Exhibit 10.2

RESTRICTED STOCK UNIT AWARD AGREEMENT

(<Year of Grant> Performance-Based Award)

This Agreement (“Agreement”) is made this <Grant Date> by and between
<Participant Name> (“Participant”) and The Progressive Corporation (the
“Company”).

1. Definitions. Unless otherwise defined in this Agreement, each capitalized
term in this Agreement shall have the meaning given to it in The Progressive
Corporation 2003 Incentive Plan, as amended (collectively, the “Plan”).

2. Award of Restricted Stock Units. The Company grants to Participant an award
(the “Award”) of performance-based restricted stock units (“Restricted Stock
Units” or “Units”), pursuant and subject to the Plan. The Award is based on an
initial award value of <# of Units> Units (the “Initial Award Value”). The
number of Restricted Stock Units that are ultimately earned pursuant to the
Award (if any) will be determined based on the Initial Award Value and the
procedures and calculations set forth in this Agreement. Under the calculations
set forth below, the maximum potential Award would be a number of Units equal to
two (2) times the Initial Award Value (the “Maximum Award Value”).

3. Condition to Participant’s Rights under this Agreement. This Agreement shall
not become effective, and Participant shall have no rights with respect to the
Award or any Restricted Stock Units, unless and until Participant has fully
executed this Agreement and delivered it to the Company. In the Company’s
discretion, such execution and delivery may be accomplished through electronic
means.

4. Restrictions; Vesting. Subject to the terms and conditions of the Plan and
this Agreement, Participant’s rights in and to Restricted Stock Units shall
vest, if at all, as follows:

a. Evaluation Period. The Evaluation Period shall be the <#>-year period
comprised of the years <Calendar Years>.

b. Certification. The Award shall vest (if at all) only if, to the extent, and
when the Compensation Committee of the Board of Directors (the “Committee”)
certifies:

1. the extent to which the Company’s performance results have satisfied the
performance criteria set forth in both subparagraphs c. and d. below; and

2. the corresponding number of Restricted Stock Units (if any) that have vested
as a result of such performance.

Such certification shall occur as soon as practicable after the end of the
Evaluation Period, but in any event must occur (if at all) on or before
<expiration date> (the “Expiration Date”). If the Committee certifies the
vesting of a number of Units that is less than the Maximum Award Value, the
Award will terminate and be forfeited with respect to all other Units that could
have been earned under this Agreement.

c. Profitability Requirement. The Award shall not vest unless the Company has
achieved a combined ratio of 96 or less, determined in accordance with GAAP, for
the twelve (12) consecutive fiscal months immediately preceding the date of the
certification described in subparagraph b. above (the “Profitability
Requirement”).

 

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d. Number of Units Vesting. Provided that the Profitability Requirement has been
satisfied, the number of Restricted Stock Units (if any) that vest in connection
with the Award will be determined as follows:

1. The Company’s compounded annual rate of growth in “Written Premiums” (defined
below) for the Evaluation Period for the Company’s private passenger auto and
commercial auto businesses (“Company Growth Rate”) will be compared to the
compounded annual rate of growth of the private passenger auto and commercial
auto markets as a whole for the Evaluation Period (“Market Growth Rate”), in
each case determined as provided below. If the Company Growth Rate exceeds the
Market Growth Rate, the applicable calculation required by the following table
will determine the number of Restricted Stock Units vesting:

<Vesting Goals and Formulae>

2. If the Company Growth Rate is equal to or less than the Market Growth Rate,
or if the Profitability Requirement has not been satisfied with respect to the
Award prior to the Expiration Date, none of the Award shall vest, and the Award
shall be forfeited in its entirety;

3. For purposes of these determinations:

A. Subject to any adjustment(s) that may be required by subparagraphs B., C. or
D. below:

i. Written Premiums shall mean premiums written directly during the applicable
time period for the specified types of business, without taking into account
reinsurance.

ii. The Company Growth Rate will be the compounded annual rate of growth in
Written Premiums during the Evaluation Period, determined by comparing (a) the
annual aggregate Written Premiums of the subsidiaries and affiliates of the
Company in their Private Passenger Auto and Commercial Auto businesses for <Last
Year of Evaluation Period>, as reported by A.M. Best in its annual report
currently know as the “A2 Report,” with (b) such Written Premiums of the
subsidiaries and affiliates of the Company for <Comparison Year> as reported in
A.M. Best’s A2 Report; and

iii. The Market Growth Rate will be the compounded annual rate of growth in
Written Premiums during the Evaluation Period, determined by comparing (a) the
aggregate Written Premiums of the Private Passenger Auto market and the
Commercial Auto market for <Last Year of Evaluation Period>, as reported in A.M.
Best’s A2 Report, with (b) such Written Premiums for <Comparison Year> as
reported in A.M. Best’s A2 Report, but excluding (in each case) the applicable
Written Premiums of the subsidiaries and affiliates of the Company;

B. If <Comparison Year/Last Year of Evaluation Period> is a 53-week year under
the Company’s fiscal calendar, then in determining the Company Growth Rate as
set forth in subparagraph A. above, the aggregate

 

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Written Premiums for such year will be reduced by an amount equal to twenty
percent (20%) of the Written Premiums of the subsidiaries and affiliates of the
Company in fiscal December <Comparison Year/Last Year of Evaluation Period> in
their Private Passenger Auto and Commercial Auto businesses, as determined from
the Company’s records;

C. In making the calculations required under this Agreement: the Company Growth
Rate and the Market Growth Rate shall each be rounded to the nearest
one-thousandth of a whole percentage point (e.g., a growth rate of 2.376666%
will be rounded to 2.377%); and the number of Restricted Stock Units shall be
rounded to the nearest ten-thousandth of a whole Unit (e.g., 1,432.456789 will
be rounded to 1,432.4568); and

D. In the event that A.M. Best ceases to publish the A2 Report, or modifies the
A2 Report in such a way as to render the comparisons required by this
calculation to be not meaningful, in the Committee’s sole judgment, the
determinations required above shall be made using such comparable Company and
industry-wide data as may be then available from A.M. Best in any successor or
replacement report or publication, or such comparable data as may be available
from another nationally recognized provider of insurance industry data, in each
case as the Committee may approve in its sole discretion.

e. Committee Discretion. Notwithstanding anything to the contrary contained in
this Agreement, at or prior to the time of vesting, the Committee, in its sole
discretion, may reduce the number of Restricted Stock Units that otherwise would
vest according to this Agreement, or eliminate the Award in full. The Committee
may, in its sole discretion, treat individual participants differently for these
purposes. Any such determination by the Committee shall be final and binding on
Participant. Under no circumstances shall the Committee have discretion to
increase the award to any Participant in excess of the number of Units that
would have been awarded at vesting based on this Paragraph 4 (except for
adjustments required by Section 3(c) of the Plan).

The Award shall vest in accordance with and subject to the foregoing unless,
prior to the Committee’s certification of the Award, the Award is forfeited or
has become subject to accelerated vesting under the terms and conditions of the
Plan.

5. Expiration of Award. Notwithstanding anything to the contrary in this
Agreement, if Participant’s rights in and to the Award have not vested in
accordance with Section 4 of this Agreement on or before the Expiration Date,
this Award shall expire at 11:59 p.m. on the Expiration Date. Upon such
expiration, the Award shall automatically be forfeited, and Participant shall
have no further rights with respect to the Award.

6. Dividend Equivalents. Participant shall be credited with Dividend Equivalents
with respect to the outstanding Award prior to the applicable vesting date.
Subject to the immediately following sentence, all Dividend Equivalents so
credited will be deemed to be reinvested in Restricted Stock Units based on the
Initial Award Value and any Units resulting from prior reinvestments of Dividend
Equivalents (rounded to the nearest ten-thousandth of a whole Unit). In the
event that Dividend Equivalents cannot be reinvested in Units due to the
operation of Section 10(f) of the Plan, such Dividend Equivalents will be
credited to Participant as a cash value based on the Initial Award Value and any
Units resulting from prior reinvestments of Dividend Equivalents, which cash
value shall be held by the Company (without interest) subject to this Agreement.
The Units and, if applicable, cash value resulting

 

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from the reinvestment of such Dividend Equivalents shall be subject to the same
terms and conditions, and shall vest or be forfeited (if applicable) at the same
time and in the same proportion, as the Initial Award Value set forth in this
Award.

7. Units Non-Transferable. No Restricted Stock Units shall be transferable by
Participant other than by will or by the laws of descent and distribution. In
the event any Award is transferred or assigned pursuant to a court order, such
transfer or assignment shall be without liability to the Company, and the
Company shall have the right to offset against such Award any expenses
(including attorneys’ fees) incurred by the Company in connection with such
transfer or assignment.

8. Executive Deferred Compensation Plan. If Participant is eligible, and has
made the appropriate election, to defer the Award into The Progressive
Corporation Executive Deferred Compensation Plan (the “Deferral Plan”), upon
vesting, the Restricted Stock Units that would otherwise vest under this
Agreement shall be considered to be deferred pursuant to the Deferral Plan,
subject to and in accordance with the terms and conditions of the Deferral Plan
and any deferral agreement entered into by Participant under the Deferral Plan.

9. Termination of Employment. Except as otherwise provided in the Plan or as
determined by the Committee, if Participant’s employment with the Company is
terminated for any reason other than death or RSU Qualified Retirement, all
Restricted Stock Units held by Participant which are unvested or subject to
restriction at the time of such termination shall be automatically forfeited.
Without limiting the foregoing, in the event that any such termination occurs
after the end of the Evaluation Period but prior to the Committee’s
certification as described in Section 4(b) above, the Award shall be
automatically forfeited.

10. Taxes. No later than the date as of which an amount relating to the Award
first becomes taxable, Participant shall pay to the Company, or make
arrangements satisfactory to the Committee regarding the payment of, any
federal, state and local taxes and other items of any kind required by law to be
withheld with respect to such amount. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company and
its Subsidiaries and Affiliates, to the extent permitted by law, shall have the
right to deduct any such taxes from any payment of any kind otherwise due to
Participant. At vesting, Restricted Stock Units awarded under this Agreement
will be valued at the Fair Market Value of the Company’s Stock on such date.

Participant must satisfy the minimum statutory tax withholding obligations
resulting from the vesting of Restricted Stock Units (“Minimum Withholding
Obligations”) either (a) by surrendering to the Company Restricted Stock Units
which are then vesting with a value sufficient to satisfy the Minimum
Withholding Obligations, or (b) by paying to the Company the appropriate amount
in cash or, if acceptable to the Company, by check or other instrument. Unless
Participant advises the Company of his or her election to use an alternative
payment method, Participant shall be deemed to have elected to surrender to the
Company Restricted Stock Units which are then vesting with a value sufficient to
satisfy the Minimum Withholding Obligations. If Participant requests that the
Company withhold taxes in addition to the Minimum Withholding Obligations, such
additional withholding must be satisfied by Participant either (x) by paying to
the Company the appropriate amount in cash or, if acceptable to the Company, by
check or other instrument, or (y) provided that Participant has obtained the
approval of either the Company or the Committee (as required under rules adopted
by the Committee) prior to the date of vesting, by surrendering unrestricted
shares of the Company’s Stock which are not being distributed to Participant as
a result of the vesting event and which have then been owned by Participant in
unrestricted form for more than six (6) months.

 

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Under no circumstances will Participant be entitled to satisfy any such
additional withholding by surrendering Restricted Stock Units, shares of the
Company’s Stock that are being distributed to Participant as a result of the
vesting event, or other shares of Stock which have then been owned by
Participant in unrestricted form for six (6) months or less. In addition, under
no circumstances will Participant be entitled to satisfy any Minimum Withholding
Obligations or additional withholding by surrendering Restricted Stock Units
which are not then vesting or any Restricted Stock Units which Participant has
elected to defer under Paragraph 8 above. All payments, surrenders of Units or
shares, elections or requests for approval must be made by Participant in
accordance with such procedures as may be adopted by the Company in connection
therewith, and subject to such rules as have been or may be adopted by the
Committee.

11. Distribution at Vesting. Subject to the provisions of the Plan and this
Agreement, upon vesting of all or part of the Award, the Company shall
distribute to Participant one share of the Company’s Stock in exchange for each
such vested Restricted Stock Unit, and the applicable Restricted Stock Units
shall be cancelled. Unless determined otherwise by the Company at any time prior
to the applicable distribution, each fractional Restricted Stock Unit shall vest
and be settled in an equal fraction of a share of the Company’s Stock.

12. Non-Solicitation. In consideration of the Award made to Participant under
this Agreement, for a period of twelve (12) months immediately following
Participant’s Separation Date, Participant shall not directly or indirectly
recruit or solicit for hire, or hire, or assist in any manner in the
recruitment, solicitation for hire or hiring of any employee or officer of the
Company or its subsidiaries, or in any way induce any such employee or officer
to terminate his or her employment with the Company or its subsidiaries. For
purposes of this Paragraph, “Separation Date” means the date on which
Participant’s employment with the Company or its subsidiaries is terminated for
any reason.

13. Entire Agreement. This Agreement constitutes the entire agreement between
the parties and supersedes and cancels any other agreement, representation or
communication, whether oral or in writing, between the parties relating to the
Award, provided that the Agreement shall be at all times subject to the Plan.

14. Amendment. The Committee, in its sole discretion, may amend the terms of
this Award, but no such amendment shall be made which would impair the rights of
Participant, without Participant’s consent.

15. Acknowledgments. Participant: (i) acknowledges receiving a copy of the Plan
Description relating to the Plan, and represents that he or she is familiar with
all of the material provisions of the Plan, as set forth in such Plan
Description; (ii) accepts this Agreement and the Award subject to all provisions
of the Plan and this Agreement; and (iii) agrees to accept as binding,
conclusive and final all decisions and interpretations of the Committee relating
to the Plan, this Agreement or the Award.

Participant evidences his or her agreement with the terms and conditions of this
Agreement, and his or her intention to be bound by this Agreement, by
electronically accepting the Award pursuant to the procedures adopted by the
Company. Upon such acceptance by Participant, this Agreement will be immediately
binding and enforceable against Participant and the Company.

 

THE PROGRESSIVE CORPORATION

By:

 

/s/ Charles E. Jarrett

  Vice President & Secretary

 

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