<PAGE> 1
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, 1995
-----------------------------------------------
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 (I.R.S. Employer
incorporation or organization) Identification No.)
6300 Wilson Mills Road, Mayfield Village, Ohio 44143
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(216) 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 par value: 72,063,790 outstanding at October 31, 1995
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements.
The Progressive Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
Periods Ended September 30, 1995 1994 % Change 1995 1994 % Change
- --------------------------------------------------------------------------------------------------
(millions - except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
NET PREMIUMS WRITTEN $733.8 $633.6 16 $2,175.1 $1,814.4 20
================ ====================
REVENUES
Premiums earned $709.3 $572.3 24 $2,011.0 $1,587.6 27
Investment income 51.4 40.4 27 146.2 115.2 27
Net realized gains on security sales 5.3 11.4 (54) 42.8 17.7 142
Service revenues 9.7 10.0 (3) 29.0 30.0 (3)
---------------- --------------------
Total revenues 775.7 634.1 22 2,229.0 1,750.5 27
---------------- --------------------
EXPENSES
Losses and loss adjustment expenses 503.9 384.1 31 1,435.4 1,047.5 37
Policy acquisition costs 119.2 99.8 19 339.8 284.5 19
Other underwriting expenses 43.9 38.1 15 128.7 111.7 15
Investment expenses 1.7 2.0 (15) 6.3 6.4 (2)
Service expenses 5.2 6.5 (20) 22.4 24.1 (7)
Interest expense 14.3 13.8 4 42.8 41.1 4
---------------- --------------------
Total expenses 688.2 544.3 26 1,975.4 1,515.3 30
---------------- --------------------
NET INCOME
Income before income taxes 87.5 89.8 (3) 253.6 235.2 8
Provision for income taxes 25.0 25.0 -- 69.5 61.8 12
---------------- --------------------
Net income $ 62.5 $ 64.8 4 $184.1 $173.4 6
================ ====================
PER SHARE
Primary $ .81 $ .85 (5) $2.40 $2.25 7
Fully diluted .81 .85 (5) 2.39 2.25 6
WEIGHTED NUMBER AVERAGE EQUIVALENT SHARES
Primary 74.3 73.9 1 74.1 74.1 --
Fully diluted 74.4 73.9 1 74.4 74.2 --
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
The Progressive Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
----------------------------- --------------
1995 1994 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(millions)
ASSETS
Investments:
Held-to-maturity:
Fixed maturities, at amortized cost
(market: $310.7, $349.0, and $343.8) $ 301.1 $ 339.4 $ 337.6
Available-for-sale:
Fixed maturities, at market (amortized cost:
$2,615.0, $2,025.4, and $2,129.7) 2,624.2 2,017.1 2,087.0
Equity securities, at market (cost: $563.1, $456.5, and
$481.0) 592.8 458.6 476.3
Short-term investments, at amortized cost (market: $191.1,
$382.6, and $279.2) 191.1 382.5 279.1
----------------------------- --------------
Total investments 3,709.2 3,197.6 3,180.0
Cash 18.0 11.9 13.4
Accrued investment income 47.8 39.6 43.4
Premiums receivable, net of allowance for doubtful accounts of
$18.0, $14.6, and $15.6 635.7 509.5 542.4
Reinsurance recoverables 361.4 387.1 379.7
Prepaid reinsurance premiums 75.7 91.0 83.2
Deferred acquisition costs 183.7 160.4 161.6
Income taxes 64.7 99.2 103.2
Property and equipment, net of accumulated depreciation of
$124.0, $114.0, and $116.7 155.1 139.4 143.3
Other assets 24.4 26.2 24.9
----------------------------- --------------
Total assets $5,275.7 $4,661.9 $4,675.1
============================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Unearned premiums $1,193.3 $1,005.2 $1,036.7
Loss and loss adjustment expense reserves 1,604.9 1,475.2 1,434.4
Policy cancellation reserve 37.9 50.8 47.3
Accounts payable and accrued expenses 371.3 365.7 329.2
Funded debt 675.7 675.6 675.6
----------------------------- --------------
Total liabilities 3,883.1 3,572.5 3,523.2
----------------------------- --------------
Shareholders' equity:
9 3/8% Serial Preferred Shares, Series A (shares issued and
outstanding: 3.5, 3.6, and 3.5) 85.0 87.0 85.8
Common Shares, $1.00 par value
(net of treasury shares of 11.0, 11.0, and 11.2) 72.1 71.3 71.2
Paid-in capital 374.4 355.5 357.1
Net unrealized appreciation (depreciation) on investment
securities 25.3 (4.0) (30.7)
Retained earnings 835.8 579.6 668.5
----------------------------- --------------
Total shareholders' equity 1,392.6 1,089.4 1,151.9
----------------------------- --------------
Total liabilities and shareholders' equity $5,275.7 $4,661.9 $4,675.1
============================= ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
The Progressive Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
(millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 184.1 $ 173.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 15.1 14.2
Net realized gains on security sales (42.8) (17.7)
Changes in:
Unearned premiums 156.6 233.2
Loss and loss adjustment expense reserves 170.5 126.6
Accounts payable and accrued expenses 32.0 38.7
Policy cancellation reserve (9.4) (9.3)
Prepaid reinsurance 7.5 (6.4)
Reinsurance recoverables 18.3 (6.2)
Premiums receivable (93.3) (128.9)
Deferred acquisition costs (22.1) (35.8)
Income taxes 8.2 (.6)
Other, net 10.8 12.1
--------- ---------
Net cash provided by operating activities 435.5 393.3
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases:
Held-to-maturity: fixed maturities (.2) (71.5)
Available for sale: fixed maturities (2,175.1) (1,027.9)
equity securities (567.5) (228.4)
Sales:
Available-for-sale: fixed maturities 1,366.7 507.1
equity securities 485.9 201.6
Maturities, paydowns, calls and other:
Held-to-maturity: fixed maturities 34.7 39.5
Available-for-sale: fixed maturities 345.8 245.2
equity securities 10.4 17.7
Net (purchases) sales of short-term investments 88.0 (151.7)
(Receivable) payable on securities 10.1 (28.6)
Purchases of property and equipment (28.6) (45.9)
--------- ---------
Net cash used in investing activities (429.8) (542.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 9.9 1.7
Tax benefit of stock options exercised 8.3 --
Proceeds from funded debt -- 198.4
Payments on funded debt (.3) (.3)
Dividends paid to shareholders (18.1) (17.5)
Acquisition of treasury shares (.9) (29.5)
--------- ---------
Net cash provided by (used in) financing activities (1.1) 152.8
--------- ---------
Increase in cash 4.6 3.2
Cash, January 1 13.4 8.7
--------- ---------
Cash, September 30 $ 18.0 $ 11.9
========= =========
</TABLE>
4
<PAGE> 5
The Progressive Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 SUPPLEMENTAL CASH FLOW INFORMATION. The Company paid Federal income
taxes of $45.5 million and $59.3 million for the nine months ended September
30, 1995 and 1994, respectively. Total interest paid was $34.9 million and
$33.5 million for the nine months ended September 30, 1995 and 1994,
respectively.
NOTE 2 On September 30, 1995, the Company paid a quarterly dividend of $.055
per Common Share and a regular quarterly dividend of approximately $.5859 per
share on the 9 3/8% Serial Preferred Shares, Series A, to shareholders of
record as of the close of business on September 8, 1995. Both dividends were
declared by the Board of Directors on July 28, 1995.
On October 27, 1995, the Board of Directors declared a quarterly dividend of
$.055 per Common Share and a regular quarterly dividend of approximately $.5859
per share on the 9 3/8% Serial Preferred Shares, Series A. Both dividends are
payable December 31, 1995, to shareholders of record as of the close of
business on December 8, 1995.
NOTE 3 Certain amounts in the financial statements for 1994 were reclassified
to conform with the presentation used for 1995. These reclassifications had no
effect on net income.
NOTE 4 The 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 periods
ended September 30, 1995 are not necessarily indicative of the results expected
for the full year.
5
<PAGE> 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
For the third quarter 1995, operating income, which excludes net realized gains
on security sales, was $59.0 million, or $.76 per share, compared to $57.4
million, or $.75 per share, last year. The combined ratio was 94.0, compared
to 91.2 for the third quarter 1994. For the nine months ended September 30,
1995, operating income was $156.2 million, or $2.02 per share, compared to
$161.9 million, or $2.10 per share, in 1994. The year-to-date combined ratio
was 94.7, compared to 90.9, last year.
Net premiums written increased 16% over the third quarter 1994 and 20%
year-to-date, primarily reflecting unit growth in the core automobile insurance
business driven by the Company's rates remaining competitive. Premiums earned,
which are a function of the amount of premiums written in the current and prior
periods, increased 24% for the quarter and 27% for the first nine months.
Service revenue decreased 3% to $9.7 million for the quarter and 3% to $29.0
million for the first nine months, primarily reflecting the decrease in the
size of the CAIP market.
Claim costs, which represent actual and estimated future payments to or for our
policyholders, as well as loss estimates for future assignments and assessments
under state-mandated assigned risk programs, increased as a percentage of
premiums earned to 71% for the quarter, compared to 67% in 1994, and 71% for
the first nine months, compared to 66% last year. During the year, the
Company's loss costs have continued to rise at a faster pace than rates,
reflecting the Company's intent to keep rates competitive. Policy acquisition
costs and other underwriting expenses as a percentage of premiums earned
decreased to 23% for the third quarter and first nine months, compared to 24%
for the third quarter and 25% for the first nine months in 1994. Service
expenses decreased 20% for the quarter and 7% for the first nine months,
reflecting a decrease in loss adjustment expense reserves.
Recurring investment income (interest and dividends) increased 27% for
both the quarter and the first nine months, reflecting an increase in the
average size of the investment portfolio and a mix shift in the portfolio to
taxable securities. The Company had net realized gains on security sales of
$5.3 million and $42.8 million for the quarter and first nine months,
respectively, compared to $11.4 million and $17.7 million in 1994. On
September 30, 1995, the Company's portfolio had $48.5 million in total
unrealized gains, compared to $41.1 million in total unrealized losses at
December 31, 1994, primarily reflecting the general decline in interest rate
levels.
The Company continues to invest in fixed maturity, short-term and equity
securities. The majority of the portfolio ($3,055.6 million, or 82.4%, at
September 30, 1995 and $2,504.2 million, or 78.3%, at September 30, 1994) was
in short-term and intermediate-term, investment-grade fixed-maturity
securities. Long-term investment-grade fixed-maturity securities represented
$44.8million, or $1.2%, and $68.7 million, or 2.2%, of the total investment
portfolio at September 30, 1995 and 1994, respectively.
6
<PAGE> 7
As of September 30, 1995 and 1994, equity investments of the Company were
$592.8 million, or 16.0%, and $458.6 million, or 14.3%, respectively, of the
total investment portfolio. Equity investments are comprised of preferred
stocks ($339.1 million in 1995 and $379.1 million in 1994) and common stocks
($253.7 million in 1995 and $79.5 million in 1994). As of September 30, 1995
and 1994, the non-investment-grade fixed-maturity securities of the Company
were $16.0 million, or .4%, and $166.1 million, or 5.2%, respectively, of the
total investment portfolio.
The Company's financial instruments with off-balance-sheet risk had a net
market value of $(4.7) million and $4.6 million as of September 30, 1995 and
1994, respectively.
The weighted average annualized fully taxable equivalent book yield of the
portfolio was 6.9% and 6.6% for the nine months ended September 30, 1995 and
1994, respectively.
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, 1995, operations generated a positive
cash flow of $435.5 million. During the third quarter 1995, 33,000 9 3/8%
Serial Preferred Shares, Series A, were repurchased at an average cost of
$25.83 per share.
During 1995, the Company paid $3.8 million to complete its contractual
commitments related to the construction of its corporate office complex in
Mayfield Village, Ohio. The total cost of the project was $75.5 million and
was funded through operating cash flows.
PART II - OTHER INFORMATION
---------------------------
ITEM 5. Other Information.
The First Amendment to The Progressive Corporation Executive Deferred
Compensation Trust ("Trust Amendment") is filed as Exhibit 99A to this Form
10-Q in order to supplement and amend Registration Statement No. 33-57121,
which was filed by the Company with the Securities and Exchange Commission (the
"Commission") on December 29, 1994 pursuant to the Securities Act of 1933, as
amended (the "1933 Act"). Registration Statement No. 33-57121 incorporates by
reference this Form 10-Q and, upon the filing of this Form 10-Q with the
Commission, the Trust Amendment shall be incorporated into said Registration
Statement as Exhibit 4(b)(2) thereto.
The Progressive Retirement Security Program (1994 Amendment and Restatement),
as amended (formerly known as The Progressive Corporation Long-Term Savings
Plan) ("Retirement Plan") is filed as Exhibit 99B to this Form 10-Q in order to
supplement and amend Registration Statements No. 33-16509 and 33-51034, as
heretofore amended, which were filed by the Company with the Commission on
August 14, 1987 and August 20, 1992, respectively, pursuant to the 1933 Act.
Registration Statements No. 33-16509 and 33-51034 incorporate by reference this
Form 10-Q and, upon the filing of this Form 10-Q with the Commission, the
Retirement Plan shall be incorporated into each of Registration Statements No.
33-16509 and 33-51034 as Exhibit 4(a) thereto.
7
<PAGE> 8
The First Amendment to Trust Agreement between The Progressive Corporation and
NBD Bank, N.A., as Trustee for The Progressive Retirement Security Program,
("Retirement Trust Amendment") is filed as Exhibit 99C to this Form 10-Q in
order to supplement and amend Registration Statements No. 33-16509 and
33-51034, as heretofore amended, which were filed by the Company with the
Commission on August 14, 1987 and August 20, 1992, respectively, pursuant to
the 1933 Act. Registration Statements No. 33-16509 and 33-51034 incorporate by
reference this Form 10-Q and, upon the filing of this Form 10-Q with the
Commission, the Retirement Trust Amendment shall be incorporated into each of
Registration Statements No. 33-16509 and 33-51034 as Exhibit 4(d) thereto.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See exhibit index on page 10.
(b) Reports on Form 8-K filed during the quarter ended
September 30, 1995: None
8
<PAGE> 9
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 9, 1995 BY: /s/ DAVID M. SCHNEIDER
------------------------- -----------------------------
David M. Schneider
Secretary
Date: November 9, 1995 BY: /s/ CHARLES B. CHOKEL
------------------------- -----------------------------
Charles B. Chokel
Chief Financial Officer
9
<PAGE> 10
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Form 1O-Q
Under Reg. Exhibit
S-K, Item 601 No. Description of Exhibit
- ------------- --------- ----------------------
<S> <C> <C>
11 11 Computation of Earnings Per Share
27 27 Financial Data Schedule
99 99A First Amendment to The Progressive Corporation Executive Deferred Compensation Trust
99 99B The Progressive Retirement Security Program (1994 Amendment and Restatement), as amended
(formerly known as The Progressive Corporation Long-Term Savings Plan)
99 99C First Amendment to Trust Agreement Between The Progressive Corporation and NBD Bank,
N.A., as Trustee for The Progressive Retirement Security Program
</TABLE>
10
<PAGE> 1
EXHIBIT 11
THE PROGRESSIVE CORPORATION AND
SUBSIDIARIES COMPUTATION OF
EARNINGS PER SHARE
(millions - except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
-------------------------------- -------------------------------
Periods Ended September 30, 1995 1994 1995 1994
-------------------------------- -------------------------------
Per Per Per Per
Amount Share Amount Share Amount Share Amount Share
-------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRIMARY:
Net income $62.5 $64.8 $184.1 $173.4
Less: Preferred stock (2.1) (2.1) (6.3) (6.5)
dividends ---------------------- ------------------------
Income available to common
shareholders $60.4 $.81 $62.7 $.85 $177.8 $2.40 $166.9 $2.25
================================ ===============================
Average shares outstanding 72.0 71.3 71.8 71.7
Net effect of dilutive stock
options 2.3 2.6 2.3 2.4
---------------------- ------------------------
Total 74.3 73.9 74.1 74.1
====================== ========================
FULLY DILUTED:
Net income $62.5 $64.8 $184.1 $173.4
Less: Preferred stock
dividends (2.1) (2.1) (6.3) (6.5)
Income available to common ---------------------- ------------------------
shareholders $60.4 $.81 $62.7 $.85 $177.8 $2.39 $166.9 $2.25
================================ ===============================
Average shares outstanding 72.0 71.3 71.8 71.7
Net effect of dilutive stock
options 2.4 2.6 2.6 2.5
---------------------- ------------------------
Total 74.4 73.9 74.4 74.2
====================== ========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated balance sheets and statements of income
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 2,624,200
<DEBT-CARRYING-VALUE> 301,100
<DEBT-MARKET-VALUE> 310,700
<EQUITIES> 592,800
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,709,200
<CASH> 18,000
<RECOVER-REINSURE> 361,400
<DEFERRED-ACQUISITION> 183,700
<TOTAL-ASSETS> 5,275,700
<POLICY-LOSSES> 1,604,900
<UNEARNED-PREMIUMS> 1,193,300
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 675,700
<COMMON> 72,100
0
85,000
<OTHER-SE> 1,235,500
<TOTAL-LIABILITY-AND-EQUITY> 5,275,700
2,011,000
<INVESTMENT-INCOME> 139,900
<INVESTMENT-GAINS> 42,800
<OTHER-INCOME> 29,000
<BENEFITS> 1,435,400
<UNDERWRITING-AMORTIZATION> 339,800
<UNDERWRITING-OTHER> 128,700
<INCOME-PRETAX> 253,600
<INCOME-TAX> 69,500
<INCOME-CONTINUING> 184,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,100
<EPS-PRIMARY> 2.40
<EPS-DILUTED> 2.39
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE> 1
EXHIBIT 99A
FIRST AMENDMENT TO THE PROGRESSIVE CORPORATION
EXECUTIVE DEFERRED COMPENSATION TRUST
THIS AMENDMENT ("Amendment") is entered into as of the 29th day of August,
1995 by and between The Progressive Corporation ("Company") and NBD Bank
("Trustee").
WHEREAS, The Progressive Corporation Executive Deferred Compensation Trust is
currently maintained pursuant to a trust agreement dated December 28, 1994
(the "Trust"); and
WHEREAS, Company desires to amend the Trust;
NOW, THEREFORE, the Trust is hereby amended as set forth below:
1. Effective as of the date set forth above, Section 1(b) of the Trust is
hereby amended and restated in its entirety to provide as follows:
"The Trust hereby established shall be irrevocable."
2. Except as expressly set forth in this Amendment, the terms and
provisions of the Trust, as heretofore in effect, shall remain entirely
unchanged and continue in full force and effect.
IN WITNESS WHEREOF, Company and Trustee have hereunto caused this Amendment to
be executed by their duly authorized representatives.
THE PROGRESSIVE CORPORATION
/s/ David M. Schneider
______________________________ By:__________________________________
Witness
Name:________________________________
Secretary
Title:_______________________________
NBD BANK
/s/ Louisa C. Taylor
______________________________ By:__________________________________
Witness
Name:________________________________
Second VP
Title:_______________________________
<PAGE> 1
EXHIBIT 99B
THE PROGRESSIVE RETIREMENT SECURITY PROGRAM
-------------------------------------------
(1994 Amendment and Restatement)
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ARTICLE 1
---------
INTRODUCTION
------------
1.1 NAME OF PLAN 1
------------
1.2 EFFECTIVE DATE 1
--------------
1.3 TYPE AND PURPOSE OF PLAN 1
------------------------
ARTICLE 2
---------
DEFINITIONS
-----------
2.1 ACCOUNT 1
-------
2.2 ACTIVE LTSP PARTICIPANT 1
-----------------------
2.3 ACTIVE SDRP PARTICIPANT 1
-----------------------
2.4 ADMINISTRATOR 1
-------------
2.5 AFFILIATED COMPANY 1
------------------
2.6 ANNIVERSARY SHARES 1
------------------
2.7 ARTICLE 1
-------
2.8 BENEFICIARY 1
-----------
2.9 BOARD 2
-----
2.10 CODE OR IRC 2
-----------
2.11 COMPANY 2
-------
2.12 COMPANY STOCK FUND 2
------------------
2.13 COMPENSATION 2
------------
2.14 COMPENSATION DEFERRAL AGREEMENT 2
-------------------------------
2.15 CONTRIBUTIONS 2
-------------
2.16 COVERED EMPLOYEE 2
----------------
2.17 COVERED EMPLOYMENT 2
------------------
2.18 DISABILITY OR DISABLED 2
----------------------
2.20 ELIGIBLE COMPENSATION 3
---------------------
2.21 EMPLOYEE 3
--------
2.22 EMPLOYER 3
--------
2.23 EMPLOYER FORFEITURE ACCOUNT 3
---------------------------
2.24 EMPLOYER MATCHED CONTRIBUTIONS 3
------------------------------
2.25 EMPLOYER SDRP CONTRIBUTIONS 3
---------------------------
2.26 EMPLOYMENT 3
----------
2.27 ENTRY DATE 3
----------
2.28 ERISA 3
-----
2.29 EXCESS ADP CONTRIBUTIONS 3
------------------------
2.30 EXCESS AGGREGATE CONTRIBUTIONS 3
------------------------------
2.31 EXCESS DEFERRAL 3
---------------
2.32 FORMER EMPLOYER SUPPLEMENTAL
----------------------------
CONTRIBUTION ACCOUNT 3
--------------------
2.33 FORMER PARTICIPANT 3
------------------
2.34 FORMER PAYSOP ACCOUNT 3
---------------------
2.35 FUND 3
----
2.36 HARDSHIP 5
--------
2.37 "HIGHLY COMPENSATED EMPLOYEE" 5
-----------------------------
2.38 INACTIVE LTSP PARTICIPANT 6
-------------------------
2.39 INACTIVE SDRP PARTICIPANT 6
-------------------------
2.40 INVESTMENT FUNDS 6
----------------
2.41 MATERNITY OR PATERNITY ABSENCE 6
------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2.42 MERGER 6
------
2.43 NON-HIGHLY COMPENSATED EMPLOYEE 6
-------------------------------
2.44 NORMAL RETIREMENT AGE 6
---------------------
2.45 NORMAL RETIREMENT DATE 6
----------------------
2.46 PARTICIPANT 6
-----------
2.47 PARTNERSHIP SHARE 6
-----------------
2.48 PAYROLL DEDUCTION AGREEMENT 7
---------------------------
2.49 PLAN 7
----
2.50 PLAN YEAR 7
---------
2.51 POST-TAX CONTRIBUTIONS 7
----------------------
2.52 PRE-TAX CONTRIBUTIONS 7
---------------------
2.53 QUALIFIED DOMESTIC RELATIONS
----------------------------
ORDER (QDRO) 7
------------
2.54 RETIREMENT 7
----------
2.55 SECTION 7
-------
2.56 SERVICE, HOUR OF SERVICE AND
----------------------------
YEAR OF SERVICE 7
---------------
2.57 SPOUSE 7
------
2.58 STOCK 7
-----
2.59 TERMINATION OF EMPLOYMENT 7
-------------------------
2.60 TRUST 7
-----
2.61 TRUST AGREEMENT 7
---------------
2.62 TRUSTEE 7
-------
2.63 VALUATION DATE 7
--------------
ARTICLE 3
---------
PARTICIPATION
-------------
3.1 ELIGIBILITY FOR PARTICIPATION 8
-----------------------------
3.2 COMMENCEMENT OF PARTICIPATION 8
-----------------------------
3.3 TRANSFERS OF EMPLOYMENT 8
-----------------------
3.4 SUSPENSION OF CONTRIBUTIONS 8
---------------------------
3.5 FORMER PARTICIPANTS AND RE-
---------------------------
PARTICIPATION 9
-------------
ARTICLE 4
---------
DEPOSITS AND CONTRIBUTIONS
--------------------------
4.1 PRE-TAX CONTRIBUTIONS 9
---------------------
4.2 POST-TAX CONTRIBUTIONS 9
----------------------
4.3 EMPLOYER MATCHED CONTRIBUTIONS 9
------------------------------
4.3A SDRP CONTRIBUTIONS 10
------------------
4.4 CHANGE IN AMOUNT OF
-------------------
CONTRIBUTIONS 10
-------------
4.5 SUSPENSION OF CONTRIBUTIONS 10
---------------------------
4.6 REMITTANCE OF CONTRIBUTIONS 11
---------------------------
4.7 RETURN OF CONTRIBUTIONS 11
-----------------------
ARTICLE 5
---------
MAXIMUM CONTRIBUTIONS
---------------------
5.1 LIMITATIONS ON PRE-TAX
----------------------
CONTRIBUTIONS 11
-------------
5.2 LIMITATIONS ON POST-TAX
-----------------------
CONTRIBUTIONS AND EMPLOYER
--------------------------
MATCHED CONTRIBUTIONS 14
---------------------
ARTICLE 6
---------
ACCOUNTS
--------
6.1 ACCOUNTS 16
--------
6.2 ACCOUNTS REPRESENT UNDIVIDED
----------------------------
INTERESTS 17
---------
6.3 ACCOUNT VALUES 17
--------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.4 VALUATION OF INVESTMENT FUNDS 17
-----------------------------
6.5 ALLOCATION OF NET GAIN OR LOSS
------------------------------
OF INVESTMENT FUNDS TO ACCOUNTS 17
-------------------------------
6.6 BASIS OF VALUATION 17
------------------
6.7 ADMINISTRATION OF PRE-TAX
-------------------------
CONTRIBUTION ACCOUNT 18
--------------------
6.8 ADMINISTRATION OF POST-TAX
--------------------------
CONTRIBUTION ACCOUNT 18
--------------------
6.9 ADMINISTRATION OF EMPLOYER
--------------------------
MATCHED CONTRIBUTION ACCOUNT 18
----------------------------
6.10 ADMINISTRATION OF FORMER PAYSOP
-------------------------------
ACCOUNT 18
-------
6.11 ADMINISTRATION OF THE FORMER
----------------------------
EMPLOYER SUPPLEMENTAL
---------------------
CONTRIBUTION ACCOUNT 18
--------------------
6.12 ADMINISTRATION OF THE SUSPENSE
------------------------------
ACCOUNT 18
-------
6.13 ADMINISTRATION OF THE EMPLOYER
------------------------------
FORFEITURE ACCOUNT 19
------------------
6.14 CREDITING OF CONTRIBUTIONS 19
--------------------------
6.15 EMPLOYEE CONTRIBUTION RECORDS 19
-----------------------------
ARTICLE 7
---------
RETIREMENT, DISABILITY OR DEATH
-------------------------------
7.1 BENEFIT AT RETIREMENT 19
---------------------
7.2 DISABILITY BENEFIT 19
------------------
7.3 DEATH BENEFIT 20
-------------
ARTICLE 8
---------
VESTING AND TERMINATIONS
------------------------
8.1 VESTING 20
-------
8.2 TERMINATION OF EMPLOYMENT 21
-------------------------
8.3 FORFEITURES 21
-----------
8.4 REEMPLOYMENT 21
------------
ARTICLE 9
---------
PAYMENT OF BENEFITS
-------------------
9.1 APPLICATION FOR PAYMENT 21
-----------------------
9.2 TIME OF PAYMENT 21
---------------
9.3 FORM OF PAYMENT 23
---------------
9.4 DETERMINATION OF VALUE OF
-------------------------
PAYMENT 23
-------
9.5 CLAIMS PROCEDURE 23
----------------
9.6 FACILITY OF PAYMENT 24
-------------------
ARTICLE 10
----------
WITHDRAWALS AND LOANS DURING EMPLOYMENT
---------------------------------------
10.1 IN-SERVICE WITHDRAWALS FROM
---------------------------
PRE-TAX CONTRIBUTION ACCOUNT 24
----------------------------
10.2 IN-SERVICE WITHDRAWALS FROM
---------------------------
POST-TAX CONTRIBUTION ACCOUNT 25
-----------------------------
10.3 IN-SERVICE WITHDRAWALS FROM
---------------------------
EMPLOYER MATCHED CONTRIBUTION
-----------------------------
ACCOUNT 25
-------
10.4 NO WITHDRAWALS AVAILABLE FROM
-----------------------------
OTHER ACCOUNTS 25
--------------
10.5 PAYMENT OF WITHDRAWALS 26
----------------------
10.6 LOANS TO PARTICIPANTS 26
---------------------
ARTICLE 11
----------
SERVICE
-------
11.1 SERVICE 28
-------
11.2 PRIOR SERVICE REINSTATED 29
------------------------
11.3 YEAR OF SERVICE 29
---------------
</TABLE>
<PAGE> 5
<TABLE>
ARTICLE 12
----------
PLAN OPERATION AND ADMINISTRATION
---------------------------------
<S> <C> <C>
12.1 POWERS OF ADMINISTRATOR 29
-----------------------
12.2 NONDISCRIMINATORY EXERCISE OF
-----------------------------
AUTHORITY 30
---------
12.3 RELIANCE ON TABLES, ETC. 30
------------------------
12.4 NAMED FIDUCIARY 30
---------------
12.5 INDEMNIFICATION 30
---------------
12.6 NOTICES TO ADMINISTRATOR 30
------------------------
ARTICLE 13
----------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
13.1 AMENDMENT 30
---------
13.2 TERMINATION 31
-----------
13.3 LIQUIDATION OF THE FUND 32
-----------------------
ARTICLE 14
----------
ADOPTION OF THE PLAN BY OTHER EMPLOYERS
---------------------------------------
14.1 ADOPTION WITH APPROVAL 32
----------------------
14.2 PROCEDURE FOR ADOPTION 32
----------------------
14.3 EFFECT OF ADOPTION 32
------------------
14.4 TERMINATION OF ADOPTION 32
-----------------------
ARTICLE 15
----------
LIMITATIONS OF ANNUAL ADDITIONS
-------------------------------
15.1 GENERAL LIMITATIONS 33
-------------------
15.2 EXCESS AMOUNT 33
-------------
15.3 AGGREGATION OF PLANS OF THE
---------------------------
EMPLOYER 34
--------
15.4 DEFINITIONS 35
-----------
15.5 TOP-HEAVY PLAN REQUIREMENTS 36
---------------------------
ARTICLE 16
----------
INVESTMENT OF CONTRIBUTIONS
---------------------------
16.1 INVESTMENT FUNDS 40
----------------
16.2 ADMINISTRATION OF COMPANY STOCK
-------------------------------
FUND 41
----
16.3 DEPOSIT OF CONTRIBUTIONS 41
------------------------
16.4 INVESTMENT ELECTIONS OF
-----------------------
PARTICIPANTS 41
------------
16.5 ELECTION TO TRANSFER INTEREST
-----------------------------
BETWEEN INVESTMENT FUNDS 41
------------------------
16.6 OTHER PROVISIONS CONCERNING
---------------------------
INVESTMENT ELECTIONS AND
------------------------
TRANSFERS 42
---------
16.7 FORMER PAYSOP ACCOUNTS 42
----------------------
ARTICLE 17
----------
MISCELLANEOUS PROVISIONS
------------------------
17.1 HEADINGS 42
--------
17.2 PLAN NOT CONTRACT OF EMPLOYMENT 42
-------------------------------
17.3 VESTED RIGHTS 42
-------------
17.4 SEVERABILITY 42
------------
17.5 GENERAL UNDERTAKING 43
-------------------
17.6 ACTION BY COMPANY 43
-----------------
17.7 NO RESPONSIBILITY FOR ACTS OF
-----------------------------
AN INSURER 43
----------
17.8 SPENDTHRIFT 43
-----------
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
17.9 NUMBER AND GENDER 43
-----------------
17.10 GOVERNING LAW 43
-------------
17.11 MERGER, CONSOLIDATION. AND
--------------------------
TRANSFER OF ASSETS 43
------------------
17.12 RECEIPT OF ASSETS FROM
----------------------
QUALIFIED PLANS 43
---------------
17.13 INTERPRETATION OF PLAN 44
----------------------
17.14 SATISFACTION OF CLAIMS 44
----------------------
17.15 SERVICE OF PROCESS 44
------------------
17.16 WARRANTIES 44
----------
17.17 LEASED EMPLOYEES 44
----------------
17.18 DIRECT ROLLOVER DISTRIBUTIONS 45
-----------------------------
17.19 PLAN ADDENDA 45
------------
</TABLE>
<PAGE> 7
ARTICLE 1
---------
INTRODUCTION
------------
1.1 NAME OF PLAN
This Plan shall be known as The Progressive Retirement Security Program.
Prior to July 1, 1994, this Plan was known as The Progressive Corporation
Long-Term Savings Plan.
1.2 EFFECTIVE DATE
Except as otherwise expressly provided herein, this Plan, as amended and
restated, shall be effective as of July 1, 1994.
1.3 TYPE AND PURPOSE OF PLAN
Pursuant to Section 401(a)(27) of the Code, the Plan is hereby designated
as a profit-sharing plan. The primary purpose of the Plan is to encourage
Employee savings, to facilitate Employee Stock ownership and to provide
benefits upon a Participant's or Former Participant's Retirement, death,
Disability or Termination of Employment.
ARTICLE 2
---------
DEFINITIONS
-----------
The following terms, when used herein with initial capital letters, shall have
the meaning given to them in this Article 2.
2.1 ACCOUNT shall mean one of several records maintained pursuant to Section 6
to record a Participant's, Former Participant's, or Beneficiary's interest
in the Investment Funds.
2.2 ACTIVE LTSP PARTICIPANT shall have the meaning set forth in Article 3.
2.3 ACTIVE SDRP PARTICIPANT shall have the meaning set forth in Article 3.
2.4 ADMINISTRATOR, which is the administrator for purposes of ERISA and the
plan administrator for purposes of the Code, shall mean Progressive
Casualty Insurance Company, an Ohio corporation, or its successors.
2.5 AFFILIATED COMPANY shall mean any corporation, trade or business if it and
the Company are members of a controlled group of corporations, or are
under common control, or are members of an affiliated service group,
within the meaning of Code Sections 414(b), 414(c), and 414(m),
respectively; provided, however, that for purposes of Code Section 415,
the definitions prescribed by Code Sections 414(b) and 414(c) shall be
modified as provided by Code Section 415(h) by substituting "more than
50%" common control for "at least 80%" common control. This term shall
also include any entity required to be treated as an Affiliated Company
under Code Section 414(o).
2.6 ANNIVERSARY SHARES shall mean such shares of Stock, if any, as may be
awarded on or before February 28, 1992 to Employees by the Company upon
completion of five (5) year increments of Years of Service.
2.7 ARTICLE shall mean an Article of this Plan.
2.8 BENEFICIARY as to a Participant or Former Participant who is married at
the time of his death, shall mean his Spouse or such other person(s) as he
has designated with the consent of his Spouse, and, as to a Participant or
Former Participant who is not married at the time of his death, shall be
such person(s) as he has designated. A Participant or Former Participant
may change his Beneficiary designation at any time, provided that no such
change shall be effective as to any married Participant or Former
Participant who predeceases his Spouse, unless the Spouse has consented to
the change. Each consent of a Spouse shall be irrevocable, but shall be
effective only with respect to the particular Beneficiary designation to
which it
1
<PAGE> 8
pertains. All Beneficiary designations (including changes) and consents
of a Spouse shall be made in writing on such forms as the Administrator
shall prescribe, and shall become effective only when received by the
Administrator; provided, however, that a Beneficiary designation
(including a change) or a consent of a Spouse received by the
Administrator after the designating Participant's death shall be
disregarded. In the absence of a Beneficiary designation, or if the
designated Beneficiary is no longer living or in existence at the time of
the Participant's or Former Participant's death, all benefits due from the
Plan upon the Participant's or Former Participant's death shall be paid to
the Participant's or Former Participant's (i) Spouse, if the Participant
or Former Participant was married at the time of his/her death or (ii)
estate, if the Participant or Former Participant was not married at the
time of his/her death. Notwithstanding the foregoing, consent of a Spouse
shall not be required if the Participant or Former Participant and his/her
Spouse are legally separated or the Spouse cannot be located.
2.9 BOARD shall mean the Board of Directors of the Company.
2.10 CODE OR IRC shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.
2.11 COMPANY shall mean The Progressive Corporation or its successor(s).
2.12 COMPANY STOCK FUND shall mean an Investment Fund consisting exclusively of
Stock.
2.13 COMPENSATION of a Participant or Former Participant for a Plan Year shall
mean all amounts that are received by him/her during such Plan Year from
the Employer that are reported as wages on IRS Form W-2 for such Plan
Year, plus (i) the amount contributed by the Employer to the Trustee
pursuant to a Compensation Deferral Agreement reduced by amounts required
by Section 5.1(c), and (ii) amounts of pay reduced in accordance with an
arrangement established by the Employer which qualifies under Section 125
of the Code. However, the maximum annual dollar amount that will be
recognized as Compensation is $150,000 in all cases. Such $150,000 limit
shall be automatically adjusted in accordance with regulations under
Section 401(a)(17) of the Code. If, as a result of the application of the
rules of Section 414(q)(6) of the Code, the adjusted $150,000 limit is
exceeded, then the limit shall be prorated among the affected individuals
in proportion to each such individual's Compensation, as determined under
this Section 2.13 prior to the application of the limit.
2.14 COMPENSATION DEFERRAL AGREEMENT shall mean an arrangement
pursuant to which the Employee agrees to reduce his Eligible
Compensation, pursuant to Section 4.1 hereof, and the Employer
agrees to contribute to the Plan the amount equal to the amount
reduced as a Pre-Tax Contribution. The Compensation Deferral
Agreement shall also serve to provide such other information
about the Participant as the Administrator shall require.
2.15 CONTRIBUTIONS shall mean a Participant's Pre-Tax Contributions
and Post-Tax Contributions.
2.16 COVERED EMPLOYEE shall mean an Employee of the Employer,
earning Eligible Compensation, excluding (i) any such Employee
whose terms and conditions of Employment are negotiated with
the Employer by or through a certified or recognized collective
bargaining organization unless such negotiation provides for
his/her inclusion, (ii) those Employees classified by the
Employer as temporary under its personnel policies and
procedures and for whom the employment relationship is
maintained on a task or project specific basis for a period of
less than six months, and (iii) Employees who are residents of
Canada.
2.17 COVERED EMPLOYMENT shall mean the period or periods during
which an Employee is a Covered Employee.
2.18 DISABILITY OR DISABLED shall mean that a Participant shall be
totally disabled (as defined in the Long-Term Disability Plan
coverage provided by the Company, whether or not such
Participant is eligible for such coverage) for a period of
twelve (12) consecutive calendar months beginning on the first
day of disability absence.
2.19 EFFECTIVE DATE shall mean July 1, 1994.
2
<PAGE> 9
2.20 ELIGIBLE COMPENSATION of a Participant shall mean his base salary,
straight time hourly wages, overtime pay, vacation pay, holiday pay, jury
duty pay, taxable sick pay, military pay, funeral pay, lump sum salary
adjustments and retroactive payments of any of the foregoing items
pursuant to any back pay award (but only to the extent such retroactive
payments are actually paid in periods during which a Compensation
Deferral Agreement is in effect). However, the maximum annual dollar
amount that will be recognized as Eligible Compensation is $150,000 per
year in all cases. Such $150,000 limit shall be automatically adjusted
in accordance with regulations under Section 401(a)(17) of the Code.
2.21 EMPLOYEE shall mean any person who renders services to an Employer or
Affiliated Company as a common law employee (including any common law
employee who is employed as an officer).
2.22 EMPLOYER shall mean the Company. The term Employer shall also include any
Affiliated Company which adopts the Plan pursuant to Article 14, but only
for such period as such company continues in its adoption of the Plan.
2.23 EMPLOYER FORFEITURE ACCOUNT shall mean the Account maintained and
administered in accordance with Section 6.13 hereof.
2.24 EMPLOYER MATCHED CONTRIBUTIONS shall mean those amounts contributed by
the Employer pursuant to Section 4.3 hereof.
2.25 EMPLOYER SDRP CONTRIBUTIONS shall mean those amounts contributed by the
Employer pursuant to Section 4.3A.
2.26 EMPLOYMENT shall mean the period or periods during which an individual is
an Employee.
2.27 ENTRY DATE shall mean the first day of the pay period coincident with or
immediately following the date on which a Participant satisfies the
requirements for participation contained in Section 3.1(b).
2.28 ERISA shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time hereafter.
2.29 EXCESS ADP CONTRIBUTIONS shall mean the amount of the Pre-Tax
Contributions of the Highly Compensated Employees for the Plan Year above
the maximum amount permitted under Section 5.1.
2.30 EXCESS AGGREGATE CONTRIBUTIONS shall mean the amount of the Post-Tax
Contributions and Employer Matching Contributions of the Highly
Compensated Employees for the Plan Year above the maximum amount of such
Post-Tax Contributions and Employer Matching Contributions permitted
under Section 5.2(d).
2.31 EXCESS DEFERRAL shall mean a Pre-Tax Contribution in excess of the
permitted maximum deferral amount set forth in Section 5.1(d), or an
amount designated as such by the Employee where the excess is generated
by aggregation of pre-tax contributions to plans other than this Plan.
2.32 FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT, as to each Participant
shall mean the Account derived from the Employer Supplemental
Contributions (within the meaning of the Plan as previously in effect),
if any, made in respect of the Participant during periods that the Plan
provided for such contributions.
2.33 FORMER PARTICIPANT shall mean a Participant who has terminated Employment
but who has one or more Accounts remaining in the Plan.
2.34 FORMER PAYSOP ACCOUNT shall mean the Account described in Section 6.10.
2.35 FUND shall mean the assets held by the Trustee in accordance with the
provisions of the Plan and the Trust Agreement.
3
<PAGE> 10
2.36 HARDSHIP shall mean an immediate and heavy financial need of a
Participant arising from any of the following items:
(a) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant or his/her Spouse or
dependents (as defined in Code Section 152).
(b) Purchase (excluding mortgage payments) of a principal residence
for the Participant.
(c) Payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Participant or
his/her Spouse or dependents.
(d) Prevention of the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's
principal residence.
2.37 "HIGHLY COMPENSATED EMPLOYEE" shall mean any Employee or former
Employee who, during the Plan Year or the preceding Plan Year:
[a] was at any time a five percent owner;
[b] received annual Compensation from the Employer in excess of
$75,000, as adjusted for increases in the cost of living;
[c] received annual Compensation from the Employer in excess of
$50,000, as adjusted for increases in the cost of living
and was in the top-paid group of Employees for the Plan
Year. An Employee is in the top-paid group of Employees
for any Plan Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees
when ranked on the basis of Compensation paid during the
Plan Year; or
[d] was at any time an officer of the Employer and received
Compensation greater than 50% of the dollar limitation in
effect under Code Section 415(b)(1)(A), as adjusted for
increases in the cost of living.
The term Highly Compensated Employee also includes Employees who meet at
least one of the criteria in Section 2.37[a], [b], or [d], in the current
Plan Year, and who are one of the 100 Employees who received the most
Compensation from the Employer during such year.
In determining which Employees are Highly Compensated Employees, an
Employee not described in paragraphs [b], [c], or [d] above for the
preceding year will not be treated as falling under the categories
described in paragraphs [b], [c], or [d] for the current year. The
Employer may adopt any reasonable, nondiscriminatory tie-breaking or
rounding rules necessary to determine which Employees are Highly
Compensated Employees, provided that such rules are uniformly and
consistently applied. If no officer has satisfied the Compensation
requirement of paragraph [d] above during the Plan Year, the highest paid
officer for such year will be treated as a Highly Compensated Employee,
unless provided otherwise by regulations. In determining an individual's
Compensation under this section, Compensation from each Employer required
to be aggregated under Code Sections 414(b), (c), (m), and (o) will be
taken into account. For purposes of this section, the determination of
Compensation will be made without regard to Code Sections 125, 402(a)(8),
402(h)(1)(B) and, in the case of Employer contributions made pursuant to a
salary reduction agreement, without regard to Code Section 403(b).
A former Employee will be treated as a Highly Compensated Employee if such
Employee separated from service (or was deemed to have separated) prior to
the Plan Year, performs no service for the Employer during the Plan Year,
and was a Highly Compensated Employee for either the separation year or
any Plan Year ending on or after the Employee's 55th birthday.
4
<PAGE> 11
If during the Plan Year or the preceding Plan Year, an Employee is a
family member of either [1] a five percent owner who is an Employee or
former Employee; or [2] a High Compensated Employee who is one of the ten
most Highly Compensated Employees ranked on the basis of Compensation paid
by the Employer during such year, then the family member and the five
percent owner or top-ten Highly Compensated Employee will be treated as
one Employee receiving Compensation and Plan contributions equal to the
sum of such Compensation and contributions of both individuals. For
purposes of this section, a family member includes the spouse, lineal
ascendants and descendants of the Employee or former Employee, and the
spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as officers,
and the Compensation that is considered, will be made in accordance with
Code Section 414(q).
2.38 INACTIVE LTSP PARTICIPANT shall have the meaning set forth in
Article 3.
2.39 INACTIVE SDRP PARTICIPANT shall have the meaning set forth in
Article 3.
2.40 INVESTMENT FUNDS shall mean the funds established from time to
time by the Trustee pursuant to Section 16.1.
2.41 MATERNITY OR PATERNITY ABSENCE shall mean an absence from work by
an Employee for any period
(a) By reason of pregnancy of the Employee,
(b) By reason of the birth of a child of the Employee,
(c) By reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or
(d) For purposes of caring for such child for a period immediately
following such birth or placement.
An absence will not be considered a "Maternity or Paternity Absence"
unless the Employee provides the Administrator with information within 5
working days demonstrating that the absence is for one of the four
permitted reasons outlined above.
Nothing in this Plan shall require the Employer to grant a paid or unpaid
leave of absence to any Employee.
2.42 MERGER shall mean the merger of The Progressive Corporation
Supplemental Retirement Plan into this Plan, effective July 1,
1994.
2.43 NON-HIGHLY COMPENSATED EMPLOYEE means an Employee not considered a
Highly Compensated Employee under Section 2.37.
2.44 NORMAL RETIREMENT AGE shall mean attainment by the Participant of
age 65.
2.45 NORMAL RETIREMENT DATE shall mean the first of the month following
the date on which a Participant attains Normal Retirement Age.
2.46 PARTICIPANT shall mean a Covered Employee who has satisfied and
continues to satisfy the requirements set forth in Section 3.1(a)
and/or 3.1(b) for participation and shall include an Active LTSP
Participant, Active SDRP Participant, Inactive LTSP Participant
and Inactive SDRP Participant.
2.47 PARTNERSHIP SHARE shall mean the share of Stock awarded on or
before October 30, 1991 to all Employees upon completion of 30
calendar days from his or her date of employment.
5
<PAGE> 12
2.48 PAYROLL DEDUCTION AGREEMENT shall mean an arrangement pursuant to
which an Employee agrees, pursuant to Section 4.2 hereof, to have
a stipulated percentage of his Eligible Compensation deducted from
such Eligible Compensation and deposited in the Fund as a Post-Tax
Contribution. The Payroll Deduction Agreement shall also serve to
provide such other information about the Participant as the
Administrator shall require.
2.49 PLAN shall mean The Progressive Retirement Security Program, as
set forth in this document, as the same may be amended or restated
from time to time hereafter.
2.50 PLAN YEAR shall mean a calendar year.
2.51 POST-TAX CONTRIBUTIONS shall mean those amounts contributed by the
Participant pursuant to a Payroll Deduction Agreement and to
Section 4.2 hereof. These may have been formerly known as Optional
Employee Contributions, but hereafter shall be Post-Tax
Contributions.
2.52 PRE-TAX CONTRIBUTIONS shall mean those amounts which the Employer
is obligated to contribute to the Plan pursuant to a Compensation
Deferral Agreement and to Section 4.1 hereof. These may have been
formerly known as Deferred Income Contributions, but hereafter
shall be Pre-Tax Contributions.
2.53 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) shall mean any judgment,
decree or order as defined in Section 414(p) of the Code.
2.54 RETIREMENT shall mean a Participant's or Former Participant's
Termination of Employment on or after his/her Normal Retirement
Date.
2.55 SECTION shall mean a Section of this Plan.
2.56 SERVICE, HOUR OF SERVICE AND YEAR OF SERVICE for purposes of this
Plan, are defined in Article 11 hereof, except that, for purposes
of Article 3, Year of Service shall mean any twelve (12)
consecutive month period during which an Employee completes at
least one thousand (1,000) Hours of Service, and, "Hours of
Service", for purposes of computing a Year of Service under
Article 3, shall mean all hours required to be taken into account
under 29 C.F.R. 2530.200b-2(a).
2.57 SPOUSE shall mean the legal spouse of a Participant or Former
Participant on the date of his/her death.
2.58 STOCK means the Common Stock, $1.00 par value, of the Company.
2.59 TERMINATION OF EMPLOYMENT shall mean the earlier of (i) the last
day worked after which an Employee quits, retires, is discharged,
or dies, or (ii) the first anniversary of the first date of
continuous absence from employment for any other reason.
2.60 TRUST shall mean the Trust created and maintained by the Trust
Agreement and known as The Progressive Retirement Security Program
Trust.
2.61 TRUST AGREEMENT shall mean the agreement of trust between the
Company and Trustee executed in furtherance of the Plan, as the
same may be amended from time to time hereafter.
2.62 TRUSTEE shall mean the person (or persons), bank or trust company
selected from time to time by the Company to serve as Trustee (or
co-Trustees) under the Plan.
2.63 VALUATION DATE shall mean such date or dates as shall be
established from time to time by the Administrator for the purpose
of valuing the Investment Funds and adjusting Accounts hereunder,
which dates need not be uniform with respect to each Investment
Fund or Account; provided, however, that each Investment Fund
shall be valued, and each Account shall be adjusted no less often
than quarterly.
6
<PAGE> 13
ARTICLE 3
---------
PARTICIPATION
-------------
3.1 ELIGIBILITY FOR PARTICIPATION
(a) Each Covered Employee shall be eligible to become an LTSP
Participant in the Plan (pursuant to Section 3.2), after thirty
(30) calendar days from his date of employment.
(b) Each Covered Employee shall be eligible to become an SDRP
Participant in the Plan as of the Entry Date coincident with or
immediately following the date such Covered Employee both attains
age twenty-one (21) and has completed a Year of Service, provided
that such Covered Employee is a Covered Employee on such Entry
Date.
3.2 COMMENCEMENT OF PARTICIPATION
(a) A Covered Employee who meets the eligibility provisions of Section
3.1(a) hereof may become an Active LTSP Participant by filing a
Compensation Deferral Agreement or a Payroll Deduction Agreement
with the Administrator and providing such other information as the
Administrator shall require. The Compensation Deferral Agreement
will stipulate the amount of the Participant's Pre-Tax
Contributions. The Payroll Deduction Agreement will stipulate the
amount of the Participant's Post-Tax Contributions. Such
Participant's Pre-Tax Contributions and Post-Tax Contributions
shall be effective as of the first payroll period next following
receipt and processing of the Participant's Compensation Deferral
Agreement or Payroll Deduction Agreement (as applicable) by the
Administrator.
(b) A covered Employee who meets the eligibility provisions of Section
3.1(b) shall automatically become an Active SDRP Participant on
the Entry Date referred to in Section 3.1(b).
3.3 TRANSFERS OF EMPLOYMENT
(a) An Active LTSP Participant who transfers from Covered Employment
to Employment other than Covered Employment shall become an
Inactive LTSP Participant and his/her Contributions, if
applicable, shall be suspended in accordance with Section 4.5
hereof.
(b) An Active SDRP Participant who transfers from Covered Employment
to Employment other than Covered Employment shall become an
Inactive SDRP Participant and his/her SDRP Contributions shall
cease automatically.
(c) An Inactive LTSP Participant who transfers from Employment other
than Covered Employment to Covered Employment will become an
Active LTSP Participant on the date such Employee resumes Covered
Employment. Should such Active LTSP Participant elect to make
Pre-Tax Contributions or Post-Tax Contributions hereunder, such
Contributions will be effective with the first payroll period next
following receipt and processing of the Active Participant's
Compensation Deferral Agreement or Payroll Deduction Agreement (as
applicable) by the Administrator.
(d) An Inactive SDRP Participant who transfers from Employment other
than Covered Employment to Covered Employment will become an
Active SDRP Participant on the date such Employee resumes Covered
Employment.
3.4 SUSPENSION OF CONTRIBUTIONS
An Active LTSP Participant whose Contributions are suspended pursuant to
Section 4.5 at his/her option shall continue to be considered an Inactive
LTSP Participant.
7
<PAGE> 14
3.5 FORMER PARTICIPANTS AND RE-PARTICIPATION
(a) Termination of Employment shall cause an Active Participant or
Inactive Participant to become and remain a Former Participant
until such time he/she has no remaining Accounts under the Plan.
(b) A Former Participant who returns to Employment other than Covered
Employment shall become an Inactive Participant.
(c) Any individual who ceases to be an Active LTSP Participant or
Inactive LTSP Participant (including Former Participants) because
of a Termination of Employment and who subsequently returns to
Covered Employment will become an Active LTSP Participant on the
date such Employee resumes Covered Employment. Should such Active
LTSP Participant elect to make Pre-Tax Contributions or Post-Tax
Contributions hereunder, such Contributions will be effective with
the first payroll period next following receipt and processing of
the Active LTSP Participant's Compensation Deferral Agreement or
Payroll Deduction Agreement (as applicable) by the Administrator.
(d) Any individual who ceases to be an Active SDRP Participant or
Inactive SDRP Participant (including Former Participants) because
of a Termination of Employment and who subsequently returns to
Covered Employment will become an Active SDRP Participant on the
date such Employee resumes Covered Employment.
ARTICLE 4
---------
DEPOSITS AND CONTRIBUTIONS
--------------------------
4.1 PRE-TAX CONTRIBUTIONS
Each Active LTSP Participant may, pursuant to a Compensation Deferral
Agreement, have the Employer contribute on his or her behalf an amount to
the Plan known as Pre-Tax Contributions (as defined in Section 2.52) of
not less than one percent (1%) or more than eighteen percent (18%) (in any
percentage to one hundredth of a percent) of his/her Eligible Compensation
subject to the limitations of Sections 5.1 and Article 15. The percentage
contributed under this Section 4.1, when combined with the percentage
contributed under Section 4.2, cannot exceed eighteen percent (18%) of the
Active LTSP Participant's Eligible Compensation in the aggregate.
4.2 POST-TAX CONTRIBUTIONS
Each Active LTSP Participant may elect, pursuant to a Payroll Deduction
Agreement, to contribute an amount of not less than one percent (1%) or
more than eighteen percent (18%) (in any percentage to one hundredth of a
percent) of his/her Eligible Compensation, subject to limitations of
Section 5.2 and Article 15. The percentage contributed under this Section
4.2, when combined with the percentage contributed under Section 4.1,
cannot exceed eighteen percent (18%) of the Active LTSP Participant's
Eligible Compensation in the aggregate.
4.3 EMPLOYER MATCHED CONTRIBUTIONS
The Employer shall contribute in respect of each Active LTSP Participant
Employer Matched Contributions equal to one hundred percent (100%) on the
first one percent and fifty percent (50%) on up to the next four percent
of such Active LTSP Participant's Pre-Tax Contributions and/or Post-Tax
Contributions. For purposes of determining the amount of Employer Matched
Contributions to be allocated to each Active LTSP Participant for a
particular payroll period, only Pre-Tax Contributions and Post-Tax
Contributions attributable to such payroll period, both of which in the
aggregate do not exceed five percent (5%) of Eligible Compensation for
such payroll period, will be taken into consideration. The Employer
Matched Contribution will first be attributable to Pre-Tax Contributions,
if any, and then to Post- Tax Contributions, if any. The Employer, with
the approval of its Board of Directors, may increase or decrease the
amount of Employer Matched Contributions at any time and from time to time
for any reason.
8
<PAGE> 15
4.3A SDRP CONTRIBUTIONS
Each pay period the Employer shall contribute a percentage of the FICA
Taxable Compensation paid to each Active SDRP Participant during such pay
period determined in accordance with the following table, based on such
Active SDRP Participant's Years of Service, as defined in Section 2.56, as
of the first day of such pay period:
<TABLE>
<CAPTION>
CONTRIBUTION
YEARS OF SERVICE PERCENTAGE
---------------- ----------
<S> <C>
Less than 5 years 1%
At least 5 years but
less than 10 years 2%
At least 10 years but
less than 15 years 3%
At least 15 years but
less than 20 years 4%
20 years or more 5%
</TABLE>
Each Employer SDRP Contribution shall be promptly allocated to
such Active SDRP Participant's Account as soon as practicable
after it is made. For purposes of this Section, an Active SDRP
Participant's "FICA Taxable Compensation" for a given Plan Year
shall consist of that portion of his or her Eligible Compensation
which is not in excess of the dollar amount specified as the
maximum contribution and benefit base applicable to old-age,
survivors, and disability insurance under Title II of the Social
Security Act, as in effect on the first day of such Plan Year (the
"Taxable Wage Base").
4.4 CHANGE IN AMOUNT OF CONTRIBUTIONS
(a) The percentage of Eligible Compensation designated by a
Participant as his/her Pre-Tax Contributions and/or Post-Tax
Contributions shall continue in effect, notwithstanding any change
in his/her Eligible Compensation, until he/she elects to change
such percentage.
(b) An Active LTSP Participant may elect to change his/her percentage
of Pre-Tax Contributions and/or Post-Tax Contributions by filing a
written election with the Administrator on such forms as the
Administrator shall specify. Any such change shall become
effective with the first payroll period next following receipt and
processing of the Participant's revised Compensation Deferral
Agreement or Payroll Deduction Agreement (as applicable) by the
Administrator.
4.5 SUSPENSION OF CONTRIBUTIONS
(a) An Active LTSP Participant may elect to suspend all of his/her
Pre-Tax Contributions and/or Post Tax Contributions by filing a
written election with the Administrator on such forms as the
Administrator shall specify. Such suspension shall become
effective with the first payroll period next following receipt and
processing of the suspension request by the Administrator.
(b) The Pre-Tax and Post-Tax Contributions of a Participant who
becomes an Inactive LTSP Participant pursuant to Section 3.3(a)
(Transfers of Employment) shall be suspended automatically
beginning with the first payroll period thereafter, and may not be
resumed until he/she becomes an Active LTSP Participant pursuant
to Article 3.
(c) All suspensions of Pre-Tax and Post-Tax Contributions shall be
indefinite in duration and a Participant shall not be permitted to
make up such suspended Contributions.
9
<PAGE> 16
(d) An Active LTSP Participant who has elected to suspend all of
his/her Pre-Tax Contributions and/or Post-Tax Contributions shall
be eligible to resume making such Contributions as of the first
payroll period next following receipt and processing of a new
Compensation Deferral Agreement or Payroll Deduction Agreement (as
applicable) by the Administrator.
4.6 REMITTANCE OF CONTRIBUTIONS
It is the Company's intent to remit Contributions to the Trustee as soon
as practical after the close of the payroll period for which they are
attributable. In no event, however, will Contributions be remitted to the
Trustee later than ninety (90) days following the date they are deducted
from the Participant's Eligible Compensation. In no event will Employer
Matched Contributions and Employer SDRP Contributions be remitted to the
Trustee later than ninety (90) days following the close of the month in
which they are granted.
4.7 RETURN OF CONTRIBUTIONS
Except as provided in Section 15.2, in Section 6.13 regarding forfeitures,
and in this Section 4.7, the assets of the Plan shall never revert to or
be used by the Employer. Contributions made by the Employer to the Trust
by reason of a mistake of fact may be returned to the Employer within one
year after the payment of the contribution. Furthermore, contributions
made by the Employer to the Trust are conditioned upon the deductibility
of the contribution under Code Section 404 and, to the extent the
deduction is disallowed, may be returned to the Employer within one year
after disallowance of the deduction. Any amount returned to the Employer
by reason of this Section 4.7 shall not include earnings attributable
thereto and shall be reduced by any losses attributable thereto.
ARTICLE 5
---------
MAXIMUM CONTRIBUTIONS
---------------------
5.1 LIMITATIONS ON PRE-TAX CONTRIBUTIONS
(a) For purposes of determining the maximum Pre-Tax Contribution,
contributions by the Employer designated as Pre-Tax Contributions
shall be expressed as a percentage of Compensation for each
Participant and each Covered Employee who is eligible to be, but
who is not, a Participant.
(b) The Actual Deferral Percentage for each Participant and Covered
Employee for the Plan Year shall be determined in accordance with
Code Section 401(k) and the regulations thereunder.
The Actual Deferral Percentage for eligible Highly Compensated Employees
for the Plan Year shall be the average of the ratios of the eligible
Highly Compensated Employees. This will be compared to the Actual
Deferral Percentage for the Non-highly Compensated Employees for the Plan
Year, which will be the average of the ratios of the eligible Non-highly
Compensated Employees.
The Actual Deferral Percentage for any Plan Year for eligible Highly
Compensated Employees shall not exceed the greater of either (i) or (ii)
below:
(i) One hundred and twenty-five percent (125%) of the Actual
Deferral Percentage of the eligible Non-highly Compensated
Employees, or
(ii) The lesser of the amounts determined under (A) or (B)
following (or such other amount as may be prescribed in
applicable regulations under the Code to prevent multiple
use of the alternative limitation set forth in this clause
(ii)):
(A) Two hundred percent (200%) of the Actual Deferral
Percentage of eligible Non-highly Compensated
Employees, or
10
<PAGE> 17
(B) The Actual Deferral Percentage of the eligible
Non-highly Compensated Employees plus two
percentage points (2%).
Notwithstanding any other provision of this Plan, the Pre-Tax
Contributions shall be limited to the extent necessary to meet this test.
(c) PROCEDURE TO LIMIT PRE-TAX CONTRIBUTIONS
(i) PRIOR TO THE END OF THE PLAN YEAR
The Administrator may determine prior to the end of the
Plan Year whether there is a reasonable expectation that
the Actual Deferral Percentage results satisfy the test
contained in Section 5.1(b).
In the event that the test described in Section 5.1(b)
will not be satisfied, the following procedure will be
followed:
(A) The future Pre-Tax Contributions, previously
authorized, for each Highly Compensated Employee
whose Pre-Tax Contributions are at the highest
available whole percentage shall be reduced by a
uniform percentage, not to exceed one percent
(1%), of each Active Participant's Compensation
such that the Actual Deferral Percentage for the
Highly Compensated Employees will satisfy a test
in Section 5.1(b). If the test is still not
satisfied after the adjustments in the immediately
preceding sentence have been made, then similar
adjustments shall be made to the Pre-Tax
Contributions for each Highly Compensated Active
Participant whose Pre-Tax Contributions are at the
next highest available whole percentage until such
time as the Actual Deferral Percentage for the
Highly Compensated Employees will satisfy a test
in Section 5.1(b). The process shall continue
until such time as a test in Section 5.1(b) is
satisfied, or the reduction has eliminated all
future contributions.
(B) Any such reduction of future, previously
authorized Pre-Tax Contributions shall remain in
force until the January 1 immediately following.
(C) The amount resulting from a reduction in a
Participant's future Pre-Tax Contribution in
Section 5.1(c)(i)(B) shall be treated as taxable
income to the Employee for the month in which the
reduction occurs and subsequent months through the
end of the Plan Year. The Employer shall withhold
those taxes required by law on such increase in
taxable income.
(ii) SUBSEQUENT TO END OF PLAN YEAR
(A) If it is determined subsequent to the end of the
Plan Year that the test in Section 5.1(b) has not
been met, the Excess ADP Contributions and the
income allocable thereto for the Highly
Compensated Employees must be calculated.
(1) AMOUNT
The amount of Excess ADP Contributions for
each Highly Compensated Employee is
determined using the leveling method as set
forth in Section 5.1(c)(i)(A).
(2) DESIGNATION AND DISTRIBUTION
Such Excess ADP Contributions are to be
designated as such by the Company and must
be distributed to the appropriate Highly
Compensated Employee within twelve months
of the close of the Plan Year, reduced by
Excess
11
<PAGE> 18
Deferrals previously distributed, if
any. Any Employer Matched Contributions
relating to such Excess ADP Contributions
shall be considered to have been made in
respect of the Highly Compensated Employee's
Post-Tax Contributions to the extent
possible, and otherwise shall be forfeited
and applied in accordance with Section 6.13.
(3) CALCULATION OF INCOME FOR PLAN YEAR
The income allocable to the Excess ADP
Contribution must also be distributed
within twelve months of the close of the
Plan Year. The determination of allocable
income for the Plan Year is made by
multiplying the net gain (as set forth in
Article 6) for the Plan Year allocable to
Pre-Tax Contributions by a fraction, the
numerator of which is the Excess ADP
Contribution for the Highly Compensated
Employee for the Plan Year and the
denominator of which is the sum of (i) such
Employee's total Pre-Tax Contribution
Account balance as of the beginning of the
Plan Year, plus (ii) such Employee's
Pre-Tax Contributions for the Plan Year.
(d) MAXIMUM DEFERRAL
(i) The maximum annual amount of any Participant's Pre-Tax
Contributions beginning in the calendar year 1987 is
$7,000. Such $7,000 amount shall be automatically
adjusted in subsequent years in the same manner as the
$90,000 amount is adjusted under Code Section 415(d).
(ii) (A) If the maximum deferral set forth in Section
5.1(d)(i) above is exceeded for a Non-highly
Compensated Employee, such amount may not be
considered when performing the test in Section
5.1(b).
(B) If a Highly Compensated Employee has an Excess
Deferral, regardless of distribution after the
close of the Plan Year as set forth in (v) below,
it must be taken into account in the performance
of the test in Section 5.1(b).
(iii) CORRECTIVE DISTRIBUTION DURING PLAN YEAR
If there has been an Excess Deferral, a
corrective distribution may be made to the
Employee DURING THE PLAN YEAR IF:
(A) The Employee requests such distribution and
designates in writing the distribution as
an Excess Deferral, and
(B) The correcting distribution is made after
the Plan received the amount of the Excess
Deferral, and
(C) The Plan designates in writing the
distribution as a distribution of an Excess
Deferral.
(D) CALCULATION OF INCOME DURING PLAN YEAR
The income allocable to the Excess Deferral is to
be distributed with the Excess Deferral. The
determination of allocable income during the Plan
Year is made by multiplying the income allocable
to Pre-Tax Contributions for the period from the
beginning of the Plan Year to the date on which
the distribution is made by a fraction, the
numerator of which is the amount of Excess
Deferral made by the Employee for the Plan Year,
and the denominator of which is the sum of (i)
such Employee's total Pre-Tax Contribution
Account balance as of the beginning of the
12
<PAGE> 19
Plan Year plus (ii) such Employee's Pre-Tax
Contributions for such Plan Year through the
date of distribution.
(iv) CORRECTIVE DISTRIBUTION AFTER THE END OF THE PLAN YEAR
(A) If the Employee notifies the Plan of the amount
of Excess Deferrals not later than March 15
following the close of the Plan Year, then not
later than April 15 following the close of the
Plan Year, the Plan may distribute the Excess
Deferrals and any income allocable to such
amount.
(B) CALCULATION OF INCOME FOR THE PLAN YEAR
The income allocable to the Excess Deferral must
also be distributed by the April 15 following the
close of the Plan Year. The determination of
allocable income for the Plan Year is made by
multiplying the net gain (as set forth in Article
6) for the Plan Year allocable to Pre-Tax
Contributions by a fraction, the numerator of
which is the amount of Excess Deferrals made by
the Employee in the Plan Year, and the
denominator of which is the sum of (i) such
Employee's total Pre-Tax Contribution Account
balance as of the beginning of the Plan Year,
plus (ii) such Employee's Pre-Tax Contributions
for the Plan Year.
(v) No corrective distribution of Excess Deferrals will be
permitted after the April 15 following the close of the
Plan Year for which there was a Pre-Tax Contribution.
(vi) Any Excess Deferral remaining in the Plan shall be
subject to the Pre-Tax Contribution withdrawal
restrictions found in Section 9.1 and shall be
includable in the Employee's gross income when
distributed from the Plan.
(e) A Participant's Pre-Tax Contributions may also be limited under
Article 15.
5.2 LIMITATIONS ON POST-TAX CONTRIBUTIONS AND EMPLOYER MATCHED CONTRIBUTIONS
(a) For purposes of determining the maximum Post-Tax Contribution and
Employer Matched Contribution, a Contribution Deferral Percentage
shall be determined for each Participant and each Employee who is
eligible to be, but who is not, a Participant.
(b) The Contribution Deferral Percentage for each Participant and
Covered Employee shall be determined in accordance with Code
Section 401 (m) and the regulations thereunder. The Contribution
Deferral Percentage for eligible Highly Compensated Employees for
the Plan Year shall be the average of the ratios of the eligible
Highly Compensated Employees. This will be compared to the
Contribution Deferral Percentage for the Non-highly Compensated
Employees for the Plan Year, which will be the average of the
ratios of the eligible Non-highly Compensated Employees.
(c) The Contribution Deferral Percentage for any Plan Year for
eligible Highly Compensated Employees shall not exceed the greater
of either (i) or (ii) below:
(i) One hundred and twenty-five percent (125%) of the
Contribution Deferral Percentage of the eligible
Non-highly Compensated Employees, or
(ii) The lesser of the amounts determined under (A) or (B)
following (or such other amount as may be prescribed in
applicable regulations under the Code to prevent
multiple use of the alternative limitation set forth in
this clause (ii)):
(A) Two hundred percent (200%) of the Contribution
Deferral Percentage of eligible Non-highly
Compensated Employees, or
13
<PAGE> 20
(B) The Contribution Deferral Percentage of the
eligible Non-highly Compensated Employees plus
two percentage points (2%).
(d) PROCEDURE TO LIMIT POST-TAX AND EMPLOYER MATCHED CONTRIBUTION
(i) PRIOR TO THE END OF THE PLAN YEAR
The Administrator may determine prior to the end of the
Plan Year whether there is a reasonable expectation
that the Contribution Deferral Percentage results
satisfy either of the tests contained in Section
5.2(c). In the event that neither of the tests
described in Section 5.2 will be satisfied, the
following procedure will be followed:
(A) The future unmatched Post-Tax Contributions,
previously authorized, for each Highly
Compensated Employee whose Contribution Deferral
Percentages are at the highest available whole
percentage shall be reduced by a uniform
percentage, not to exceed one percent (1%), of
each Active Participant's Compensation such that
the Contribution Deferral Percentage for the
Highly Compensated Employees will satisfy a test
in Section 5.2(c). If a test in Section 5.2(c) is
still not satisfied after the adjustments in the
immediately preceding sentence have been made,
then similar adjustments shall be made to the
unmatched Post-Tax Contributions for each Highly
Compensated Active Participant whose Contribution
Deferral Percentage is at the next highest
available whole percentage until such time as the
Contribution Deferral Percentage for the Highly
Compensated Employees will satisfy a test in
Section 5.2(c). This process shall continue until
one of the tests is satisfied, or there are no
further unmatched Post-Tax Contributions to
reduce, or the Contribution Deferral Percentage
would be reduced below the highest level
attributable to a Highly Compensated Employee.
(B) In the event that none of the tests described in
Section 5.2(c) will be satisfied under (A) above,
the future matched Post-Tax Contributions and the
Employer Matched Contributions attributable to
them for each Highly Compensated Employee whose
Contribution Deferral Percentage is at the
highest available whole percentage shall be
reduced by a uniform percentage, to the nearest
one-hundredth of one percent (.01%), but not to
exceed one percent (1%), of each Active
Participant's Compensation such that the
Contribution Deferral Percentage for the Highly
Compensated Employees will satisfy a test in
Section 5.2(c). If a test in Section 5.2(c) is
still not satisfied after the adjustments in the
immediately preceding sentence have been made,
then similar adjustments shall be made to the
matched Post-Tax Contributions and attributable
Employer Matched Contributions for each Highly
Compensated Active Participant whose Contribution
Deferral Percentage is at the next highest
available whole percentage until such time as the
Contribution Deferral Percentage for the Highly
Compensated Employees will satisfy a test in
Section 5.2(c). This process shall continue until
such time as a test in Section 5.2(c) is
satisfied.
(C) Any such reduction of future Post-Tax
Contributions or Employer Matched Contributions
shall remain in force until the January 1
immediately following.
(D) The amount resulting from a reduction in an
Active Participant's future Post-Tax Contribution
in Section 5.2 will not be considered a
Contribution and no future Employer Matched
Contributions will be made relating to such.
14
<PAGE> 21
(ii) SUBSEQUENT TO THE END OF THE PLAN YEAR
(A) If it is determined subsequent to the end of the
Plan Year that the tests in Section 5.2(c) have
not been met, the Excess Aggregate Contributions
and the income allocable thereto for the Highly
Compensated Employees must be calculated.
(1) AMOUNT
The amount of Excess Aggregate Contributions
for each Highly Compensated Employee is
determined using the leveling method as set
forth in Sections 5.2(d)(i)(A) and
5.2(d)(i)(B).
(2) DESIGNATION AND DISTRIBUTION
Such Excess Aggregate Contributions are to
be designated as such by the Company and to
the extent consisting of Post-Tax
Contributions, must be distributed to the
appropriate Highly Compensated Employee
within twelve months of the close of the
Plan Year, and, to the extent consisting of
Employer Matched Contributions, shall be
forfeited and applied in accordance with
Section 6.13.
(3) CALCULATION OF INCOME FOR PLAN YEAR
The income allocable to the Excess Aggregate
Contribution must also be distributed within
twelve months of the close of the Plan Year.
The determination of allocable income for
the Plan Year is made by multiplying the net
gain (as set forth in Article 6) for the
Plan Year allocable to Post-Tax
Contributions and Employer Matched
Contributions by a fraction, the numerator
of which is the Excess Aggregate
Contribution for the Highly Compensated
Employee for the Plan Year and the
denominator of which is the sum of (i) such
Employee's total Post-Tax Contribution
Account balance plus Employer Matched
Contribution Account balance as of the
beginning of the Plan Year plus (ii) such
Employee's Post-Tax Contributions and
Employer Matched Contributions for the Plan
Year.
(e) A Participant's Post-Tax and Employer Matched Contributions may
also be limited under Article 15.
ARTICLE 6
---------
ACCOUNTS
--------
6.1 ACCOUNTS
The Administrator shall maintain in the name of each Participant or Former
Participant such of the following Accounts as shall be applicable:
(a) A Pre-Tax Contribution Account;
(b) A Post-Tax Contribution Account;
(c) An Employer Matched Contribution Account;
(d) An Employer SDRP Contribution Account;
(e) A Former PAYSOP Account; and
15
<PAGE> 22
(f) A Former Employer Supplemental Contribution Account;
Such Accounts shall be administered in the manner hereinafter provided.
6.2 ACCOUNTS REPRESENT UNDIVIDED INTERESTS
The portion of balances standing to the credit of the Pre-Tax Contribution
Account, the Post-Tax Contribution Account, the Employer Matched
Contribution Account, the Employer SDRP Contribution Account, the Former
PAYSOP Account, the Former Employer Supplemental Contribution Account, the
Employer Forfeiture Account and the suspense account referred to in
Section 6.12 that is invested in one of the Investment Funds shall
represent an undivided interest in such fund.
6.3 ACCOUNT VALUES
The value of an Account on any date shall be its value determined on the
coinciding or immediately preceding Valuation Date, plus any contributions
and amounts subsequently credited thereto, and less any distributions
subsequently made therefrom.
6.4 VALUATION OF INVESTMENT FUNDS
As of each Valuation Date, the Trustee shall compute the value of each
Investment Fund from which shall be determined the net gain and loss of
such Fund since the immediately preceding Valuation Date. The net gain or
loss shall include any unrealized and realized profits or losses, and any
dividends, interest, or other income and any expenses which are due or
accrued, but shall not include contributions made by the Employer or a
Participant and distributions made to a Participant, Former Participant or
Beneficiary. The cost basis for shares of Company Stock purchased since
the prior Valuation Date shall be the average cost per share; such average
based on all purchase and sale prices in the Fund since the prior
Valuation Date.
6.5 ALLOCATION OF NET GAIN OR LOSS OF INVESTMENT FUNDS TO ACCOUNTS
(a) As of each Valuation Date, the net gain or loss of each Investment
Fund shall be allocated among the appropriate Accounts in
proportion to the ratio of:
(i) The value of the portion of each such Account that is,
and has been continuously, invested in such Investment
Fund as of the immediately preceding Valuation Date,
adding one-half of the contributions added to such
Investment Fund after such Valuation Date and on or
before the subsequent Valuation Date, and subtracting
distributions, withdrawals or loans made from such
Investment Fund on or after the prior Valuation Date but
prior to the subsequent Valuation Date; to
(ii) The aggregate of the amounts computed under clause (i)
above for all Accounts that are invested in such
Investment Fund as of such immediately preceding
Valuation Date.
(b) The Administrator may, however, adopt such procedures as it
considers equitable to establish a proportionate crediting of the
net gain or loss of the Investment Fund or Investment Funds for
contributions made since the last Valuation Date.
(c) In determining the value of the appropriate Accounts under Section
6.5 as of the immediately preceding Valuation Date, there shall be
excluded any amounts forfeited in accordance with Section 8.3
since such date.
6.6 BASIS OF VALUATION
In determining the value of any Investment Fund pursuant to the provisions
of Section 6.4, the Trustee shall use the following values: securities
listed on any nationally recognized securities exchange shall be valued at
the closing price reported on any such exchange on the Valuation Date, or,
if there were no sales on the
16
<PAGE> 23
Valuation Date, then at the quoted bid price on the Valuation Date.
Securities not listed on a recognized stock exchange shall be valued at
the quoted closing bid price on the Valuation Date. A unit of
participation in a common trust fund maintained by the Trustee or a share
in a mutual fund shall be valued at the unit value, or share price
respectively, in effect on the Valuation Date. Securities with respect to
which there were no available sale prices or bid prices on the Valuation
Date, and any other investments, shall be valued at prices deemed by the
Trustee to represent the fair market value thereof on the Valuation Date.
6.7 ADMINISTRATION OF PRE-TAX CONTRIBUTION ACCOUNT
(a) There shall be credited to the Pre-Tax Contribution Account of a
Participant all Pre-Tax Contributions made pursuant to Section 4.1
and all Qualified Plan Rollover Contributions made pursuant to
Section 17.12 on behalf of such Participant.
(b) There shall be charged against such Account withdrawals by the
Participant pursuant to Section 10.1 hereof.
6.8 ADMINISTRATION OF POST-TAX CONTRIBUTION ACCOUNT
(a) There shall be credited to the Post-Tax Contribution Account of a
Participant all Post-Tax Contributions made by such Participant
under this Plan.
(b) There shall be charged against such Account withdrawals by the
Participant in accordance with Section 10.2 hereof.
6.9 ADMINISTRATION OF EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(a) There shall be credited to the Employer Matched Contribution
Account of a Participant all Employer Matched Contributions made
on behalf of such Participant under this Plan.
(b) There shall be charged against such Account withdrawals by the
Active Participant in accordance with Section 10.3 hereof.
6.9A ADMINISTRATION OF EMPLOYER SDRP CONTRIBUTION ACCOUNT
There shall be credited to the Employer SDRP Contribution Account of a
Participant all Employer SDRP Contributions made on behalf of such
Participant under this Plan. No withdrawals or loans are permitted from
such Account.
6.10 ADMINISTRATION OF FORMER PAYSOP ACCOUNT
No further amounts shall be credited to the Former PAYSOP Account. Such
Account shall consist of stock and funds of the Participant's or Former
Participant's former PAYSOP and former Supplemental PAYSOP Account (as
such contributions ceased, effective December 31,1987). No withdrawals or
loans are permitted from such Account.
6.11 ADMINISTRATION OF THE FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT
No amounts attributable to Plan Years after 1988 shall be credited to the
Former Employer Supplemental Contribution Account of a Participant or
Former Participant (as such provision ceased to be effective as of
December 31, 1988). No withdrawals or loans are permitted from such
Account.
6.12 ADMINISTRATION OF THE SUSPENSE ACCOUNT
(a) There shall be credited to a suspense account the amount of any
Contributions, Employer Matched Contributions and Employer SDRP
Contributions for a Participant which are in excess of the amount
permitted under Article 15 hereof.
17
<PAGE> 24
(b) The balance in such suspense account at the close of such Plan
Year shall be accounted for as follows:
(i) The Post-Tax Contributions considered as excess under
(a) above, including gains or less losses, shall be
returned to the Participant before the end of the next
Plan Year.
(ii) All such other Contributions, Employer Matched
Contributions and Employer SDRP Contributions that are
considered as excess under (a) above shall remain
credited to this suspense account and reallocated in the
following Plan Year as Employer Matched Contributions
and Employer SDRP Contributions for such Plan Year (and
succeeding Plan Years if necessary).
6.13 ADMINISTRATION OF THE EMPLOYER FORFEITURE ACCOUNT
(a) There shall be credited to the Employer Forfeiture Account all
funds creditable to such Account as provided in Section 8.3 hereof.
(b) There shall be charged against such Account all amounts withdrawn
from time to time and reallocated as Employer Matched
Contributions or Employer SDRP Contributions.
6.14 CREDITING OF CONTRIBUTIONS
Pre-Tax Contributions and Post-Tax Contributions shall be credited to the
appropriate Account or Accounts of such Participants no later than the end
of the quarter for which such contributions are attributable or as soon
thereafter as administratively possible. Employer Matched Contributions
and Employer SDRP Contributions made for the benefit of Participants with
respect to a particular Plan Year shall be credited to the appropriate
Accounts of such Participants no later than the end of the quarter for
which such Contributions are attributable or as soon thereafter as
administratively possible.
6.15 EMPLOYEE CONTRIBUTION RECORDS
The Administrator shall maintain a Pre-Tax Contribution record in the name
of each Participant or Former Participant, in which shall be entered, in
dollars and cents, the amount of each Pre-Tax Contribution made on behalf
of such Participant; and a Post-Tax Contribution record in which shall be
entered, in dollars and cents, the amount of each Post-Tax Contribution
made by such Participant. Each such record shall at all times carry a
current cumulative balance as of the preceding Valuation Date plus
Contributions, distributions and withdrawals made in the interim since
such Valuation Date.
ARTICLE 7
---------
RETIREMENT, DISABILITY OR DEATH
-------------------------------
7.1 BENEFIT AT RETIREMENT
Upon attaining his/her Normal Retirement Age hereunder, a Participant
shall be one hundred percent (100%) vested in and eligible to receive upon
separation from service the value of his/her Pre-Tax Contribution Account,
Post-Tax Contribution Account, Employer Matched Contribution Account,
Employer SDRP Contribution Account, Former PAYSOP Account, and Former
Employer Supplemental Contribution Account in the manner provided in
Article 9 hereof.
7.2 DISABILITY BENEFIT
A Participant who is Disabled shall be one hundred percent (100%) vested
in and eligible to receive the value of his/her Pre-Tax Contribution
Account, Post-Tax Contribution Account, Employer Matched Contribution
Account, Employer SDRP Contribution Account, Former PAYSOP Account, and
Former Employer Supplemental Contribution Account in the manner provided
in Article 9 hereof.
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<PAGE> 25
7.3 DEATH BENEFIT
Upon the death of a Participant, his/her Beneficiary shall be eligible to
receive one hundred percent (100%) of the value of his/her Pre-Tax
Contribution Account, Post-Tax Contribution Account, Employer Matched
Contribution Account, Employer SDRP Contribution Account, Former PAYSOP
Account, and Former Employer Supplemental Contribution Account in the
manner provided in Article 9 hereof. Notwithstanding anything in the Plan
to the contrary, as to each Participant for whom funds were transferred to
an Employer SDRP Contribution Account as a result of the Merger, such
Participant's Beneficiary shall not be entitled to receive the value of
such Participant's Employer SDRP Contribution Account, unless such
Beneficiary is named in a single written designation that expressly
applies to both the Long-Term Savings Plan portion and the Self-Directed
Retirement Plan portion of The Progressive Retirement Security Program.
In the absence of such a designation, such Participant's Employer SDRP
Contribution Account shall be paid upon such Participant's death to such
Participant's "Beneficiary" under and within the meaning of The
Progressive Corporation Supplemental Retirement Plan, as in effect
immediately prior to the Merger.
ARTICLE 8
---------
VESTING AND TERMINATIONS
------------------------
8.1 VESTING
A Participant is vested in his/her Accounts as follows:
(a) PARTICIPANT ACCOUNTS
Each Participant and Former Participant is one hundred percent
(100%) vested in his/her Pre-Tax Contribution Account, Post-Tax
Contribution Account, and Former PAYSOP Account.
(b) EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(i) Each Participant and Former Participant shall be vested in
his/her Employer Matched Contribution Account in accordance
with the following schedule:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
</TABLE>
(ii) Notwithstanding (i) above, and due to the fact that class
year vesting was eliminated effective December 31,1988,
this transitional vesting section shall apply to any
Participant for whom it produces a greater vested benefit
than (i) above. A Participant's vested benefit in his/her
Employer Matched Contribution Account as of December
31,1988 will be frozen (for calculation purposes only) and
the amount maintained separately. To calculate the vested
percentage of a Participant's Employer Matched Contribution
Account, the frozen December 31,1988 balance will be added
to the subsequent Employer Matched Contributions. This sum
will be multiplied by the appropriate vested percentage
corresponding to the Participant's Years of Service as
determined in (i) above.
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<PAGE> 26
(c) FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT AND EMPLOYER SDRP
CONTRIBUTION ACCOUNT
Each Participant or Former Participant shall be vested in his/her
Former Employer Supplemental Contribution Account and Employer
SDRP Contribution Account in accordance with the following
schedule:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 5 0%
5 or more 100%
</TABLE>
8.2 TERMINATION OF EMPLOYMENT
The final vesting status of a Participant who terminates his/her
Employment for any reason other than Retirement, Disability or death shall
be determined as of his/her Termination of Employment, taking into
consideration the provisions of Section 11.1. Such Participant shall
become a Former Participant and shall be eligible to receive the value of
his/her Pre-Tax Contribution Account, Post-Tax Contribution Account,
Former PAYSOP Account, and the vested portion of his/her Employer Matched
Contribution Account, the vested portion of his/her Employer SDRP
Contribution Account and the vested portion of his/her Former Employer
Supplemental Contribution Account as provided in Article 9 hereof.
8.3 FORFEITURES
If a Former Participant who terminated Employment for reasons other than
Retirement, Disability or death does not return to Employment during the
Plan Year in which his/her Termination of Employment occurs, or if he/she
dies after his/her Termination of Employment during that Plan Year, then
the non-vested portion of his/her Employer Matched Contribution Account,
Employer SDRP Contribution Account and Former Employer Supplemental
Contribution Account shall be provisionally forfeited and such forfeiture
shall be applied in accordance with Section 6.13 hereof.
8.4 REEMPLOYMENT
If a Participant who ceased to be an Employee returns to active
Employment, an amount equal to the value of the provisionally forfeited
non-vested portion of his/her Employer Matched Contribution Account,
Employer SDRP Contribution Account and Former Employer Supplemental
Contribution Account, determined as of the Valuation Date coincident with
or next following the date he/she last ceased to be an Employee, will be
reinstated by crediting such amounts to the Employee's respective Employer
Matched Contribution Account, Employer SDRP Contribution Account and
Former Employer Supplemental Contribution Account. The amounts so
reinstated will be made from any unapplied forfeitures then available
under the Plan, provided, however, that if unapplied forfeitures are less
than the amount to be reinstated, the Employer will make a supplemental
contribution to eliminate such insufficiency.
ARTICLE 9
---------
PAYMENT OF BENEFITS
-------------------
9.1 APPLICATION FOR PAYMENT
Application for distribution of benefits under this Plan shall be made by
a Participant or Former Participant (or other claimant) in accordance with
Section 9.5 hereof and approved by the Administrator before payment
commences.
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<PAGE> 27
9.2 TIME OF PAYMENT
(a) Distribution of benefits to a Participant (or Former Participant)
on account of Retirement shall be made as soon as practicable
after the Valuation Date coincident with or next following his/her
Retirement.
(b) Distribution of benefits to a Participant on account of Disability
shall be made as soon as practicable after the Valuation Date
coincident with or next following the Disabled Participant's
application pursuant to Section 9.1.
(c) In no event, however, will benefit payments to a Participant (or
Former Participant) commence later than April 1 of the calendar
year next following the calendar year in which such Participant
(or Former Participant) attains age seventy and one-half (70-1/2).
Any individual who receives a distribution of benefits prior to
age fifty-nine and one-half (59-1/2) shall be advised by the
Administrator that an additional federal income tax penalty may be
imposed on all or a portion of such distribution unless made on
account of death or Disability.
(d) In the case of a Participant (or Former Participant) who dies
before benefit payments have commenced all benefits in respect of
such Participant (or Former Participant) shall be paid to his or
her Beneficiary in a lump sum as soon as practicable after the
Valuation Date coincident with or next following his or her death.
(e) Subject to Section 9.2(h), distribution of benefits to a
Participant who terminates Employment for reasons other than
Retirement, Disability or death shall be made as soon as
practicable after the Valuation Date coincident with or next
following the date of his/her Termination of Employment where the
Participant (or Former Participant) has made proper application.
(f) If proper application has been made, distribution shall be made,
in any event, not later than sixty (60) days after the close of
the Plan Year in which the Participant or Former Participant
attains age sixty-five (65) or terminates his/her Employment,
whichever is later.
Where the amount to be distributed cannot be determined,
distribution may be delayed, but in no event beyond sixty (60)
days after such amount is determined.
(g) Notwithstanding anything to the contrary in this Section 9.2,
while such Participant is in the employ of the Employer, no
distribution from the Former PAYSOP Account may be made from a
Participant's Account before the end of the eighty-fourth month
beginning after the month in which it was allocated. In fact, no
withdrawals are permitted from the Former PAYSOP Account pursuant
to Section 10.4.
(h) Notwithstanding anything provided in this Section 9.2 to the
contrary, if the lump sum value of a Participant's Accounts does
not exceed three thousand five hundred dollars ($3,500),
determined as of the Valuation Date coinciding with or immediately
preceding his/her proposed date of distribution,the lump sum value
of such Accounts shall be paid in total, in cash (unless the
Employee elects Company Stock from his/her Former PAYSOP Account
or Company Stock Fund pursuant to Section 9.4), whether or not
application for payment has been made in accordance with Section
9.1. Such $3,500 amount shall be automatically adjusted in
subsequent years in accordance with regulations.
(i) No distribution shall be made to any Participant before his Normal
Retirement Date unless:
(i) his prior written consent has been obtained by the
Administrator; or
(ii) the aggregate balance of his Accounts, determined as of the
Valuation Date coinciding with or immediately preceding the
proposed date of distribution, does not exceed $3,500.
21
<PAGE> 28
If the Participant's consent is required under this Section
9.2(i), but is not obtained by the Administrator prior to the time
the distribution is to be made under Section 9.2, the distribution
shall be made as soon as reasonably practicable following the
earlier of (1) the Participant's Normal Retirement Date, (2) the
date the Administrator receives satisfactory evidence of the
Participant's death, or (3) the date the Administrator obtains the
Participant's written consent.
9.3 FORM OF PAYMENT
A Participant, Former Participant or Beneficiary shall receive the value
of his/her Accounts payable in cash or shares of Company Stock (if
invested in Company Stock Fund at Termination) as elected by the
Participant in the form of a lump sum payment.
However, if a Participant's entire Account consists of only the
Partnership Share, the distribution shall be in cash (due to the small
value of such an Account).
9.4 DETERMINATION OF VALUE OF PAYMENT
The value of the Accounts to be distributed to a Participant, Former
Participant or Beneficiary shall be determined as of the Valuation Date
coincident with or immediately following the receipt of request for such
distribution. However, if the Participant's Termination of Employment
occurs within forty-five (45) days prior to a Valuation Date, and if
receipt of the request for distribution occurs within forty-five (45) days
following the Participant's Termination of Employment, even if such
receipt of the request for distribution occurs subsequent to the Valuation
Date in question, such Valuation Date will be used to value the Accounts.
9.5 CLAIMS PROCEDURE
(a) The Administrator shall establish reasonable procedures under
which a claimant, who may be a Participant, Former Participant or
Beneficiary, may present a claim for benefits under this Plan.
(b) Unless such claim is allowed in full by the Administrator, written
notice of the denial shall be furnished to the claimant within
ninety (90) days (which may be extended by a period not to exceed
an additional ninety (90) days if special circumstances so require
and proper written notice to the claimant is given prior to the
expiration of the initial ninety (90) day period) setting forth
the following in a manner calculated to be understood by the
claimant:
(i) The specific reason(s) for the denial;
(ii) Specific reference(s) to any pertinent provision(s) of
the Plan or rules promulgated pursuant thereto on which
the denial is based;
(iii) A description of any additional information or material
as may be necessary to perfect the claim, together with
an explanation of why it is necessary; and
(iv) An explanation of the steps to be taken if the claimant
wishes to resubmit his/her claim for review.
(c) Within a reasonable period of time after the denial of the claim,
but in any event, not to be more than sixty (60) days, the
claimant or his/her duly authorized representative may make
written application to the Administrator for a review of such
denial. The claimant or his/her representative, may review
documents held by the Administrator and pertinent to the denial of
such claim, and may submit a written statement of issues and
comments.
(d) If an appeal is timely filed, the Administrator shall conduct a
full and fair review of the claim and mail or deliver to the
claimant its written decision within sixty (60) days after the
claimant's request for review (which may be extended by a period
not to exceed an additional sixty (60) days if special
22
<PAGE> 29
circumstances or a hearing so require and proper written notice to the
claimant is given prior to the expiration of the initial sixty (60) day
period). Such decision shall:
(i) Be written in a manner calculated to be understandable by the
claimant;
(ii) State the specific reason(s) for the decision; and
(iii) Make specific reference to pertinent provision(s) of the Plan.
9.6 FACILITY OF PAYMENT
If the Administrator determines that a Participant, Former Participant or
Beneficiary entitled to receive benefits under this Plan is (at the time
such benefit is payable) a minor or physically, mentally or legally
incompetent to receive such benefit and that another person or an
institution has legal custody of such minor or incompetent individual, the
Administrator may cause payment to be made to such person or institution
having custody of such Participant, Former Participant or Beneficiary.
Such payment, to the extent made, shall operate as a complete discharge of
obligation by the Administrator, the Employer, the Trustee and the Fund.
ARTICLE 10
----------
WITHDRAWALS AND LOANS DURING EMPLOYMENT
---------------------------------------
10.1 IN-SERVICE WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT
(a) If a Participant has attained age 59-1/2, such Participant may at
any time, by filing written application with the Administrator,
make an in-service withdrawal from his/her Pre-Tax Contribution
Account.
(b) (i) If a Participant has not attained age 59-1/2, such
Participant may make an in-service withdrawal from
his/her Pre-Tax Contribution Account only in the event of
Hardship and only to the extent that such in-service
withdrawal is necessary to satisfy the Hardship. The
Participant must request the withdrawal in writing from
the Administrator.
(ii) SAFE-HARBOR
A request for an in-service withdrawal will be deemed to
be necessary to satisfy a Hardship only if all of the
following requirements are met:
(A) The amount of the withdrawal does not exceed the
amount of the Hardship plus amounts necessary to
pay any federal, state or local income taxes or
penalties reasonably anticipated to result from
the withdrawal, and
(B) The Participant has obtained all withdrawals
(other than Hardship withdrawals) and all
nontaxable loans available under this Plan and any
other plan maintained by the Employer, and
(C) The Participant certifies in writing that the
amount of the requested Hardship withdrawal is
necessary to satisfy an immediate and heavy
financial need and that such need cannot
reasonably be relieved (i) through reimbursement
or compensation by insurance or otherwise, (ii) by
liquidation of assets, (iii) by discontinuing Plan
contributions, (iv) by other distributions or
non-taxable loans from any other plans maintained
by Progressive or any other current or former
employer of the Participant or (v) by borrowing
from commercial sources on reasonable commercial
terms.
23
<PAGE> 30
(c) The amount of the Pre-Tax Contribution Account available for
withdrawal shall include:
(i) The Pre-Tax Contributions and earnings as of December 31,
1988, and
(ii) The Pre-Tax Contributions made on or after January
1,1989, but shall not include any income on such Account
subsequent to that date.
10.2 IN-SERVICE WITHDRAWALS FROM POST-TAX CONTRIBUTION ACCOUNT
(a) A Participant may at any time file a written application with the
Administrator to make a voluntary withdrawal of not less than
$250.00 from his/her Post-Tax Contribution Account for any reason.
(b) The entire Post-Tax Contribution Account balance including income
attributable to such Account, is available for withdrawal. Any
withdrawal will be processed as follows:
(i) First, from the pre-1987 Post-Tax Contribution Account
balance,
(ii) Next, from income on the pre-1987 Post-Tax Contribution
Account balance together with Contributions (and income
thereon) made to the post-1986 Post-Tax Contribution
Account.
Such amount shall be on a pro rata basis between Contributions and
income thereon, pursuant to Code Section 72.
10.3 IN-SERVICE WITHDRAWALS FROM EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(a) An Active Participant may file a written application with the
Administrator to make a withdrawal from his/her vested Employer
Matched Contribution Account balance not to exceed the following:
(i) if the Active Participant has been a Participant in the
Plan for less than five (5) years, an amount equal to the
sum of all Employer Matched Contributions made in respect
to such Participant at least two (2) years prior to the
date of the withdrawal; or
(ii) if the Active Participant has been a Participant in the
Plan for at least five (5) years, the entire vested
balance of such Participant's Employer Matched
Contribution Account.
An Active Participant may make such a withdrawal no more
frequently than once per Plan Year.
(b) An in-service withdrawal from an Active Participant's Employer
Matched Contribution Account is not available unless the Active
Participant has filed an application and is eligible to receive a
withdrawal of Contributions pursuant to either 10.1 or 10.2,
subject to the further requirement that a withdrawal of all
available Post-Tax Contributions pursuant to 10.2 must first
occur.
10.4 NO WITHDRAWALS AVAILABLE FROM OTHER ACCOUNTS
(a) No withdrawals under any circumstances shall be available from:
(i) The non-vested portion of the Employer Matched
Contribution Account,
(ii) The Former PAYSOP Account,
(iii) The Former Employer Supplemental Contribution Account, or
(iv) The Employer SDRP Contribution Account.
24
<PAGE> 31
(b) No withdrawals are available to anyone other than an Active
Participant and Inactive Participants as specifically noted in
Sections 10.1 and 10.2; that is, no Former Participants or
Beneficiaries are eligible to make withdrawals from any Accounts,
as they may request distribution pursuant to Section 9.1.
10.5 PAYMENT OF WITHDRAWALS
(a) Withdrawals shall be processed not less frequently than bi-weekly.
Withdrawals shall be distributed as soon as practicable after the
date the Participant's application for withdrawal is received,
provided full documentation is enclosed.
(b) The amount of the withdrawal shall be based upon the value of the
Participant's Pre-Tax Contribution Account, Post-Tax Contribution
Account, and Employer Matched Contribution Account (as restricted
by Section 10.3) as applicable, determined as of the Valuation
Date coincident with or immediately preceding the Administrator's
receipt of a request for such withdrawal; provided, however, all
Stock shall be valued using the closing price on the business day
immediately preceding the date the withdrawal is processed.
(c) Unless the Participant otherwise directs in writing, each
withdrawal shall be charged to each of the Investment Funds in
which any portion of his/her Accounts are invested in the
proportion that the balance held in such Investment Fund bears to
the aggregate balance held in all such Investment Funds.
10.6 LOANS TO PARTICIPANTS
(a) As approved by the Administrator, a Participant may at any time
borrow an amount as set forth in Section 10.6(b) under the terms
and conditions of this Section 10.6.
(b) The Administrator shall investigate each application for a loan.
In addition to such rules and regulations as the Administrator may
adopt, all loans shall comply with the following terms and
conditions:
(i) An application for a loan by a Participant shall be made
in writing to the Administrator on such forms as the
Administrator shall prescribe. The loan application
will include a promissory note executed by the borrowing
Participant obligating the Participant to repay the loan
through payroll deduction of substantially level
payments made no less frequently than quarterly within
the term described in Section 10.6(b)(vi).
(ii) No loans will be available for the purchase of a primary
residence.
(iii) Each loan shall be secured by the borrower's entire
right, title and interest in and to the trust fund (not
to exceed the amount of the loan), evidenced by the
Participant's collateral promissory note for the amount
of the loan, including interest, payable to the order of
the Trustee.
(iv) The minimum loan amount shall be one thousand dollars
($1,000).
(v) The loan amount requested must be a multiple of $100.
The outstanding balance of each loan amount (plus the
highest outstanding balance of all other loans made from
this Plan within the immediately preceding twelve-month
period) shall not exceed the lesser of:
(A) $50,000; or
(B) Fifty percent (50%) of the Participant's vested
Account(s) based on the Participant's Pre-Tax
Contribution Account, Post-Tax Contribution
Account, and Employer Matched Contribution
Account.
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<PAGE> 32
(vi) The period of repayment of any loan shall not exceed
three (3) years.
(vii) Repayment Options: A loan may be prepaid without penalty
by paying the balance of the loan plus accrued interest
in a lump sum payment.
(viii) Each loan shall bear interest at a rate to be set and
reviewed periodically by the Administrator and, in
determining the interest rate, the Administrator shall
take into consideration commercial interest rates
currently being charged by persons in the business of
lending money for loans which would be made under
similar circumstances. The Administrator shall not
discriminate among Participants in the matter of
interest rates. To the extent permitted by law, the
interest rate on any loan will not be adjusted.
(ix) No application for a loan by the Participant will be
approved as long as an outstanding balance for a loan
remains in the name of such Participant.
(c) (i) Loans shall be processed not less frequently than
bi-weekly. For all purposes relating to loans, the value
of the Participant's Account shall be determined as of
the Valuation Date coinciding with or immediately
following receipt of a loan application by the
Administrator; provided, however, all Stock shall be
valued using the closing price on the business day
immediately preceding the date the withdrawal is
processed.
(d) A Participant whose Employment terminates shall have 30 days from
the date of termination to repay the loan. Repayment must be made
by check or money order in a lump sum for the remaining loan
balance plus accrued interest. However, a Participant whose
active Employment terminates as a result of a leave of absence
approved by his or her Employer may continue to repay his or her
loan in installments payable in the amounts and at the times that
payroll deduction payments would have been made had he continued
in active Employment.
(e) In the event of a default on any loan the entire outstanding
principal balance of the loan plus all accrued interest shall be
immediately due and payable and the Administrator is authorized
(to the extent permitted by law) to take any and all actions
necessary or appropriate to collect such sums. However,
foreclosure on and reduction of a Participant's Plan benefits in
repayment of a loan shall not occur until an event has occurred
which would entitle the Participant or his/her Beneficiary to
receive a distribution of his/her Plan benefits, provided that the
amount of such distribution shall be reduced by the outstanding
principal amount of the loan plus all accrued interest. For
purposes of the preceding provisions, "default" means any of the
following events:
(i) failure of any Participant whose Employment has
terminated to repay the entire outstanding principal
balance of the loan plus accrued interest within the
time specified in Section 10.6(d); or
(ii) any other failure of a Participant to make any required
payment of principal or interest on any loan within
thirty (30) days following the date such payment was
due.
(f) Anything in this Section 10.6 to the contrary notwithstanding, all
loans will comply with the terms of Code Section 72(p).
(g) The source of funds for each loan shall be those Trust assets
comprising first, the Participant's Post-Tax Contribution Account,
followed by the Participant's Pre-Tax Contribution Account, and
finally, the vested portion of the Participant's Employer Matched
Contribution Account. Within each such Account funds for the
Participant's loan shall be withdrawn from each Investment Fund in
which any portion of such Account is invested in the proportion
that the balance held in such Investment Fund bears to the
aggregate balance held in all such Investment Funds, unless the
Participant elects otherwise in writing.
26
<PAGE> 33
(h) Funds paid by a Participant in repayment of a loan shall be
invested in the same manner as the Participant has elected for
Pre-Tax and/or Post-Tax Contributions, as applicable.
(i) Notwithstanding the foregoing, no loan shall be made to a
Participant during the period in which the Administrator is making
a determination of whether a domestic relations order affecting
the Participant's Account is a Qualified Domestic Relations Order.
Further, if the Administrator is in receipt of a Qualified
Domestic Relations Order with respect to any Participant's
Account, it may prohibit such Participant from obtaining a loan
until the alternate payee's rights under such order are satisfied.
(j) In the event that a payment is required to be made to a
Beneficiary upon the death of a Participant or an alternate payee
pursuant to a Qualified Domestic Relations Order, while the
Participant whose Account is the subject of such order has a loan
outstanding, the Administrator, in its discretion, may direct that
the Participant's promissory note be transferred to such
Beneficiary or alternate payee, as applicable.
ARTICLE 11
----------
SERVICE
-------
11.1 SERVICE
An Employee's eligibility for benefits under the Plan shall be based on
his Period of Service. For purposes of this Article 11, the following
terms shall have the meanings shown.
(a) HOUR OF SERVICE shall mean an hour for which an Employee is paid,
or entitled to payment, for the performance of duties for the
Employer or any Affiliated Company.
(b) PERIOD OF SEVERANCE shall mean the period of time which begins on
an Employee's Termination of Employment date and which ends if
he/she again completes an Hour of Service.
(c) PERIOD OF SERVICE shall include the periods described in (i) and
(ii) below.
(i) Period of Service shall include each period of time
beginning on an Employee's date of employment or
re-employment, as applicable, and ending on his/her next
succeeding Termination of Employment.
(ii) Period of Service shall include the Period of Severance
following an Employee's Termination of Employment date
which resulted from his/her having quit, retired, or
been discharged, if he/she again performs an Hour of
Service before the first anniversary of the earlier of:
(A) The date on which he/she quit, retired, or was
discharged, or
(B) The date on which he/she began an absence
during which he/she quit, retired, or was
discharged.
(iii) An Employee's Period of Service shall be determined by
aggregating all the periods required to be taken into
account under this Section 11.1(c) with less than whole
years aggregated on the basis that twelve (12) months
equals one (1) year and where any beginning or final
fraction of a month shall equal one twelfth (1/12th) of
a Year of Service. If the final month of employment
includes the annual anniversary of their first date of
employment, the Employee must work through such
anniversary date in order to receive that month of
Service.
27
<PAGE> 34
(d) DETERMINATION OF TERMINATION OF EMPLOYMENT
(i) A Termination of Employment shall be deemed not to have
occurred when an Employee is or has been absent from his
employment either with or without pay due to:
(A) A leave of absence granted by the Employer,
provided the Employee resumes his employment
promptly on the termination of such leave. The
decision of the Employer on all questions of
leaves of absence shall be final and
conclusive.
(B) Service in the Armed Forces of the United
States, including the Merchant Marine, to the
extent the Employee retains reemployment rights
with the Employer by law. Should an Employee
fail to report for employment within the time
required by law, or should he/she take
employment elsewhere following military service
before resuming employment with the Company,
his/her Termination of Employment date shall be
deemed to be the day he/she loses his
reemployment rights with the Company under the
law.
(ii) The Termination of Employment for a Maternity or
Paternity Absence shall be the first anniversary of the
first day of absence from employment due to a Maternity
or Paternity Absence.
11.2 PRIOR SERVICE REINSTATED
Upon reemployment of an Employee whose Termination of Employment under
Section 11.1 occurred on or after the Effective Date as defined in Section
2.19, whether or not distribution has been made, any pre-break Period of
Service shall be restored as of the date of his employment.
11.3 YEAR OF SERVICE
An Employee shall be credited with one Year of Service for each full year
in his/her Period of Service.
ARTICLE 12
----------
PLAN OPERATION AND ADMINISTRATION
---------------------------------
12.1 POWERS OF ADMINISTRATOR
The Administrator will have full power to administer the Plan in all its
details. Such power includes, but is not limited to, the following
authority:
(a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan and to decide all matters arising
thereunder, including the right to resolve or remedy any
ambiguities, inconsistencies or omissions. All such
interpretations shall be final and binding;
(c) to compute the amount of benefits which will be payable to any
Participant, Former Participant, Beneficiary or other person in
accordance with the provisions of the Plan;
(d) to authorize disbursements from the Trust;
(e) to keep such records and submit such filings, elections,
applications, returns or other documents or forms as may be
required under ERISA, the Code or other applicable law;
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<PAGE> 35
(f) to appoint such agents, counsel, accountants and consultants as
may be desirable to assist in administering the Plan;
(g) To exercise the other powers that are expressly granted to it
herein, or that are impliedly necessary for it to carry out any of
its responsibilities hereunder; and
(h) by written instrument, to delegate any of the foregoing powers and
fiduciary responsibilities in accordance with Section 405 of
ERISA.
12.2 NONDISCRIMINATORY EXERCISE OF AUTHORITY
The Administrator shall exercise its authority in a nondiscriminatory
manner so that all persons similarly situated will receive substantially
the same treatment.
12.3 RELIANCE ON TABLES, ETC.
The Administrator will be entitled, to the extent permitted by law, to
rely conclusively on all tables, valuations, certificates, opinions and
reports which are furnished by any accountant, Trustee, counsel or other
expert who is retained by the Administrator to assist it in administering
the Plan.
12.4 NAMED FIDUCIARY
The Administrator will be a "named fiduciary" for purposes of ERISA with
authority to control and manage the operation and administration of the
Plan, and will be responsible for complying with all of the reporting and
disclosure requirements of ERISA.
12.5 INDEMNIFICATION
In addition to whatever rights of indemnification to which employees,
officers and directors of the Company and of the other Employers may be
entitled under the articles of incorporation, regulations, or bylaws of
the Company or such Employers, under any provision of law, or under any
other agreement, the Company shall satisfy any liability actually and
reasonably incurred by any such employee, officer or director, including
expenses, attorney's fees, judgments, fines and amounts paid in
settlement, in connection with any threatened, pending, or completed
action, suit, or proceeding which is related to the exercise or failure to
exercise by such person or persons of any of the powers, authority,
responsibilities, or discretion of the Company, the Employers or the
Administrator provided under the Plan or the Trust Agreement, or
reasonably believed by such person or persons to be provided thereunder,
and any action taken by such person or persons in connection therewith.
12.6 NOTICES TO ADMINISTRATOR
The Administrator shall designate one or more addresses where notices and
other communications to the Administrator shall be sent. No notice or
other communication shall be considered to have been given to or received
by the Administrator until it has been delivered to the Administrator's
attention at one of such designated addresses.
ARTICLE 13
----------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
13.1 AMENDMENT
The Company may amend the Plan and Trust Agreement in any respect at any
time, for any reason and as to all Employers by action of the Company's
Board of Directors, provided, however, that any amendment that is required
by law or that will not require any Employer to increase the contributions
it must make to the Plan may be approved by the Company's Chairman,
President or Chief Executive Officer, or the holder of
29
<PAGE> 36
any similar successor office, which approval shall be conclusively
evidenced by such officer's execution of such amendment, and further
provided that the Company may not:
(a) amend the Plan or Trust Agreement in such manner as would cause or
permit any part of the assets of the Trust to be diverted to
purposes other than for the exclusive benefit of Participants,
Former Participants and their Beneficiaries (except as permitted
herein), unless such amendment is permitted by law, governmental
regulation or ruling;
(b) amend the Plan or Trust Agreement retroactively in such a manner
as would deprive any Participant or Former Participant of any
benefit to which he/she was entitled under the Plan by reason of
Contributions made prior to the amendment, unless such amendment
is necessary to conform the Plan or Trust Agreement to, or satisfy
the conditions of, any law, governmental regulation or ruling, or
to permit the Trust and the Plan to meet the requirements of
Sections 401(a) and 501(a) of the Code;
(c) to amend the Plan or Trust Agreement in such manner as would
increase the duties or liabilities of the Trustee or reduce its
fee for services thereunder, unless the Trustee consents thereto
in writing;
(d) amend the Plan to reduce a Participant's vesting percentage
determined as of the later of the date such amendment is effective
or adopted; or
(e) amend the Plan to revise the vesting schedule unless:
(i) Each Participant's vesting percentage under such
amendment is not less at any time than the vesting
percentage determined without regard to such amendment;
or
(ii) Each Participant who has completed three or more Years
of Service (whether or not consecutive) is permitted to
make an election to have his/her vesting percentage
determined without respect to such amendment; such an
election shall be irrevocable and shall be made within
the period beginning with the date on which such
amendment is adopted and ending no later than the latest
of the following:
(A) Sixty (60) days after the day such amendment is
adopted;
(B) Sixty (60) days after the date such amendment
becomes effective; or
(C) Sixty (60) days after the day the Participant
is issued written notice of the amendment.
13.2 TERMINATION
The Company has established the Plan with the bona fide intention and
expectation that contributions will be continued indefinitely, but the
Company will have no obligation or liability whatsoever to maintain the
Plan for any given length of time and may discontinue contributions under
the Plan, terminate the Plan or permit any Employer to withdraw from the
Plan at any time for any reason by action of the Company's Board of
Directors without any liability whatsoever for any such discontinuance,
termination or withdrawal. In the event of the termination or partial
termination of the Plan, the balance of each affected Participant's
Accounts shall be nonforfeitable. Upon termination of the Plan, the
Trustee will distribute to each Participant, Former Participant or
Beneficiary, as the case may be, the value of the Participant's, Former
Participant's or Beneficiary's Accounts, determined as of the Valuation
Date coinciding with or immediately following the date of termination, in
a single lump sum cash payment. However, if a successor plan is
established within the meaning of, and within the time limits prescribed
by, Section 401(k)(2)(B)(i)(II) of the Code or applicable regulations
thereunder, distributions shall be made to Participants and Former
Participants only in accordance with Articles 7 and 10. Upon the
completion of distributions to all Participants, Former Participants or
Beneficiaries, as the case may be, no Participant, Former Participant ,
Beneficiary or person claiming under or through them, will have any claims
in respect of the Plan.
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<PAGE> 37
13.3 LIQUIDATION OF THE FUND
The Trust and the Fund shall continue in existence after the termination
of the Plan for such period of time as may be required to complete the
liquidation thereof in accordance with the terms of this Article 13.
ARTICLE 14
----------
ADOPTION OF THE PLAN BY OTHER EMPLOYERS
---------------------------------------
14.1 ADOPTION WITH APPROVAL
Any Affiliated Company or corporation (hereinafter referred to as
"Participating Employer") may adopt and become a party to this Plan with
the consent of the Company and subject to such terms and conditions as the
Company may require or approve.
14.2 PROCEDURE FOR ADOPTION
A Participating Employer may adopt the Plan and become an Employer
hereunder by executing an instrument in writing evidencing such adoption
on the order of its Board of Directors and filing a copy thereof with the
Company. Upon approval of the Participating Employer's adoption of the
Plan by the Company and the delivery of the instruments evidencing the
Participating Employer's adoption of the Plan and the Company's approval
thereof to the Trustee, the Participating Employer's adoption of the Plan
shall be effective as of the date specified in said instruments.
14.3 EFFECT OF ADOPTION
(a) If there is more than one Employer hereunder, the costs and
expenses in connection with the Plan and Fund each year shall be
shared by all Employers.
(b) Each Participating Employer shall also pay for that portion of the
Contribution of the Employers attributable to Pre-Tax
Contributions made under the Plan by its Covered Employees but the
Contributions of Employers included in an affiliated group under
the Code with the Company may be paid by the Company on behalf of
itself and the other Participating Employers or may be allocated
among such Participating Employers by the Company as will permit
the deduction for purposes of Federal taxes.
(c) Each Participating Employer, as a condition of continued
participation in this Plan, delegates to the Company the sole
power and authority to administer and operate the Plan, including
the power and authority to:
(i) Appoint and remove the Trustee;
(ii) Consent to the adoption of this Plan by other
Participating Employers;
(iii) Amend or terminate the Plan or Trust; and
(iv) Determine the amount of Employer contributions.
14.4 TERMINATION OF ADOPTION
(a) Each Participating Employer may elect separately to withdraw from
the Plan, but amendments may be made only by the Company. Any such
withdrawal shall be expressed in an instrument in writing executed
by the withdrawing Participating Employer on order of its Board of
Directors and filed with the Company and the Trustee.
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<PAGE> 38
(b) Upon withdrawal from the Plan by a Participating Employer, and
subject to the provisions of ERISA, the Code, and other applicable
law, the portion of the Fund attributable to the proportionate
interests of the Participants affected by said termination of
participation may, in the discretion of the Company:
(i) Be retained in the Fund and benefits paid in accordance
with the terms of the Plan in effect at the time the
Participating Employer terminated its participation in
the Plan;
(ii) Be transferred (along with the liability for the payment
of benefits) to another qualified retirement plan
maintained by the Participating Employer terminating
participation in the Plan; or
(iii) Be dealt with in any other manner consistent with the
provisions of ERISA, the Code, or other applicable law.
In the event the portion of the Fund attributable to the
proportionate interests of the Participants and Former
Participants affected by the termination of participation of a
Participating Employer is retained in the Fund, the Administrator
may direct the Trustee to segregate such portion of the Fund.
ARTICLE 15
----------
LIMITATIONS OF ANNUAL ADDITIONS
-------------------------------
15.1 GENERAL LIMITATIONS
Notwithstanding anything provided herein to the contrary, the maximum
annual addition, as defined in Section 15.4, credited to the Accounts of a
Participant for any Plan Year shall not exceed the lesser of:
(a) Twenty-five percent (25%) of the Participant's compensation as
defined in Code Section 415(c)(3) for that Plan Year; or
(b) Thirty thousand dollars ($30,000) (or, if greater, one fourth of
the dollar limitation in effect under Code Section 415(b)(1)(A)),
provided that as of January 1 of each Plan Year, the dollar
limitation as adjusted by the Commissioner of Internal Revenue for
such Plan Year shall be substituted for the dollar amount
specified in this Section 15.1(b).
15.2 EXCESS AMOUNT
(a) Prior to the determination of a Participant's actual compensation
for a Plan Year, the maximum annual addition for a Participant may
be determined on the basis of a reasonable estimation of his/her
compensation for a Plan Year with Contributions then appropriately
limited.
(b) If such additions exceed the maximum due to a reasonable error in
estimating a Participant's annual Compensation or under other
limited facts and circumstances which the Commissioner of Internal
Revenue finds justifiable, such excess Post-Tax Contributions and
Income shall be returned to Employees pursuant to Section 5.2
(except that the Employer Match attributable to any such Post- Tax
Contributions shall be deposited in a suspense account as
described below). Should an excess remain (Pre-Tax Contributions,
Employer Matched Contributions, Employer SDRP Contributions), a
suspense account shall be established to hold such excess and such
excess shall be allocated in the succeeding Plan Year (and
subsequent Plan Years as necessary) as the Employer Matched
Contribution and/or Employer SDRP Contribution for all Plan
Participants.
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<PAGE> 39
15.3 AGGREGATION OF PLANS OF THE EMPLOYER
(a) If the Employer is or becomes a member of a group of employers
which constitute a controlled group of corporations (within the
meaning of Code Section 414(b) as modified by Code Section 415(h))
or which constitute trades or businesses under common control
(within the meaning of Code Section 414(c) as modified by Code
Section 415(h)) or which constitute an affiliated service group
(within the meaning of Code Section 414(m)), such group of
employers shall be treated as one employer for purposes of this
Article 15.
(b) For purposes of applying the limitation of this Article 15, all
defined benefit plans (whether or not terminated) of the Employer
shall be treated as one defined benefit plan and all defined
contribution plans (whether or not terminated) shall be treated as
one defined contribution plan. However, multi-employer plans shall
not be aggregated with multi-employer plans. If an Employer
maintains both a plan which is not a multi-employer plan and a
plan which is a multi-employer plan, the plan which is not a
multi-employer plan shall be aggregated with the multi-employer
plan only to the extent that the benefits provided under the
multi-employer plan are provided by such Employer with respect to
the Participant.
(c) If an excess amount results from the aggregation of annual
additions under this Plan and under any other defined contribution
plan sponsored by the Employer:
(i) The excess amount shall be attributable to the plan
under which annual additions were last allocated; or
(ii) If annual additions were allocated on a date under this
Plan which coincides with an allocation date of the
other defined contribution plan, the excess amount
attributable to this Plan shall be a pro rata portion of
the excess amount determined by the ratio of the annual
additions that would have been allocated to the
Participant under this Plan to the total annual
additions that would have been allocated to the
Participant under all such defined contribution plans
(with the ratio being determined without regard to the
limitations imposed by this Article 15).
(d) Where a Participant is a Participant at any time in both a defined
contribution plan and a defined benefit plan sponsored by the
Employer, the sum of the defined benefit fraction and the defined
contribution fraction for any Plan Year shall not exceed 1.0. If,
at the close of the Plan Year, the limitation set forth in this
Section 15.3(d) would be exceeded, the Participant's annual
additions under the defined contribution plan(s) shall be reduced
in accordance with the terms of the defined contribution plan(s)
(after any benefits under the defined benefit plan(s) in excess of
the limitations of Code Section 415 have been appropriately
reduced) so that the defined contribution fraction is equal to the
difference between 1.0 and the defined benefit fraction.
(e) If the sum of the defined benefit fraction and the defined
contribution fraction hereof would exceed 1.0 for Plan Year 1982,
the numerator of the defined contribution fraction will be
adjusted, in accordance with Regulations prescribed by the
Commissioner of Internal Revenue, by subtracting an amount (not
exceeding such numerator) so that the sum of the defined benefit
fraction and the defined contribution fraction does not exceed
1.0. This numerator, as adjusted herein, will be used for the
calculation of the defined contribution fraction for Plan Years
commencing on and after January 1, 1983.
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<PAGE> 40
15.4 DEFINITIONS
For purposes of this Article 15:
(a) (i) ANNUAL ADDITION means the sum of the following amounts
allocated on behalf of a Participant for a Plan Year:
(A) Employer Matched Contributions;
(B) Forfeitures;
(C) Pre-Tax Contributions;
(D) Post-Tax Contributions;
(E) Employer SDRP Contributions;
(F) Partnership Share Contribution, if applicable;
and
(G) Anniversary Share Contributions, if applicable.
(ii) Annual additions shall not include:
(A) The forfeitures and/or Employer contributions
which are used to restore a Participant's (or
Beneficiary's) benefit under Section 8.4
hereof,
(B) Loan repayments, or
(C) Transfers of Funds from another qualified plan.
(b) COMPENSATION shall be as defined in Code Section 415(c)(3).
(c) The DEFINED BENEFIT FRACTION for any Plan Year is a fraction, the
numerator of which is the Participant's projected annual benefit
(determined as of the close of the Plan Year) under the defined
benefit plan and the denominator of which is the lesser of:
(i) The product of 1.25 multiplied by the dollar limitation
in effect under Code Section 415(b)(1) for such Plan
Year; or
(ii) The product of 1.4 multiplied by one hundred percent
(100%) of the Participant's average compensation for the
three consecutive calendar years in which he/she
received the highest compensation while an Employee.
(d) DEFINED BENEFIT PLAN means a qualified plan as defined in Code
Section 414(j).
(e) The DEFINED CONTRIBUTION FRACTION for any Plan Year is a fraction,
the numerator of which is the sum of annual additions to the
Participant's Accounts under the Plan as of the close of such Plan
Year and all prior Plan Years and the denominator of which is the
sum of the lesser of the following amounts determined for such
Plan Year and each prior Year of Service:
(i) The product of 1.25 multiplied by the dollar limits
under Code Section 415(c)(1)(A) for such Plan Years; or
(ii) The product of 1.4 multiplied by twenty-five percent
(25%) of the Participant's compensation for such Plan
Years.
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<PAGE> 41
(f) DEFINED CONTRIBUTION PLAN means a qualified plan as defined in
Code Section 414(i).
(g) EXCESS AMOUNT means the excess of the Participant's annual
addition for the Plan Year over the maximum annual addition
permitted under this Article 15 for the Plan Year.
(h) MULTI-EMPLOYER PLAN means a multi-employer plan as defined in Code
Section 414(f).
(i) PROJECTED ANNUAL BENEFIT means an amount equal to the annual
benefit to which the Participant would be entitled to receive
under the terms of the defined benefit plan in which he/she is a
participant assuming that the Participant continues participation
until his/her normal retirement age, that his/her compensation
continues at the same rate as in effect in the Plan Year in
consideration until his/her normal retirement age is attained and
that all relevant factors used to determine benefits under such
plan remain constant. Projected annual benefit is a benefit
expressed in the form of either a single life annuity or qualified
joint and survivor annuity disregarding any ancillary benefits or
benefits attributable to a rollover contribution.
15.5 TOP-HEAVY PLAN REQUIREMENTS
(a) GENERAL RULE. For any Plan Year for which this Plan is a
top-heavy plan as defined in Section 15.5(g) below, any other
provisions of this Plan to the contrary notwithstanding, this Plan
shall be subject to the following provisions:
(i) The vesting provisions of Section 15.5(b) below:
(ii) The minimum Contribution provisions of Section 15.5(c)
below;
(iii) The limitation on Compensation set by Section 15.5(c)
below; and
(iv) The limitation on Contributions set by Section 15.5(e)
below.
(b) VESTING PROVISIONS. Each Participant who has completed at least
three Years of Service and has completed an Hour of Service during
any Plan Year in which the Plan is a top-heavy plan shall have a
nonforfeitable right to the benefit accrued under this Plan.
Each Participant's nonforfeitable accrued benefit shall not be
less than his/her nonforfeitable accrued benefit determined as of
the last day of the last Plan Year in which the Plan was a
top-heavy plan. If the Plan ceases to be top heavy, each
Participant with three or more years of service, whether or not
consecutive, shall have his/her nonforfeitable accrued benefit
determined in accordance with this Article 15 and separately in
accordance with the terms of Article 8, and such will be
considered an amendment to the vesting schedule to be governed by
Section 13.1(e).
(c) MINIMUM CONTRIBUTION PROVISIONS
(i) Each Covered Employee who is a Non-key employee (as
defined in Section 15.5(i) below) and who has not
separated from service as of the last day of the Plan
Year shall be entitled to have a contribution made on
his/her behalf by the Employer of not less than the
lesser of:
(A) Three percent (3%) (the "Minimum Contribution
Percentage") of the Covered Employee's
Compensation for such Plan Year, or
(B) The largest percentage of Compensation
allocated to the Account of any Key Employee
for such Plan Year. Such allocations shall
include all Pre-Tax Contributions made pursuant
to Section 4.1 of the Plan during such Plan
Year.
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<PAGE> 42
(ii) Where Section 15.5(c)(i) is found to apply after
calculation of the amounts to be allocated has been
made, Section 15.5(c)(i) shall be implemented by first
reducing the Forfeitures to be allocated among the
Accounts of Key Employees to the extent necessary; then
by the Employer contributing an additional amount of
current or accumulated profits to the extent necessary;
and finally by reducing the contribution allocated to
the Accounts of Key Employees and reallocating it to
Non-key Employees to the extent necessary.
(iii) For purposes of this Section 15.5, Compensation shall be
as defined in Section 2.13 of the Plan; however,
excluding any Pre-Tax Contributions made pursuant to
Section 4.1.
(d) LIMITATION ON COMPENSATION. Compensation taken into account under
this Section 15.5 and Eligible Compensation under Article 4 for
purposes of computing contributions under this Plan shall not
exceed the first two hundred thousand dollars ($200,000) for any
Plan Year in which the Plan is deemed to be top heavy. Such amount
shall be adjusted automatically for each Plan Year to the amount
prescribed by the Secretary of the Treasury or his/her delegate
pursuant to regulations for the calendar year in which such Plan
Year commences.
(e) LIMITATION ON CONTRIBUTIONS. In the event that the Employer also
maintains a defined benefit plan providing benefits on behalf of
Participants in this Plan, one of the two following provisions
shall apply:
(i) If, for the Plan Year, this Plan would not be a
top-heavy plan as defined in Section 15.5(g) below if
"ninety percent (90%)" were substituted for "sixty
percent (60%)," then Section 15.5(c) shall apply for
such Plan Year as if amended so that "four percent (4%)"
were substituted for "three percent (3%)."
(ii) If, for the Plan Year, this Plan would continue to be a
top-heavy plan as defined in Section 15.5(g) below if
"ninety percent (90%)" were substituted for "sixty
percent (60%)," then the denominator of both the defined
contribution plan fraction and the defined benefit plan
fraction shall be calculated as set forth in Section
15.4 hereof for the limitation year ending in such Plan
Year by substituting "1.0" for "1.25" in each place such
figure appears, except with respect to any individual
for whom there are no Employer contributions or accruals
for such individual under the defined benefit plan.
(f) COORDINATION WITH OTHER PLANS. In the event that the Employer
maintains a top-heavy defined benefit plan under which
contributions are provided on behalf of participants under this
plan, the amount of contributions and forfeitures allocated
hereunder to the account of each Non-key Employee also covered
under the defined benefit plan shall be at least 5% of average
annual compensation for years in the testing period.
If the plan is subject to Section 15.5(e)(ii) but the employer
does not substitute "1.0" for "1.25" as required by Section
15.5(e)(ii), the amount of contributions and forfeitures allocated
hereunder to such participant shall be 7-1/2% of average annual
compensation during the testing period.
(g) TOP-HEAVY PLAN DEFINITION. This Plan shall be a top-heavy plan
for any Plan Year if, as of the determination date (as defined in
Section 15.5(g)(i) below), the present value aggregate of the
Accounts under the Plan for Participants (including Former
Participants) who are Key Employees (as defined in Section 15.5(h)
below) exceeds sixty percent (60%) of the present value of the
aggregate of the Accounts of all Employees or if this Plan is
required to be in an aggregation group (as defined in Section
15.5(g)(iii) below) which for such Plan Year is a top-heavy group
(as defined in Section 15.5(g)(iv) below).
(i) DETERMINATION DATE means for any Plan Year the last day
of the immediately preceding Plan Year (except that for
the first Plan Year of this Plan the determination date
means the last day of such Plan Year).
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<PAGE> 43
(ii) The present value of the aggregate of the Accounts shall
be the sum of the Account balances determined as of the
most recent Valuation Date that is within the 12-month
period ending on the determination date, and the
adjustment for contributions due as of the determination
date, and as described in the Regulations under the
Code, as amended.
(iii) AGGREGATION GROUP means the group of plans, if any, that
includes both the group of plans that are required to be
aggregated and the group of plans that are permitted to
be aggregated.
(A) The group of plans that are required to be
aggregated (the required aggregation group)
includes:
(1) Each plan of the Employer for a Plan
Year containing the Determination Date
or any of the four preceding years in
which a Key Employee is a participant,
including collectively bargained plans
and terminated plans maintained at any
time within the last five years ending
on the applicable termination date; and
(2) Each other plan of the Employer,
including collectively bargained plans
of the Employer, which enables a plan
in which a Key Employee is a
participant to meet the requirements of
either Code Section 401(a)(4) or Code
Section 410 prohibiting discrimination
as to contributions or benefits in
favor of Employees who are officers,
shareholders, or the highly
compensated, or prescribing the minimum
participation standards.
(B) The group of plans that are permitted to be
aggregated (the permissive aggregation group)
includes the required aggregation group plus
any plan that is not part of the required
aggregation group that the Administrator
certifies as constituting a plan within the
permissive aggregation group. Such plans may be
added to the permissive aggregation group only
if, after the addition, the aggregation group
as a whole continues to meet the requirements
of both Code Sections 401(a)(4) and 410.
(iv) TOP-HEAVY GROUP means the aggregation group, if as of
the applicable determination date, the sum of the
present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in
the aggregation group plus the aggregate of the accounts
of Key Employees under all defined contribution plans
included in the aggregation group exceeds sixty percent
(60%) of the sum of the present value of the cumulative
accrued benefits for all Employees, excluding former Key
Employees under all such defined benefit plans plus the
aggregate accounts for all Employees, excluding former
Key Employees under such defined contribution plans. If
the aggregation group that is a top-heavy group is a
required aggregation group, each plan in the group will
be top-heavy. If the aggregation group that is a
top-heavy group is a permissive aggregation group, only
those plans that are part of the required aggregation
group will be treated as top heavy. If the aggregation
group is not a top-heavy group, no plan within such
group will be top heavy.
(v) In determining whether this Plan constitutes a top-heavy
plan, the Committee (or its agent) shall make the
following adjustments in connection therewith:
(A) When more than one plan is aggregated, the
Administrator shall determine separately for
each plan as of each plan's determination date
the present value of the accrued benefits or
account balance. The results shall then be
aggregated by adding the results of each plan
as of the determination dates for such plans
that fall within the same calendar year.
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<PAGE> 44
(B) In determining the present value of the
cumulative accrued benefit or the amount of the
account of any Employee, such present value or
account shall include the amount in dollar
value of the aggregate distributions made to
such Employee under the applicable plan during
the five-year period ending on the
determination date unless reflected in the
value of the accrued benefit or account balance
as of the most recent Valuation Date. Such
amounts shall include distributions to such
Employees which represented the entire amount
credited to their accounts under the applicable
plan.
(C) Further, in making such determination, such
present value or such account shall include any
rollover contribution (or similar transfer) as
follows:
(1) If the rollover contribution (or
similar transfer) is initiated by the
Employee and made to or from a plan
maintained by another Employer, the
plan providing the distribution shall
include such distribution in the
present value or such account.
(2) If the rollover contribution (or
similar transfer) is not initiated by
the Employee or made from a plan
maintained by another Employer, the
plan accepting the distribution shall
include such distribution in the
present value or such account. The plan
making the distribution shall not
include the distribution in the present
value or such account.
(D) Further, in making such determination, in any
case where an individual is a Non-key Employee,
as defined in Section 15.5(i) below, with
respect to an applicable plan, but was a Key
Employee with respect to such plan for any
prior Plan Year, any accrued benefit and any
account of such Employee shall be altogether
disregarded. For this purpose, to the extent
that a Key Employee is deemed to be a Key
Employee if he/she met the definition of Key
Employee within any of the four preceding Plan
Years, this provision shall apply following the
end of such period of time.
(E) If any individual has not performed any
services for any Employer maintaining the Plan
at any time during the five-year period ending
on the determination date, any accrued benefit
and Account of such individual shall not be
taken into account.
(h) KEY EMPLOYEE means any Employee, former Employee or Beneficiary of
an Employee or former Employee under this Plan who, at any time
during the Plan Year of the determination date or during any of
the four preceding Plan Years, is or was one of the following:
(i) An officer of the Employer having an annual Compensation
greater than fifty percent (50%) of the amount in effect
under Section 415(b)(1)(A) for any such Plan Year.
Whether an individual is an officer shall be determined
by the Committee on the basis of all the facts and
circumstances, such as an individual's authority, duties
and terms of office, not on the mere fact that the
individual has the title of an officer. For any such
Plan Year, there shall be treated as officers no more
than the lesser of:
(A) Fifty (50) Employees; or
(B) Ten percent (10%) of the Employees or, if
greater than ten percent (10%), three Employees.
For this purpose, the highest paid officers shall be
selected and business organizations other than
corporations shall be deemed to have no officers.
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<PAGE> 45
(ii) One of the ten Employees having annual Compensation from
the Employer of more than the limitation in affect under
Code Section 415(c)(1)(A) and owning (or considered as
owning, in accordance with applicable principles, such
as Code Section 318 or a successor provision) the
largest interests in the Employer. If two Employees have
the same interest in the Employer, the Employee having
the greater annual Compensation from the Employer shall
be treated as having a larger interest. An Employee who
has some ownership interest is considered to be one of
the top ten owners unless at least ten other Employees
own a greater interest than that Employee.
However, an Employee will not be considered a top ten
owner for a Plan Year if the Employee earns less than
the maximum dollar limitation on contributions and other
annual additions to a Participant's Account in a defined
contribution Plan under the Code, as amended, as in
effect for the calendar year in which the determination
date falls.
(iii) Any person who owns (or is considered as owning, in
accordance with applicable principles, such as Code
Section 318 or a successor provision) more than five
percent (5%) of the outstanding stock of the Employer or
stock possessing more than five percent (5%) of the
combined total voting power of all stock of the
Employer.
(iv) Any person who owns (or is considered as owning, in
accordance with applicable principles, such as Code
Section 318 or a successor provision) more than one
percent (1%) of the outstanding stock of the Employer or
stock possessing more than five percent (5%) of the
combined total voting power of all stock of the Employer
and receives annual Compensation from the Employer of
more than one hundred and fifty thousand dollars
($150,000). For purposes of this subsection,
Compensation means all items includable as compensation
for purposes of applying the limitations on
contributions and other annual additions to a
Participant's account in a defined contribution plan and
the maximum benefit payable under a defined benefit plan
under the Code.
(i) NON-KEY EMPLOYEE means any Employee (and any Beneficiary of an
Employee) who is not a Key Employee as defined in this Section
15.5.
(j) COLLECTIVE BARGAINING RULES. The provisions of Sections 15.5(b),
15.5(c) and 15.5(d) do not apply with respect to any Employee
included in a unit of Employees covered by a collective bargaining
agreement unless retirement benefits were the subject of good
faith bargaining.
ARTICLE 16
----------
INVESTMENT OF CONTRIBUTIONS
---------------------------
16.1 INVESTMENT FUNDS
The Trustee shall establish and maintain the Company Stock Fund and such
other Investment Funds as are specified from time to time by the Company.
In this regard, the Company may choose to offer as Investment Funds any
investment vehicles, including: (i) securities issued by investment
companies advised by affiliates of the Trustee, (ii) guaranteed investment
contracts chosen by the Trustee, and (iii) collective investment trusts
maintained by the Trustee for qualified plans. Each such Investment Fund
shall be held and administered by the Trustee as a separate, common fund
within the Trust Fund. The interest of each Participant or Former
Participant under the Plan in any such Investment Fund shall be an
undivided interest. Any dividends, interest, or other income received by
the Trustee in respect of any Investment Fund shall be reinvested by the
Trustee in that Investment Fund.
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<PAGE> 46
16.2 ADMINISTRATION OF COMPANY STOCK FUND
Stock to be held in the Company Stock Fund shall be purchased at fair
market value on the open market or from the Company through the issuance
of authorized but previously unissued shares at the option of the Company.
Such Stock may also be obtained through the exercise of stock rights. The
Trustee shall vote the shares of Stock allocated to the Accounts of each
Participant or Former Participant in accordance with such Participant's or
Former Participant's written instructions. If a Participant's or Former
Participant's voting instructions are not received by the Trustee by the
tenth day prior to any meeting of shareholders of the Company, the Trustee
shall vote the shares of stock allocated to such Participant's or Former
Participant's Accounts in the same proportion as those shares for which
voting instructions are received by the Trustee.
The Trustee shall vote the shares of Stock held in the Company Stock Fund
which have not been allocated to Participants' or Former Participants'
Accounts as of the record date of any meeting of shareholders of the
Company in the same proportion as those allocated shares for which voting
instructions are received by the Trustee.
16.3 DEPOSIT OF CONTRIBUTIONS
All Employer Matched Contributions, Partnership Shares, Anniversary
Shares, and contributions to Former PAYSOP Account shall be invested by
the Trustee in the Company Stock Fund at all times. All Pre-Tax
Contributions, Post-Tax Contributions, Employer SDRP Contributions and
Qualified Plan Rollover Contributions and contributions to the Former
Employer Supplemental Contribution Account made hereunder in respect of a
Participant shall be invested by the Trustee in such Investment Funds as
the Administrator shall direct based on the Participant's investment
election made in accordance with Section 16.4 (or, in the case of a
Participant who fails to make such an investment election, in an
Investment Fund consisting of guaranteed investment contracts) and shall
be credited to the Participant's Accounts in accordance with Article 6.
16.4 INVESTMENT ELECTIONS OF PARTICIPANTS
Each Participant shall make an investment election in the manner
prescribed by the Administrator, directing the manner in which his Pre-
Tax Contributions, Post-Tax Contributions, Employer SDRP Contributions,
Qualified Plan Rollover Contributions and contributions to the Former
Employer Supplemental Contribution Account shall be invested by the
Trustee. Such investment election shall specify that such Pre- Tax
Contributions, Post Tax Contributions, Employer SDRP Contributions,
Qualified Plan Rollover Contributions and contributions to the Former
Employer Supplemental Contribution Account shall be deposited in one or
more of the Investment Funds in percentages that are each an integral
multiple of 10% and that in the aggregate equal 100%. Each Participant's
investment election shall remain in effect until he changes it in
accordance with such procedures and limitations as are prescribed by the
Administrator. Each investment election change made by a Participant
pursuant to this Section 16.4 shall apply only to Pre-Tax Contributions,
Post-Tax Contributions, Employer SDRP Contributions, Qualified Plan
Rollover Contributions and contributions to the Former Employer
Supplemental Contribution Account received by the Trustee after the change
is made. Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP
Contributions, Qualified Plan Rollover Contributions and contributions to
the Former Employer Supplemental Contribution Account deposited in an
Investment Fund pursuant to this Section 16.4 may be transferred to
another Investment Fund only in accordance with Section 16.5.
16.5 ELECTION TO TRANSFER INTEREST BETWEEN INVESTMENT FUNDS
Subject to the first sentence of Section 16.3, a Participant who has an
interest in any Investment Fund may elect to transfer all or a portion of
such interest to any of the other Investment Funds in accordance with such
procedures and limitations as are prescribed by the Administrator.
40
<PAGE> 47
16.6 OTHER PROVISIONS CONCERNING INVESTMENT ELECTIONS AND TRANSFERS
The procedures and limitations prescribed by the Administrator pursuant to
Sections 16.4 and 16.5 may include, without limitation, provisions which
(i) limit transfers to specified dollar amounts or percentages (ii) limit
to not less than four the number of transfers that each Participant may
make each Plan Year (iii) limit to not less than four the number of
investment election changes that each Participant may make each Plan Year
(iv) limit the dates as of which transfers and investment election changes
may become effective and (v) impose waiting periods or other restrictions
in connection with multiple transfers in and out of the same Investment
Fund. All such procedures and limitations shall apply uniformly to
similarly situated Participants. Each investment election and investment
election change made in accordance with this Article 16 and with the
procedures and limitations established by the Administrator shall be given
effect as soon as practicable following the date the investment election
or investment election change is received by the Administrator. Each
transfer request made in accordance with this Article 16 and with the
procedures and limitations established by the Administrator shall be given
effect within one week following the Administrator's receipt of the
request.
16.7 FORMER PAYSOP ACCOUNTS
Notwithstanding the first sentence of Section 16.3, a Participant who has
held a Former PAYSOP Account for at least ten (10) years and who has
attained age 55, may, during the first quarter of any subsequent Plan Year
elect to transfer all or any portion of the balance of his Former PAYSOP
Account from the Company Stock Fund to any of the other Investment Funds.
ARTICLE 17
----------
MISCELLANEOUS PROVISIONS
------------------------
17.1 HEADINGS
The headings of the Plan have been inserted for convenience of reference
only and are not to be deemed controlling in any constructions of the
provisions herein (other than with respect to defined terms).
17.2 PLAN NOT CONTRACT OF EMPLOYMENT
The existence of the Plan shall not create or change any contract of
Employment between the Employer and its Employees, whether Participants or
Former Participants hereunder or not. The right of the Employer to take
corrective, disciplinary or other action with respect to its Employees,
including terminating their respective Employment at any time for any
reason, shall not be affected by any provision of this Plan, and the
Employer will not be deemed responsible to provide continuing Employment
for any reason, at any time solely by reason of this Plan.
17.3 VESTED RIGHTS
No person shall have any vested rights under the Plan except to the extent
that such rights may accrue to him/her as provided under the Plan.
Furthermore, any person with vested rights under the Plan shall look
solely to the Plan and the assets thereunder for satisfaction of such
vested rights.
17.4 SEVERABILITY
If any provision of the Plan shall be invalid, such provision shall be
fully severable, and the remainder of the Plan and the application thereof
shall not be affected thereby.
41
<PAGE> 48
17.5 GENERAL UNDERTAKING
All parties to this Plan and any persons claiming any interest whatsoever
hereunder shall perform all and any acts that may be necessary for
carrying out its terms. This Plan and the acts and decisions of the
parties hereto, shall be binding upon the heirs, executors,
administrators, successors, and assignees of any party hereto or any
persons claiming any benefit hereunder.
17.6 ACTION BY COMPANY
Whenever, under the terms of the Plan or Trust Agreement, the Company is
required or permitted to take action, such action may be taken, unless
otherwise provided by the Plan or Trust Agreement or by action of the
Board, by any officer of the Company.
17.7 NO RESPONSIBILITY FOR ACTS OF AN INSURER
Neither the Employer, the Company, the Administrator nor the Trustee shall
be responsible for any action or inaction of an insurer, nor shall they be
required to institute legal action in connection with the same.
17.8 SPENDTHRIFT
Benefits and interests under this Plan shall not be anticipated, assigned
(in law or in equity), alienated, subjected to attachment, garnishment,
levy, execution, or other legal or equitable process, or be otherwise
subject to the claim of creditors, except under the terms of a Qualified
Domestic Relations Order.
17.9 NUMBER AND GENDER
Any use of the singular shall be interpreted to include the plural and the
plural the singular. Any use of the masculine, feminine or neuter shall be
interpreted to include the masculine, feminine and neuter, as the context
shall require.
17.10 GOVERNING LAW
To the extent not preempted by Federal law, the provisions of the Plan
shall be construed, regulated and administered under the laws of the State
of Ohio.
17.11 MERGER, CONSOLIDATION. AND TRANSFER OF ASSETS
Before this Plan can be merged or consolidated with any other plan, or its
assets or liabilities transferred to another plan, each Participant in the
Plan must be entitled to receive a benefit immediately after the merger,
transfer or consolidation (as if the Plan had then terminated) which is
equal to or greater than the benefit he/she would have been entitled to
receive immediately before the merger, consolidation or transfer (as if
the Plan had then terminated).
17.12 RECEIPT OF ASSETS FROM QUALIFIED PLANS
An Employee (whether or not otherwise a Participant) may make a rollover
contribution to the Plan at any time consisting of a "Qualified Plan
Rollover Contribution" or an "Individual Retirement Account Rollover
Contribution" (each defined below).
Any rollover contribution shall be held in the Participant's Pre-Tax
Contribution Account, shall be invested in accordance with the direction
of the Participant pursuant to Article 16 and shall be distributed as
provided in Articles 7 and 9.
42
<PAGE> 49
"Qualified Plan Rollover Contribution" means an "eligible rollover
distribution" within the meaning of Section 402(c)(4) of the Code. The
Employee may transfer any portion of the cash he receives in such
distribution ( or the cash proceeds of the sale of other property
received in such distribution) to the trust under this Plan provided that
the Administrator receives such amounts from the Employee on or
before the 45th day after the day on which he received the property
distributed. The maximum amount which may be transferred shall not
exceed the fair market value of all the property received in the
distribution reduced by (a) the sum of (i) the amount of the Employee's
own contributions under such Plan and (ii) any other amounts considered
as contributed by him (determined b applying Section 72(f) of the Code)
less (b) any amounts previously distributed to him from such other plan
and not includable in his gross income. The amount so transferred must
consist of cash distributed from such other plan or any portion of the
cash proceeds from the sale of distributed property other than case, to
the extent permitted by Section 402(c) of the Code.
"Individual Retirement Account Rollover Contribution" means the entire
amount received by an Employee from an individual retirement account
representing the entire amount in the account (the "qualifying amount")
if no part of the amount in the account is attributable to any source
other than a rollover contribution from (i) an employee's trust
described in Section 401(a) of the Code, which is exempt from tax
under Section 501(a) of the Code, or (ii) a qualified annuity plan
meeting the requirements of Section 403(a) and any earnings on such sums.
An Individual Retirement Account Rollover Contribution will be accepted
only if the entire qualifying amount was received by the Employee in cash
and only such cash amount is included in the Individual Retirement
Account Rollover Contribution.
17.13 INTERPRETATION OF PLAN
It is the intent of the Company that this Plan shall qualify under Code
Section 401(a) and Code Section 501 and meet all applicable requirements
of ERISA. Accordingly, the Plan and Trust Agreement shall be construed
and interpreted in such manner as to give effect to this intent and shall
be administered at all times and in all respects in a nondiscriminatory
manner.
17.14 SATISFACTION OF CLAIMS
Any payment to any Participant, Former Participant or Beneficiary in
accordance with the terms of the Plan, shall, to the extent thereof, be
in full satisfaction of all claims hereunder, whether they be against the
Employer, the Company, the Administrator, or the Trustee, any of whom may
require the Participant, Former Participant or Beneficiary (or legal
representative), as a condition precedent to such payment to execute a
release and receipt therefor.
17.15 SERVICE OF PROCESS
The Administrator shall be the designated agent of the Plan for the
service of process in connection with all matters affecting the Plan.
17.16 WARRANTIES
Neither the Company, any Employer, the Administrator, nor the Trustee
warrant against any loss or diminution in the value of Accounts.
17.17 LEASED EMPLOYEES
Notwithstanding anything herein to the contrary, any person who, with
respect to any Employer or Affiliated Company, is a "leased employee", as
defined in Section 414(n)(2) of the Code (other than a leased employee
excludable pursuant to Section 414(n)(5) of the Code) shall be treated as
an Employee for all Plan purposes except eligibility to participate,
entitlement to Contributions and Employer Matched Contributions, and
crediting of Service. However, if any such leased employee becomes an
Employee, he shall be credited with Service for all periods that he was,
with respect to any Employer or Affiliated Company, a leased employee, in
accordance with and subject to the provisions and limitations of Article
11 of the Plan, as if he had been an Employee during such periods.
43
<PAGE> 50
17.18 DIRECT ROLLOVER DISTRIBUTIONS
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution
to the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution that is
not includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
(c) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement
annuity.
(d) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
(e) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
17.19 PLAN ADDENDA
The Addendum attached hereto entitled "Addendum to The Progressive
Retirement Security Program (formerly known as The Progressive Corporation
Long-Term Savings Plan) ("Plan") Re: Former Participants Under The
Progressive Corporation Supplemental Retirement Plan" is hereby
incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by
its duly authorized officers as of this 25th day of May, 1994.
THE PROGRESSIVE CORPORATION
/s/ David M. Schneider
By____________________________________________________
Secretary
Title:________________________________________________
44
<PAGE> 51
FIRST AMENDMENT TO THE PROGRESSIVE RETIREMENT
SECURITY PROGRAM
(1994 AMENDMENT AND RESTATEMENT)
WHEREAS, The Progressive Retirement Security Program is currently maintained
pursuant to a 1994 Amendment and Restatement ("Plan"); and
WHEREAS, it is deemed desirable to amend the Plan further;
NOW THEREFORE, the Plan is hereby amended in the respects hereinafter set
forth. Except as otherwise indicated, all such amendments shall be effective
as of July 1, 1994.
1. Section 8.3 of the Plan is hereby amended and restated in its entirety to
provide as follows:
"8.3 FORFEITURES
If a Former Participant who terminated Employment for reasons other than
Retirement, Disability or death does not return to Employment during the
Plan Year in which his/her Termination of Employment occurs, or if
he/she dies after his/her Termination of Employment during that Plan
Year, then the following provisions shall apply to the non-vested
portion of his/her Employer Matched Contribution Account, Employer SDRP
Contribution Account and Former Employer Supplemental Contribution
Account:
a) If he/she is 0% vested in his/her Employer SDRP Contribution
Account and/or his/her Former Employer Supplemental Contribution
Account, he/she shall be deemed to have received a distribution of
$0.00 Dollars from such Employer SDRP Contribution Account, and/or
Former Employer Supplemental Contribution Account, as the case may
be, and the balance of such Account(s) shall be provisionally
forfeited and such forfeiture shall be applied in accordance with
Section 6.13 hereof.
b) If he/she is less than 100% vested in his/her Employer Matched
Contribution Account, the non-vested portion of such Account shall
be provisionally forfeited and such forfeiture shall be applied in
accordance with Section 6.13 hereof as of the earlier of (i) the
date he/she receives a distribution of the vested portion of such
Account, (ii) the fifth anniversary of the date of his/her
Termination of Employment or (iii) the date he/she dies."
2. The second sentence of Section 13.2 of the Plan is hereby amended and
restated in its entirety to provide as follows:
Page 1 of 6
<PAGE> 52
"In the event of the termination or partial termination of the Plan
or the complete discontinuance of contributions under the Plan, the
balance of each affected Participant's Accounts shall be
nonforfeitable."
3. Section 2.56 of the Plan is hereby amended and restated in its entirety to
provide as follows:
"SERVICE, HOUR OF SERVICE and YEAR OF SERVICE for purposes of this
Plan are defined in Article 10 hereof, except that, for purposes of
Article 3 Year of Service shall mean any 12 consecutive month
period beginning on the date an Employee first performs on Hour of
Service (or any anniversary thereof) during which the Employee
completes at least 1,000 Hours of Service."
4. Section 11.1(a) of the Plan is hereby amended and restated in its entirety
to provide as follows:
"HOUR OF SERVICE shall mean each hour credited to an Employee in
accordance with the following provisions:
(a) An Employee shall be credited with one Hour of Service
for each hour for which such Employee is paid, or
entitled to payment, by an Employer for the performance
of duties during the applicable computation period, with
such Hours of Service being credited for the Plan Year in
which the duties were performed.
(b) An Employee shall be credited with an Hour of Service
for each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed
to by an Employer for the performance of services during
a Plan Year, with such Hours of Service being credited
for the Plan Year or Plan Years to which the award or
agreement pertains (rather than the Plan Year or Plan
Years in which the award, agreement, or payment is made).
(c) An Employee also shall be credited with one Hour of
Service for each hour for which he is paid, or entitled
to payment, by an Employer on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due
to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of
absence but excluding payments for reimbursement for
medical or medically related expenses and payments under
a plan maintained solely for the purpose of complying
with applicable workmen's compensation or unemployment
compensation and disability insurance
Page 2 of 6
<PAGE> 53
laws; provided, however, that not more than 501 Hours of
Service shall be credited to an Employee under this
paragraph (c), on account of any single continuous period
during which the Employee performs no duties for an
Employer (whether or not such period occurs in a single
computation period). A payment shall be deemed to be
made by or due from an Employer regardless of whether
such payment is made by or due from the Employer
directly, or indirectly through, among others, a trust
fund, or insurer, to which the Employer contributes or
pays premiums. Such Hours of Service shall be credited
for the Plan Year or, on a ratable basis, for the Plan
Years with respect to which the payments are made."
5. The following is hereby added at the end of Section 15.5(c)(i) of the Plan:
"The contribution required by this Section 15.5(c)(i) shall be made
regardless of the Non-key employee's level of compensation or
whether he/she has earned credit for a 1,000 Hours of Service
in the Plan Year."
6. The following is hereby added at the end of Section 2.13 of the Plan:
"In applying the rules of Section 414(q)(6) of the Code, the term
"family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age 19
before the close of the year."
7. Section 6.3 of the Plan is hereby amended and restated in its entirety to
provide as follows:
"The value of an Account on any date shall be its value determined
on the coinciding or immediately preceding Valuation Date plus any
contributions and other amounts subsequently credited thereto, and
less any distributions and other amounts subsequently charged
thereto."
8. Section 6.5(a)(i) is hereby amended and restated in its entirety to provide
as follows:
"The value of the portion of each such Account that is, and has
been continuously, invested in such Investment Fund as of the
immediately preceding Valuation Date; to"
9. Section 9.2(h) of the Plan is hereby amended and restated in its entirety to
provide as follows:
"Notwithstanding anything provided in this Section 9.2 to the
contrary, if the lump sum value of a Participant's Accounts does
not exceed Three Thousand Five Hundred Dollars ($3,500), as
determined annually by the Administrator, the Administrator,
shall direct that the
Page 3 of 6
<PAGE> 54
lump sum value of such Accounts be paid in total, in cash (unless
the Employee elects Company Stock from his/her Former PAYSOP
Account or Company Stock Fund pursuant to Section 9.4), as soon as
administratively feasible following the Participant's Termination
of Employment, whether or not application for payment has been made
in accordance with Section 9.1. Distribution will not be made
without the Participant's consent if the lump sum value of the
Participant's Accounts is $3,500 or more at the time of proposed
distribution or at the time of any prior distribution. Such Three
Thousand Five Hundred Dollar ($3,500) amount shall be automatically
adjusted in subsequent years in accordance with regulations
under the Code."
10. Section 9.4 of the Plan is hereby amended and restated in its entirety to
provide as follows:
"The value of the Accounts to be distributed to a Participant,
Former Participant or Beneficiary shall be determined as of the
earliest Valuation Date that is at least seven (7) days after
receipt of a written request for such distribution."
11. The following is hereby added to the Plan as new Section 5.3:
5.3 PROCEDURE IF MULTIPLE USE LIMITATION IS EXCEEDED
(i) If it is determined subsequent to the performance of the
tests in Sections 5.1 and 5.2 and subsequent to the end
of the Plan Year, that there has been an impermissible
multiple use of the alternative limitations set forth in
Sections 5.1(b)(ii) and 5.2(c)(ii), the Contribution
Deferral Percentage for each Highly Compensated Employee
must be reduced in the same manner as set forth in
Section 5.2(d) so that there is no multiple use of the
alternative limitation. The required reduction shall be
treated as an Excess Aggregate Contribution, in the
same manner as set forth in Section 5.2(d)(ii).
(ii) If the reduction in (i) above is not sufficient, then the
Actual Deferral Percentage for each Highly Compensated
Employee must be reduced in the same manner as set forth
in Section 5.1(c) so that there is no multiple use of the
alternative limitation. The required reduction shall be
treated as an Excess ADP Contribution, in the same manner
as set forth in Section 5.1(c)(ii).
12. Effective November 1, 1994, Section 3.1(a) of the Plan is hereby amended
and restated in its entirety to provide as follows:
"Each Covered Employee shall be eligible to become an LTSP
Participant in the Plan (pursuant to Section 3.2), after the
later of (i)
Page 4 of 6
<PAGE> 55
thirty (30) calendar days from his/her date of employment or (ii)
the date he/she becomes a Covered Employee."
13. Effective November 1, 1994, Clause (ii) of Section 2.16 of the Plan is
hereby amended and restated in its entirety to provide as follows:
"(ii) those Employees classified by the Employer as temporary under
its personnel policies and procedures, and".
14. Effective November 1, 1994, the following is hereby added at the end of
Section 2.16 of the Plan:
"Notwithstanding the provisions of clause (ii) above, an Employee
who has been classified by the Employer as temporary under its
personnel policies and procedures and who performs at least one
thousand (1,000) Hours of Service during any twelve (12)
consecutive month period beginning on his/her date of hire (or any
anniversary thereof) shall be considered a Covered Employee
effective as of the first day following such twelve (12)
consecutive month period."
15. The following is hereby added at the end of Section 15.4(c) of the Plan:
"Notwithstanding the above, if the Participant was a Participant as
of the first day of the first limitation year beginning after
December 31, 1986, in one or more defined benefit plans maintained
by the employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last limitation year
beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually and
in the aggregate satisfied the requirements of section 415 for all
limitation years beginning before January 1, 1987."
16. The first sentence of Section 17.17 of the Plan is hereby amended and
restated in its entirety to provide as follows:
"Notwithstanding anything herein to the contrary, any person who,
with respect to any Employer or Affiliated Company, is a leased
employee shall be treated as an Employee for all Plan purposes,
except eligibility to participate, entitlement to Contributions and
Employer Matched Contributions and Crediting of Service. For
purposes of the preceding sentence, "leased employee" means any
person who provides services to a recipient, but who is not an
employee of the recipient, if (i) such services are provided
pursuant to an agreement between the recipient and any other person
("leasing organization") (ii) such person has performed such
services for the recipient (or for the recipient and related
persons) on a substantially full-time basis
Page 5 of 6
<PAGE> 56
for a period of at least one (1) year and (iii) such services
are of a type historically performed, in the business field of the
recipient, by employees, excluding, however, any such person who
(i) is covered by a plan which is maintained by the leasing
organization and which 1) is a money purchase pension plan with a
non-integrated employer contribution rate for each participant of
at least 10% of compensation 2) is a plan that provides full and
immediate vesting and 3), is a plan that permits each employee of
the leasing organization (other than employees who perform
substantially all of their services for the leasing organization)
to immediately participate in such plan and (ii) performs services
for a recipient as to which leased employees (determined without
regard to the preceding provisions) do not constitute more than 20%
of the recipient's non-highly compensated work force.
17. The following is hereby added to the Plan as new section 9.2(j):
"All distributions under the Plan with comply with code Section
401(a)(9) and the regulations thereunder."
18. Section 2.12 of the Plan is hereby amended and restated in its entirety to
provide as follows:
"COMPANY STOCK FUND shall mean an Investment Fund consisting
principally of Stock."
19. Except as expressly set forth in this Amendment, the terms and provisions
of the Plan shall remain entirely unchanged and continue in full force and
effect.
IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this
Amendment to be executed by its duly authorized representative, effective as of
the date set forth above.
THE PROGRESSIVE CORPORATION
/s/ David M. Schneider
By:____________________________________________________________
Secretary
Title:_________________________________________________________
Page 6 of 6
<PAGE> 57
SECOND AMENDMENT TO THE PROGRESSIVE RETIREMENT
SECURITY PROGRAM
(1994 AMENDMENT AND RESTATEMENT)
WHEREAS, The Progressive Retirement Security Program is currently maintained
pursuant to a 1994 Amendment and Restatement and the First Amendment thereto
("Plan"); and
WHEREAS, it is deemed desirable to amend the Plan further;
NOW THEREFORE, effective April 1, 1995, the Plan is hereby amended in the
respects hereinafter set forth.
1. Section 2.36(c) of the Plan is hereby amended and restated in its entirety
to provide as follows:
"(c) Payment of tuition, related educational fees, and room and board
expenses, for the next twelve months of post-secondary education for
the Participant or his/her Spouse or dependents."
2. Except as expressly set forth in this Amendment, the terms and provisions
of the Plan shall remain entirely unchanged and continue in full force and
effect.
IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this
Amendment to be executed by its duly authorized representative, effective as of
the date set forth above.
THE PROGRESSIVE CORPORATION
/s/ David M. Schneider
By:________________________________________________________________
Secretary
Title:_____________________________________________________________
<PAGE> 58
THIRD AMENDMENT TO THE PROGRESSIVE RETIREMENT
SECURITY PROGRAM
(1994 AMENDMENT AND RESTATEMENT)
WHEREAS, The Progressive Retirement Security Program is currently maintained
pursuant to a 1994 Amendment and Restatement and the First and Second
Amendments thereto ("Plan"); and
WHEREAS, it is deemed desirable to amend the Plan further;
NOW THEREFORE, effective June 1, 1995, the Plan is hereby amended in the
respects hereinafter set forth.
1. The following is hereby added to the Plan as new Section 17.20:
"17.20 ADJUSTMENT. In the event of any merger, reorganization,
consolidation, recapitalization, share dividend, share split,
combination of shares or other change in corporate structure of the
Company affecting the Stock, such substitution or adjustment shall
be made in the aggregate number of shares of Stock available for
issuance under the Plan, as may be approved by the Company, in its
sole discretion."
2. Except as expressly set forth in this Amendment, the terms and provisions of
the Plan shall remain entirely unchanged and continue in full force and
effect.
IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused this
Amendment to be executed by its duly authorized representative, effective as of
the date set forth above.
THE PROGRESSIVE CORPORATION
/s/ David M. Schneider
By:______________________________________________________________
Secretary
Title:___________________________________________________________
<PAGE> 1
EXHIBIT 99C
FIRST AMENDMENT TO TRUST AGREEMENT
----------------------------------
BETWEEN THE PROGRESSIVE CORPORATION AND
---------------------------------------
NBD BANK, N.A., AS TRUSTEE
--------------------------
FOR THE PROGRESSIVE CORPORATION LONG-TERM SAVINGS PLAN
------------------------------------------------------
THIS AMENDMENT is entered into as of the 25th day of May, 1994 by and
between The Progressive Corporation, an Ohio corporation ("Sponsor") and NBD
Bank, N.A., a national banking association organized and existing under the
laws of the United States of America ("Trustee").
WHEREAS, Sponsor currently maintains The Progressive Corporation
Long-Term Savings Plan ("LTSP"); and
WHEREAS, the assets of the LTSP currently are held in a trust
("Trust") maintained pursuant to the Trust Agreement between The Progressive
Corporation and Trustee ("LTSP Trust Agreement"); and
WHEREAS, Sponsor desires to provide for the merger of the assets held
pursuant to The Progressive Corporation Supplemental Retirement Plan into the
Trust;
NOW, THEREFORE, the LTSP Trust Agreement is hereby amended by adding
the following thereto as new Section 19.1:
"19.1 TRANSFERRED ASSETS; ADMINISTRATION OF TRANSFERRED ASSETS;
POWERS AND DUTIES OF TRUSTEE.
(a) There will, from time to time, subsequent to June 30,
1994, be delivered to the Trustee certain assets
("SRP Assets") previously held pursuant to The
Progressive Corporation Supplemental Retirement Plan
("SRP"). All such SRP Assets shall be held,
administered and disbursed by the Trustee as part of
the Trust, pursuant to the provisions of this
Agreement, as in effect from time to time subsequent
to June 30, 1994.
(b) The Trustee will have no duty to verify whether the
amount of any such SRP Assets delivered to it is
correct, and shall have no duty of inquiry into the
prior administration of the SRP or funding for the
SRP.
(c) Such SRP Assets shall be invested in such investment
funds as the Sponsor shall direct, based on each
Participant's investment election then in effect
pursuant to the Plan, if any, and if no investment
election is then in effect as to any Participant,
such SRP Assets relating to such Participant shall be
invested in an investment fund consisting of
guaranteed investment contracts or a similar
successor investment fund until the Sponsor directs
otherwise based on a subsequent investment election
of the Participant."
2. Except as expressly provided in this Amendment, the terms and
provisions of the LTSP Trust Agreement shall remain entirely unchanged
and continue in full force and effect.
1
<PAGE> 2
IN WITNESS WHEREOF, Sponsor and Trustee have hereunto caused this
Amendment to be executed by their duly authorized representatives as of the
date set forth above.
THE PROGRESSIVE CORPORATION
- ----------------------------- By: /s/ David M. Schneider
Witness ----------------------------
Name:
--------------------------
Title: Secretary
-------------------------
NBD BANK, N.A.
- ----------------------------- By: /s/ John R. Mrzyglod
Witness --------------------------
Name:
-------------------------
Title: Second Vice President
------------------------
MRU\L930152\AMD00001.001
(05/25/94) 2
