10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements.
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II — OTHER INFORMATION
	Item 6.  Exhibits and Reports on Form 8-K.
SIGNATURES
EXHIBIT INDEX
EX-10(A) W. Thomas Forrester Employment Agreement
EX-10(B) Brian J. Passell Employment Agreement
EX-10(C) Charles E. Jarrett Employment Agreement
EX-10(D) Glenn M. Renwick Employment Agreement
EX-10(E) Richard H. Watts Employment Agreement
EX-10(F) Raymond M. Voelker Employment Agreement
EX-10(G) Robert T. Williams Employment Agreement
EX-10(H) Alan R. Bauer Employment Agreement
EX-10(I) Executive Separation Allowance Plan

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1O-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended                      September 30, 2001                     

or

[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______________________ to _________________________

Commission File Number                1-9518

THE PROGRESSIVE CORPORATION
(Exact name of registrant as specified in its charter)

Ohio	34-0963169
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6300 Wilson Mills Road, Mayfield Village, Ohio	44143
(Address of principal executive offices)	(Zip Code)

(440) 461-5000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Shares, $1.00 par value: 73,306,933 outstanding at September 30, 2001

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.
The Progressive Corporation and Subsidiaries
Consolidated Statements of Income
(unaudited)

				Three Months								Nine Months
									%							%
Periods Ended September 30,				2001			2000		Change			2001			2000			Change
(millions - except per share amounts)
Revenues
Premiums earned				$	1,832.9		$	1,615.5		13		$	5,262.6		$	4,716.4				12
Investment income					103.6			99.2		4			305.1			284.0				7
Net realized gains (losses) on security sales					(83.2	)		32.3	NM				(88.8	)		(9.3	)			855
Service revenues					6.8			5.0		36			17.6			15.2				16
	Total revenues				1,860.1			1,752.0		6			5,496.5			5,006.3				10
Expenses
Losses and loss adjustment expenses					1,307.6			1,317.9		(1	)		3,901.7			3,971.7				(2	)
Policy acquisition costs					222.4			198.4		12			636.5			587.1				8
Other underwriting expenses					171.3			125.9		36			485.3			398.3				22
Investment expenses					2.1			3.4		(38	)		9.3			7.3				27
Service expenses					5.6			5.5		2			14.9			16.3				(9	)
Interest expense					12.9			19.8		(35	)		38.0			59.7				(36	)
	Total expenses				1,721.9			1,670.9		3			5,085.7			5,040.4				1
Net Income (Loss)
Income (loss) before income taxes					138.2			81.1		70			410.8			(34.1	)		NM
Provision (benefit) for income taxes					41.8			22.3		87			124.1			(32.2	)		NM
Net income (loss)				$	96.4		$	58.8		64		$	286.7		$	(1.9	)		NM
Computation of Earnings Per Share
Basic:
Average shares outstanding					73.6			73.3		—			73.7			73.1				1
			Per share	$	1.31		$	.80		64		$	3.89		$	(.03	)		NM
Diluted:
Average shares outstanding					73.6			73.3		—			73.7			73.1				1
Net effect of dilutive stock options					1.4			1.0		40			1.3			1.1				18
		Total equivalent shares			75.0			74.3		1			75.0			74.2				1
			Per share(1)	$	1.29		$	.79		63		$	3.82		$	(.03	)		NM

NM = Not Meaningful

(1) Since the Company reported a net loss for the nine months ended September 30, 2000, the calculated diluted earnings per share was
antidilutive; therefore, basic earnings per share is disclosed.

See notes to consolidated financial statements.

2

The Progressive Corporation and Subsidiaries
Consolidated Balance Sheets
(unaudited)

				September 30,						December 31,
(millions)				2001			2000			2000
Assets Investments:
	Available-for-sale:
			Fixed maturities, at market (amortized cost:
			$5,392.8, $4,939.8 and $4,741.9)	$	5,570.1		$	4,907.1		$	4,784.1
			Equity securities, at market Preferred stocks (cost: $786.1, $705.7 and $806.3)		834.3			710.9			813.7
			Common stocks (cost: $1,284.5, $1,097.1 and $1,141.3)		1,218.0			1,202.9			1,198.7
		Short-term investments, at amortized cost (market: $307.6, $244.1 and $186.8)			307.6			244.1			186.8
			Total investments		7,930.0			7,065.0			6,983.3
Cash					23.4			19.2			8.9
Accrued investment income					66.3			60.0			64.2
Premiums receivable, net of allowance for doubtful accounts of $42.7, $41.2 and $42.0					1,573.4			1,829.1			1,567.0
Reinsurance recoverables					206.6			248.1			237.7
Prepaid reinsurance premiums					73.8			100.5			95.7
Deferred acquisition costs					328.8			349.9			309.9
Income taxes					112.9			281.7			241.1
Property and equipment, net of accumulated depreciation of $370.1, $296.3 and $315.5					506.6			496.4			504.5
Other assets					36.4			43.6			39.3
			Total assets	$	10,858.2		$	10,493.5		$	10,051.6
Liabilities and Shareholders’ Equity
Unearned premiums				$	2,795.4		$	2,951.3		$	2,636.5
Loss and loss adjustment expense reserves					3,177.0			2,918.1			2,986.4
Accounts payable and accrued expenses					1,035.5			780.0			810.1
Debt					749.1			1,049.1			748.8
			Total liabilities		7,757.0			7,698.5			7,181.8
Shareholders’ equity:
	Common Shares, $1.00 par value (treasury shares of 9.8, 9.8 and 9.6)				73.3			73.3			73.5
	Paid-in capital				541.1			501.6			511.2
	Accumulated comprehensive income:
		Net unrealized appreciation on investment securities			103.3			50.9			69.5
		Other			(4.8	)		(9.0	)		(4.8	)
	Retained earnings				2,388.3			2,178.2			2,220.4
			Total shareholders’ equity		3,101.2			2,795.0			2,869.8
			Total liabilities and shareholders’ equity	$	10,858.2		$	10,493.5		$	10,051.6

See notes to consolidated financial statements.

3

The Progressive Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

Nine Months Ended September 30,					2001			2000
(millions)
Cash Flows From Operating Activities
	Net income (loss)				$	286.7		$	(1.9	)
		Adjustments to reconcile net income (loss) to net cash provided by operating activities:
				Depreciation and amortization		58.2			58.1
				Net realized losses on security sales		88.8			9.3
			Changes in:
				Unearned premiums		158.9			169.9
				Loss and loss adjustment expense reserves		190.6			501.9
				Accounts payable and accrued expenses		150.9			71.8
				Prepaid reinsurance premiums		21.9			(12.2	)
				Reinsurance recoverables		31.1			6.6
				Premiums receivable		(6.4	)		(68.3	)
				Deferred acquisition costs		(18.9	)		(6.5	)
				Income taxes		110.0			(37.4	)
				Tax benefit from exercise of stock options		15.8			7.4
				Other, net		30.2			(1.7	)
				Net cash provided by operating activities		1,117.8			697.0
Cash Flows From Investing Activities
	Purchases:
			Available-for-sale: fixed maturities			(3,683.8	)		(3,131.6	)
				equity securities		(1,603.0	)		(859.1	)
	Sales:
			Available-for-sale: fixed maturities			2,686.7			2,487.1
				equity securities		1,354.2			610.8
	Maturities, paydowns, calls and other:
			Available-for-sale: fixed maturities			334.9			308.6
				equity securities		20.4			25.1
	Net purchases of short-term investments					(120.8	)		(15.1	)
	Payable on securities					74.5			2.5
	Purchases of property and equipment					(60.6	)		(103.0	)
				Net cash used in investing activities		(997.5	)		(674.7	)
Cash Flows From Financing Activities
	Proceeds from exercise of stock options					20.9			13.4
	Dividends paid to shareholders					(15.5	)		(14.6	)
	Acquisition of treasury shares					(111.2	)		(17.8	)
	Other, net					—			1.7
			Net cash used in financing activities			(105.8	)		(17.3	)
	Increase in cash					14.5			5.0
	Cash, January 1					8.9			14.2
	Cash, September 30				$	23.4		$	19.2

See notes to consolidated financial statements.

4

The Progressive Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

     Note 1 Basis of Presentation — These financial statements and the notes thereto should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2000.

The consolidated financial statements reflect all normal recurring adjustments which were, in the opinion of management, necessary to present a fair statement of the results for the interim periods. The results of operations for the period ended September 30, 2001, are not necessarily indicative of the results expected for the full year.

     Note 2 Supplemental Cash Flow Information — The Company paid income taxes of $2.3 million and $0 during the nine months ended September 30, 2001 and 2000, respectively. Total interest paid was $42.2 million and $62.5 million during the nine months ended September 30, 2001 and 2000, respectively.

     Note 3 Debt — Debt at September 30 consisted of:

	2001				2000
			Market				Market
	Cost		Value		Cost		Value
6 5/8% Senior Notes	$	293.9	$	270.3	$	293.8	$	241.8
7.30% Notes		99.8		108.2		99.7		96.7
6.60% Notes		199.5		210.0		199.4		196.4
7% Notes		148.6		157.3		148.5		139.0
10% Notes		—		—		150.0		151.0
10 1/8% Subordinated Notes		—		—		150.0		151.1
Other Debt		7.3		7.3		7.7		7.7
	$	749.1	$	753.1	$	1,049.1	$	983.7

     Note 4 Comprehensive Income/Loss — Total comprehensive income was $153.6 million and $66.8 million for the quarters ended September 30, 2001 and 2000, respectively, and $320.5 million and $52.4 million for the nine months ended September 30, 2001 and 2000, respectively.

     Note 5 Dividends — On September 30, 2001, the Company paid a quarterly dividend of $.07 per Common Share to shareholders of record as of the close of business on September 14, 2001. The dividend was declared by the Board of Directors on August 24, 2001.

On October 19, 2001, the Board of Directors declared a quarterly dividend of $.07 per Common Share. The dividend is payable December 31, 2001, to shareholders of record as of the close of business on December 14, 2001.

5

     Note 6 Segment Information — The Company’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles. The other lines of business include writing insurance for small fleets of commercial vehicles, lenders’ collateral protection and directors’ and officers’ liability, and providing related services. All revenues are generated from external customers.

Periods ended September 30,
(millions)

		Three Months										Nine Months
		2001					2000					2001					2000
				Pretax					Pretax					Pretax					Pretax
				Profit					Profit					Profit					Profit
		Revenues		(Loss)			Revenues		(Loss)			Revenues		(Loss)			Revenues		(Loss)
Personal Lines — Agent		$	1,193.0	$	85.4		$	1,166.7	$	(10.0	)	$	3,489.4	$	172.4		$	3,494.6	$	(168.2	)
Personal Lines — Direct			464.4		31.4			322.0		(22.0	)		1,296.9		28.6			872.3		(89.4	)
	Total Personal Lines		1,657.4		116.8			1,488.7		(32.0	)		4,786.3		201.0			4,366.9		(257.6	)
Other			182.3		16.0			131.8		4.8			493.9		40.8			364.7		15.8
Investments1			20.4		18.3			131.5		128.1			216.3		207.0			274.7		267.4
Interest Expense			—		(12.9	)		—		(19.8	)		—		(38.0	)		—		(59.7	)
		$	1,860.1	$	138.2		$	1,752.0	$	81.1		$	5,496.5	$	410.8		$	5,006.3	$	(34.1	)

¹ Revenues represent recurring investment income and net realized gains (losses) on security sales; pretax profit is net of investment expenses.

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations.

RESULTS OF OPERATIONS

On a companywide basis, for the third quarter 2001, net income was $96.4 million, or $1.29 per share, compared to $58.8 million, or $.79 per share, for the same period last year. For the third quarter 2001, operating income, which is calculated as net income less the after-tax effect of net realized gains and losses on security sales and one-time items, was $150.5 million, or $2.01 per share, compared to $37.9 million, or $.51 per share, last year. The increase in operating income is primarily driven by improved underwriting results as discussed below. By excluding items which are not of a recurring nature, the Company believes that operating income provides a useful measure of the Company’s operating results. However, since operating income is not a term defined by generally accepted accounting principles, the Company’s operating income results may not be comparable to similarly titled measures reported by other companies. There were no one-time items during the third quarter 2001 or 2000. The combined ratio was 92.8 for the third quarter 2001, compared to 101.7 for the third quarter 2000.

For the nine months ended September 30, 2001, net income was $286.7 million, or $3.82 per share, compared to a net loss of $1.9 million, or $.03 per share, for the same period last year. Year-to-date operating income was $345.8 million, or $4.61 per share, compared to $5.3 million, or $.07 per share, in 2000. The year-to-date one-time items consist of severance and other costs of $2.1 million and $1.7 million which were incurred during the second quarters of 2001 and 2000, respectively. The year-to-date combined ratio was 95.5, compared to 105.1 last year.

Companywide net premiums written, which represent the premiums generated from policies written during the period less any reinsurance, increased 22% over the third quarter 2000 and 12% year-to-date. Although the majority of the growth was due to increased rate levels, almost four points of the quarterly growth rate was affected by the shift from 12-month to 6-month policies. This shift resulted in a higher number of policies renewing in the third quarter 2001, compared to the third quarter 2000. At September 30, 2001, substantially all of the Company’s new auto policies were written for six-month terms, compared to 65% at September 30, 2000. The shift in policy terms will continue to affect the net premiums written growth rates through the first quarter 2002. Therefore, using net premiums written as a comparative measure may not be meaningful until the second quarter 2002.

Since the shift in policy terms does not affect policies in force or earned premiums, the Company believes that net premiums earned is a better measure of premium growth at this time. Premiums earned, which are a function of the premiums written in the current and prior periods and are recognized into income over the policy term, increased 13% for the quarter and 12% for the first nine months of 2001. Auto policies in force increased 1% over the prior year. During the quarter, the Company implemented 21 auto rate revisions in various states, bringing the total rate revisions to 63 for the year, and plans to implement additional rate revisions as any rate need or product opportunity emerges.

The Company’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles and represent 89% of the Company’s total year-to-date net premiums written. The Personal Lines business is generated either by an agent or written directly by the Company. The Agent channel includes business written by our network of 30,000 Independent Insurance Agencies and through Strategic Alliance business relationships (other insurance companies, financial institutions, employers and national brokerage agencies). Direct business includes business written through 1-800-PROGRESSIVE^SM, the Internet and the Strategic Alliances business unit on behalf of affinity groups.

7

In addition to its Personal Lines business, the Company’s other lines of business include writing insurance for small fleets of commercial vehicles, lenders’ collateral protection, and directors’ and officers’ liability, and providing related services.

Underwriting results for the Company’s Personal Lines, including its channel components, and the other lines of business for the periods ended September 30, were (dollars in millions):

				THREE MONTHS							NINE MONTHS
				2001		2000		Change			2001		2000		Change
NET PREMIUMS WRITTEN
		Personal Lines — Agent		$	1,207.9	$	1,081.3		12	%	$	3,470.0	$	3,465.7		—
		Personal Lines — Direct			486.7		339.7		43	%		1,396.0		998.0		40	%
			Total Personal Lines		1,694.6		1,421.0		19	%		4,866.0		4,463.7		9	%
		Other Lines			207.2		139.4		49	%		577.4		410.4		41	%
			Companywide	$	1,901.8	$	1,560.4		22	%	$	5,443.4	$	4,874.1		12	%
NET PREMIUMS EARNED
		Personal Lines — Agent		$	1,193.0	$	1,166.7		2	%	$	3,489.4	$	3,494.6		—
		Personal Lines — Direct			464.4		322.0		44	%		1,296.9		872.3		49	%
			Total Personal Lines		1,657.4		1,488.7		11	%		4,786.3		4,366.9		10	%
		Other Lines			175.5		126.8		38	%		476.3		349.5		36	%
			Companywide	$	1,832.9	$	1,615.5		13	%	$	5,262.6	$	4,716.4		12	%
PERSONAL LINES — AGENT CR
	Loss & loss adjustment expense ratio				72.9		82.8	9.9 pts.				75.7		86.0	10.3 pts.
	Underwriting expense ratio				19.9		18.1	(1.8) pts.				19.4		18.8	(.6) pts.
					92.8		100.9	8.1 pts.				95.1		104.8	9.7 pts.
PERSONAL LINES — DIRECT CR
	Loss & loss adjustment expense ratio				68.3		80.6	12.3 pts.				72.0		81.8	9.8 pts.
	Underwriting expense ratio				24.9		26.3	1.4 pts.				25.8		28.5	2.7 pts.
					93.2		106.9	13.7 pts.				97.8		110.3	12.5 pts.
PERSONAL LINES — TOTAL CR
	Loss & loss adjustment expense ratio				71.7		82.3	10.6 pts.				74.7		85.2	10.5 pts.
	Underwriting expense ratio				21.3		19.9	(1.4) pts.				21.1		20.7	(.4) pts.
					93.0		102.2	9.2 pts.				95.8		105.9	10.1 pts.
OTHER LINES — CR
	Loss & loss adjustment expense ratio				68.4		72.8	4.4 pts.				68.9		72.3	3.4 pts.
	Underwriting expense ratio				23.2		23.0	(.2) pts.				23.1		22.9	(.2) pts.
					91.6		95.8	4.2 pts.				92.0		95.2	3.2 pts.
COMPANYWIDE GAAP CR
	Loss & loss adjustment expense ratio				71.3		81.6	10.3 pts.				74.2		84.2	10.0 pts.
	Underwriting expense ratio				21.5		20.1	(1.4) pts.				21.3		20.9	(.4) pts.
					92.8		101.7	8.9 pts.				95.5		105.1	9.6 pts.
COMPANYWIDE ACCIDENT YEAR
	Loss & loss adjustment expense ratio				74.3		82.8	8.5 pts.				76.0		82.2	6.2 pts.

		Sept 2001		Sept 2000		Change
Auto Policicies in Force
(in thousands)
Agent			2,759		2,915		(5	)%
Direct			1,176		968		21	%
	Total		3,935		3,883		1	%

8

The Agent channel net premiums written and earned increased 12% and 2%, respectively, from the third quarter last year and both were flat compared to the first nine months of last year. As discussed previously, the increase in net premiums written was influenced by a higher number of policies renewing in the third quarter 2001, compared to the third quarter 2000, due to the Company’s shift to six-month policies. The policy term shift and the rate increases the Company has taken were partially offset by a five percent decrease in Agent auto policies in force. Growth in the Agency business can be impacted by competitor rate activity and local market conditions. The Company was ahead of competitors in recognizing the increases in loss trends and filing necessary rate increases. Therefore, as competitors raise rates, the Company could experience an increase in its share of business generated in the Agent channel. In addition, a number of national companies have recently begun re-underwriting their books of business to improve results and some competitors have become more reluctant to accept nonstandard or even some standard risks. The Company believes that these signals may indicate the beginning of a market change and welcomes the opportunity to write this business in most states.

The Company’s Direct channel net premiums written increased 43% for the third quarter. For the first nine months, net premiums written increased 36%, excluding the $37.7 million of previously ceded written premiums that were assumed by the Company upon the commutation of a reinsurance agreement that was part of a Strategic Alliance relationship that was terminated in the first quarter 2001. The Company decided to terminate this Strategic Alliance relationship upon mutual agreement with the other party because the business interests of the Company and the other party were no longer aligned. In addition, the Company did not envision this relationship assisting the Company in meeting its long-term profitability objectives. The commutation of the reinsurance agreement was a natural and required result of terminating the relationship. The Direct channel net premiums earned grew 44% and 49% for the third quarter and first nine months, respectively. The Company believes that continued growth in the Direct business is heavily dependent on the success of its advertising and other marketing efforts, realizing that price sensitivity is always a factor. The Company is advertising on a national basis and supplements its coverage by local market media campaigns in over one hundred designated marketing areas. In July, the Company launched a new advertising campaign. Quotes are up slightly in the third quarter 2001, compared to the second quarter 2001, and the conversion rates are consistent, thus resulting in a slight increase in new sales volume. Direct auto policies in force increased 21% since September 2000.

Claim costs, the Company’s most significant expense, represent actual payments made and estimated future payments to be made to or on behalf of its policyholders, including expenses required to settle claims and losses. These costs include a loss estimate for future assignments and assessments, based on current business, under state-mandated involuntary automobile programs.

During the quarter, the Company’s loss ratios have improved across the country, reflecting both the Company’s pricing actions and favorable loss reserve development. For the third quarter 2001, 39 of the Company’s top 49 markets, which represent over 95% of companywide volume, made an underwriting profit. Florida and New York, which have been difficult operating environments over the last couple of years, are reporting slightly better than break-even underwriting results for both the quarter and year to date.

The Company is encouraged by signs of moderation in the severity trend, but is cautious about predicting claims frequency in future months. Personal injury protection coverage severity trend, which has been a significant contributor to rate escalation over the last several quarters, turned negative for the first time in several quarters. Physical damage severity trends are moderate, while the Company has seen increases of over 10% in bodily injury severity trend. The Company plans to continue to be diligent about recognizing trend when setting rates. The Company cannot predict claims frequency, but recognizes that it is quite possible that frequency may increase in the coming months as a result of lower gas prices coupled with air travel becoming more difficult and less desirable in the wake of the September 11, 2001, terrorist attacks.

9

During the third quarter 2001, the Company experienced 3.0 points of favorable loss reserve development, compared to 1.2 points last year. For the first nine months, the Company experienced 1.8 points of favorable development, compared to 2.0 points of adverse development for the same period last year. The current year favorable development is primarily attributable to the settlement of claims at less than amounts reserved, while the prior year adverse development reflected the Company’s effort to fully recognize the loss trends that were emerging. The current year development primarily relates to the 2000 accident year. The majority of the 2000 adverse development related to the 1999 accident year.

Policy acquisition costs and other underwriting expenses were 21.5% and 20.1% of premiums earned for the third quarter 2001 and 2000, respectively, and 21.3% for the first nine months of 2001, compared to 20.9% in 2000. The increase in expenses is primarily due to the accrual for anticipated gainsharing payments for 2001, where a minimal amount was accrued for gainsharing in 2000.

Recurring investment income increased 4% for the quarter and 7% for the first nine months, reflecting an increase in the average investment portfolio partially offset by a decrease in the yields. The weighted average annualized fully taxable equivalent book yield of the portfolio was 6.1% for the third quarter 2001, compared to 6.4% for the same period last year, and 6.2% for the first nine months of 2001, compared to 6.4% last year. The Company had net realized losses on security sales of $83.2 million for the third quarter and $88.8 million for the first nine months of 2001, compared to net realized gains of $32.3 million and net realized losses of $9.3 million, respectively, last year. Included in the net realized losses for 2001 and 2000 are $49.9 million and $22.4 million, respectively, of write-downs on securities determined to have an other-than-temporary decline in market value; $24.5 million and $12.6 million of the write-downs occurred during the third quarter 2001 and 2000, respectively. At September 30, 2001, the Company’s portfolio had $159.0 million in total unrealized gains, compared to $107.0 million at December 31, 2000 and $78.3 million at September 30, 2000.

The Company continues to invest in fixed maturity, equity and short-term securities. The market value of the portfolio

				September 30, 2001				September 30, 2000
Fixed Maturities:
	Investment-Grade:
		Short/Intermediate Term		$	5,022.6	63.3	%	$	4,804.7	68.0	%
		Long Term			670.7	8.5	%		204.9	2.9	%
	Non-Investment-Grade				184.4	2.3	%		141.6	2.0	%
Equity Securities:
	Common Stocks				1,218.0	15.4	%		1,202.9	17.0	%
	Preferred Stocks				834.3	10.5	%		710.9	10.1	%
			Total Portfolio	$	7,930.0	100.0	%	$	7,065.0	100.0	%

The duration of the fixed-income portfolio was 3.7 years at September 30, 2001, compared to 3.3 years at September 30, 2000.

The non-investment-grade fixed-maturity securities offer the Company high returns and added diversification without a significant adverse effect on the stability and quality of the investment portfolio as a whole.

The majority of the common stock portfolio is invested in domestic equities correlated to a nationally recognized broad-based index. Common stock investments also include partnership investments ($47.5 million in 2001, compared to $113.6 million in 2000), and equity investments in term trust certificates, the common shares of closed-end bond funds, which have the risk/reward characteristics of the underlying bonds ($49.8 million in 2001, compared to $240.9 million in 2000). The decrease in the partnership investments reflect the

10

shift toward publicly traded indexed equities, while the decrease in the term trust certificates resulted from the maturity of certain instruments held in the portfolio.

Derivative instruments held or issued for purposes “other than trading” are used to manage the risks and enhance the returns of the available-for-sale portfolio. This is accomplished by modifying the basis, duration, interest rate or foreign currency characteristics of the portfolio, hedged securities or hedged cash flows. At September 30, 2001, other-than-trading derivative instruments had a net market value of $.4 million (notional value of $2.3 million), compared to $(1.4) million (notional value of $22.2 million) at September 30, 2000.

Derivative instruments are also used for trading purposes. At September 30, 2001, trading derivative instruments had a net market value of $0 (notional value of $10.0 million). At September 30, 2000, the Company had a matched long trading asset offset by a short trading position in futures with a market value of $.3 (notional value of $33.0 million). In addition, the Company had derivative trading positions with net market values of $(.6) million (notional values of $113.1 million).

As of September 30, 2001, the Company had open investment funding commitments of $50.2 million.

FINANCIAL CONDITION

Progressive’s insurance operations create liquidity by collecting and investing premiums written from new and renewal business in advance of paying claims. For the nine months ended September 30, 2001, operations generated a positive cash flow of $1,117.8 million. During the third quarter 2001, the Company repurchased 600,000 Common Shares in the open market at an average cost of $127.97 per share, bringing the total year-to-date open market purchases to 800,000 at an average cost of $129.34 per share. The Company has substantial capital resources and believes it has sufficient borrowing capacity and other capital resources to support current and anticipated growth.

The Company has constructed a corporate office complex in Mayfield Village, Ohio at an estimated cost of $128.5 million, of which $128.1 million has been paid through September 30, 2001, including $.4 million paid in the third quarter 2001. Four buildings and a parking garage were completed during 1999 and 2000. The fifth building was completed in the first quarter of 2001. The project is being funded through operating cash flows.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: Statements in this quarterly report on Form 10-Q that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions and projections generally; changes in economic conditions (including changes in interest rates and financial markets); pricing competition and other initiatives by competitors; ability to obtain regulatory approval for requested rate changes and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against the Company; weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail and winter conditions); changes in driving patterns and loss trends; acts of war and terrorist activities; court decisions and trends in litigation and health care costs; and other matters described from time to time by the Company in documents filed with the United States Securities and Exchange Commission. The Company assumes no obligation to update the information in this quarterly report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

At September 30, 2001, the duration of the financial instruments subject to interest rate risk was 3.7 years, compared to 3.5 years at December 31, 2000. At September 30, 2001, the weighted average beta of the equity portfolio was .89, compared to .95 at December 31, 2000. Although components of the portfolio have changed, no material changes have occurred in the total market risk since reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.

11

PART II — OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K.

(a)	Exhibits:
	See exhibit index on page 14.
(b)	Reports on Form 8-K during the quarter ended September 30, 2001:
	None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE PROGRESSIVE CORPORATION

(Registrant)

Date:     November 5, 2001	BY:	/s/ W. Thomas Forrester
		W. Thomas Forrester
		Vice President and Chief Financial Officer

13

EXHIBIT INDEX

Exhibit Number Under	Form 10-Q
Regulation S-K, Item 601	Exhibit Number	Description of Exhibit
(10)	10(A)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and W. Thomas Forrester
(10)	10(B)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Brian J. Passell
(10)	10(C)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Charles E. Jarrett
(10)	10(D)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Glenn M. Renwick
(10)	10(E)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Richard H. Watts
(10)	10(F)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Raymond M. Voelker
(10)	10(G)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Robert T. Williams
(10)	10(H)	Employment Agreement dated August 24, 2001 between The Progressive Corporation and Alan R. Bauer
(10)	10(I)	The Progressive Corporation Executive Separation Allowance Plan

14 EX-10.A 3 l91019aex10-a.txt EX-10(A) W. THOMAS FORRESTER EMPLOYMENT AGREEMENT EXHIBIT NO. 10(A) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and W. Thomas Forrester (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (C) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: W. Thomas Forrester at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ W. Thomas Forrester --------------------------------- W. Thomas Forrester THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick ----------------------------- Name: Glenn Renwick --------------------------- Title: CEO --------------------------- Page 15 EX-10.B 4 l91019aex10-b.txt EX-10(B) BRIAN J. PASSELL EMPLOYMENT AGREEMENT Page 1 EXHIBIT NO. 10(B) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Brian J. Passell (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (C) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Brian J. Passell at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Brian J. Passell ---------------------------- Brian J. Passell THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick ------------------------- Name: Glenn Renwick ----------------------- Title: CEO ---------------------- Page 15 EX-10.C 5 l91019aex10-c.txt EX-10(C) CHARLES E. JARRETT EMPLOYMENT AGREEMENT EXHIBIT NO. 10(C) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Charles E. Jarrett (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable Page 6 belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. Page 7 (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and Page 8 (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Page 9 Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts Page 10 shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Page 11 Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment Page 12 would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. Page 13 (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Charles E. Jarrett at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights Page 14 under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Charles E. Jarrett -------------------------- Charles E. Jarrett THE PROGRESSIVE CORPORATION By: /s/Glenn Renwick ---------------------- Name: Glenn Renwick --------------------- Title: CEO -------------------- Page 15 EX-10.D 6 l91019aex10-d.txt EX-10(D) GLENN M. RENWICK EMPLOYMENT AGREEMENT EXHIBIT NO. 10(D) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Glenn M. Renwick (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (C) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Glenn M. Renwick at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Glenn M. Renwick -------------------------------- Glenn M. Renwick THE PROGRESSIVE CORPORATION By: /s/ W. T. Forrester ---------------------------- Name: W. T. Forrester --------------------------- Title: Chief Financial Officer -------------------------- Page 15 EX-10.E 7 l91019aex10-e.txt EX-10(E) RICHARD H. WATTS EMPLOYMENT AGREEMENT EXHIBIT NO. 10(E) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Richard H. Watts (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Richard H. Watts at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Richard H. Watts --------------------------- Richard H. Watts THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick ----------------------- Name: Glenn Renwick ---------------------- Title: CEO ---------------------- Page 15 EX-10.F 8 l91019aex10-f.txt EX-10(F) RAYMOND M. VOELKER EMPLOYMENT AGREEMENT EXHIBIT NO. 10(F) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Raymond M. Voelker (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to Page 3 use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, Page 4 than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. Page 5 (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or Page 6 (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). Page 7 For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, Page 8 and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's Page 9 estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Raymond M. Voelker at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Raymond M. Voelker --------------------------------- Raymond M. Voelker THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick ----------------------------- Name: Glenn Renwick ----------------------------- Tile: CEO ----------------------------- Page 15 EX-10.G 9 l91019aex10-g.txt EX-10(G) ROBERT T. WILLIAMS EMPLOYMENT AGREEMENT EXHIBIT NO. 10(G) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Robert T. Williams (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Robert T. Williams at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Robert T. Williams ----------------------------- Robert T. Williams THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick ------------------------- Name: Glenn Renwick ----------------------- Title: CEO ---------------------- Page 15 EX-10.H 10 l91019aex10-h.txt EX-10(H) ALAN R. BAUER EMPLOYMENT AGREEMENT EXHIBIT NO. 10(H) EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of the 24th day of August, 2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio corporation (the "Company"), and Alan R. Bauer (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or in anticipation of a Change of Control, then "Effective Date" means the date immediately prior to the date of such termination of employment. (b) "Change of Control Period" means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as described below whether by merger, consolidation, purchase or otherwise, that assumes and is bound to perform this Agreement by operation of law or otherwise. (d) "Affiliated company" means any company controlled by, controlling or under common control with the Company. Page 1 (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities by any Person who has acquired the Outstanding Company Common Shares or Outstanding Company Voting Securities in the ordinary course of business for investment purposes only and not with the purpose or effect of changing or influencing the control of the Company, or in connection with or as a participant in any transaction having such purpose or effect ("Investment Intent"), as demonstrated by the filing by such Person of a statement on Schedule 13G (including amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as such Person continues to hold the Outstanding Company Common Shares or Outstanding Company Voting Securities with an Investment Intent, unless the Incumbent Board (as defined below) determines, by a majority vote, that the acquisition or holding of Outstanding Company Common Shares or Outstanding Company Voting Securities by such Person constitutes a Change of Control. (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, Page 2 more than 60% of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the "Employment Period"). SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 25 miles from such office. (2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities to the best of his or her ability. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or Page 3 charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an officer or employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary (the "Annual Base Salary"), which Annual Base Salary shall be at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the affiliated companies during the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid one-twelfth (1/12th) each month. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, the Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" shall refer to the Annual Base Salary as so increased. (2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Bonus and/or Gainsharing Plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, except to the extent that the Executive shall elect to defer the receipt of such Annual Bonus pursuant to and in accordance with the Company's Executive Deferral Plan or any successor plan thereto then in effect. (3) COMPANY STOCK OPTION PLANS. During the Employment Period, the Executive shall be entitled to participate in all stock option plans, practices, policies and programs applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the affiliated companies for the Executive under such stock option plans, practices, policies and programs as in effect at any time during the 120-day period immediately Page 4 preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. The basis for the valuation for such stock option awards for Executive shall be the highest applicable percent of salary within the last three fiscal years prior to the Effective Date, based upon Executives job classification, with the target award value divided by a value per share developed through a modified Black-Scholes pricing model to determine the number of option shares to be awarded, such approach being consistent with that described in a notice of annual meeting of shareholders of the Company within the last three full fiscal years prior to the Effective Date, which yields the highest value of stock option awards. (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During the Employment Period, the Executive and as applicable the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under any incentive, savings, retirement plans and welfare benefit plans, policies, practices and programs provided by the Company and the affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive and/or the Executive's family with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the affiliated companies. In the event that because of applicable law, or for other good and valid reasons, such applicable benefit plans cannot be provided Executive by the Company following Change of Control, the Company by agreement with Executive, which agreement shall not be unreasonably withheld, may provide Executive with an amount having an overall equivalent tax adjusted value for the applicable period to those employee benefits, programs and the like, not otherwise being provided by the Company to Executive. (5) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the furtherance of the business or affairs of the Company or any of the Affiliated companies in accordance with the most favorable policies, practices and procedures of the Company and the affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (6) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the affiliated Page 5 companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. (7) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies. SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability"), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. Subject to the last paragraph of Section 4(b), "Cause" means: (1) the willful failure of the Executive to perform, and the continuance of such failure to perform for 60 days following the Executive's receipt for notice from the Company, substantially the Executive's duties with the Company or any affiliated company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties; or (2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or (3) any violation of the Code of Conduct of the Company, as in effect immediately prior to the Effective Date. Page 6 For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (3) the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(1)(B) or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (4) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (5) any failure by the Company to comply with and satisfy Section 10(c). For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a Page 7 termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). "Notice of Termination" means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's respective rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means (1) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, as the case may be, (2) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (3) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability or the Executive terminates employment for Good Reason: (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (A) the sum of (i) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination to the extent not theretofore paid, (ii) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings Page 8 thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the "Accrued Obligations"); and (B) the amount equal to the higher of (i) the product of (x) two and (y) the sum of (1) the Executive's Annual Base Salary and (2) the Highest Annual Bonus or (ii) the product of (x) four and (y) the Executive's Annual Base Salary; less (C) the value of amounts paid or to be paid to the Executive under any severance pay plans or programs of the Company then in effect. (2) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the affiliated companies and their families, provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (3) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (4) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided to the Executive or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the affiliated companies (such other amounts and benefits, the "Other Benefits"). (b) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's estate, beneficiaries or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Page 9 affiliated companies to the estates and beneficiaries of peer executives of the Company and the affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and the affiliated companies and their beneficiaries. (c) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term "Other Benefits" as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the affiliated companies and their families. (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (1) that portion of the Executive's Annual Base Salary that has accrued prior to the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for the Accrued Obligations and the timely payment or provision of the Other Benefits. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or the affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or the affiliated companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or the affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Page 10 SECTION 7. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be subject to set-off or otherwise affected by any counterclaim, recoupment, defense, or other claim, right or action that the Company or any of the Affiliated companies may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or the affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, as the same may be hereafter modified or amended or any successor provision, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively, the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other nationally recognized independent accounting firm as may be designated by the Executive (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid Page 11 by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company Page 12 shall determine; provided, however, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, upon receipt of such refund, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the affiliated companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive's employment by the Company or the affiliated companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). For two years after termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTION 10. SUCCESSORS. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. Page 13 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors, permitted assigns and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: Alan R. Bauer at his home address if to the Company: The Progressive Corporation 300 North Commons Boulevard - OHF11 Mayfield Village, Ohio 44143 Attention: Chief Legal Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) This Agreement shall not be deemed to modify, amend or supplement the terms of any existing benefit plan or program of the Company. (e) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes or other items as shall be required to be withheld pursuant to any applicable law or regulation. Page 14 (f) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a), prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Alan R Bauer ------------------------------ Alan R Bauer THE PROGRESSIVE CORPORATION By: /s/ Glenn Renwick --------------------------- Name: Glenn Renwick ------------------------- Title: CEO ------------------------ Page 15 EX-10.I 11 l91019aex10-i.txt EX-10(I) EXECUTIVE SEPARATION ALLOWANCE PLAN Exhibit 10.I THE PROGRESSIVE CORPORATION EXECUTIVE SEPARATION ALLOWANCE PLAN SECTION 1 -- DEFINITIONS 1.1 "AFFILIATED COMPANY" - means any entity in which the Company owns, directly or indirectly, more than fifty percent (50%) of the stock or assets. 1.2 "ANNUAL SALARY" - as to each Eligible Employee means his/her annualized base salary or other base wages immediately prior to his/her Termination Date (including any geographic differential). This term does not include commissions, stock-related awards, incentive compensation, separate pay adjustments or allowances or any other forms of remuneration. 1.3 "GROUP I EMPLOYEES" - are those Eligible Employees who are parties to written employment agreements duly authorized and executed by and between the Eligible Employee and Progressive the benefits to which are triggered by a "Change of Control" as defined in those written agreements. 1.4 "GROUP II EMPLOYEES" - are those Eligible Employees who, immediately preceding their Termination Date and for at least two years prior thereto, had Gainsharing and Non-Qualified Stock Option ("NQSO") targets under the then applicable Gainsharing Plan and Incentive Plan, respectively, of greater than fifty percent (50%), exclusive of Group I Employees. 1.5 "GROUP III EMPLOYEES" - are those Eligible Employees who, immediately preceding their Termination Date and for at least two years prior thereto, had Gainsharing and NQSO targets under the then applicable Gainsharing and Incentive Plan, respectively, of thirty-five percent (35%) and greater, exclusive of Group I Employees and Group II Employees. 1.6 "COMPANY" - means The Progressive Corporation, an Ohio corporation, or its successors. 1.7 "DISABILITY" - means the inability to perform work due to illness, injury or pregnancy-related condition. 1.8 "ELIGIBLE EMPLOYEE" - means regular, non-temporary, non-union executive employees of Progressive who qualify either as a Group I Employee, Group II Employee or a Group Employee as defined hereunder. 1.9 "MISCONDUCT" - means an Eligible Employee's commission of a terminable offense under Progressive's Code of Conduct, as reasonably determined in good faith by the Company. 1.10 "PCIC" - means Progressive Casualty Insurance Company, an Ohio corporation, or its successors. 1.11 "PLAN" - means The Progressive Corporation Executive Separation Allowance Plan, as set forth herein and as the same may be amended from time to time. 1.12 "PROGRESSIVE" - includes the Company and any other entity which from time to time is an Affiliated Company. 1.13 "REDUCTION IN FORCE" - means a reduction by Progressive in the number of employees working in any of Progressive's operating divisions. 1.14 "REORGANIZATION" - means Progressive's elimination of one or more positions or redefinition of the job duties of one or more positions. 1.15 "SEPARATION AGREEMENT AND GENERAL RELEASE" - means an agreement and release substantially in the forms attached hereto as Exhibits A and B together with such changes, additions and deletions as Progressive, in its sole discretion, may specify. 1.16 "TERMINATION DATE" - means the effective date of any Eligible Employee's termination of employment with Progressive. SECTION 2 -- ENTITLEMENT TO SEPARATION ALLOWANCE 2.1 An Eligible Employee shall be entitled to receive a Separation Allowance under this Plan if (a) Progressive terminates his/her employment for reasons other than resignation (including retirement), job elimination, death, Disability, unsatisfactory job performance or Misconduct; and (b) the Eligible Employee signs a Separation Agreement and General Release and delivers it to the Company within ninety (90) days after the Eligible Employee's Termination Date. In no event shall any Eligible Employee be entitled to receive a Separation Allowance if (x) his/her employment terminates as a result of a resignation (including retirement), a Reduction in Force or Reorganization, death, Disability, failure to meet job performance standards, Misconduct or any reason other than as a result of the circumstances described in (a) above, or (y) he/she fails to deliver a signed Separation Agreement and General Release to the Company within the time specified above. SECTION 3 -- AMOUNT OF SEPARATION ALLOWANCE 3.1 The Separation Allowance payable to each Eligible Employee who is entitled to such allowance under Section 2 above shall be in the amount as provided below: ELIGIBLE EMPLOYEE SEPARATION ALLOWANCE ---------------------------------------------------------- GROUP I EMPLOYEE One year Annual Salary plus ---------------- Gainsharing. The amount paid as Gainsharing shall equal the higher of a) the highest annual Gainsharing paid to the Group I Employee during the past three years; or b) payment of the Group I Employee's targeted Gainsharing at a factor of 1.0 in the calendar year of the Termination Date. GROUP II EMPLOYEE One-year Annual Salary ELIGIBLE EMPLOYEE SEPARATION ALLOWANCE ---------------------------------------------------------- GROUP III EMPLOYEE The greater of a) six months of ------------------ the Group III Employee's Annual Salary; or b) the amount that would be payable to the Group III Employee if the employee were entitled to benefits under The Progressive Corporation Separation Allowance Plan (the "SAP Plan"), provided that the Separation Allowance paid hereunder shall in no event exceed the employee's Annual Salary. 3.2 Each Separation Allowance shall be paid in a lump sum within thirty (30) days following the later of (i) the Eligible Employee's Termination Date or (ii) the expiration of the revocation period referred to in the Eligible Employee's signed Separation Agreement and General Release. Alternatively, Progressive, in its sole discretion, may elect to pay any Separation Allowance in installments over any period not exceeding twenty-four (24) months after the Eligible Employee's Termination Date. 3.3 Progressive shall withhold from each Separation Allowance all applicable federal, state, and local taxes, Social Security taxes and other deductions required by law, and any other amounts due Progressive for any reason. 3.4 Each Eligible Employee's Separation Allowance payable under this Plan shall be reduced by the amount of any state-mandated Separation Allowance or severance payments payable by Progressive to such Eligible Employee. 3.5 Notwithstanding anything herein to the contrary, no Separation Allowance payments shall be made under this Plan to any Eligible Employee more than twenty-four (24) months after his/her Termination Date. SECTION 4 -- ADDITIONAL PAYMENTS AND BENEFITS 4.1 Progressive may elect to provide or pay to any Eligible Employee who is entitled to a Separation Allowance under this Plan such additional payments or benefits, if any, as Progressive, in its sole discretion, shall determine, such as outplacement assistance benefits; reimbursements for the cost of obtaining health, life, disability, employee assistance or other welfare benefits; and other payments and benefits. SECTION 5 -- PROGRESSIVE DISCRETION 5.1 Notwithstanding anything herein to the contrary, no determination by Progressive as to the amount, timing or manner of payment of any Separation Allowance or other payment or benefit under this Plan shall be regarded as a precedent or guideline for purposes of determining the amount, timing or manner of payment of any other Separation Allowance or other payment or benefit under this Plan, nor shall any such determination otherwise limit Progressive's discretion provided for under this Plan in any way. SECTION 6 -- ELIGIBILITY UNDER OTHER PLANS AND AGREEMENTS 6.1 Except as provided in Sections 6.2 and 6.3, this Plan shall entirely supersede and replace all policies, plans, agreements, understandings and arrangements adopted or entered into before November 1, 2001 regarding separation allowances, severance pay and/or similar compensation payable by Progressive to terminated Eligible Employees (other than with respect to any Eligible Employees who may have incurred Termination Dates prior to November 1, 2001). 6.2 Section 6.1 of this Plan shall not limit any Eligible Employee's rights, if any, under the SAP Plan in the event of any Reorganization or Reduction in Force, provided that an Eligible Employee shall only be entitled to receive benefits under the circumstances specified under the Plan and the SAP Plan and shall not be entitled to receive benefits under both this Plan and the SAP Plan. 6.3 Individual employment, separation, severance and other agreements that include provisions regarding separation allowances, severance pay and/or similar compensation following termination of employment and that are entered into in writing with an Eligible Employee shall supersede and replace this Plan, except as otherwise expressly provided by such agreements; however, no such agreement entered into on or after November 1, 2001 shall be effective or enforceable unless approved in writing by PCIC's Chief Human Resources Officer or the holder of any similar successor office, and nothing in this Plan shall be construed as ratifying or validating any such agreements that have not been so approved. SECTION 7 -- CLAIMS PROCEDURES 7.1 The Company shall establish reasonable procedures under which a claimant, or his/her duly authorized representative, may present a claim for benefits under this Plan. 7.2 Unless such claim is allowed in full by the Company, 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 written notice to the claimant is given prior to the expiration of the initial ninety (90) day period describing such circumstances and indicating the date by which the Company expects to render its determination) 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; (iv) A description of the Plan's claims review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review; and (v) An explanation of the steps to be taken if the claimant wishes to resubmit his/her claim for review. 7.3 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 Company for a review of such denial. The claimant or his/her representative, may, upon request and free of charge, review or receive copies of documents, records and other information relevant to the claimant's claim for benefits, and may submit written comments, documents, records and other information relating to the claim for benefits. 7.4 If an appeal is timely filed, the Company 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 written notice to the claimant is given prior to the expiration of the initial sixty (60) day period describing such special circumstances and indicating the date by which the Company expects to render its determination). In conducting its review, the Company shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Company's decision on review shall: (i) Be written in a manner calculated to be understood by the claimant; (ii) State the specific reason(s) for the decision; (iii) Make specific reference to pertinent provision(s) of the Plan; (iv) State that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits; and (v) Include a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA. 7.5 If a period of time is extended, as permitted under Sections 7.2 and 7.4 above, due to a claimant's failure to submit information to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information." SECTION 8 -- AMENDMENT AND TERMINATION 8.1 This Plan may be amended, modified or terminated by the Company in whole or in part at any time for any reason without the consent of any Affiliated Company or any employee or other person, provided that, except for legally required amendments, modifications and terminations, no such amendment, modification or termination shall impair the rights of any Eligible Employee who incurs a Termination Date prior to the date the Company adopts such amendment or modification or approves such termination. SECTION 9 -- RIGHTS OF SETOFF 9.1 Progressive shall have the unrestricted right and power to set off against, or recover out of, any payments owed an Eligible Employee or other person under this Plan, at the time such payments would have otherwise been payable under this Plan, any amounts owed to Progressive by such Eligible Employee or other person. SECTION 10 -- FUNDING 10.1 All payments pursuant to this Plan shall be made from Progressive's general funds and nothing contained herein shall be deemed to require Progressive to, and Progressive shall not, physically segregate any sums from its general funds, or create any trust or escrow account, or make any special deposit, in respect of any amounts payable hereunder. SECTION 11 -- ADMINISTRATION 11.1 The Company shall be the Administrator of this Plan and shall be the "named fiduciary" within the meaning of Section 402 of the Employee Retirement Income Security Act of 1974, as amended, and, except as specified elsewhere herein, shall exercise all rights and duties with respect hereto, including without limitation, the right: (a) to make and enforce such rules and regulations as are necessary or proper for the efficient administration of this Plan; and (b) to interpret and construe this Plan and to decide all disputes and other matters arising hereunder, including but not limited to the right to determine eligibility for benefits and resolve possible ambiguities, inconsistencies or omissions. All such rules, interpretations and decisions shall be applied in a uniform manner to all persons similarly situated. Except as otherwise specifically provided herein, no action or decision taken in accordance with this Plan by the Company or Progressive shall be relied upon as a precedent for any similar action or decision under any circumstances. SECTION 12 -- EFFECTIVE DATE 12.1 This Plan shall be effective November 1, 2001, but only as to Eligible Employees who incur Termination Dates on or after such date. IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this Plan to be executed by its duly authorized representative as of the 31st day of October, 2001. THE PROGRESSIVE CORPORATION By: /s/ Charles E. Jarrett -------------------------------------- Charles E. Jarrett, Secretary EXHIBIT A SEPARATION AGREEMENT AND GENERAL RELEASE (GROUP I AND II EMPLOYEES) THIS AGREEMENT is entered into as of the ____ day of ______________, 20__ between ("Employee") and ("Employer") pursuant to The Progressive Corporation Executive Separation Allowance Plan (the "Plan"). WHEREAS, Employee's employment with Employer terminated (or will terminate) effective __________________________, 200__ ; and WHEREAS, Employee desires to receive certain employment termination benefits under the Plan; and WHEREAS, the Plan provides employment termination benefits only to employees who sign a Separation Agreement and General Release in the form specified in the Plan; NOW, THEREFORE, Employee and Employer hereby agree as follows: 1. Employer shall pay Employee a separation allowance of $ _______ pursuant to Section 3 of the Plan in a lump sum on _____________________________, 200__ [in monthly installments commencing ____________________, 200__], subject to the limitations specified in the Plan. 2. Employer shall pay Employee for all credited ETB in accordance with Employer's standard practices within thirty (30) days following the expiration of the revocation period referred to at the end of this Agreement or at such earlier time as may be required by law. 3. Employee shall be entitled to continue his/her and his/her dependents' medical, dental and vision coverages under The Progressive Corporation Group Insurance Plan ("Group Insurance Plan"), subject to the terms, conditions and limitations of the Group Insurance Plan. Employee also shall be entitled to the conversion privileges, if any, applicable to his/her life insurance and/or other coverages under the Group Insurance Plan. 4. Employer shall provide the following additional payments and/or benefits to Employee: ______________________________________________________________ _______________________________________________________________________________ ______________________________________________________________ _______________________________________________________________________________ ______________________________________________________________ _______________________________________________________________________________ 5. Employee's entitlement to pension benefits, if any, shall be determined in accordance with The Progressive Corporation Long- Term Savings Plan. 6. Employee shall be entitled to whatever other rights or benefits are available to former employees of Progressive under any other written employee benefit plans or programs maintained by Progressive, subject to the terms, conditions and limitations of those plans and programs. 7. With the exception of the rights and benefits contained in, or expressly referred to in this Agreement, Employee hereby waives any and all rights and benefits Employee now has or might hereafter have acquired under the Plan, The Progressive Corporation Separation Allowance Plan, The 200___ Gainsharing Program and any other compensation or bonus programs, employee benefit plans and fringe benefit programs maintained by Progressive or any of its affiliates by virtue of Employee's employment with Progressive or the termination thereof. 8. Employee acknowledges the forfeiture of any and all unvested non-qualified stock options ("NQSOs") awarded to Employee under The Progressive Corporation 1989 Incentive Plan or The Progressive Corporation 1995 Incentive Plan (the "Incentive Plans"). Employee's rights, if any, under The Progressive Corporation Executive Deferred Compensation Plan, The Progressive Pension Plan and The Incentive Plans (collectively, the "Programs") shall be determined in accordance with the governing provisions of the Programs as in effect from time to time. For purposes of such Programs, Employee shall be considered to have terminated employment with Progressive on the Separation Date. 9. In consideration of the above undertakings of Employer, Employee hereby releases Employer, Progressive and their respective affiliates, officers, directors, employees, agents, successors and assigns (collectively, the "Released Entities"), from any and all claims, liabilities, demands, actions, suits and causes of action, whether known or unknown, that Employee ever had or now has against any of the Released Entities, including but not limited to claims arising under the Age Discrimination in Employment Act, as amended, and other claims relating to Employee's employment with Progressive and the termination of that employment, and claims under The Progressive Corporation Separation Allowance Plan (collectively "Claims"). [If Employee is a California resident, Employee acknowledges that he/she has read and understands California Civil Code Section 1542, which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Employee hereby waives the provisions and protections of California Civil Code Section 1542 and agrees that the above release shall apply to all Claims that Employee ever had or now has against the Released Entities, regardless of whether Employee currently is aware of the Claims or suspects that they exist.] 10. Employee further agrees that he will not, during the twenty-four (24) month period after the Separation Date, solicit or recruit any person who is a Progressive employee at the time of such solicitation or recruitment (unless such person has theretofore been given notice of the termination of his/her employment by Progressive) to act as an employee, consultant, agent or independent contractor with respect to any insurance or other business. 11. Employee agrees that Employee will maintain the confidentiality of confidential information which Employee has received by virtue of his/her employment with Progressive and will refrain from using such information or disclosing it to anyone other than Progressive or its employees. For purposes of this Agreement, confidential information is information which Progressive endeavors to keep confidential, including, without limitation, customer lists, employee lists, rate schedules, underwriting information, the terms of contracts and policies, marketing plans, program designs, trade secrets, proprietary information, and any such information provided by a third party to Progressive in confidence. Employee represents that promptly following his/her execution of this Agreement, Employee will return to Progressive any records in his/her possession containing confidential information of Progressive or records which are the property of Progressive. 12. In the event of any actual or threatened breach by Employee of the provisions of Paragraphs 10 or 11, Progressive shall be entitled to an injunction (including an EX PARTE temporary restraining order) restraining Employee from violating these provisions. The period provided in Paragraph 10 shall not run and will be suspended during the period of any violation by Employee of Paragraph 10 and, at the conclusion of any such violation, the period will run for its remaining term. Progressive shall also be entitled to recover, as liquidated damages, the amount equal to fifty percent (50%) of the severance paid to Employee under this Agreement. 13. All payments to be made by Employer under this Agreement are subject to applicable tax withholding, other legally required deductions and (except to the extent prohibited by law) amounts due Progressive for any reason. 14. All capitalized terms used in this Agreement shall have the meanings given to them in the Plan, unless otherwise required clearly by the context. 15. This Agreement, together with the Plan and the other documents referred to herein, constitute the entire agreement of the parties, superseding all prior oral or written representations, agreements and understandings relating to the subject matter of this Agreement. Any modifications of this Agreement must be in a writing signed by both parties in order to be effective. Employee may not assign this Agreement or any of his/her rights or obligations hereunder without Employer's prior written consent. This Agreement is subject to the terms, provisions and limitations of the Plan in all respects. 16. Employee has read and understands all of the terms of this Agreement and Employee has been encouraged to consult with an attorney. Employee acknowledges that he/she has been given a period of at least ( ) days to review this Agreement with an attorney and individuals of his/her own choice and consider its effect, including Employee's release of rights. Employee signs this Agreement in exchange for the consideration to be given to him/her, which Employee acknowledges is adequate and satisfactory. Neither Progressive nor its agents, representatives or employees have made any representations to Employee concerning the terms or effects of this Agreement other than those contained in this Agreement or the Plan. IMPORTANT! BEFORE YOU SIGN THIS AGREEMENT YOU SHOULD CONSULT WITH AN ATTORNEY. ALSO, AFTER YOU HAVE SIGNED THIS AGREEMENT YOU HAVE SEVEN (7) DAYS WITHIN WHICH TO REVOKE IT FOR ANY REASON. YOU DO NOT NEED EMPLOYER'S CONSENT IN ORDER TO REVOKE THIS AGREEMENT, BUT YOU MUST GIVE WRITTEN NOTICE OF YOUR REVOCATION TO EMPLOYER WITHIN THE SEVEN (7) DAY REVOCATION PERIOD. THIS AGREEMENT WILL NOT BE EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF THE SEVEN (7) DAY REVOCATION PERIOD. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated above. ____________________________________ ____________________________________ WITNESS EMPLOYEE ____________________________________ ____________________________________ WITNESS EMPLOYER By: ________________________________ Title: _____________________________ EXHIBIT B SEPARATION AGREEMENT AND GENERAL RELEASE (GROUP III EMPLOYEES) THIS AGREEMENT is entered into as of the _____ day of _______________, 20__ between ("Employee") and ("Employer") pursuant to The Progressive Corporation Executive Separation Allowance Plan (the "Plan"). WHEREAS, Employee's employment with Employer terminated (or will terminate) effective ____________________________, 200__; and WHEREAS, Employee desires to receive certain employment termination benefits under the Plan; and WHEREAS, the Plan provides employment termination benefits only to employees who sign a Separation Agreement and General Release in the form specified in the Plan; NOW, THEREFORE, Employee and Employer hereby agree as follows: 1. Employer shall pay Employee a separation allowance of $ ______________ pursuant to Section 3 of the Plan in a lump sum on ___________________, 200__ [in _____ monthly installments commencing _________________, 200__], subject to the limitations specified in the Plan. 2. Employer shall pay Employee for all credited ETB in accordance with Employer's standard practices within thirty (30) days following the expiration of the revocation period referred to at the end of this Agreement or at such earlier time as may be required by law. 3. Employee shall be entitled to continue his/her and his/her dependents' medical, dental and vision coverages under The Progressive Corporation Group Insurance Plan ("Group Insurance Plan"), subject to the terms, conditions and limitations of the Group Insurance Plan. Employee also shall be entitled to the conversion privileges, if any, applicable to his/her life insurance and/or other coverages under the Group Insurance Plan. 4. Employer shall provide the following additional payments and/or benefits to Employee: ______________________________________________________________ _______________________________________________________________________________ ______________________________________________________________ _______________________________________________________________________________ ______________________________________________________________ _______________________________________________________________________________ 5. Employee's entitlement to pension benefits, if any, shall be determined in accordance with The Progressive Corporation Long- Term Savings Plan. 6. Employee shall be entitled to whatever other rights or benefits are available to former employees of Progressive under any other written employee benefit plans or programs maintained by Progressive, subject to the terms, conditions and limitations of those plans and programs. 7. With the exception of the rights and benefits contained in, or expressly referred to in this Agreement, Employee hereby waives any and all rights and benefits Employee now has or might hereafter have acquired under the Plan, The Progressive Corporation Separation Allowance Plan, The 200___ Gainsharing Program and any other compensation or bonus programs, employee benefit plans and fringe benefit programs maintained by Progressive or any of its affiliates by virtue of Employee's employment with Progressive or the termination thereof. 8. Employee acknowledges the forfeiture of any and all unvested non-qualified stock options ("NQSOs") awarded to Employee under The Progressive Corporation 1989 Incentive Plan or The Progressive Corporation 1995 Incentive Plan (the "Incentive Plans"). Employee's rights, if any, under The Progressive Corporation Executive Deferred Compensation Plan, The Progressive Pension Plan and The Incentive Plans (collectively, the "Programs") shall be determined in accordance with the governing provisions of the Programs as in effect from time to time. For purposes of such Programs, Employee shall be considered to have terminated employment with Progressive on the Separation Date. 9. In consideration of the above undertakings of Employer, Employee hereby releases Employer, Progressive and their respective affiliates, officers, directors, employees, agents, successors and assigns (collectively, the "Released Entities"), from any and all claims, liabilities, demands, actions, suits and causes of action, whether known or unknown, that Employee ever had or now has against any of the Released Entities, including but not limited to claims arising under the Age Discrimination in Employment Act, as amended, and other claims relating to Employee's employment with Progressive and the termination of that employment, and claims under The Progressive Corporation Separation Allowance Plan (collectively "Claims"). [If Employee is a California resident, Employee acknowledges that he/she has read and understands California Civil Code Section 1542, which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Employee hereby waives the provisions and protections of California Civil Code Section 1542 and agrees that the above release shall apply to all Claims that Employee ever had or now has against the Released Entities, regardless of whether Employee currently is aware of the Claims or suspects that they exist.] 10. Employee agrees that Employee will maintain the confidentiality of confidential information which Employee has received by virtue of his/her employment with Progressive and will refrain from using such information or disclosing it to anyone other than Progressive or its employees. For purposes of this Agreement, confidential information is information which Progressive endeavors to keep confidential, including, without limitation, customer lists, employee lists, rate schedules, underwriting information, the terms of contracts and policies, marketing plans, program designs, trade secrets, proprietary information, and any such information provided by a third party to Progressive in confidence. Employee represents that promptly following his/her execution of this Agreement, Employee will return to Progressive any records in his/her possession containing confidential information of Progressive or records which are the property of Progressive. 11. In the event of any actual or threatened breach by Employee of the provisions of Paragraphs 10, Progressive shall be entitled to an injunction (including an ex parte temporary restraining order) restraining Employee from violating these provisions. Progressive shall also be entitled to recover, as liquidated damages, the amount equal to fifty percent (50%) of the severance paid to Employee under this Agreement. 12. All payments to be made by Employer under this Agreement are subject to applicable tax withholding, other legally required deductions and (except to the extent prohibited by law) amounts due Progressive for any reason. 13. All capitalized terms used in this Agreement shall have the meanings given to them in the Plan, unless otherwise required clearly by the context. 14. This Agreement, together with the Plan and the other documents referred to herein, constitute the entire agreement of the parties, superseding all prior oral or written representations, agreements and understandings relating to the subject matter of this Agreement. Any modifications of this Agreement must be in a writing signed by both parties in order to be effective. Employee may not assign this Agreement or any of his/her rights or obligations hereunder without Employer's prior written consent. This Agreement is subject to the terms, provisions and limitations of the Plan in all respects. 15. Employee has read and understands all of the terms of this Agreement and Employee has been encouraged to consult with an attorney. Employee acknowledges that he/she has been given a period of at least ____________ (___) days to review this Agreement with an attorney and individuals of his/her own choice and consider its effect, including Employee's release of rights. Employee signs this Agreement in exchange for the consideration to be given to him/her, which Employee acknowledges is adequate and satisfactory. Neither Progressive nor its agents, representatives or employees have made any representations to Employee concerning the terms or effects of this Agreement other than those contained in this Agreement or the Plan. IMPORTANT! BEFORE YOU SIGN THIS AGREEMENT YOU SHOULD CONSULT WITH AN ATTORNEY. ALSO, AFTER YOU HAVE SIGNED THIS AGREEMENT YOU HAVE SEVEN (7) DAYS WITHIN WHICH TO REVOKE IT FOR ANY REASON. YOU DO NOT NEED EMPLOYER'S CONSENT IN ORDER TO REVOKE THIS AGREEMENT, BUT YOU MUST GIVE WRITTEN NOTICE OF YOUR REVOCATION TO EMPLOYER WITHIN THE SEVEN (7) DAY REVOCATION PERIOD. THIS AGREEMENT WILL NOT BE EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF THE SEVEN (7) DAY REVOCATION PERIOD. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated above. ________________________________________________________________________________ WITNESS EMPLOYEE ________________________________________________________________________________ ________________________________________________________________________________ WITNESS EMPLOYER By: _______________________________________________________________________ Title: ____________________________________________________________________ 10-Q 12 l91019ae10-q_pdf.pdf COURTESY COPY OF PROGRESSIVE'S 10-Q begin 644 l91019ae10-q_pdf.pdf M)5!$1BTQ+C(-)>+CS],-"C8R(#`@;V)J#3P\(`TO3&EN96%R:7IE9"`Q(`TO M3R`V-"`-+T@@6R`W,S0@,SF4@-S@-+TEN9F\@-C$@,"!2(`TO M4F]O="`V,R`P(%(@#2]0%*8FL-A*9.J&)<)NK2O5M:4<%Z9[=1WB M75^DL&3-NTJV0UO57<06;5PB)5:R8DTF6^M<+4F)YI4JTEQ7=%X&G#BT];R5 MT-*#+8)16S35LSF"%VI%1SC-Y0PZP,#0T='`P`(B6$$$7!E("]4>7!E,2`-+T9I7!E("]&;VYT(`TO4W5B='EP92`O M5'EP93$@#2]&:7)S=$-H87(@,S(@#2],87-T0VAAB]C+T\O M<75O=&5R:6=H="]E:6=H="]E+U$O;FEN92]P7`UAF5R;R]-+VXO;VYE+T$O M:R]/+W1W;R]M+W%U;W1E6UE;G0@06=R965M96YT*51J"D54"C4S+C6UE;G0@06=R965M M96YT*51J"D54"C4S+C&5C M=71I=F4@4V5P87)A=&EO;B!!;&QO=V%N8V4@4&QA;BE4:@I%5`HU,RXW,R`V M.34N-C$@;0HR.#,N,3<@-CDU+C8Q(&P*4PIE;F1S=')E86T-96YD;V)J#37!E M("]4>7!E,4,@/CX@#7-T* M+%KW(KURO7J]S'O2CTYOM/W1'W?N?#//?//.][SS/,_[O2S,B(VQ6"S"QUON M^967O;\J2ADW;[TZ2A']L;R($6',#!9CPV9H#F-MQ(A-+)`KBOXU]5<+G*YD M_:[3_8$F/*@U@Y[I'3,D@4(,9['X%=5GVJ12Q_E2Z>*5ZIADC2HL7"OY6\@< MB:/SDB_G?L3%G]#Y(SI+);)0=;!2XI<+I&KHM7:Y!BE1+9: MHH@.=5!K)"H#+RX^.$X5JE)H5,JX/[F?;'ZZ_M4VQC(<#,H$[?%T_$F[@+N(>Y#GA//GW>9OXY_=HK9E'U3&.-XXV=3R:F;ISXTL34I M,GEG*C-M%=@)JLW,S+::79DFG'9\NG1ZV?01(5MH)UPFO$G8$[O-V>:^YL?( M6/(7BY46IRV=+&.M2*LLJQYK#^N+E"5UA!H3^8CJ9[C.Z+19;*.U>4LKZ22) M0"+0U3`3IX7M%5D#'QJ`.[*E@O@'LXS))8'#V];B_NV6`_P>E9Q'C"`B,U"V MBIKS(F`TD$:-/&)\GG_GNWAQ*K+@[CQ]0_56M+#A!>\_Y2\O`H\"S+L1D0,T M[#,PKV0/)%0B-A]YS2>_:@VJOTJ=.'!G_##=B,9)8KPG],J.5=2LI:D1V;2` MB='506G#X7H(KSI5)[PY")JJWD&(K2;:T_7V#(]$[,^0N:U'W>HQ,!T!.^#\ M>T5QF+AL!]E:%[9ID3L2+_36=1]OZP*_<;$"?B9#N5$[@I6+10')Y64I8N+W M]/*4M+*M(F1LAVR^F-T??A'((7#X(#;TK\PMV5M.9U>4[FT1==54E)T4%^2A M][^Q\0ZN@;<17I&AVF-_?S(,<_N.[4I)Z1$?2"I,WTDA(Q=D[&*0[KRK,^`! 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M'VQ-8=U\82>4N,6XVLK7=L"KEAFW4GG3Z_!,\C^1LCW^"F5N9'-T7!E("]086=E7!E("]086=E

EX-10.A

EXHIBIT NO. 10(A)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and W. Thomas Forrester (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.



                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.



                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,


                                                                          Page 2


         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5


         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.


                                                                          Page 6



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (C) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a


                                                                          Page 7


termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                      (B) the amount equal to the higher of (i) the product of
                  (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                      (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9


affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                                                                         Page 10




                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11


by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12



         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.


                                                                         Page 13



                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      W. Thomas Forrester at his home address


                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.



                                                                         Page 14



                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                        /s/ W. Thomas Forrester
                                     ---------------------------------
                                        W. Thomas Forrester


                                     THE PROGRESSIVE CORPORATION


                                     By:  /s/ Glenn Renwick
                                         -----------------------------
                                     Name:  Glenn Renwick
                                           ---------------------------
                                     Title:  CEO
                                           ---------------------------


                                                                         Page 15

EX-10.B

                                                                          Page 1

EXHIBIT NO. 10(B)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Brian J. Passell (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.


                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,


                                                                          Page 2



         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a)  POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5


         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.



                                                                          Page 6


For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (C) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a


                                                                          Page 7


termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                           (A) the sum of (i) that portion of the Executive's
                  Annual Base Salary that has accrued prior to the Date of
                  Termination to the extent not theretofore paid, (ii) the
                  product of (x) the higher of (I) the Recent Annual Bonus and
                  (II) the Annual Bonus paid or payable, including any bonus or
                  portion thereof that has been earned but deferred (and
                  annualized for any fiscal year consisting of less than 12 full
                  months or during which the Executive was employed for less
                  than 12 full months), for the most recently completed fiscal
                  year during the Employment Period, if any (such higher amount,
                  the "Highest Annual Bonus") and (y) a fraction, the numerator
                  of which is the number of days in the current fiscal year
                  through the Date of Termination and the denominator of which
                  is 365, and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                   thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                           (B) the amount equal to the higher of (i) the product
                  of (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                           (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9


affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                                                                         Page 10




                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11


by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12



         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.


                                                                         Page 13



                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Brian J. Passell at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.



                                                                         Page 14


                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                                /s/ Brian J. Passell
                                             ----------------------------
                                                    Brian J. Passell



                                             THE PROGRESSIVE CORPORATION

                                             By: /s/ Glenn Renwick
                                                 -------------------------

                                             Name:  Glenn Renwick
                                                   -----------------------
                                             Title: CEO
                                                    ----------------------







                                                                         Page 15

EX-10.C

EXHIBIT NO. 10(C)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Charles E. Jarrett (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.





                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,


                                                                          Page 2



         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or



                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5


         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                           (7) VACATION. During the Employment Period, the
         Executive shall be entitled to paid vacation in accordance with the
         most favorable plans, policies, programs and practices of the Company
         and the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.

For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable


                                                                          Page 6


belief that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer of the Company or a senior officer of the Company or based
upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a

termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.


                                                                          Page 7


                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings

                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and


                                                                          Page 8


                      (B) the amount equal to the higher of (i) the product of
                  (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                      (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the

affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the


                                                                          Page 9


Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the affiliated
companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts


                                                                         Page 10


shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid

by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the



                                                                         Page 11


Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company

         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment


                                                                         Page 12


         would be payable hereunder, and the Executive shall be entitled to
         settle or contest, as the case may be, any other issue raised by the
         Internal Revenue Service or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.


                                                                         Page 13


                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Charles E. Jarrett at his home address




                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.



                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights


                                                                         Page 14


under this Agreement. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                                       /s/ Charles E. Jarrett
                                                     --------------------------
                                                           Charles E. Jarrett


                                                     THE PROGRESSIVE CORPORATION

                                                     By: /s/Glenn Renwick
                                                         ----------------------
                                                     Name:  Glenn Renwick
                                                          ---------------------
                                                     Title:       CEO
                                                           --------------------


                                                                         Page 15

EX-10.D

EXHIBIT NO. 10(D)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Glenn M. Renwick (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.



                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,



                                                                          Page 2


         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5



         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.


                                                                          Page 6



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (C) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a


                                                                          Page 7


termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                           (B) the amount equal to the higher of (i) the product
                  of (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                           (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9


affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                                                                         Page 10


                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11


by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12



         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.


                                                                         Page 13



                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Glenn M. Renwick at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.


                                                                         Page 14


                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                              /s/ Glenn M. Renwick
                                           --------------------------------
                                                  Glenn M. Renwick


                                           THE PROGRESSIVE CORPORATION


                                           By: /s/ W. T. Forrester
                                               ----------------------------

                                           Name:   W. T. Forrester
                                                ---------------------------
                                           Title:  Chief Financial Officer
                                                 --------------------------


                                                                         Page 15

EX-10.E

EXHIBIT NO. 10(E)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Richard H. Watts (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.


                                                                          Page 1



                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                           (2) Individuals who, as of the date hereof,
         constitute the Board (the "Incumbent Board") cease for any reason to
         constitute at least a majority of the Board; provided, however, that
         any individual becoming a director subsequent to the date hereof whose
         election, or nomination for election by the Company's shareholders, was
         approved by a vote of at least a majority of the directors then
         comprising the Incumbent Board shall be considered as though such
         individual were a member of the Incumbent Board, but excluding, for
         this purpose, any such individual whose initial assumption of office
         occurs as a result of an actual or threatened election contest with
         respect to the election or removal of directors or other actual or
         threatened solicitation of proxies or consents by or on behalf of a
         Person other than the Board.

                           (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,



                                                                          Page 2

         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4



         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5



         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.


                                                                          Page 6



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a



                                                                          Page 7

termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                      (B) the amount equal to the higher of (i) the product of
                  (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                      (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9


affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                                                                         Page 10


                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11



by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company



                                                                         Page 12


         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.



                                                                         Page 13

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Richard H. Watts at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.


                                                                         Page 14

                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                                     /s/ Richard H. Watts
                                                   ---------------------------
                                                       Richard H. Watts


                                                   THE PROGRESSIVE CORPORATION


                                                   By: /s/ Glenn Renwick
                                                       -----------------------
                                                   Name:   Glenn Renwick
                                                        ----------------------
                                                   Title:  CEO
                                                        ----------------------




                                                                         Page 15

EX-10.F

EXHIBIT NO. 10(F)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Raymond M. Voelker (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.


                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,



                                                                          Page 2

         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to


                                                                          Page 3


         use the Executive's reasonable best efforts to perform faithfully and
         efficiently such responsibilities to the best of his or her ability.
         During the Employment Period, it shall not be a violation of this
         Agreement for the Executive to (A) serve on corporate, civic or

         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate,


                                                                          Page 4


         than the most favorable of those provided by the Company and the
         affiliated companies for the Executive under such stock option plans,
         practices, policies and programs as in effect at any time during the
         120-day period immediately

         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.



                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.


                                                                          Page 5


                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated

         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or


                                                                          Page 6


                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).


                                                                          Page 7


For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a

termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,



                                                                          Page 8


                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings

                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                      (B) the amount equal to the higher of (i) the product of
                  (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                      (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's


                                                                          Page 9


estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and the

affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.


                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.


                                                                         Page 10



                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11


by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12



         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.



                                                                         Page 13


                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Raymond M. Voelker at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.



                                                                         Page 14


                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                              /s/ Raymond M. Voelker
                                            ---------------------------------
                                              Raymond M. Voelker


                                           THE PROGRESSIVE CORPORATION

                                           By:     /s/ Glenn Renwick
                                                -----------------------------
                                           Name:  Glenn Renwick
                                                -----------------------------
                                           Tile:        CEO
                                                -----------------------------



                                                                         Page 15

EX-10.G

EXHIBIT NO. 10(G)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Robert T. Williams (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.



                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,



                                                                          Page 2

         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3.        TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5



         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.


                                                                          Page 6



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a


                                                                          Page 7


termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                   thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                           (B) the amount equal to the higher of (i) the product
                  of (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                           (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9



affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.



                                                                         Page 10

                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid


                                                                         Page 11

by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12



         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.


                                                                         Page 13



                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Robert T. Williams at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.


                                                                         Page 14



                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                                    /s/ Robert T. Williams
                                                 -----------------------------
                                                 Robert T. Williams


                                                 THE PROGRESSIVE CORPORATION


                                                 By:   /s/ Glenn Renwick
                                                     -------------------------
                                                 Name: Glenn Renwick
                                                       -----------------------
                                                 Title: CEO
                                                        ----------------------


                                                                         Page 15

EX-10.H

EXHIBIT NO. 10(H)
                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of the 24th day of August,
2001 (this "Agreement"), by and between THE PROGRESSIVE CORPORATION, an Ohio
corporation (the "Company"), and Alan R. Bauer (the "Executive").

                  WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  SECTION 1. CERTAIN DEFINITIONS.

                  (a) "Effective Date" means the first date during the Change of
Control Period (as defined herein) on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change of Control or (2) otherwise arose in connection with or in anticipation
of a Change of Control, then "Effective Date" means the date immediately prior
to the date of such termination of employment.

                  (b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.

                  (c) "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as described below whether by
merger, consolidation, purchase or otherwise, that assumes and is bound to
perform this Agreement by operation of law or otherwise.

                  (d) "Affiliated company" means any company controlled by,
controlling or under common control with the Company.


                                                                          Page 1


                  (e) "Change of Control" means:

                      (1) The acquisition by any individual, entity or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (A) the
         then-outstanding common shares of the Company (the "Outstanding Company
         Common Shares") or (B) the combined voting power of the
         then-outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that, for purposes of this Agreement,
         the following acquisitions shall not constitute a Change of Control:
         (i) any acquisition directly from the Company, (ii) any acquisition by
         the Company, (iii) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or any affiliated
         company, (iv) any acquisition by any corporation pursuant to a
         transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
         1(d)(3)(C), or (v) any acquisition of 20% or more of the Outstanding
         Company Common Shares or Outstanding Company Voting Securities by any
         Person who has acquired the Outstanding Company Common Shares or
         Outstanding Company Voting Securities in the ordinary course of
         business for investment purposes only and not with the purpose or
         effect of changing or influencing the control of the Company, or in
         connection with or as a participant in any transaction having such
         purpose or effect ("Investment Intent"), as demonstrated by the filing
         by such Person of a statement on Schedule 13G (including amendments
         thereto) pursuant to Regulation 13D under the Exchange Act, as long as
         such Person continues to hold the Outstanding Company Common Shares or
         Outstanding Company Voting Securities with an Investment Intent, unless
         the Incumbent Board (as defined below) determines, by a majority vote,
         that the acquisition or holding of Outstanding Company Common Shares or
         Outstanding Company Voting Securities by such Person constitutes a
         Change of Control.

                      (2) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board.

                      (3) Consummation of a reorganization, merger,
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, immediately following such Business Combination, (A) all or
         substantially all of the individuals and entities that were the
         beneficial owners of the Outstanding Company Common Shares and the
         Outstanding Company Voting Securities immediately prior to such
         Business Combination beneficially own, directly or indirectly,



                                                                          Page 2

         more than 60% of the then-outstanding common shares and the combined
         voting power of the then-outstanding voting securities entitled to vote
         generally in the election of directors, as the case may be, of the
         corporation resulting from such Business Combination (including,
         without limitation, a corporation that, as a result of such
         transaction, owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership immediately
         prior to such Business Combination of the Outstanding Company Common
         Shares and the Outstanding Company Voting Securities, as the case may
         be, (B) no Person (excluding any corporation resulting from such
         Business Combination or any employee benefit plan (or related trust) of
         the Company or such corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 20% or more of,
         respectively, the then-outstanding common shares of the corporation
         resulting from such Business Combination or the combined voting power
         of the then-outstanding voting securities of such corporation, except
         to the extent that such ownership existed prior to the Business
         Combination, and (C) at least a majority of the members of the board of
         directors of the corporation resulting from such Business Combination
         were members of the Incumbent Board at the time of the execution of the
         initial agreement or of the action of the Board providing for such
         Business Combination; or

                      (4) Approval by the shareholders of the Company of a
         complete liquidation or dissolution of the Company.

                  SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").

                  SECTION 3. TERMS OF EMPLOYMENT.

                  (a) POSITION AND DUTIES.

                      (1) During the Employment Period, (A) the Executive's
         position (including status, offices, titles and reporting
         requirements), authority, duties and responsibilities shall be at least
         commensurate in all material respects with the most significant of
         those held or exercised by and assigned to the Executive at any time
         during the 120-day period immediately preceding the Effective Date and
         (B) the Executive's services shall be performed at the office where the
         Executive was employed immediately preceding the Effective Date or at
         any other location less than 25 miles from such office.

                      (2) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote reasonable attention and time during
         normal business hours to the business and affairs of the Company and,
         to the extent necessary to discharge the responsibilities assigned to
         the Executive hereunder, to use the Executive's reasonable best efforts
         to perform faithfully and efficiently such responsibilities to the best
         of his or her ability. During the Employment Period, it shall not be a
         violation of this Agreement for the Executive to (A) serve on
         corporate, civic or


                                                                          Page 3


         charitable boards or committees, (B) deliver lectures, fulfill speaking
         engagements or teach at educational institutions and (C) manage
         personal investments, so long as such activities do not significantly
         interfere with the performance of the Executive's responsibilities as
         an officer or employee of the Company in accordance with this
         Agreement. It is expressly understood and agreed that, to the extent
         that any such activities have been conducted by the Executive prior to
         the Effective Date, the continued conduct of such activities (or the
         conduct of activities similar in nature and scope thereto) subsequent
         to the Effective Date shall not thereafter be deemed to interfere with
         the performance of the Executive's responsibilities to the Company.

                  (b) COMPENSATION.

                      (1) BASE SALARY. During the Employment Period, the
         Executive shall receive an annual base salary (the "Annual Base
         Salary"), which Annual Base Salary shall be at least equal to 12 times
         the highest monthly base salary paid or payable, including any base
         salary that has been earned but deferred, to the Executive by the
         Company and the affiliated companies during the 12-month period
         immediately preceding the month in which the Effective Date occurs. The
         Annual Base Salary shall be paid one-twelfth (1/12th) each month.
         During the Employment Period, the Annual Base Salary shall be reviewed
         at least annually, beginning no more than 12 months after the last
         salary increase awarded to the Executive prior to the Effective Date.
         Any increase in the Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         During the Employment Period, the Annual Base Salary shall not be
         reduced after any such increase and the term "Annual Base Salary" shall
         refer to the Annual Base Salary as so increased.

                      (2) ANNUAL BONUS. In addition to the Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") in cash at
         least equal to the Executive's highest bonus under the Company's
         Executive Bonus and/or Gainsharing Plans, or any comparable bonus under
         any predecessor or successor plan, for the last three full fiscal years
         prior to the Effective Date (annualized, in the event that the
         Executive was not employed by the Company for the whole of such fiscal
         year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
         no later than the end of the third month of the fiscal year next
         following the fiscal year for which the Annual Bonus is awarded, except
         to the extent that the Executive shall elect to defer the receipt of
         such Annual Bonus pursuant to and in accordance with the Company's
         Executive Deferral Plan or any successor plan thereto then in effect.

                      (3) COMPANY STOCK OPTION PLANS. During the Employment
         Period, the Executive shall be entitled to participate in all stock
         option plans, practices, policies and programs applicable generally to
         other peer executives of the Company and the affiliated companies, but
         in no event shall such plans, practices, policies and programs provide
         the Executive with incentive opportunities (measured with respect to
         both regular and special incentive opportunities, to the extent, if
         any, that such distinction is applicable), in each case, less
         favorable, in the aggregate, than the most favorable of those provided
         by the Company and the affiliated companies for the Executive under
         such stock option plans, practices, policies and programs as in effect
         at any time during the 120-day period immediately


                                                                          Page 4


         preceding the Effective Date or, if more favorable to the Executive,
         those provided generally at any time after the Effective Date to other
         peer executives of the Company and the affiliated companies. The basis
         for the valuation for such stock option awards for Executive shall be
         the highest applicable percent of salary within the last three fiscal
         years prior to the Effective Date, based upon Executives job
         classification, with the target award value divided by a value per
         share developed through a modified Black-Scholes pricing model to
         determine the number of option shares to be awarded, such approach
         being consistent with that described in a notice of annual meeting of
         shareholders of the Company within the last three full fiscal years
         prior to the Effective Date, which yields the highest value of stock
         option awards.

                      (4) SAVINGS, RETIREMENT AND WELFARE BENEFIT PLANS. During
         the Employment Period, the Executive and as applicable the Executive's
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under any incentive, savings, retirement
         plans and welfare benefit plans, policies, practices and programs
         provided by the Company and the affiliated companies (including,
         without limitation, medical, prescription, dental, disability, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and the affiliated companies, but in no event
         shall such plans, practices, policies and programs provide the
         Executive and/or the Executive's family with benefits that are less
         favorable, in the aggregate, than the most favorable of such plans,
         practices, policies and programs in effect for the Executive at any
         time during the 120-day period immediately preceding the Effective Date
         or, if more favorable to the Executive, those provided generally at any
         time after the Effective Date to other peer executives of the Company
         and the affiliated companies. In the event that because of applicable
         law, or for other good and valid reasons, such applicable benefit plans
         cannot be provided Executive by the Company following Change of
         Control, the Company by agreement with Executive, which agreement shall
         not be unreasonably withheld, may provide Executive with an amount
         having an overall equivalent tax adjusted value for the applicable
         period to those employee benefits, programs and the like, not otherwise
         being provided by the Company to Executive.

                      (5) EXPENSES. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         expenses incurred by the Executive in the furtherance of the business
         or affairs of the Company or any of the Affiliated companies in
         accordance with the most favorable policies, practices and procedures
         of the Company and the affiliated companies in effect for the Executive
         at any time during the 120-day period immediately preceding the
         Effective Date or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (6) OFFICE AND SUPPORT STAFF. During the Employment
         Period, the Executive shall be entitled to an office or offices of a
         size and with furnishings and other appointments, and to personal
         secretarial and other assistance, at least equal to the most favorable
         of the foregoing provided to the Executive by the Company and the
         affiliated


                                                                          Page 5


         companies at any time during the 120-day period immediately preceding
         the Effective Date or, if more favorable to the Executive, as provided
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies.

                      (7) VACATION. During the Employment Period, the Executive
         shall be entitled to paid vacation in accordance with the most
         favorable plans, policies, programs and practices of the Company and
         the affiliated companies as in effect for the Executive at any time
         during the 120-day period immediately preceding the Effective Date or,
         if more favorable to the Executive, as in effect generally at any time
         thereafter with respect to other peer executives of the Company and the
         affiliated companies.

                  SECTION 4. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically if the Executive dies during the Employment Period. If
the Company determines in good faith that the Disability (as defined herein) of
the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability"), it may give to the Executive written notice in
accordance with Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

                  (b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. Subject to the last paragraph
of Section 4(b), "Cause" means:

                      (1) the willful failure of the Executive to perform, and
         the continuance of such failure to perform for 60 days following the
         Executive's receipt for notice from the Company, substantially the
         Executive's duties with the Company or any affiliated company (other
         than any such failure resulting from incapacity due to physical or
         mental illness), after a written demand for substantial performance is
         delivered to the Executive by the Board or the Chief Executive Officer
         of the Company that specifically identifies the manner in which the
         Board or the Chief Executive Officer of the Company believes that the
         Executive has not substantially performed the Executive's duties; or

                      (2) the willful engaging by the Executive in illegal
         conduct or gross misconduct that is materially and demonstrably
         injurious to the Company; or

                      (3) any violation of the Code of Conduct of the Company,
         as in effect immediately prior to the Effective Date.


                                                                          Page 6



For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.

                  Notwithstanding the foregoing, the cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in Sections 4(b)(1) or 4(b)(2), and specifying
the particulars thereof in detail.

                  (c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:

                      (1) the assignment to the Executive of any duties
         inconsistent in any respect with the Executive's position (including
         status, offices, titles and reporting requirements), authority, duties
         or responsibilities as contemplated by Section 3(a), or any other
         action by the Company that results in a diminution in such position,
         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and that is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

                      (2) any failure by the Company to comply with any of the
         provisions of Section 3(b), other than an isolated, insubstantial and
         inadvertent failure not occurring in bad faith and that is remedied by
         the Company promptly after receipt of notice thereof given by the
         Executive;

                      (3) the Company's requiring the Executive to be based at
         any office or location other than as provided in Section 3(a)(1)(B) or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date;

                      (4) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                      (5) any failure by the Company to comply with and satisfy
         Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a

                                                                          Page 7

termination by the Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

                  (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.

                  (e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (A)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
         cash within 30 days after the Date of Termination, the aggregate of the
         following amounts:

                      (A) the sum of (i) that portion of the Executive's Annual
                  Base Salary that has accrued prior to the Date of Termination
                  to the extent not theretofore paid, (ii) the product of (x)
                  the higher of (I) the Recent Annual Bonus and (II) the Annual
                  Bonus paid or payable, including any bonus or portion thereof
                  that has been earned but deferred (and annualized for any
                  fiscal year consisting of less than 12 full months or during
                  which the Executive was employed for less than 12 full
                  months), for the most recently completed fiscal year during
                  the Employment Period, if any (such higher amount, the
                  "Highest Annual Bonus") and (y) a fraction, the numerator of
                  which is the number of days in the current fiscal year through
                  the Date of Termination and the denominator of which is 365,
                  and (iii) any compensation previously deferred by the
                  Executive (together with any accrued interest or earnings


                                                                          Page 8


                  thereon) and any accrued vacation pay, in each case, to the
                  extent not theretofore paid (the sum of the amounts described
                  in subclauses (i), (ii) and (iii), the "Accrued Obligations");
                  and

                      (B) the amount equal to the higher of (i) the product of
                  (x) two and (y) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus or (ii) the product of
                  (x) four and (y) the Executive's Annual Base Salary; less

                      (C) the value of amounts paid or to be paid to the
                  Executive under any severance pay plans or programs of the
                  Company then in effect.

                  (2) for two years after the Executive's Date of Termination,
         or such longer period as may be provided by the terms of the
         appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those that would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 3(b)(4) if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and the affiliated companies and their families,
         provided, however, that, if the Executive becomes re-employed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility. For
         purposes of determining eligibility (but not the time of commencement
         of benefits) of the Executive for retiree benefits pursuant to such
         plans, practices, programs and policies, the Executive shall be
         considered to have remained employed until three years after the Date
         of Termination and to have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (4) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided to the Executive or that
         the Executive is eligible to receive under any plan, program, policy or
         practice or contract or agreement of the Company and the affiliated
         companies (such other amounts and benefits, the "Other Benefits").

                  (b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's estate,
beneficiaries or legal representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the


                                                                          Page 9



affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.



                  (c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.

                  (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) that portion of the Executive's Annual
Base Salary that has accrued prior to the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for the Accrued Obligations and the
timely payment or provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

                  SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.


                                                                         Page 10

                  SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be subject to set-off or otherwise affected by
any counterclaim, recoupment, defense, or other claim, right or action that the
Company or any of the Affiliated companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or the affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise but
determined without regard to any additional payments required under this Section
8) (the "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, as the same may be hereafter modified or amended or any successor
provision, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, collectively, the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other nationally recognized independent
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid



                                                                         Page 11

by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (3) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
         relating to such claim; provided, however, that the Company shall bear
         and pay directly all costs and expenses (including additional interest
         and penalties) incurred in connection with such contest, and shall
         indemnify and hold the Executive harmless, on an after-tax basis, for
         any Excise Tax or income tax (including interest and penalties with
         respect thereto) imposed as a result of such representation and payment
         of costs and expenses. Without limitation on the foregoing provisions
         of this Section 8(c), the Company shall control all proceedings taken
         in connection with such contest, and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the applicable taxing authority in respect of such
         claim and may, at its sole option, either direct the Executive to pay
         the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and the Executive agrees to prosecute such contest
         to a determination before any administrative tribunal, in a court of
         initial jurisdiction and in one or more appellate courts, as the
         Company


                                                                         Page 12

         shall determine; provided, however, that, if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis, and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax
         (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and provided, further, that any extension of
         the statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which the Gross-Up Payment would be payable
         hereunder, and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, upon receipt of such refund,
the Executive shall (subject to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

                  SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or the
affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the affiliated companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). For two years after termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                  SECTION 10. SUCCESSORS.

                  (a) This Agreement is personal to the Executive, and, without
the prior written consent of the Company, shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.


                                                                         Page 13

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

                  SECTION 11. MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified other than by a written agreement executed by the parties
hereto or their respective successors, permitted assigns and legal
representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  if to the Executive:

                      Alan R. Bauer at his home address



                  if to the Company:

                      The Progressive Corporation
                      300 North Commons Boulevard - OHF11
                      Mayfield Village, Ohio 44143
                      Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) This Agreement shall not be deemed to modify, amend or
supplement the terms of any existing benefit plan or program of the Company.

                  (e) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes or
other items as shall be required to be withheld pursuant to any applicable law
or regulation.


                                                                         Page 14

                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

                  (g) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date, this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.



                                         /s/ Alan R Bauer
                                       ------------------------------
                                         Alan R Bauer


                                       THE PROGRESSIVE CORPORATION


                                       By:  /s/ Glenn Renwick
                                          ---------------------------

                                       Name:  Glenn Renwick
                                            -------------------------
                                       Title:  CEO
                                             ------------------------




                                                                         Page 15

EX-10.I

                                                                    Exhibit 10.I

                THE PROGRESSIVE CORPORATION EXECUTIVE SEPARATION
                                 ALLOWANCE PLAN

                            SECTION 1 -- DEFINITIONS

1.1  "AFFILIATED COMPANY" - means any entity in which the Company owns, directly
     or indirectly, more than fifty percent (50%) of the stock or assets.

1.2  "ANNUAL SALARY" - as to each Eligible Employee means his/her annualized
     base salary or other base wages immediately prior to his/her Termination
     Date (including any geographic differential). This term does not include
     commissions, stock-related awards, incentive compensation, separate pay
     adjustments or allowances or any other forms of remuneration.

1.3  "GROUP I EMPLOYEES" - are those Eligible Employees who are parties to
     written employment agreements duly authorized and executed by and between
     the Eligible Employee and Progressive the benefits to which are triggered
     by a "Change of Control" as defined in those written agreements.

1.4  "GROUP II EMPLOYEES" - are those Eligible Employees who, immediately
     preceding their Termination Date and for at least two years prior thereto,
     had Gainsharing and Non-Qualified Stock Option ("NQSO") targets under the
     then applicable Gainsharing Plan and Incentive Plan, respectively, of
     greater than fifty percent (50%), exclusive of Group I Employees.

1.5  "GROUP III EMPLOYEES" - are those Eligible Employees who, immediately
     preceding their Termination Date and for at least two years prior thereto,
     had Gainsharing and NQSO targets under the then applicable Gainsharing and
     Incentive Plan, respectively, of thirty-five percent (35%) and greater,
     exclusive of Group I Employees and Group II Employees.

1.6  "COMPANY" - means The Progressive Corporation, an Ohio corporation, or its
     successors.

1.7  "DISABILITY" - means the inability to perform work due to illness, injury
     or pregnancy-related condition.

1.8  "ELIGIBLE EMPLOYEE" - means regular, non-temporary, non-union executive
     employees of Progressive who qualify either as a Group I Employee, Group II
     Employee or a Group Employee as defined hereunder.

1.9  "MISCONDUCT" - means an Eligible Employee's commission of a terminable
     offense under Progressive's Code of Conduct, as reasonably determined in
     good faith by the Company.

1.10 "PCIC" - means Progressive Casualty Insurance Company, an Ohio corporation,
     or its successors.

1.11 "PLAN" - means The Progressive Corporation Executive Separation Allowance
     Plan, as set forth herein and as the same may be amended from time to time.

1.12 "PROGRESSIVE" - includes the Company and any other entity which from time
     to time is an Affiliated Company.

1.13 "REDUCTION IN FORCE" - means a reduction by Progressive in the number of
     employees working in any of Progressive's operating divisions.



1.14 "REORGANIZATION" - means Progressive's elimination of one or more positions
     or redefinition of the job duties of one or more positions.

1.15 "SEPARATION AGREEMENT AND GENERAL RELEASE" - means an agreement and release
     substantially in the forms attached hereto as Exhibits A and B together
     with such changes, additions and deletions as Progressive, in its sole
     discretion, may specify.

1.16 "TERMINATION DATE" - means the effective date of any Eligible Employee's
     termination of employment with Progressive.


                SECTION 2 -- ENTITLEMENT TO SEPARATION ALLOWANCE

2.1  An Eligible Employee shall be entitled to receive a Separation Allowance
     under this Plan if (a) Progressive terminates his/her employment for
     reasons other than resignation (including retirement), job elimination,
     death, Disability, unsatisfactory job performance or Misconduct; and (b)
     the Eligible Employee signs a Separation Agreement and General Release and
     delivers it to the Company within ninety (90) days after the Eligible
     Employee's Termination Date. In no event shall any Eligible Employee be
     entitled to receive a Separation Allowance if (x) his/her employment
     terminates as a result of a resignation (including retirement), a Reduction
     in Force or Reorganization, death, Disability, failure to meet job
     performance standards, Misconduct or any reason other than as a result of
     the circumstances described in (a) above, or (y) he/she fails to deliver a
     signed Separation Agreement and General Release to the Company within the
     time specified above.

                   SECTION 3 -- AMOUNT OF SEPARATION ALLOWANCE

3.1  The Separation Allowance payable to each Eligible Employee who is entitled
     to such allowance under Section 2 above shall be in the amount as provided
     below:

ELIGIBLE EMPLOYEE         SEPARATION ALLOWANCE
----------------------------------------------------------

GROUP I EMPLOYEE          One year Annual Salary plus
----------------
                          Gainsharing.  The amount paid as
                          Gainsharing shall equal the
                          higher of a) the highest annual
                          Gainsharing paid to the Group I
                          Employee during the past three
                          years; or b) payment of the Group
                          I Employee's targeted Gainsharing
                          at a factor of 1.0 in the
                          calendar year of the Termination
                          Date.


GROUP II EMPLOYEE         One-year Annual Salary




ELIGIBLE EMPLOYEE         SEPARATION ALLOWANCE
----------------------------------------------------------

GROUP III EMPLOYEE        The greater of a) six months of
------------------
                          the Group III Employee's Annual
                          Salary; or b) the amount that
                          would be payable to the Group III
                          Employee if the employee were
                          entitled to benefits under The
                          Progressive Corporation
                          Separation Allowance Plan (the
                          "SAP Plan"), provided that the
                          Separation Allowance paid
                          hereunder shall in no event
                          exceed the employee's Annual
                          Salary.


3.2  Each Separation Allowance shall be paid in a lump sum within thirty (30)
     days following the later of (i) the Eligible Employee's Termination Date or
     (ii) the expiration of the revocation period referred to in the Eligible
     Employee's signed Separation Agreement and General Release. Alternatively,
     Progressive, in its sole discretion, may elect to pay any Separation
     Allowance in installments over any period not exceeding twenty-four (24)
     months after the Eligible Employee's Termination Date.

3.3  Progressive shall withhold from each Separation Allowance all applicable
     federal, state, and local taxes, Social Security taxes and other deductions
     required by law, and any other amounts due Progressive for any reason.

3.4  Each Eligible Employee's Separation Allowance payable under this Plan shall
     be reduced by the amount of any state-mandated Separation Allowance or
     severance payments payable by Progressive to such Eligible Employee.

3.5  Notwithstanding anything herein to the contrary, no Separation Allowance
     payments shall be made under this Plan to any Eligible Employee more than
     twenty-four (24) months after his/her Termination Date.

                  SECTION 4 -- ADDITIONAL PAYMENTS AND BENEFITS

4.1  Progressive may elect to provide or pay to any Eligible Employee who is
     entitled to a Separation Allowance under this Plan such additional payments
     or benefits, if any, as Progressive, in its sole discretion, shall
     determine, such as outplacement assistance benefits; reimbursements for the
     cost of obtaining health, life, disability, employee assistance or other
     welfare benefits; and other payments and benefits.



                      SECTION 5 -- PROGRESSIVE DISCRETION

5.1  Notwithstanding anything herein to the contrary, no determination by
     Progressive as to the amount, timing or manner of payment of any Separation
     Allowance or other payment or benefit under this Plan shall be regarded as
     a precedent or guideline for purposes of determining the amount, timing or
     manner of payment of any other Separation Allowance or other payment or
     benefit under this Plan, nor shall any such determination otherwise limit
     Progressive's discretion provided for under this Plan in any way.

            SECTION 6 -- ELIGIBILITY UNDER OTHER PLANS AND AGREEMENTS

6.1  Except as provided in Sections 6.2 and 6.3, this Plan shall entirely
     supersede and replace all policies, plans, agreements, understandings and
     arrangements adopted or entered into before November 1, 2001 regarding
     separation allowances, severance pay and/or similar compensation payable by
     Progressive to terminated Eligible Employees (other than with respect to
     any Eligible Employees who may have incurred Termination Dates prior to
     November 1, 2001).

6.2  Section 6.1 of this Plan shall not limit any Eligible Employee's rights, if
     any, under the SAP Plan in the event of any Reorganization or Reduction in
     Force, provided that an Eligible Employee shall only be entitled to receive
     benefits under the circumstances specified under the Plan and the SAP Plan
     and shall not be entitled to receive benefits under both this Plan and the
     SAP Plan.

6.3  Individual employment, separation, severance and other agreements that
     include provisions regarding separation allowances, severance pay and/or
     similar compensation following termination of employment and that are
     entered into in writing with an Eligible Employee shall supersede and
     replace this Plan, except as otherwise expressly provided by such
     agreements; however, no such agreement entered into on or after November 1,
     2001 shall be effective or enforceable unless approved in writing by PCIC's
     Chief Human Resources Officer or the holder of any similar successor
     office, and nothing in this Plan shall be construed as ratifying or
     validating any such agreements that have not been so approved.

                         SECTION 7 -- CLAIMS PROCEDURES

7.1  The Company shall establish reasonable procedures under which a claimant,
     or his/her duly authorized representative, may present a claim for benefits
     under this Plan.

7.2  Unless such claim is allowed in full by the Company, 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 written notice to the claimant is
     given prior to the expiration of the initial ninety (90) day period
     describing such circumstances and indicating the date by which the Company
     expects to render its determination) 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;

     (iv) A description of the Plan's claims review procedures and the time
          limits applicable to such procedures, including a statement of the
          claimant's right to



          bring a civil action under Section 502(a) of ERISA following an
          adverse benefit determination on review; and

     (v)  An explanation of the steps to be taken if the claimant wishes to
          resubmit his/her claim for review.

7.3  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 Company
     for a review of such denial. The claimant or his/her representative, may,
     upon request and free of charge, review or receive copies of documents,
     records and other information relevant to the claimant's claim for
     benefits, and may submit written comments, documents, records and other
     information relating to the claim for benefits.

7.4  If an appeal is timely filed, the Company 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 written notice to
     the claimant is given prior to the expiration of the initial sixty (60) day
     period describing such special circumstances and indicating the date by
     which the Company expects to render its determination). In conducting its
     review, the Company shall take into account all comments, documents,
     records and other information submitted by the claimant relating to the
     claim, without regard to whether such information was submitted or
     considered in the initial benefit determination. The Company's decision on
     review shall:

     (i)  Be written in a manner calculated to be understood by the claimant;

     (ii) State the specific reason(s) for the decision;

     (iii) Make specific reference to pertinent provision(s) of the Plan;

     (iv) State that the claimant is entitled to receive, upon request and free
          of charge, reasonable access to, and copies of, all documents, records
          and other information relevant to the claimant's claim for benefits;
          and

     (v)  Include a statement of the claimant's right to bring a civil action
          under Section 502(a) of ERISA.

7.5  If a period of time is extended, as permitted under Sections 7.2 and 7.4
     above, due to a claimant's failure to submit information to decide a claim,
     the period for making the benefit determination on review shall be tolled
     from the date on which the notification of the extension is sent to the
     claimant until the date on which the claimant responds to the request for
     additional information."

                     SECTION 8 -- AMENDMENT AND TERMINATION

8.1  This Plan may be amended, modified or terminated by the Company in whole or
     in part at any time for any reason without the consent of any Affiliated
     Company or any employee or other person, provided that, except for legally
     required amendments, modifications and terminations, no such amendment,
     modification or termination shall impair the rights of any Eligible
     Employee who incurs a Termination Date prior to the date the Company adopts
     such amendment or modification or approves such termination.

                          SECTION 9 -- RIGHTS OF SETOFF




9.1  Progressive shall have the unrestricted right and power to set off against,
     or recover out of, any payments owed an Eligible Employee or other person
     under this Plan, at the time such payments would have otherwise been
     payable under this Plan, any amounts owed to Progressive by such Eligible
     Employee or other person.

                              SECTION 10 -- FUNDING

10.1 All payments pursuant to this Plan shall be made from Progressive's general
     funds and nothing contained herein shall be deemed to require Progressive
     to, and Progressive shall not, physically segregate any sums from its
     general funds, or create any trust or escrow account, or make any special
     deposit, in respect of any amounts payable hereunder.

                          SECTION 11 -- ADMINISTRATION

11.1 The Company shall be the Administrator of this Plan and shall be the "named
     fiduciary" within the meaning of Section 402 of the Employee Retirement
     Income Security Act of 1974, as amended, and, except as specified elsewhere
     herein, shall exercise all rights and duties with respect hereto, including
     without limitation, the right:

     (a)  to make and enforce such rules and regulations as are necessary or
          proper for the efficient administration of this Plan; and

     (b)  to interpret and construe this Plan and to decide all disputes and
          other matters arising hereunder, including but not limited to the
          right to determine eligibility for benefits and resolve possible
          ambiguities, inconsistencies or omissions. All such rules,
          interpretations and decisions shall be applied in a uniform manner to
          all persons similarly situated.

     Except as otherwise specifically provided herein, no action or decision
     taken in accordance with this Plan by the Company or Progressive shall be
     relied upon as a precedent for any similar action or decision under any
     circumstances.

                          SECTION 12 -- EFFECTIVE DATE

     12.1 This Plan shall be effective November 1, 2001, but only as to Eligible
          Employees who incur Termination Dates on or after such date.

     IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this
Plan to be executed by its duly authorized representative as of the 31st day of
October, 2001.

     THE PROGRESSIVE CORPORATION

     By:  /s/ Charles E. Jarrett
          --------------------------------------
          Charles E. Jarrett, Secretary





                                    EXHIBIT A
                    SEPARATION AGREEMENT AND GENERAL RELEASE
                           (GROUP I AND II EMPLOYEES)

THIS AGREEMENT is entered into as of the ____ day of ______________, 20__
between ("Employee") and ("Employer") pursuant to The Progressive Corporation
Executive Separation Allowance Plan (the "Plan").

     WHEREAS, Employee's employment with Employer terminated (or will terminate)
effective __________________________, 200__ ; and

     WHEREAS, Employee desires to receive certain employment termination
benefits under the Plan; and

     WHEREAS, the Plan provides employment termination benefits only to
employees who sign a Separation Agreement and General Release in the form
specified in the Plan;

     NOW, THEREFORE, Employee and Employer hereby agree as follows:

     1.   Employer shall pay Employee a separation allowance of $ _______
          pursuant to Section 3 of the Plan in a lump sum on
          _____________________________, 200__ [in monthly installments
          commencing ____________________, 200__], subject to the limitations
          specified in the Plan.

     2.   Employer shall pay Employee for all credited ETB in accordance with
          Employer's standard practices within thirty (30) days following the
          expiration of the revocation period referred to at the end of this
          Agreement or at such earlier time as may be required by law.

     3.   Employee shall be entitled to continue his/her and his/her dependents'
          medical, dental and vision coverages under The Progressive Corporation
          Group Insurance Plan ("Group Insurance Plan"), subject to the terms,
          conditions and limitations of the Group Insurance Plan. Employee also
          shall be entitled to the conversion privileges, if any, applicable to
          his/her life insurance and/or other coverages under the Group
          Insurance Plan.

     4.   Employer shall provide the following additional payments and/or
          benefits to Employee:

                  ______________________________________________________________

_______________________________________________________________________________

                  ______________________________________________________________

_______________________________________________________________________________

                  ______________________________________________________________

_______________________________________________________________________________




     5.   Employee's entitlement to pension benefits, if any, shall be
          determined in accordance with The Progressive Corporation Long- Term
          Savings Plan.

     6.   Employee shall be entitled to whatever other rights or benefits are
          available to former employees of Progressive under any other written
          employee benefit plans or programs maintained by Progressive, subject
          to the terms, conditions and limitations of those plans and programs.

     7.   With the exception of the rights and benefits contained in, or
          expressly referred to in this Agreement, Employee hereby waives any
          and all rights and benefits Employee now has or might hereafter have
          acquired under the Plan, The Progressive Corporation Separation
          Allowance Plan, The 200___ Gainsharing Program and any other
          compensation or bonus programs, employee benefit plans and fringe
          benefit programs maintained by Progressive or any of its affiliates by
          virtue of Employee's employment with Progressive or the termination
          thereof.

     8.   Employee acknowledges the forfeiture of any and all unvested
          non-qualified stock options ("NQSOs") awarded to Employee under The
          Progressive Corporation 1989 Incentive Plan or The Progressive
          Corporation 1995 Incentive Plan (the "Incentive Plans"). Employee's
          rights, if any, under The Progressive Corporation Executive Deferred
          Compensation Plan, The Progressive Pension Plan and The Incentive
          Plans (collectively, the "Programs") shall be determined in accordance
          with the governing provisions of the Programs as in effect from time
          to time. For purposes of such Programs, Employee shall be considered
          to have terminated employment with Progressive on the Separation Date.

     9.   In consideration of the above undertakings of Employer, Employee
          hereby releases Employer, Progressive and their respective affiliates,
          officers, directors, employees, agents, successors and assigns
          (collectively, the "Released Entities"), from any and all claims,
          liabilities, demands, actions, suits and causes of action, whether
          known or unknown, that Employee ever had or now has against any of the
          Released Entities, including but not limited to claims arising under
          the Age Discrimination in Employment Act, as amended, and other claims
          relating to Employee's employment with Progressive and the termination
          of that employment, and claims under The Progressive Corporation
          Separation Allowance Plan (collectively "Claims"). [If Employee is a
          California resident, Employee acknowledges that he/she has read and
          understands California Civil Code Section 1542, which reads as
          follows:

               "A general release does not extend to claims which the
               creditor does not know or suspect to exist in his favor at the
               time of executing the release, which if known by him must
               have materially affected his settlement with the debtor."




     Employee hereby waives the provisions and protections of California Civil
Code Section 1542 and agrees that the above release shall apply to all Claims
that Employee ever had or now has against the Released Entities, regardless of
whether Employee currently is aware of the Claims or suspects that they exist.]

     10.  Employee further agrees that he will not, during the twenty-four (24)
          month period after the Separation Date, solicit or recruit any person
          who is a Progressive employee at the time of such solicitation or
          recruitment (unless such person has theretofore been given notice of
          the termination of his/her employment by Progressive) to act as an
          employee, consultant, agent or independent contractor with respect to
          any insurance or other business.

     11.  Employee agrees that Employee will maintain the confidentiality of
          confidential information which Employee has received by virtue of
          his/her employment with Progressive and will refrain from using such
          information or disclosing it to anyone other than Progressive or its
          employees. For purposes of this Agreement, confidential information is
          information which Progressive endeavors to keep confidential,
          including, without limitation, customer lists, employee lists, rate
          schedules, underwriting information, the terms of contracts and
          policies, marketing plans, program designs, trade secrets, proprietary
          information, and any such information provided by a third party to
          Progressive in confidence. Employee represents that promptly following
          his/her execution of this Agreement, Employee will return to
          Progressive any records in his/her possession containing confidential
          information of Progressive or records which are the property of
          Progressive.

     12.  In the event of any actual or threatened breach by Employee of the
          provisions of Paragraphs 10 or 11, Progressive shall be entitled to an
          injunction (including an EX PARTE temporary restraining order)
          restraining Employee from violating these provisions. The period
          provided in Paragraph 10 shall not run and will be suspended during
          the period of any violation by Employee of Paragraph 10 and, at the
          conclusion of any such violation, the period will run for its
          remaining term. Progressive shall also be entitled to recover, as
          liquidated damages, the amount equal to fifty percent (50%) of the
          severance paid to Employee under this Agreement.

     13.  All payments to be made by Employer under this Agreement are subject
          to applicable tax withholding, other legally required deductions and
          (except to the extent prohibited by law) amounts due Progressive for
          any reason.

     14.  All capitalized terms used in this Agreement shall have the meanings
          given to them in the Plan, unless otherwise required clearly by the
          context.

     15.  This Agreement, together with the Plan and the other documents
          referred to herein, constitute the entire agreement of the parties,
          superseding all prior oral or written representations, agreements and
          understandings relating to the subject matter of this Agreement. Any
          modifications of this Agreement must be in a writing signed by both
          parties in order to be effective. Employee may not assign




          this Agreement or any of his/her rights or obligations hereunder
          without Employer's prior written consent. This Agreement is subject to
          the terms, provisions and limitations of the Plan in all respects.

     16.  Employee has read and understands all of the terms of this Agreement
          and Employee has been encouraged to consult with an attorney. Employee
          acknowledges that he/she has been given a period of at least ( ) days
          to review this Agreement with an attorney and individuals of his/her
          own choice and consider its effect, including Employee's release of
          rights. Employee signs this Agreement in exchange for the
          consideration to be given to him/her, which Employee acknowledges is
          adequate and satisfactory. Neither Progressive nor its agents,
          representatives or employees have made any representations to Employee
          concerning the terms or effects of this Agreement other than those
          contained in this Agreement or the Plan.

     IMPORTANT! BEFORE YOU SIGN THIS AGREEMENT YOU SHOULD CONSULT WITH AN
     ATTORNEY. ALSO, AFTER YOU HAVE SIGNED THIS AGREEMENT YOU HAVE SEVEN (7)
     DAYS WITHIN WHICH TO REVOKE IT FOR ANY REASON. YOU DO NOT NEED EMPLOYER'S
     CONSENT IN ORDER TO REVOKE THIS AGREEMENT, BUT YOU MUST GIVE WRITTEN NOTICE
     OF YOUR REVOCATION TO EMPLOYER WITHIN THE SEVEN (7) DAY REVOCATION PERIOD.
     THIS AGREEMENT WILL NOT BE EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF
     THE SEVEN (7) DAY REVOCATION PERIOD.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
indicated above.

____________________________________        ____________________________________
WITNESS                                     EMPLOYEE



____________________________________        ____________________________________
WITNESS                                     EMPLOYER


                                            By: ________________________________


                                            Title: _____________________________






                                    EXHIBIT B
                    SEPARATION AGREEMENT AND GENERAL RELEASE
                             (GROUP III EMPLOYEES)

THIS AGREEMENT is entered into as of the _____ day of _______________, 20__
between ("Employee") and ("Employer") pursuant to The Progressive Corporation
Executive Separation Allowance Plan (the "Plan").

     WHEREAS, Employee's employment with Employer terminated (or will terminate)
effective ____________________________, 200__; and

     WHEREAS, Employee desires to receive certain employment termination
benefits under the Plan; and

     WHEREAS, the Plan provides employment termination benefits only to
employees who sign a Separation Agreement and General Release in the form
specified in the Plan;

     NOW, THEREFORE, Employee and Employer hereby agree as follows:

     1.   Employer shall pay Employee a separation allowance of $ ______________
          pursuant to Section 3 of the Plan in a lump sum on
          ___________________, 200__ [in _____ monthly installments commencing
          _________________, 200__], subject to the limitations specified in the
          Plan.

     2.   Employer shall pay Employee for all credited ETB in accordance with
          Employer's standard practices within thirty (30) days following the
          expiration of the revocation period referred to at the end of this
          Agreement or at such earlier time as may be required by law.

     3.   Employee shall be entitled to continue his/her and his/her dependents'
          medical, dental and vision coverages under The Progressive Corporation
          Group Insurance Plan ("Group Insurance Plan"), subject to the terms,
          conditions and limitations of the Group Insurance Plan. Employee also
          shall be entitled to the conversion privileges, if any, applicable to
          his/her life insurance and/or other coverages under the Group
          Insurance Plan.

     4.   Employer shall provide the following additional payments and/or
          benefits to Employee:

                  ______________________________________________________________

_______________________________________________________________________________

                  ______________________________________________________________

_______________________________________________________________________________

                  ______________________________________________________________

_______________________________________________________________________________


     5.   Employee's entitlement to pension benefits, if any, shall be
          determined in accordance with The Progressive Corporation Long- Term
          Savings Plan.




     6.   Employee shall be entitled to whatever other rights or benefits are
          available to former employees of Progressive under any other written
          employee benefit plans or programs maintained by Progressive, subject
          to the terms, conditions and limitations of those plans and programs.

     7.   With the exception of the rights and benefits contained in, or
          expressly referred to in this Agreement, Employee hereby waives any
          and all rights and benefits Employee now has or might hereafter have
          acquired under the Plan, The Progressive Corporation Separation
          Allowance Plan, The 200___ Gainsharing Program and any other
          compensation or bonus programs, employee benefit plans and fringe
          benefit programs maintained by Progressive or any of its affiliates by
          virtue of Employee's employment with Progressive or the termination
          thereof.

     8.   Employee acknowledges the forfeiture of any and all unvested
          non-qualified stock options ("NQSOs") awarded to Employee under The
          Progressive Corporation 1989 Incentive Plan or The Progressive
          Corporation 1995 Incentive Plan (the "Incentive Plans"). Employee's
          rights, if any, under The Progressive Corporation Executive Deferred
          Compensation Plan, The Progressive Pension Plan and The Incentive
          Plans (collectively, the "Programs") shall be determined in accordance
          with the governing provisions of the Programs as in effect from time
          to time. For purposes of such Programs, Employee shall be considered
          to have terminated employment with Progressive on the Separation Date.

     9.   In consideration of the above undertakings of Employer, Employee
          hereby releases Employer, Progressive and their respective affiliates,
          officers, directors, employees, agents, successors and assigns
          (collectively, the "Released Entities"), from any and all claims,
          liabilities, demands, actions, suits and causes of action, whether
          known or unknown, that Employee ever had or now has against any of the
          Released Entities, including but not limited to claims arising under
          the Age Discrimination in Employment Act, as amended, and other claims
          relating to Employee's employment with Progressive and the termination
          of that employment, and claims under The Progressive Corporation
          Separation Allowance Plan (collectively "Claims"). [If Employee is a
          California resident, Employee acknowledges that he/she has read and
          understands California Civil Code Section 1542, which reads as
          follows:

               "A general release does not extend to claims which the creditor
               does not know or suspect to exist in his favor at the time of
               executing the release, which if known by him must have materially
               affected his settlement with the debtor."

          Employee hereby waives the provisions and protections of California
          Civil Code Section 1542 and agrees that the above release shall apply
          to all Claims that Employee ever had or now has against the Released
          Entities, regardless of whether Employee currently is aware of the
          Claims or suspects that they exist.]

     10.  Employee agrees that Employee will maintain the confidentiality of
          confidential information which Employee has received by virtue of
          his/her employment with




          Progressive and will refrain from using such information or disclosing
          it to anyone other than Progressive or its employees. For purposes of
          this Agreement, confidential information is information which
          Progressive endeavors to keep confidential, including, without
          limitation, customer lists, employee lists, rate schedules,
          underwriting information, the terms of contracts and policies,
          marketing plans, program designs, trade secrets, proprietary
          information, and any such information provided by a third party to
          Progressive in confidence. Employee represents that promptly following
          his/her execution of this Agreement, Employee will return to
          Progressive any records in his/her possession containing confidential
          information of Progressive or records which are the property of
          Progressive.

     11.  In the event of any actual or threatened breach by Employee of the
          provisions of Paragraphs 10, Progressive shall be entitled to an
          injunction (including an ex parte temporary restraining order)
          restraining Employee from violating these provisions. Progressive
          shall also be entitled to recover, as liquidated damages, the amount
          equal to fifty percent (50%) of the severance paid to Employee under
          this Agreement.

     12.  All payments to be made by Employer under this Agreement are subject
          to applicable tax withholding, other legally required deductions and
          (except to the extent prohibited by law) amounts due Progressive for
          any reason.

     13.  All capitalized terms used in this Agreement shall have the meanings
          given to them in the Plan, unless otherwise required clearly by the
          context.

     14.  This Agreement, together with the Plan and the other documents
          referred to herein, constitute the entire agreement of the parties,
          superseding all prior oral or written representations, agreements and
          understandings relating to the subject matter of this Agreement. Any
          modifications of this Agreement must be in a writing signed by both
          parties in order to be effective. Employee may not assign this
          Agreement or any of his/her rights or obligations hereunder without
          Employer's prior written consent. This Agreement is subject to the
          terms, provisions and limitations of the Plan in all respects.

     15.  Employee has read and understands all of the terms of this Agreement
          and Employee has been encouraged to consult with an attorney. Employee
          acknowledges that he/she has been given a period of at least
          ____________ (___) days to review this Agreement with an attorney and
          individuals of his/her own choice and consider its effect, including
          Employee's release of rights. Employee signs this Agreement in
          exchange for the consideration to be given to him/her, which Employee
          acknowledges is adequate and satisfactory. Neither Progressive nor its
          agents, representatives or employees have made any representations to
          Employee concerning the terms or effects of this Agreement other than
          those contained in this Agreement or the Plan.




     IMPORTANT! BEFORE YOU SIGN THIS AGREEMENT YOU SHOULD CONSULT WITH AN
     ATTORNEY. ALSO, AFTER YOU HAVE SIGNED THIS AGREEMENT YOU HAVE SEVEN (7)
     DAYS WITHIN WHICH TO REVOKE IT FOR ANY REASON. YOU DO NOT NEED EMPLOYER'S
     CONSENT IN ORDER TO REVOKE THIS AGREEMENT, BUT YOU MUST GIVE WRITTEN NOTICE
     OF YOUR REVOCATION TO EMPLOYER WITHIN THE SEVEN (7) DAY REVOCATION PERIOD.
     THIS AGREEMENT WILL NOT BE EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF
     THE SEVEN (7) DAY REVOCATION PERIOD.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
indicated above.

________________________________________________________________________________
WITNESS
     EMPLOYEE


________________________________________________________________________________
________________________________________________________________________________
WITNESS
     EMPLOYER



     By: _______________________________________________________________________


     Title: ____________________________________________________________________