Exhibit 10.65
THE PROGRESSIVE CORPORATION
1998 DIRECTORS’ STOCK OPTION PLAN
SECTION 1. Purpose; Definitions.
The purposes of The Progressive
Corporation 1998 Directors’ Stock Option Plan (the
“Plan”) are to enable The Progressive Corporation (the
“Company”) to attract, retain and reward directors of
the Company and to strengthen the mutuality of interests between
such directors and the Company’s shareholders by offering
such directors options to purchase Common Shares of the
Company.
For
purposes of the Plan, the following terms shall be defined as set
forth below:
(a) “Award” means any
award of Stock Options under the Plan.
(b) “Board” means the
Board of Directors of the Company.
(c) “Code” means the
Internal Revenue Code of 1986, as amended from time to time, and
any successor thereto.
(d) “Committee” means the
Committee referred to in Section 2 hereof.
(e) “Company” means The
Progressive Corporation, an Ohio corporation, or any successor
corporation.
(f) “Disability” means
disability as determined under procedures established by the
Committee for purposes of the Plan, or in the absence of the
Committee, the Board.
(g) “Exchange Act” means
the Securities Exchange Act of 1934, as amended.
(h) “Fair Market Value”
means, as of any given date, the mean between the highest and
lowest quoted selling price, regular way, of the Stock on such date
on the New York Stock Exchange or, if no such sale of the Stock
occurs on the New York Stock Exchange on such date, then such mean
price on the next preceding day on which the Stock was traded. If
the Stock is no longer traded on the New York Stock Exchange, then
the Fair Market Value of the Stock shall be determined by the
Committee in good faith.
(i) “Non-Qualified Stock
Option” means any Stock Option that is not an incentive stock
option, within the meaning of Section 422 of the Code or any
successor section thereto.
(j) “Option Term” has the
meaning given to such term in Section 4(b)(2).
(k) “Plan” means The
Progressive Corporation 1998 Directors’ Stock Option Plan, as
amended from time to time.
(l) “Stock” means the
Common Shares, $1.00 par value per share, of the Company.
(m) “Stock Option” or
“Option” means any option to purchase shares of Stock
granted pursuant to Section 4.
(n) “Subsidiary” means
any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such
chain.
In
addition, the terms “Change in Control,”
“Potential Change in Control” and “Change in
Control Price” shall have meanings set forth, respectively,
in Sections 5(b), (c) and (d) below.
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SECTION 2. Administration.
The
Plan shall be administered by a Committee of not less than three
directors of the Company, all of whom shall be directors who are
“Non-Employee Directors”, as defined in Section 16
of the Exchange Act or the rules and regulations promulgated
thereunder. Such directors shall be appointed by the Board and
shall serve as the Committee at the pleasure of the Board. The
functions of the Committee specified in the Plan shall be exercised
by the Board if and to the extent that no Committee exists which
has the authority to so administer the Plan.
The
Committee shall have full power and authority to interpret and
administer the Plan and, subject to Section 4(a) below, full
authority to select the individuals to whom Awards will be granted,
and to determine the number of shares of Stock that may be
purchased upon exercise of Awards granted under the Plan, the
consideration, if any, to be paid for such Awards, the timing of
such Awards, the terms and conditions of Awards granted under the
Plan and the terms and conditions of the related agreements which
will be entered into with participants.
The
Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any Award issued under the Plan (and any
agreements relating thereto); to direct employees of the Company or
other advisors to prepare such materials or perform such analyses
as the Committee deems necessary or appropriate; and otherwise to
supervise the administration of the Plan.
Any
interpretation and administration of the Plan by the Committee, and
all actions and determinations of the Committee in connection with
the Plan, shall be final, binding and conclusive on the Company,
its shareholders, all participants in the Plan, their respective
legal representatives, successors and assigns, and upon all persons
claiming under or through any of them. No member of the Board or of
the Committee shall incur any liability for any action taken or
omitted, or any determination made, in good faith in connection
with the Plan.
SECTION 3. Stock Subject to the Plan.
(a) Aggregate Stock Subject to the
Plan . Subject to adjustment as provided in Section 3(c) below,
the total number of shares of Stock reserved and available for
Awards under the Plan is 200,000. Any Stock issued hereunder may
consist, in whole or in part, of authorized and unissued shares or
treasury shares.
(b) Forfeiture or Termination of
Awards of Stock . If any Award granted hereunder is forfeited
or an Award otherwise terminates or expires without the issuance of
Stock, the unissued Stock that is subject to such Award shall again
be available for distribution in connection with future Awards
under the Plan as set forth in Section 3(a).
(c)
Adjustment .
(1) If the Company (i) pays a
dividend or makes a distribution in shares of Stock,
(ii) subdivides or splits its outstanding Stock into a greater
number of shares, or (iii) combines its outstanding Stock into
a smaller number of shares, the aggregate number of shares of Stock
reserved for issuance pursuant to the Plan and the number and
option price of shares of Stock subject to outstanding Options
granted pursuant to the Plan immediately prior thereto shall be
adjusted so that, assuming that Options had been previously granted
for all of the shares of Stock so reserved, the participants would
be entitled to receive for the same aggregate price that number of
shares of Stock which they would have owned after the happening of
any of the events described above had they exercised all of such
Options prior to the happening of such event. An adjustment made
pursuant to this Section 3(c)(1) shall become effective
immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
(2) If the Company reclassifies or
changes the Stock (except for splitting or combining, or changing
par value, or changing from par value to no par value, or changing
from no par value to par value) or participates in a consolidation
or merger (other than a merger in which the Company is the
surviving corporation and which does not result in any
reclassification of or change in the Stock except as stated above),
the aggregate number of shares of Stock reserved for issuance
pursuant to the Plan and the number and option price of shares of
Stock subject to outstanding Options granted pursuant to the Plan
immediately prior thereto shall be adjusted so that, assuming that
Options had been previously
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granted for all
the shares of Stock so reserved, the participants would be entitled
to receive for the same aggregate price that number and type of
shares of capital stock which they would have owned after the
happening of any of the events described above had they exercised
all of such Options prior to the happening of such event.
(3) No adjustment pursuant to this
Section 3(c) shall be required unless such adjustment would require
an increase or decrease of at least 1% in such number or price;
provided, however, that any adjustments which by reason of
this Section 3(c)(3) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 3(c) shall be made
to the nearest cent or to the nearest full share, as the case may
be. Anything in this Section 3(c) to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the option
price, in addition to those required by this Section 3(c), as
it in its discretion shall determine to be advisable in order that
any stock dividends or distributions, subdivisions or splits of
shares, distribution of rights to purchase stock or securities, or
a distribution of securities convertible into or exchangeable for
stock hereafter made by the Company to its stockholders shall not
be taxable.
SECTION 4. Stock Options.
(a) Grant . All directors of
the Company who are not full time employees of the Company or any
of its Subsidiaries are eligible to be granted Stock Options under
the Plan. The Committee shall determine the individual directors to
whom, and the time or times at which, grants of Stock Options will
be made, the number of shares purchasable under each Stock Option
granted hereunder and the other terms and conditions of the Stock
Options in addition to those set forth in Sections 4(b). Any
Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve. Stock Options granted
under the Plan will be Non-Qualified Stock Options.
(b) Terms and Conditions .
Options granted under the Plan shall be evidenced by Option
agreements substantially in the form of Exhibit A hereto (or
such other form as the Committee may approve), shall be subject to
the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable:
(1) Option Price . The option
price per share of Stock purchasable under a Stock Option shall be
equal to the Fair Market Value of the Stock on the date the Option
is granted.
(2) Option Term . The term of
each Stock Option shall be determined by the Committee and may not
exceed ten (10) years from the date the Option is granted
(“Option Term”).
(3) Exercise . Stock Options
shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at or
after grant; provided, however, that, unless otherwise provided
herein or determined by the Committee at or after grant, no Stock
Option shall be exercisable prior to six months and one day
following the date of grant. If any Stock Option is exercisable
only in installments or only after a specified vesting date, the
Committee may accelerate or waive, in whole or in part, such
installment exercise provisions or vesting date at any time at or
after grant based on such factors as the Committee shall determine,
in its sole discretion.
(4) Method of Exercise .
Subject to whatever installment exercise provisions apply with
respect to such Stock Option and, if applicable, the six month and
one day holding period set forth in Section 4(b)(3), a Stock
Option may be exercised, in whole or in part, at any time during
the related Option Term, by giving the Company written notice of
exercise specifying the number of shares of Stock to be
purchased.
Such
notice shall be accompanied by payment in full of the option price
of the shares of Stock for which the Option is being exercised, in
cash or by check or such other instrument as the Committee may
accept. Unless otherwise determined by the Committee, in its sole
discretion, at or after grant, payment, in full or in part, of the
option price may be made in the form of unrestric
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