits to such Registration Statement, and to any and all applications, instruments and other documents pertaining thereto, giving and granting unto each such attorney-in-fact and agent full power and authority to do and perform any and all acts and things whatsoever necessary or appropriate to be done in and about the premises, as fully for all intents and purposes as he might or could do if personally present, and hereby ratifying and confirming all that each such attorney-in-fact and agent, or any such substitute or substitutes, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed in the capacities and on the date indicated below. Date: June 29, 2000 /s/ Norman S. Matthews --------------------------- Norman S. Matthews Director EX-24.B 10 ex24-b.txt EXHIBIT 24(B) 1 EXHIBIT 24(b) ------------- Resolutions of the Board of Directors of the Registrant as to Power of Attorney, certified by Secretary of the Registrant 2 RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE PROGRESSIVE CORPORATION RESOLVED, that the Company be and hereby is authorized and empowered to direct the trustee of The Progressive Retirement Security Program, as heretofore supplemented and amended (the "Plan"), to acquire all Common Shares, $1.00 par value per share, of the Company ("Common Shares") to be held in the Plan's Company Stock Fund at fair market value on the open market or directly from the Company through the issuance of authorized but previously unissued shares or treasury shares; and FURTHER RESOLVED, that the Common Shares of the Company to be issued in accordance with the terms and provisions of the Plan shall be duly authorized and issued, fully paid and non-assessable Common Shares of the Company, free of any shareholder preemptive rights; and FURTHER RESOLVED, that the Chairman of the Board, the President, any Vice President, the Treasurer and the Secretary of the Company (the "Authorized Officers") be, and each of them with full power to act without the others is, hereby authorized and empowered to prepare or cause to be prepared, and to execute and file or cause to be executed and filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), for and on behalf of the Company, one or more Registration Statements on Form S-8, or such other available form or forms as may be approved by any such officer, (including one or more prospectuses, prospectus supplements, all exhibits and other documents relating thereto) (individually and collectively, the "Registration Statement") with respect to the registration of an additional 1,000,000 Common Shares of the Company to be offered under the terms of the Plan (with such changes, including, but not limited to, the number of Common Shares to be registered and other changes of a substantive nature) as any such officer or officers shall approve, which approval shall be shown conclusively by execution of the Registration Statement; and FURTHER RESOLVED, that the Authorized Officers be, and each of them with full power to act without the others is, hereby authorized and empowered, for and on behalf of the Company, to prepare or cause to be prepared and to execute or cause to be executed such amendments (including post-effective amendments) and supplements to the Registration Statement as they, or any of them, may deem necessary or desirable, or as may be required by the Commission; to cause such amendments and supplements, when duly executed (if required), to be filed with the Commission; and to do all such other acts and things and to execute and deliver all such other documents as they, or any of them, may deem necessary or desirable in order to cause the Registration Statement to comply with the Act and the rules and regulations promulgated by the Commission pursuant thereto (the "Rules and Regulations") and to become effective under the Act and the Rules and Regulations; and 3 FURTHER RESOLVED, that when the registration of the Common Shares with the Commission on the Registration Statement has become effective, the Authorized Officers be, and each of them with full power to act without the others is, hereby authorized and empowered, for and on behalf of the Company, to execute, deliver and file any and all documents and to do any and all things, as may be necessary or proper to carry out the offer and sale of the Common Shares under the Plan; and FURTHER RESOLVED, that R. Steven Kestner, or such other individual as may hereafter be named by the Executive Committee and designated to the Commission in his stead, is hereby named as the person authorized to receive service of all notices, orders, communications and other documents which may be issued or sent by the Commission in connection with the Registration Statement and any and all amendments and supplements thereto, with all the powers consequent upon such designation under the Rules and Regulations; and FURTHER RESOLVED, that Jeffrey W. Basch, Charles B. Chokel, W. Thomas Forrester, R. Steven Kestner, Dane A. Shrallow and David M. Schneider be, and each of them hereby is, appointed as the attorney-in-fact and agent of the Company, with full power of substitution and resubstitution, for and in the name, place and stead of the Company, to sign, attest and file the Registration Statement for registration of the Common Shares to be issued pursuant to the Plan, and any and all amendments and supplements to such Registration Statement, and any and all applications or other documents to be filed with the Commission and any and all applications or other documents to be filed with any governmental or private agency or official relative to the issuance of the Common Shares, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary to be done in the premises, hereby ratifying and approving the acts of such attorneys or any such substitute or substitutes and, without implied limitation, including in the above the authority to do the foregoing things on behalf of the Company in the name of the person so acting or on behalf and in the name of any duly authorized officer of the Company; and the Authorized Officers be, and each of them with full power to act without the others is, hereby authorized and empowered for and on behalf of the Company to execute a Power of Attorney evidencing the foregoing appointment; and FURTHER RESOLVED, that any director or officer of the Company required by law to affix his or her signature to the Registration Statement and any and all amendments and supplements thereto may affix his or her signature personally, or by any attorney-in-fact, duly constituted in writing by said director or officer to sign his or her name thereto; and FURTHER RESOLVED, that Jeffrey W. Basch, Charles B. Chokel, R. Steven Kestner, W. Thomas Forrester, David M. Schneider and Dane A. Shrallow be, and each of them with full power to act without the others is, hereby authorized to sign the Registration Statement, and any and all amendments and supplements to the Registration Statement, on behalf of and as attorneys-in-fact for the principal executive officer, principal accounting officer, principal financial officer or any other officer of the Company, including, without limitation, the President, 4 Treasurer and Secretary, and on behalf of and as attorneys-in-fact for each director of the Company; and FURTHER RESOLVED, that each of the officers of the Company and its attorneys, Messrs. R. Steven Kestner, David M. Schneider, Dane A. Shrallow and Michael R. Uth be, and each of them with full power to act without the others is, hereby authorized and empowered to appear on behalf of the Company before the Commission in connection with any matters relating to the Registration Statement and all amendments and supplements thereto; and FURTHER RESOLVED, that the Authorized Officers be, and each of them with full power to act without the others is, hereby authorized and empowered, in the name and on behalf of the Company, to take any and all action which they, or any of them, deem necessary or advisable in order to obtain a permit, register or qualify the Common Shares for issuance, or to request an exemption from registration of the Common Shares, or to register or obtain a license for the Company as a dealer or broker, under the securities laws of such states of the United States of America and of such foreign jurisdictions as such officers may deem advisable, and in connection with such registrations, permits, licenses, qualifications and exemptions to execute, acknowledge, verify, deliver, file and publish or cause to be published all such applications, reports, resolutions, surety bonds, consents to service of process, appointments of attorneys to receive service of process, powers of attorney and other papers and instruments, and to take any and all further action, which they, or any of them, may deem necessary or advisable to order to maintain such registration or qualification in effect for as long as they may deem to be in the best interests of the Company or as required by law; and that the execution by any such officer or officers of any such document or the taking of any such action in connection with the foregoing matters shall be deemed to be conclusive evidence that such officer or officers deem(s) the taking of any such action to be necessary or proper and in the best interests of the Company and approves such action; and FURTHER RESOLVED, that the preparation, execution and delivery to the New York Stock Exchange of a Listing Application or a Supplemental Listing Application (including all exhibits and supporting material) to list 1,000,000 additional Common Shares to be issued under the Plan be, and it hereby is, authorized and approved; and that the Authorized Officers of the Company and its attorneys-in-fact, Messrs. Jeffrey W. Basch, Charles B. Chokel, R. Steven Kestner, W. Thomas Forrester, David M. Schneider and Dane A. Shrallow be, and each of them with full power to act without the others is, hereby authorized and empowered to make application for such listings and, in connection therewith, to execute, in the name and on behalf of the Company, and under its corporate seal or otherwise, and to file or deliver all such applications, statements, certificates, agreements and other instruments and documents as shall be necessary or desirable to accomplish such listing, with authority to make such changes (which may be of a substantive nature) in any such listing application or other documents and in any agreements that may be made in connection therewith as, in his or her discretion, may be necessary to comply with the requirements for or to otherwise obtain such listing; and that such officers and attorneys be, and each of them with full power to 5 act without the others is, hereby authorized to appear on behalf of the Company before the appropriate committee or body of the New York Stock Exchange, Inc., as such appearance may be required; and FURTHER RESOLVED, that the authority of National City Bank ("NCB"), as transfer agent and registrar for the Company's outstanding Common Shares be, and is hereby extended to include the original issue and the transfer and registration from time to time of the Common Shares to be issued under the Plan; and FURTHER RESOLVED, that for the purpose of the original issue or transfer of Common Shares by the Company under the Plan as aforesaid, or the transfer of Common Shares by any trustee under the Plan, NCB, as transfer agent and registrar for the Common Shares, be, and is hereby, authorized and directed to (i) countersign as such transfer agent by manual or facsimile signature stock certificates for such Common Shares when such certificates shall be delivered to such transfer agent duly executed on behalf of the Company, (ii) procure as registrar of the Common Shares the registration of such certificates, and (iii) deliver such certificates, when so countersigned and registered, to the trustee under the Plan or other person entitled thereto as set forth in the order or orders of the Company for the issuance or transfer of such Common Shares; and FURTHER RESOLVED, that the Board of Directors of the Company hereby adopts and incorporates by reference any form of specific resolution to carry into effect the purpose and intent of the foregoing resolutions, or covering authority included in matters authorized in the foregoing resolutions, including forms of resolutions in connection therewith that may be required by the Commission, the New York Stock Exchange, the National Association of Securities Dealers, Inc., and any state, institution, person or agency, and the Secretary of the Company is hereby directed to insert a copy thereof in the minute book of the Company following this written action and to certify the same as having been duly adopted thereby; and FURTHER RESOLVED, that the Authorized Officers be, and each of them with full power to act without the others is, hereby authorized and empowered to do or cause to be done all such acts or things, to pay or cause to be paid all fees and expenses, and to make, execute and deliver or cause to be made, executed and delivered, all such agreements, documents, instruments and certificates, in the name of and on behalf of the Company or otherwise, as they, or any of them, may deem necessary, advisable or appropriate to effectuate or carry out the purposes and intent of the foregoing resolutions; and FURTHER RESOLVED, that any and all actions heretofore or hereafter taken by any of the Authorized Officers within the terms of the foregoing resolutions be and are hereby ratified and confirmed as the authorized acts and deeds of the Company. I, R. Steven Kestner, do hereby certify that I am the duly elected, qualified and acting Secretary of The Progressive Corporation, an Ohio corporation (the "Company"); that I have custody of the official records 6 of the Company; and that the foregoing is a true, correct, and complete copy of the resolutions duly adopted by the Board of Directors of the Company at a Meeting held on December 17, 1999, and that said resolutions are valid and binding, and have not been amended, modified or rescinded, and are in full force and effect on the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary and affixed the seal of the Company on the 12th day of July, 2000. [SEAL] /s/ R. Steven Kestner ------------------------ R. Steven Kestner Secretary -----END PRIVACY-ENHANCED MESSAGE-----