8-KLeadership Changes

PROGRESSIVE CORP/OH/ 8-K Report, Executive Changes (Jul 21, 2006)

Filed July 21, 2006For Securities:PGR

Summary

This Form 8-K filing by The Progressive Corporation reports on the finalization of employment agreements with three recently appointed executive officers: John A. Barbagallo, John P. Sauerland, and Brian A. Silva. These agreements, effective July 17, 2006, outline specific terms related to compensation and benefits in the event of a Change of Control. Key provisions include a three-year employment continuation post-Change of Control with no material reduction in roles or compensation. In cases of termination without cause, or by the executive for "Good Reason" within this period, the executives are entitled to significant severance payments, generally calculated as a multiple of their base salary and highest earned bonus. The agreements also include a "Gross-Up Payment" provision to cover excise taxes on payments made during a Change of Control, and continued health and welfare benefits for two years post-termination.

Key Highlights

  • 1The Progressive Corporation has finalized employment agreements with executives John A. Barbagallo, John P. Sauerland, and Brian A. Silva.
  • 2These agreements, effective July 17, 2006, detail executive compensation and benefits in the event of a Change of Control.
  • 3In the event of a Change of Control, executives are guaranteed employment for three years with no material reduction in responsibilities or compensation.
  • 4Severance packages are substantial if employment is terminated without cause or if the executive resigns for 'Good Reason' within the three-year post-Change of Control period.
  • 5Severance is calculated as the greater of two times total compensation (salary + highest bonus) or four times base salary, minus other severance plan payouts.
  • 6The agreements include a "Gross-Up Payment" to offset potential excise taxes on Change of Control payments.
  • 7Executives are eligible for health and welfare benefits for two years following a qualifying termination.

Frequently Asked Questions

The main purpose of this filing is to report that The Progressive Corporation has entered into employment agreements with three key executive officers: John A. Barbagallo, John P. Sauerland, and Brian A. Silva, effective July 17, 2006. These agreements define terms related to their employment, compensation, and benefits, particularly in the context of a Change of Control.

If a Change of Control occurs, these executives are guaranteed continued employment for a three-year period. During this time, their roles and responsibilities will not be materially reduced, and their compensation will be at least what they were receiving prior to the Change of Control.

If an executive's employment is terminated by the company without cause, or if the executive resigns for 'Good Reason' (which includes material reductions in duties or compensation) within the three-year post-Change of Control period, they are entitled to significant severance. This typically includes accrued salary and benefits, plus an amount equal to the greater of two times their total compensation (salary + highest bonus) or four times their annual base salary, less any payments from existing severance plans.

The 'Gross-Up Payment' is a provision designed to protect the executives from the financial impact of excise taxes that could be imposed on payments they receive in connection with a Change of Control. The company will make an additional payment to the executive to ensure they retain a net amount after all applicable taxes, interest, and penalties are paid.