EX-10(R) 1995 INCENTIVE PLAN



 








Exhibit No. 10(R)




THE PROGRESSIVE CORPORATION




1995 INCENTIVE PLAN




SECTION 1. Purpose; Definitions.




            The purpose of The Progressive Corporation 1995 Incentive Plan (the “Plan”) is to enable The
Progressive Corporation (the “Company”) to attract, retain and reward key employees of the Company
and its Subsidiaries and Affiliates and strengthen the mutuality of interests between such key
employees and the Company’s shareholders by offering such key employees equity or equity-based
incentives.



            For purposes of the Plan, the following terms shall be defined as set forth below:




     (a) “Affiliate” means any entity (other than the Company and its Subsidiaries) that is
designated by the Board as a participating employer under the Plan.




     (b) “Award” means any award of Stock Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Purchase Rights and Other Stock-Based Awards under the Plan.




     (c) “Board” means the Board of Directors of the Company.




     (d) “Book Value” means, as of any given date, on a per share basis (1) the
shareholders’ equity in the Company as of the end of the immediately preceding fiscal year
as reflected in the Company’s audited consolidated balance sheet as of such year-end date,
subject to such adjustments as the Committee shall specify at or after grant, divided by
(2) the number of outstanding shares of Stock as of such year-end date, subject to such
adjustments as the Committee shall specify for events subsequent to such year-end date.




     (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and
any successor thereto.




     (f) “Committee” means the Committee referred to in Section 2 of the Plan.




     (g) “Company” means The Progressive Corporation, an Ohio corporation, or any successor
corporation.




     (h) “Deferred Stock” means an award of the right to receive Stock at the end of a
specified deferral period granted pursuant to Section 8.




     (i) “Disability” means disability as determined under procedures established by the
Committee for purposes of the Plan.



 - 1 -









 






     (j) “Disinterested Person” shall have the meaning set forth in Rule 16b-3(c)(2)(i) as
promulgated by the Securities and Exchange Commission under the Exchange Act, or any
successor definition adopted by the Commission.




     (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.




     (l) “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.




     (m) “Incentive Stock Option” means any Stock Option intended to be and designated as
an “Incentive Stock Option”, within the meaning of Section 422 of the Code or any successor
section thereto.




     (n) “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock
Option.




     (o) “Other Stock-Based Award” means an award granted pursuant to Section 10 that is
valued, in whole or in part, by reference to, or is otherwise based on, Stock.




     (p) “Plan” means The Progressive Corporation 1995 Incentive Plan, as amended from time
to time.




     (q) “Restricted Stock” means an award of shares that is granted pursuant to Section 7
and is subject to restrictions.




     (r) “Section 16 participant” means a participant under the Plan who is then subject to
Section 16 of the Exchange Act.




     (s) “Stock” means the Common Shares, $1.00 par value per share, of the Company.




     (t) “Stock Appreciation Right” means an award of rights that is granted pursuant to
Section 6.




     (u) “Stock Option” or “Option” means any option to purchase shares of Stock (including
Restricted Stock and Deferred Stock, if the Committee so determines) that is granted
pursuant to Section 5.




     (v) “Stock Purchase Right” means an award of the right to purchase Stock that is granted
pursuant to Section 9.



 - 2 -









 






     (w) “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 the meanings set forth, respectively, in Sections 11(b), (c) and (d) and
the term “Cause” shall have the meaning set forth in Section 5(b)(8) below.



SECTION 2. Administration.




            The Plan shall be administered by the Executive Compensation Committee of the Board (the
“Committee”). The Committee shall consist of not less than three directors of the Company, all of
whom shall be Disinterested Persons and “outside directors”, as defined in Section 162(m) of the
Code and the 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 to interpret and administer the Plan and full authority to
select the individuals to whom Awards will be granted and to determine the type and amount of
Award(s) to be granted to each participant, the consideration, if any, to be paid for such
Award(s), the timing of such Award(s), 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. As to the selection of and grant of Awards to participants who are not Section 16
participants, the Committee may delegate its responsibilities to members of the Company’s
management consistent with applicable law.



            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, shall be final, binding and conclusive on the Company, its
shareholders, Subsidiaries, Affiliates, 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.



 - 3 -









 





SECTION 3. Stock Subject to the Plan.





     (a) Aggregate Stock Subject to the Plan. Subject to adjustment as provided below in
Section 3(c), the total number of shares of Stock reserved and available for Awards under
the Plan is 5,000,000. 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 Stock subject to any Award
granted hereunder is forfeited or an Award otherwise terminates or expires without the
issuance of Stock, the Stock 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),
unless the participant who had been awarded such forfeited Stock or the expired or
terminated Award has theretofore received dividends or other benefits of ownership with
respect to such Stock. For purposes hereof, a participant shall not be deemed to have
received a benefit of ownership with respect to such Stock by the exercise of voting rights
or the accumulation of dividends which are not realized due to the forfeiture of such Stock
or the expiration or termination of the related Award without issuance of such Stock.




     (c) 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 reserved for issuance under the
Plan, in the number and option price of shares subject to outstanding Options granted under
the Plan, in the number and purchase price of shares subject to outstanding Stock Purchase
Rights granted under the Plan, and in the number of shares subject to Restricted Stock
Awards, Deferred Stock Awards and any other outstanding Awards granted under the Plan as
may be approved by the Committee, in its sole discretion; provided that the number of
shares subject to any Award shall always be a whole number. Any fractional shares shall be
eliminated.




     (d) Annual Award Limit. No participant may be granted Stock Options or other Awards
under the Plan with respect to an aggregate of more than 300,000 shares of Stock (subject
to adjustment as provided in Section 3(c) hereof) during any calendar year.



SECTION 4. Eligibility.




            Officers and other key employees of the Company and its Subsidiaries and Affiliates (but
excluding members of the Committee and any person who serves only as a director) who are
responsible for or contribute to the management, growth or profitability of the business of



 - 4 -









 







the Company or its Subsidiaries or Affiliates are eligible to be granted Awards under the Plan.



SECTION 5. Stock Options.





     (a) Grant. Stock Options may be granted alone, in addition to or in tandem with other
Awards granted under the Plan or cash awards made outside of the Plan. However, no
Incentive Stock Option shall be issued in tandem with any other Award other than a Stock
Appreciation Right as provided for in Section 6. The Committee shall determine the
individuals 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 and the other terms and conditions
of the Stock Options in addition to those set forth in Sections 5(b) and 5(c). 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 may be of two types which shall be indicated on
their face: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Subject to
Section 5(c) hereof, the Committee shall have the authority to grant to any participant
Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options.




     (b) Terms and Conditions. Options granted under the Plan shall be evidenced by Option
Agreements, 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
Non-Qualified Stock Option shall be determined by the Committee at the time of
grant and shall not be less than fifty percent of the Fair Market Value of the
Stock at the date of grant.

The option price per share of Stock purchasable under an Incentive Stock Option
shall be determined by the Committee at the time of grant and shall be not less
than 100% of the Fair Market Value of the Stock at the date of grant (or 110% of
the Fair Market Value of the Stock at the date of grant in the case of a
participant who at the date of grant owns shares possessing more than ten percent
of the total combined voting power of all classes of stock of the Company or its
parent or subsidiary corporations (as determined under Section 424(d), (e) and (f)
of the Code)).




     (2) Option Term. The term of each Stock Option shall be determined by the
Committee and may not exceed ten years from the date the Option is granted (or,
with respect to Incentive Stock Options, five years in the case of a participant
who at the date of grant owns shares possessing more than ten percent of the total
combined voting power of



 - 5 -









 







all classes of stock of the Company or its parent or subsidiary corporations (as determined under Section 424(d), (e) and (f) of the Code)).




     (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, except as provided in Section 5(b)(6) and
Section 11, unless otherwise 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 the six month and one day holding
period set forth in Section 5(b)(3), Stock Options may be exercised in whole or in
part, at any time during the option period, by giving to 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 exercised, in cash or by check or such
other instrument as the Committee may accept. Subject to the following sentence,
unless otherwise determined by the Committee, in its sole discretion, at or after
grant, payment, in full or in part, of the option price of (i) Incentive Stock
Options may be made in the form of unrestricted Stock then owned by the participant
and (ii) Non-Qualified Stock Options may be made in the form of unrestricted Stock
then owned by the participant or Stock that is part of the Non-Qualified Stock
Option being exercised. Notwithstanding the foregoing, any election by a Section
16 participant to satisfy such payment obligation, in whole or in part, with Stock
that is part of the Non-Qualified Stock Option being exercised shall be subject to
approval by the Committee, in its sole discretion. The value of each such share
surrendered or withheld shall be 100% of the Fair Market Value of the Stock on the
date the Option is exercised.




          No Stock shall be issued pursuant to an exercise of an Option until full
payment has been made. A participant shall not have rights to dividends or any
other rights of a shareholder with respect to any Stock subject to an Option unless
and until the participant has given written notice of exercise, has paid in full
for such shares, has given, if



 - 6 -









 







requested, the representation described in Section 14(a) and such shares have been issued to him.




     (5) Non-Transferability of Options. No Stock Option shall be transferable by
the participant other than by will or by the laws of descent and distribution, and
all Stock Options shall be exercisable, during the participant’s lifetime, only by
the participant or, subject to Sections 5(b)(3) and 5(c), by the participant’s
authorized legal
representative if the participant is unable to exercise an Option as a result of
the participant’s Disability.




     (6) Termination by Death. Subject to Section 5(c), if any participant’s
employment by the Company or any Subsidiary or Affiliate terminates by reason of
death, any Stock Option held by such participant may thereafter be exercised, to
the extent such Option was exercisable at the time of death or would have become
exercisable within one year from the time of death had the participant continued to
fulfill all conditions of the Option during such period (or on such accelerated
basis as the Committee may determine at or after grant), by the estate of the
participant (acting through its fiduciary), for a period of one year (or such other
period as the Committee may specify at or after grant) from the date of such death.
The balance of the Stock Option shall be forfeited.




     (7) Termination by Reason of Disability. Subject to Sections 5(b)(3) and
5(c), if a participant’s employment by the Company or any Subsidiary or Affiliate
terminates by reason of Disability, any Stock Option held by such participant may
thereafter be exercised, to the extent such Option was exercisable at the time of
termination or would have become exercisable within one year from the time of
termination had the participant continued to fulfill all conditions of the Option
during such period (or on such accelerated basis as the Committee may determine at
or after grant), by the participant or by the participant’s duly authorized legal
representative if the participant is unable to exercise the Option as a result of
the participant’s Disability, for a period of one year (or such other period as the
Committee may specify at or after grant) from the date of such termination of
employment; provided, however, that in no event may any such Option be exercised
prior to six months and one day from the date of grant; and provided, further, that
if the participant dies within such one-year period (or such other period as the
Committee shall specify at or after grant), any unexercised Stock Option held by
such participant shall thereafter be exercisable by the estate of the participant
(acting through its fiduciary) to the same extent to which it was exercisable at
the time of death for a period of one year from the date of such termination of
employment. The balance of the Stock Option shall be forfeited.



 - 7 -









 






     (8) Other Termination. Unless otherwise determined by the Committee at or
after the time of granting any Stock Option, if a participant’s employment by the
Company or any Subsidiary or Affiliate terminates for any reason other than death
or Disability, all Stock Options held by such participant shall thereupon
immediately terminate, except that if the participant is involuntarily terminated
by the Company or any Subsidiary or Affiliate without Cause, any such Stock Option
may be exercised, to the extent otherwise exercisable at the time of such
termination, at any time during the lesser of two months from the date of such
termination or the balance of such Stock Option’s term. For purposes of this Plan,
“Cause” means a felony conviction of a participant or the failure of a participant
to contest prosecution for a felony, or a participant’s willful misconduct or
dishonesty, any of which, in the judgment of the Committee, is harmful to the
business or reputation of the Company or any Subsidiary or Affiliate.




     (c) Incentive Stock Options. Notwithstanding Section 4, only key employees of the
Company or any Subsidiary shall be eligible to receive Incentive Stock Options.
Notwithstanding Sections 5(b)(6) and (7), an Incentive Stock Option shall be exercisable by
(i) a participant’s authorized legal representative (if the participant is unable to
exercise the Incentive Stock Option as a result of the participant’s Disability) only if,
and to the extent, permitted by Section 422 of the Code and Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder and (ii) by the participant’s estate,
in the case of death, or authorized legal representative, in the case of Disability, no
later than 10 years from the date the Incentive Stock Option was granted (in addition to
any other restrictions or limitations which may apply). Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the
Code, or, without the consent of the participant(s) affected, to disqualify any Incentive
Stock Option under such Section 422 or any successor Section thereto.




     (d) Buyout Provisions. The Committee may at any time buy out for a payment in cash,
Stock, Deferred Stock or Restricted Stock an Option previously granted, based on such terms
and conditions as the Committee shall establish and agree upon with the participant,
provided that no such transaction involving a Section 16 participant shall be structured or
effected in a manner that would violate, or result in any liability on the part of the
participant under, Section 16 of the Exchange Act or the rules and regulations promulgated
thereunder.



 - 8 -









 





SECTION 6. Stock Appreciation Rights.





     (a) Grant. Stock Appreciation Rights may be granted alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made outside of the Plan.
The Committee shall determine the individuals to whom, and the time or times at which,
grants of Stock Appreciation Rights will be made and the other terms and conditions of the
Stock Appreciation Rights in addition to those set forth in Section 6(b). Any Stock
Appreciation Right granted under the Plan shall be in such form as the Committee may from
time to time approve. In the case of Non-Qualified Stock Options, such rights may be
granted either at or after the time of the grant of the related Non-Qualified Stock
Options. In the case of Incentive Stock Options, such rights may be granted in tandem with
Incentive Stock Options only at the time of the grant of such Incentive Stock Options and
exercised only when the Fair Market Value of the Stock subject to the Option exceeds the
option price of the Option.




          Stock Appreciation Rights issued in tandem with Stock Options (“Tandem SARs”) shall
terminate and no longer be exercisable upon the termination or exercise of the related
Stock Option, subject to such provisions as the Committee may specify at grant if a Stock
Appreciation Right is granted with respect to less than the full number of shares of Stock
subject to the related Stock Option.




          All Stock Appreciation Rights granted hereunder shall be exercised, subject to Section
6(b), in accordance with the procedures established by the Committee for such purpose.
Upon such exercise, the participant shall be entitled to receive an amount determined in the manner prescribed in Section 6(b).




     (b) Terms and Conditions. Stock Appreciation Rights granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:




     (1) Tandem SARs shall be exercisable only at such time or times and to the
extent that the Stock Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this Section 6, and Stock
Appreciation Rights granted separately (“Freestanding SARs”) shall be exercisable
as the Committee shall determine; provided, however, that any Stock Appreciation
Right granted to a Section 16 participant shall not be exercisable at any time
prior to six months and one day from the date of the grant of such Stock
Appreciation Right, except that this limitation shall not apply in the event of the
death of the participant prior to the expiration of the six-month and one-day
period.



 - 9 -









 






     (2) Upon the exercise of a Stock Appreciation Right, a participant shall be
entitled to receive an amount in cash or shares of Stock, as determined by the
Committee, equal in value to the excess of the Fair Market Value of one share of
Stock on the date of exercise of the Stock Appreciation Right over (i) the option
price per share specified in the related Stock Option in the case of Tandem SARs,
which price shall be fixed no later than the date of grant of the Tandem SARs, or
(ii) the price per share specified in the related Stock Appreciation Rights
Agreement in the case of Freestanding SARs, which price shall be fixed at the date
of grant and shall be not less than fifty percent of the Fair Market Value of the
Stock on the date of grant, multiplied by the number of shares of Stock in respect
of which the Stock Appreciation Right shall have been exercised. The Committee, in
its sole discretion, shall have the right to determine the form of payment (i.e.
cash, Stock or any combination thereof) and to approve any election by the
participant to receive cash, in whole or in part, upon exercise of the Stock
Appreciation Right . When payment is to be made in Stock, the number of
shares of Stock to be paid shall be calculated on the basis of the Fair Market
Value of the Stock on the date of exercise. Notwithstanding the foregoing, the Committee may unilaterally limit the
appreciation in value of any Stock Appreciation Right at any time prior to
exercise.




     (3) Upon the exercise of a Tandem SAR, the Stock Option or part thereof to
which such Tandem SAR is related shall be deemed to have been exercised.




     (4) In its sole discretion, the Committee may grant “Limited” Stock
Appreciation Rights under this Section 6; that is, Freestanding SARs that become
exercisable only in the event of a Change in Control or a Potential Change in
Control, subject to such terms and conditions as the Committee may specify at
grant. Such Limited Stock Appreciation Rights shall be settled solely in cash.




     (5) Stock Appreciation Rights shall not be transferable by the participant
other than by will or by the laws of descent and distribution, and all Stock
Appreciation Rights shall be exercisable, during the participant’s lifetime, only
by the participant or, subject to Section 6(b)(6), by the participant’s authorized
legal representative if the participant is unable to exercise a Stock Appreciation
Right as a result of the participant’s Disability.




     (6) Unless varied by the Committee, Stock Appreciation Rights shall be subject
to the terms and conditions specified for Stock Options in Sections 5(b)(6), (7)
and (8) and 5(d), except that the terms and conditions applicable to any Stock
Appreciation Right held by a Section 16 participant shall not be varied in a manner
that would cause the exercise or cancellation of such Stock Appreciation Right to
fail to



 - 10 -









 







qualify for any applicable exemption from Section 16(b) of the Exchange Act provided by Rule 16b-3 thereunder.



SECTION 7. Restricted Stock.





     (a) Grant. Shares of Restricted Stock may be issued alone, in addition to or in
tandem with other Awards under the Plan or cash awards made outside of the Plan. The
Committee shall determine the individuals to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares of Restricted Stock to be awarded to
each participant, the price (if any) to be paid by the participant (subject to Section
7(b)), the date or dates upon which Restricted Stock Awards will vest and the period or
periods within which such Restricted Stock Awards may be subject to forfeiture, and the
other terms and conditions of such Awards in addition to those set forth in Section 7(b).




          The Committee may condition the grant of Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee may determine in its
sole discretion.




     (b) Terms and Conditions. Restricted Stock awarded under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. A
participant who receives a Restricted Stock Award shall not have any rights with respect to
such Award, unless and until such participant has executed an agreement evidencing the
Award in the form approved from time to time by the Committee and has delivered a fully
executed copy thereof to the Company, and has otherwise complied with the applicable terms
and conditions of such Award.




     (1) The purchase price for shares of Restricted Stock shall be determined by
the Committee at the time of grant and may be equal to their par value or zero.




     (2) Awards of Restricted Stock must be accepted by executing a Restricted
Stock Award agreement and paying whatever price (if any) is required under Section
7(b)(1).




     (3) Each participant receiving a Restricted Stock Award shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such participant, and shall bear an appropriate
legend referring to the terms, conditions and restrictions applicable to such
Award.




     (4) The Committee shall require that the stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have
lapsed, and that, as a condition of any Restricted Stock Award, the



 - 11 -









 







participant shall have delivered to the Company a stock power, endorsed in blank, relating to
the Stock covered by such Award.




     (5) Subject to the provisions of this Plan and the Restricted Stock Award
agreement, during a period set by the Committee commencing with the date of such
Award (the “Restriction Period”), the participant shall not be permitted to sell,
transfer, pledge, assign or otherwise encumber the shares of Restricted Stock
awarded under the Plan. The Restriction Period shall not be less than six months
and one day in duration (“Minimum Restriction Period”). Subject to these
limitations and the Minimum Restriction Period requirement, the Committee, in its
sole discretion, may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions, in whole or in part, based on service,
performance or such other factors and criteria as the Committee may determine, in
its sole discretion.




     (6) Except as provided in this Section 7(b)(6), Section 7(b)(5) and Section
7(b)(7), the participant shall have, with respect to the shares of Restricted Stock
awarded, all of the rights of a shareholder of the Company, including the right to
vote the Stock, and the right to receive any dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or require the payment
of cash dividends to be deferred and, if the Committee so determines, reinvested,
subject to Section 14(f), in additional Restricted Stock to the extent shares are
available under Section 3, or otherwise reinvested. Stock dividends issued with
respect to Restricted Stock shall be treated as additional shares of Restricted
Stock that are subject to the same restrictions and other terms and conditions that
apply to the shares with respect to which such dividends are issued.




     (7) No Restricted Stock shall be transferable by a participant otherwise than
by will or by the laws of descent and distribution.




     (8) If a participant’s employment by the Company or any Subsidiary or
Affiliate terminates by reason of death, any Restricted Stock held by such
participant shall thereafter vest or any restriction lapse, to the extent such
Restricted Stock would have become vested or no longer subject to restriction
within one year from the time of death had the participant continued to fulfill all
of the conditions of the Restricted Stock Award during such period (or on such
accelerated basis as the Committee may determine at or after grant). The balance
of the Restricted Stock shall be forfeited.



 - 12 -









 






     (9) If a participant’s employment by the Company or any Subsidiary
or Affiliate terminates by reason of Disability, any Restricted Stock held by such
participant shall thereafter vest or any restriction lapse, to the extent such
Restricted Stock would have become vested or no longer subject to restriction
within one year from the time of termination had the participant continued to
fulfill all of the conditions of the Restricted Stock Award during such period (or
on such accelerated basis as the Committee may determine at or after grant),
subject in all cases to the Minimum Restriction Period requirement. The balance of
the Restricted Stock shall be forfeited.




     (10) Unless otherwise determined by the Committee at or after the time of
granting any Restricted Stock, if a participant’s employment by the Company or any
Subsidiary or Affiliate terminates for any reason other than death or Disability,
the Restricted Stock held by such participant which is unvested or subject to
restriction at the time of termination shall thereupon be forfeited.




     (c) Minimum Value Provisions. In order to better ensure that award payments actually
reflect the performance of the Company and service of the participant, the Committee may
provide, in its sole discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Stock to the recipient of a Restricted Stock
Award, subject to such performance, future service, deferral and other terms and conditions
as may be specified by the Committee.



SECTION 8. Deferred Stock.





     (a) Grant. Deferred Stock may be awarded alone, in addition to or in tandem with
other Awards granted under the Plan or cash awards made outside of the Plan. The Committee
shall determine the individuals to whom, and the time or times at which, Deferred Stock
shall be awarded, the number of shares of Deferred Stock to be awarded to any participant,
the duration of the period (the “Deferral Period”) during which, and the conditions under
which, receipt of the Stock will be deferred, and the other terms and conditions of the
Award in addition to those set forth in Section 8(b).




          The Committee may condition the grant of Deferred Stock upon the attainment of
specified performance goals or such other factors as the Committee shall determine, in its
sole discretion.




     (b) Terms and Conditions. Deferred Stock Awards 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:



 - 13 -









 






     (1) The purchase price for shares of Deferred Stock shall be determined at the
time of grant and may be equal to their par value or zero, as determined by the
Committee. Subject to the provisions of the Plan and the Award agreement referred
to in Section 8(b)(9), Deferred Stock Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral Period. At the
expiration of the Deferral Period (or the Elective Deferral Period referred to in
Section 8(b)(8), where applicable), share certificates shall be delivered to the
participant, or his legal representative, for the shares covered by the Deferred
Stock Award. The Deferral Period applicable to any Deferred Stock Award shall not
be less than six months and one day (“Minimum Deferral Period”).




     (2) Unless otherwise determined by the Committee at grant, amounts equal to
any dividends declared during the Deferral Period with respect to the number of
shares covered by a Deferred Stock Award will be paid to the participant currently,
or deferred and deemed to be reinvested in additional Deferred Stock, or otherwise reinvested,
all as determined at or after the time of the Award by the Committee, in its sole
discretion.




     (3) No Deferred Stock shall be transferable by a participant otherwise than by
will or by the laws of descent and distribution.




     (4) If a participant’s employment by the Company or any Subsidiary or
Affiliate terminates by reason of death, any Deferred Stock held by such
participant shall thereafter vest or any restriction lapse, to the extent such
Deferred Stock would have become vested or no longer subject to restriction within
one year from the time of death had the participant continued to fulfill all of the
conditions of the Deferred Stock Award during such period (or on such accelerated
basis as the Committee may determine at or after grant). The balance of the
Deferred Stock shall be forfeited.




     (5) If a participant’s employment by the Company or any Subsidiary or
Affiliate terminates by reason of Disability, any Deferred Stock held by such
participant shall thereafter vest or any restriction lapse, to the extent such
Deferred Stock would have become vested or no longer subject to restriction within
one year from the time of termination had the participant continued to fulfill all
of the conditions of the Deferred Stock Award during such period (or on such
accelerated basis as the Committee may determine at or after grant), subject in all
cases to the Minimum Deferral Period requirement. The balance of the Deferred
Stock shall be forfeited.



 - 14 -









 






     (6) Unless otherwise determined by the Committee at or after the time of
granting any Deferred Stock Award, if a participant’s employment
by the
Company or any Subsidiary or Affiliate terminates for any reason other than death
or Disability, all Deferred Stock held by such participant which is unvested or
subject to restriction shall thereupon be forfeited.




     (7) Based on service, performance or such other factors or criteria as the
Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or any part of
any Deferred Stock Award or waive a portion of the Deferral Period for all or any
part of such Award, subject in all cases to the Minimum Deferral Period
requirement.




     (8) A participant may elect to further defer receipt of a Deferred Stock Award
(or an installment of an Award) for a specified period or until a specified event
(the “Elective Deferral Period”), subject in each case to the Committee’s approval
and the terms of this Section 8 and such other terms as are determined by the
Committee, all in its sole discretion. Subject to any exceptions approved by the
Committee, such election must be made at least 12 months prior to completion of the
Deferral Period for such Deferred Stock Award (or such installment).




     (9) Each such Award shall be confirmed by, and subject to the terms of, a
Deferred Stock Award agreement evidencing the Award in the form approved from time
to time by the Committee.




     (c) Minimum Value Provisions. In order to better ensure that award payments actually
reflect the performance of the Company and service of the participant, the Committee may
provide, in its sole discretion, for a tandem performance-based or other Award designed to
guarantee a minimum value, payable in cash or Stock to the recipient of a Deferred Stock
Award, subject to such performance, future service, deferral and other terms and conditions
as may be specified by the Committee.



SECTION 9. Stock Purchase Rights.





     (a) Grant. Stock Purchase Rights may be granted alone, in addition to or in tandem
with other Awards granted under the Plan or cash awards made outside the Plan. The
Committee shall determine the individuals to whom, and the time or times at which, grants
of Stock Purchase Rights will be made, the number of shares of Stock which may be purchased
pursuant to the Stock Purchase Rights, and the other terms and conditions of the Stock
Purchase Rights in addition to those set forth in Section 9(b). The Stock subject to the
Stock Purchase Rights may be purchased, as determined by the Committee at the time of grant:



 - 15 -









 






     (1) at the Fair Market Value of such Stock on the date of grant;




     (2) at 50% of the Fair Market Value of such Stock on the date of grant;




     (3) at an amount equal to the Book Value of such Stock on the date of grant;
or




     (4) at an amount equal to the par value of such Stock on the date of grant.




            Subject to Section 9(b) hereof, the Committee may also impose such deferral,
forfeiture or other terms and conditions as it shall determine, in its sole discretion, on
such Stock Purchase Rights or the exercise thereof.




            Each Stock Purchase Right Award shall be confirmed by, and be subject to the terms of,
a Stock Purchase Rights Agreement which shall be in form approved by the Committee.




     (b) Terms and Conditions. Stock Purchase Rights may contain such additional terms and
conditions not inconsistent with the terms of the Plan as the Committee shall deem
desirable, and shall generally be exercisable for such period as shall be determined by the
Committee. However, Stock Purchase Rights granted to Section 16 participants shall not
become exercisable earlier than six months and one day after the grant date. Stock
Purchase Rights shall not be transferable by a participant other than by will or by the
laws of descent and distribution.



SECTION 10. Other Stock-Based Awards.





     (a) Grant. Other Awards of Stock and other Awards that are valued, in whole or in
part, by reference to, or are otherwise based on, Stock, including, without limitation,
performance shares, convertible preferred stock, convertible debentures, exchangeable
securities and Stock Awards or options valued by reference to Book Value or subsidiary performance, may be granted alone, in addition to or in tandem with other
Awards granted under the Plan or cash awards made outside of the Plan.




            At the time the Stock or Other Stock-Based Award is granted, the Committee shall
determine the individuals to whom and the time or times at which such Stock or Other
Stock-Based Awards shall be awarded, the number of shares of Stock to be used in computing
an Award or which are to be awarded pursuant to such Awards, the consideration, if any, to
be paid for such Stock or Other Stock-Based Awards, and all other terms and conditions of
the Awards in addition to those set forth in Section 10(b).




            The provisions of Other Stock-Based Awards need not be the same with respect to each
participant.



 - 16 -









 






     (b) Terms and Conditions. Other Stock-Based Awards 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) Subject to the provisions of this Plan and the Award agreement referred to
in Section 10(b)(5) below, Stock awarded or subject to Awards made under this
Section 10 may not be sold, assigned, transferred, pledged or otherwise encumbered
prior to the date on which the Stock is issued, or, if later, the date on which any
applicable restriction, performance, holding or deferral period or requirement is
satisfied or lapses. All Stock or Other Stock Based Awards granted under this
Section 10 shall be subject to a minimum holding period (including any applicable
restriction, performance and/or deferral periods) of six months and one day
(“Minimum Holding Period”).




     (2) Subject to the provisions of this Plan and the Award agreement and unless
otherwise determined by the Committee at the time of grant, the recipient of an
Other Stock-Based Award shall be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend equivalents with respect to
the number of shares of Stock covered by the Award, as determined at the time of
the Award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been
reinvested in additional Stock or otherwise reinvested.




     (3) Subject to the Minimum Holding Period, any Other Stock-Based Award and any
Stock covered by any such Award shall vest or be forfeited to the extent, at the
times and subject to the conditions, if any, provided in the Award agreement, as
determined by the Committee, in its sole discretion.




     (4) In the event of the participant’s Disability or death, or in cases of
special circumstances, the Committee may, in its sole discretion, waive, in whole
or in part, any or all of the remaining limitations imposed hereunder or under any
related Award agreement (if any) with respect to any part or all of any Award under
this Section 10, provided that the Minimum Holding Period requirement may not be
waived, except in case of a participant’s death.




     (5) Each Award shall be confirmed by, and subject to the terms of, an
agreement or other instrument evidencing the Award in the form approved from time
to time by the Committee, the Company and the participant.




     (6) Stock (including securities convertible into Stock) issued on a bonus
basis under this Section 10 shall be



 - 17 -









 







issued for no cash consideration. Stock (including securities convertible into Stock) purchased pursuant to a purchase
right awarded under this Section 10 shall bear a price of at least 50% of the Fair
Market Value of the Stock on the date of grant. The purchase price of such Stock,
and of any Other Stock Based Award granted hereunder, or the formula by which such
price is to be determined, shall be fixed by the Committee at the time of grant.




     (7) In the event that any “derivative security”, as defined in Rule 16a-1(c)
(or any successor thereto) promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act, is awarded pursuant to this Section 10 to any
Section 16 participant, such derivative security shall not be transferrable other than by will or by the laws of descent and distribution.



SECTION 11. Change In Control Provision.





     (a) Impact of Event. In the event of: (1) a “Change in Control” as defined in
Section 11(b) or (2) a “Potential Change in Control” as defined in Section 11(c), the
following acceleration and valuation provisions shall apply:




     (1) Any Stock Appreciation Rights and any Stock Options awarded under the Plan
not previously exercisable and vested shall become fully exercisable and vested;




     (2) The restrictions and deferral limitations applicable to any Restricted
Stock, Deferred Stock, Stock Purchase Rights and Other Stock-Based Awards shall
lapse and such shares and awards shall be deemed fully vested; and




     (3) The value of all outstanding Awards, in each case to the extent vested,
shall, unless otherwise determined by the Committee in its sole discretion at or
after grant but prior to any Change in Control or Potential Change in Control, be
cashed out on the basis of the “Change in Control Price” as defined in Section
11(d) as of the date such Change in Control or such Potential Change in Control is
determined to have occurred;




provided, however, that the provisions of Sections 11(a)(1)-(3) shall not apply with
respect to Awards granted to any Section 16 participant which have been held by such
participant for less than six months and one day as of the date that such Change in Control
or Potential Change in Control is determined to have occurred.




     (b) Definition of Change in Control. For purposes of Section 11(a), a “Change in
Control” means the happening of any of the following:



 - 18 -









 






     (1) When any “person” as defined in Section 3(a)(9) of the Exchange Act and as
used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section
13(d) of the Exchange Act, but excluding the Company and any Subsidiary and any
employee benefit plan sponsored or maintained by the Company or any Subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as
amended from time to time), of securities of the Company representing 20 percent or
more of the combined voting power of the Company’s then outstanding securities;
provided, however, that the terms “person” and “group” shall not include any
“Excluded Director”, and the term “Excluded Director” means any director who, on
the effective date of the Plan, is the beneficial owner of or has the right to
acquire an amount of Stock equal to or greater than five percent of the number of
shares of Stock outstanding on such effective date; and further provided that,
unless otherwise determined by the Board or any committee thereof, the terms
“person” and “group” shall not include any entity or group of entities which has
acquired Stock of the Company in the ordinary course of business for investment
purposes only and not with the purpose or effect of changing or influencing the
control of the Company, or in connection with or as a participant in any
transaction having such purpose or effect, (“Investment Intent”), as demonstrated
by the filing by such entity or group of a statement on Schedule 13G (including
amendments thereto) pursuant to Regulation 13D under the Exchange Act, as long as
such entity or group continues to hold such Stock with an Investment Intent;




     (2) When, during any period of 24 consecutive months during the existence of
the Plan, the individuals who, at the beginning of such period, constitute the
Board (the “Incumbent Directors”) cease for any reason other than death to
constitute at least a majority thereof; provided, however, that a director who was
not a director at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if such director
was elected by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors either
actually (because they were directors at the beginning of such 24-month period) or
by prior operation of this Section 11(b)(2); or




     (3) The occurrence of a transaction requiring shareholder approval for the
acquisition of the Company by an entity other than the Company or a Subsidiary
through purchase of assets, by merger or otherwise; provided, however, a change in
control shall not be deemed to be a Change in Control for purposes of the Plan if
the Board approves such change prior to either (i) the commencement of



 - 19 -









 







any of the events described in Section (b)(l), (2), or (3) or (c)(l) or (ii) the commencement
by any person other than the Company of a tender offer for Stock.




     (c) Definition of Potential Change in Control. For purposes of Section 11(a), a
“Potential Change in Control” means the happening of any one of the following:




     (1) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company as defined
in Section 11(b); or




     (2) The acquisition of beneficial ownership, directly or indirectly, by any
entity, person or group (other than the Company or a Subsidiary or any Company
employee benefit plan (including any trustee of such plan acting as such trustee))
of securities of the Company representing 5% or more of the combined voting power
of the Company’s outstanding securities and the adoption by the Board of a
resolution to the effect that a Potential Change in Control of the Company has
occurred for purposes of this Plan.




     (d) Change in Control Price. For purposes of this Section 11, “Change in Control
Price” means the highest price per share paid in any transaction reported on the New York
Stock Exchange Composite Index, or paid or offered in any bona fide transaction related to
a Change in Control or Potential Change in Control of the Company, at any time during the
60-day period immediately preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control event), in each case as
determined by the Committee, except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the participant exercises such Stock Appreciation Rights or, where applicable, the date on which a cashout occurs under Section
11(a)(3).



SECTION 12. Amendments and Termination.




            The Board may at any time, in its sole discretion, amend, alter or discontinue the Plan, but
no such amendment, alteration or discontinuation shall be made which would impair the rights of a
participant under an Award theretofore granted, without the participant’s consent. The Company
shall submit to the shareholders of the Company for their approval any amendments to the Plan which
are required by Section 16 of the Exchange Act, or the rules and regulations thereunder, to be
approved by the shareholders.



            The Committee may at any time, in its sole discretion, amend the terms of any Award, but no
such amendment shall be made which would impair the rights of a participant under an Award
theretofore granted,



 - 20 -









 







without the participant’s consent; nor shall any such amendment be made which
would make the applicable exemptions provided by Rule 16b-3 under the Exchange Act unavailable to
any Section 16 participant holding the Award without the participant’s consent. The Committee may
also substitute new Stock Options for previously granted Stock Options (on a one-for-one or other
basis), including previously granted Stock Options having a higher option price.



            Subject to the above provisions, the Board shall have all necessary authority to amend the
Plan to take into account changes in applicable securities and tax laws and accounting rules, as
well as other developments.



SECTION 13. Unfunded Status of Plan.




            The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation.
With respect to any payments not yet made to a participant by the Company, nothing contained
herein shall give any such participant any rights that are greater than those of a general creditor
of the Company.



SECTION 14. General Provisions.




     (a) The Committee may require each participant acquiring Stock pursuant to an Award
under the Plan to represent to and agree with the Company in writing that the participant
is acquiring the Stock without a view to distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.




            All shares of Stock or other securities delivered under the Plan shall be subject to
such stop-transfer orders and other restrictions as the Committee may deem advisable under
the rules, regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be put on any
certificates for such shares to make appropriate reference to such restrictions.




     (b) Nothing contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to shareholder approval if such approval
is required; and such arrangements may be either generally applicable or applicable
only in specific cases.




     (c) Neither the adoption of the Plan, nor its operation, nor any document describing,
implementing or referring to the Plan, or any part thereof, shall confer upon any
participant under the Plan any right to continue in the employ, or as a director, of the
Company or any Subsidiary or Affiliate, or shall in any way



 - 21 -









 







affect the right and power of the Company or any Subsidiary or Affiliate to terminate the employment, or service as a
director, of any participant under the Plan at any time with or without assigning a reason
therefor, to the same extent as the Company or any Subsidiary or Affiliate might have done
if the Plan had not been adopted.




     (d) For purposes of this Plan, a transfer of a participant between the Company and its
Subsidiaries and Affiliates shall not be deemed a termination of employment.




     (e) No later than the date as of which an amount first becomes includable in the gross
income of the participant for federal income tax purposes with respect to any Award under
the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any
federal, state or local taxes or other items of any kind required by law to be withheld
with respect to such amount. Subject to the following sentence, unless otherwise
determined by the Committee, withholding obligations may be settled with Stock, including
unrestricted Stock previously owned by the participant or Stock that is part of the Award
that gives rise to the withholding requirement. Notwithstanding the foregoing, any
election by a Section 16 participant to settle such tax withholding obligation with Stock
that is part of such Award shall be subject to approval by the Committee, in its sole
discretion. The obligations of the Company under the Plan shall be conditional on such
payment or arrangements and the Company and its Subsidiaries and Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any payment of any
kind otherwise due to the participant.




     (f) The actual or deemed reinvestment of dividends or dividend equivalents in
additional Restricted Stock (or in Deferred Stock or other types of Awards) at the time of
any dividend payment shall only be permissible if sufficient shares of Stock are available
under Section 3 for such reinvestment (taking into account then outstanding Stock Options,
Stock Purchase Rights and other Plan Awards).




     (g) The Plan, all Awards made and actions taken thereunder and any agreements relating
thereto shall be governed by and construed in accordance with the laws of the State of
Ohio.




     (h) All agreements entered into with participants pursuant to the Plan shall be
subject to the Plan.




     (i) The provisions of Awards need not be the same with respect to each participant.



 - 22 -









 





     SECTION 15. Shareholder Approval; Effective Date of Plan.




            The Plan was adopted by the Board on February 10, 1995 and is subject to approval by the
holders of the Company’s outstanding Stock, in accordance with applicable law. The Plan will
become effective on the date of such approval.



     SECTION 16. Term of Plan.





            No Award shall be granted pursuant to the Plan on or after February 10, 2005, but Awards
granted prior to such date may extend beyond that date.



 - 23 -