What is the main purpose of the new Executive Separation Allowance Plan?

The primary purpose of the new Plan is to provide a standardized and exclusive framework for executive severance benefits in the event of termination of employment under specific circumstances, and to supersede previous employment agreements that addressed severance.

How much severance pay can an executive expect under the new Plan?

For executive officers, including the CEO, the severance allowance will be equal to 156 weeks (3 years) of their base salary at the time of termination. This amount does not include cash bonuses or equity-based awards.

What situations qualify an executive for severance pay under this Plan?

Severance is generally provided if an executive's employment terminates for reasons other than resignation (including retirement), death, disability, leave of absence, or discharge for "Cause." Additionally, after a "Change in Control," executives are entitled to severance if they are terminated without cause or resign due to a "Job Change" within a three-year period.

Does the new Plan include continued health and welfare benefits?

Yes, executives and other covered employees are entitled to continue their health and welfare benefits for a period not exceeding 18 months at the Company's expense. The terminated employee will, however, be required to make contributions to the cost of these benefits at the same level as prior to termination.

PGR 8-K: Leadership Changes & Regulation FD

Summary

The Progressive Corporation (PGR) filed an 8-K report on December 13, 2006, detailing significant changes to its executive compensation and severance policies. The Board of Directors approved an updated Executive Separation Allowance Plan (the "Plan"), effective for terminations after December 31, 2006. This new Plan supersedes the previous one and significantly alters the severance benefits for covered executives, including the CEO. The updated Plan outlines substantial severance packages for executives, including 156 weeks (3 years) of base salary in the event of termination without cause, resignation due to a "Job Change" post-"Change in Control," or other qualifying terminations. Additionally, executives will receive continued health and welfare benefits for up to 18 months at the Company's expense (though employees will contribute as before). Notably, this Plan replaces all prior executive employment agreements regarding severance, streamlining the process and establishing it as the exclusive source of such benefits, excluding "tax gross-up" payments but preserving rights to outstanding equity awards.

Key Highlights

1Progressive Corporation has implemented a new Executive Separation Allowance Plan (2006 Amendment and Restatement), effective December 31, 2006.
2The new Plan provides executive officers, including the CEO, with a severance allowance equivalent to 156 weeks (3 years) of base salary upon qualifying termination.
3Severance benefits are triggered by termination for reasons other than resignation, death, disability, leave, or for cause.
4A "Change in Control" provision allows executives to receive the 3-year severance package if employment terminates without cause or if they resign due to a "Job Change" within three years of a Change in Control.
5Executives will continue to receive health and welfare benefits for up to 18 months at the Company's cost, with the terminated employee making pre-termination level contributions.
6The new Plan replaces all prior executive employment agreements concerning severance, establishing a single, exclusive source for these benefits.
7The Company also issued a news release on December 13, 2006, providing financial results for November 2006 and updates on its variable dividend policy.

PROGRESSIVE CORP/OH/ 8-K Report, Executive Changes (Dec 13, 2006)

Summary

Key Highlights

Frequently Asked Questions