Exhibit 10.24

THE PROGRESSIVE CORPORATION EXECUTIVE

DEFERRED COMPENSATION PLAN

( 2003 Amendment and Restatement)

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS         PAGE NO. ARTICLE 1    DEFINITIONS    1.1 “Affiliated
Company”    1 1.2 “Account” or “Deferral Account”    1 1.3 “Award”    1 1.4
“Beneficiary”    1 1.5 “Change in Control”    1 1.6 “Code”    1 1.7 “Committee”
   1 1.8 “Company”    1 1.9 “Company Stock Fund”    2 1.10 “Deduction
Limitation”    2 1.11 “Deferral Agreement”    2 1.12 “Deferral”    2 1.13
“Disabled” and “Disability”    2 1.14 “Distribution Event”    2 1.15 “Eligible
Executive”    2 1.16 “ERISA”    2 1.17 “Fixed Deferral Period”    3 1.18
“Gainsharing Award”    3 1.19 “Incentive Plan”    3 1.20 “Investment Fund”    3
1.21 “Participant”    3 1.22 “Performance-Based Restricted Stock Award”    3
1.23 “Plan”    3 1.24 “Plan Year”    3 1.25 “Restricted Stock”    3 1.26
“Restricted Stock Award”    3 1.27 “Stock”    3 1.28 “Termination of Employment”
   3 1.29 “Time-Based Restricted Stock Award”    3 1.30 “Trust”    4 1.31 “Trust
Agreement”    4 1.32 “Trustee”    4 1.33 “Valuation Date”    4 1.34 “Withdrawal
Date”    4 ARTICLE 2    DEFERRAL OF AWARDS    2.1 Method of Deferral    4 2.2
Deferral Agreement Provisions    4 2.3 Fixed Deferral Periods    5

--------------------------------------------------------------------------------

ARTICLE 3    DISTRIBUTIONS AND WITHDRAWALS    3.1 Date of Distribution    6 3.2
Method of Distribution    6 3.3 Amount of Distribution    7 3.4 Form of
Distribution    7 3.5 Withdrawal Election    7 ARTICLE 4    ACCOUNTS    4.1
Establishment of Deferral Accounts    8 4.2 Investment of Accounts    8 4.3
Valuation of Investment Funds    8 4.4 Valuation of Accounts    9 4.5 Nature of
Accounts    9 4.6 Account Statements    9 ARTICLE 5    INVESTMENT FUNDS    5.1
Investment Funds    9 5.2 Investment Elections of Participants    10 5.3
Transfers    10 5.4 Special Rules for Restricted Stock    10 5.5 Nature of
Investment Funds    10 5.6 Liquidation of Investment Funds    10 ARTICLE 6   
TRUST    6.1 Establishment of Trust    11 ARTICLE 7    PLAN OPERATION AND
ADMINISTRATION    7.1 Powers of Committee    11 7.2 Nondiscriminatory Exercise
of Authority    12 7.3 Reliance on Tables, etc    12 7.4 Indemnification    12
7.5 Notices to Committee    12

--------------------------------------------------------------------------------

ARTICLE 8    CLAIMS PROCEDURES    8.1 Establishment of Claims Procedures    13
8.2 Claims Denials    13 8.3 Appeals of Denied Claims    13 8.4 Review of
Appeals    14 8.5 Extensions    14 ARTICLE 9    AMENDMENT AND TERMINATION OF THE
PLAN    9.1 Amendment    14 9.2 Termination    15 9.3 Liquidation of the Trust
   15 ARTICLE 10    MISCELLANEOUS PROVISIONS    10.1 Headings    15 10.2 Plan
Not Contract of Employment    15 10.3 Severability    16 10.4 Prohibition on
Assignment    16 10.5 Number and Gender    16 10.6 Governing Law    16 10.7
Satisfaction of Claims    16 10.8 No Liability    16 10.9 Tax Withholding    17
10.10 Facility of Payment    17 10.11 Repayment of Awards    17 10.12 Stock
Subject to the Plan    17

--------------------------------------------------------------------------------

THE PROGRESSIVE CORPORATION EXECUTIVE

DEFERRED COMPENSATION PLAN

(2003 Amendment and Restatement)

WHEREAS, The Progressive Corporation maintains The Progressive Corporation
Executive Deferred Compensation Plan pursuant to a 2000 Amendment and
Restatement and the First Amendment thereto; and

WHEREAS, it is desired to further amend and restate the Plan;

NOW, THEREFORE, effective March 1, 2003 the Plan is hereby amended and restated
in its entirety to provide as follows:

ARTICLE 1

DEFINITIONS

1.1 “Affiliated Company” means any corporation included in the affiliated group
of corporations as defined in Section 1504 of the Code (determined without
regard to 1504(b)) of which the Company is the common parent corporation.

1.2 “ Account” or “ Deferral Account” shall have the meaning set forth in
Section 4.1.

1.3 “Award” means a Gainsharing Award or Restricted Stock Award.

1.4 “Beneficiary” means such person(s) as the Participant has designated. A
Participant may change his/her Beneficiary designation at any time. All
Beneficiary designations (including changes) shall be made in writing on such
forms as the Committee shall prescribe, and shall become effective only when
received and accepted by the Committee; provided, however, that a Beneficiary
designation (including a change) received by the Committee after the designating
Participant’s death shall be disregarded. In the absence of a Beneficiary
designation, or if the designated Beneficiary is no longer living or in
existence at the time of the Participant’s death, all distributions payable from
the Plan upon the Participant’s death shall be paid to the Participant’s estate.

1.5 “Change in Control” means a “Change in Control” or “Potential Change in
Control” within the meaning of The Progressive Corporation 2003 Incentive Plan
(as amended from time to time).

1.6 “Code” means the Internal Revenue Code of 1986, as amended.

1.7 “Committee” means the Compensation Committee of the Board of Directors of
the Company, or any successor committee.

1.8 “Company” means The Progressive Corporation, an Ohio corporation, or its
successors.

 

- 1 -

--------------------------------------------------------------------------------

1.9 “Company Stock Fund” means an Investment Fund consisting of Stock and cash,
and administered in accordance with such rules regarding reinvestment of
dividends and treatment of fractional shares as the Committee shall prescribe.

1.10 “Deduction Limitation” means the following described limitation on a
payment that may otherwise be distributable under the Plan. If the Committee
determines in good faith prior to a Change in Control that there is a reasonable
likelihood that any compensation paid to a Participant for a taxable year of the
Company would not be deductible by the Company solely by reason of the
limitation under Code Section 162(m), then to the extent deemed necessary by the
Committee to ensure that the entire amount of any distribution to the
Participant pursuant to this Plan prior to a Change in Control is deductible,
the Committee may elect to defer all or any portion of a distribution under this
Plan. Any amounts deferred pursuant to this limitation shall continue to be
deemed to be invested as provided in Article 5. The amounts so deferred (subject
to investment gains and losses) shall be distributed to the Participant or his
or her Beneficiary (if the Participant dies) at the earliest possible date, as
determined by the Committee in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable year of the
Company during which the distribution is made will not be limited by Code
Section 162(m), or, if earlier, upon a Change in Control. Notwithstanding
anything to the contrary in this Plan, the Deduction Limitation shall not apply
to any distributions made after a Change in Control.

1.11 “Deferral Agreement” means an agreement entered into by an Eligible
Executive pursuant to Article 2.

1.12 “Deferral” means an amount credited to a Deferral Account pursuant to a
Deferral Agreement.

1.13 “Disabled” and “Disability” means that a Participant is expected to be
unable to perform the duties of his usual occupation for at least twelve
(12) consecutive months, as determined by the Committee.

1.14 “Distribution Event” means, as to each Participant, the earliest of the
following events:

 

  (i) the Participant’s death;

 

  (ii) the Participant’s Termination of Employment; or

 

  (iii) Change in Control.

1.15 “Eligible Executive” means any executive of the Company or any Affiliated
Company who is designated in writing as an Eligible Executive by the Committee,
excluding, however, individuals who are not residents of the United States or
are not working at a location in the United States.

1.16 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

 

- 2 -

--------------------------------------------------------------------------------

1.17 “Fixed Deferral Period” shall have the meaning set forth in Section 2.3.

1.18 “Gainsharing Award” means any bonus or other incentive award payable with
respect to a Plan Year under The Progressive Corporation 2003 Gainsharing Plan,
The Progressive Corporation 2003 Information Technology Incentive Plan, 2003
Progressive Capital Management Bonus Plan, The Progressive Corporation 1999
Executive Bonus Plan (as amended on January 31, 2003) or any other plan or
program as may be designated by the Committee.

1.19 “Incentive Plan” means The Progressive Corporation 2003 Incentive Plan, as
amended from time to time.

1.20 “Investment Fund” means a device established from time to time by the
Committee pursuant to Section 5.1 that is used to calculate gains and losses in
amounts deferred by Participants under the Plan.

1.21 “Participant” means an Eligible Executive who has deferred receipt of a
portion of any Gainsharing Award or Restricted Stock Award pursuant to a
Deferral Agreement. Participation shall begin on the date that a Deferral
Account is established in the name of the Participant and shall end on the date
that the Participant dies or receives a distribution of the balance of all
his/her Deferral Accounts.

1.22 “Performance-Based Restricted Stock Award” means an Award of
“Performance-Based Restricted Stock”, as defined in the Incentive Plan.

1.23 “Plan” means The Progressive Corporation Executive Deferred Compensation
Plan (2003 Amendment and Restatement), as set forth herein and as it may be
amended from time to time.

1.24 “Plan Year” means 2003 and each subsequent calendar year.

1.25 “Restricted Stock” means an award of shares of Stock that is made pursuant
to the Incentive Plan and is subject to restrictions.

1.26 “Restricted Stock Award” means an award of Restricted Stock under the
Incentive Plan.

1.27 “Stock” means the Common Shares, $1.00 par value, of the Company.

1.28 “Termination of Employment” means the voluntary or involuntary cessation of
a Participant’s active employment with the Company and all Affiliated Companies
as a result of any reason other than death, Disability and approved leave of
absence.

1.29 “Time-Based Restricted Stock Award” means an Award of “Time-Based
Restricted Stock”, as defined in the Incentive Plan.

 

- 3 -

--------------------------------------------------------------------------------

1.30 “Trust” shall mean the trust maintained pursuant to the Trust Agreement and
known as The Progressive Corporation Executive Deferred Compensation Trust.

1.31 “Trust Agreement” shall mean the agreement of trust between the Company and
the Trustee executed in furtherance of the Plan, as the same may be amended from
time to time.

1.32 “Trustee” shall mean the person selected from time to time by the Company
to serve as trustee under the Trust Agreement.

1.33 “Valuation Date” shall mean each day that the New York Stock Exchange is
open for trading.

1.34 “Withdrawal Amount” shall have the meaning provided in Article 3.

ARTICLE 2

DEFERRAL OF AWARDS

2.1 Method of Deferral.

Each Eligible Executive may elect to defer receipt of all or a portion of
his/her Gainsharing Award and/or the entirety of any of his/her Restricted Stock
Awards in respect of any Plan Year by signing a Deferral Agreement and
delivering it to the Committee or by completing a Deferral Agreement and
transmitting it to the Committee via the Company’s electronic mail system. If a
Gainsharing Award is payable in installments, each installment, whether or not
payable in the same Plan Year, shall be subject to the same Deferral Agreement.
Any taxes or other amounts due with respect to any deferred Gainsharing Award or
Restricted Stock Award shall be paid by the Eligible Executive to the Company no
later than the date specified by the Company.

2.2 Deferral Agreement Provisions.

Each Deferral Agreement must satisfy all of the following requirements:

(a) it must be in the form specified by the Committee;

(b) it must be delivered in writing, or transmitted electronically, to the
Committee in accordance with such procedures as the Committee may establish from
time to time.

(c) it must be irrevocable;

(d) as to deferrals of Gainsharing Awards, it must apply to only one such Award;

(e) as to deferrals of Restricted Stock Awards, it must apply to all Time-Based
Restricted Stock Awards granted during the Plan Year, all Performance-Based
Restricted Stock Awards granted during the Plan Year, or both;

 

- 4 -

--------------------------------------------------------------------------------

(f) it must be delivered to the Committee in writing, or received by the
Committee via the Company’s electronic mail system, (i) as to each Gainsharing
Award, prior to the Plan Year in which the Gainsharing Award will be earned, and
(ii) as to each Restricted Stock Award, prior to the date the Restricted Stock
Award is granted;

(g) as to deferrals of Gainsharing Awards, it must specify the percentage of the
Eligible Executive’s Gainsharing Award to be deferred, which percentage shall
not be less than ten percent (10%). The same deferral percentage shall apply to
each installment of a Gainsharing Award covered by the Deferral Agreement.
However, a Deferral Agreement may provide for the deferral of a percentage of
that portion of a Gainsharing Award that exceeds a specified gross dollar
amount, which percentage shall not be less than ten percent (10%).
Notwithstanding the preceding provisions of this Section 2.2(g), no Deferral
shall be less than such dollar amount as the Committee may specify from time to
time;

(h) as to deferral of a Restricted Stock Award, it must apply to the entirety of
each Time-Based Restricted Stock Award granted during the Plan Year, the
entirety of each Performance-Based Restricted Stock Award granted during the
Plan Year, or both;

(i) it must specify whether the balance of the Deferral Account to be
established pursuant to that Deferral Agreement will be distributed in a lump
sum, in three (3) annual installments, in five (5) annual installments, or in
ten (10) annual installments; and

(j) it must contain such other provisions, conditions and limitations as may be
required by the Company or the Committee.

2.3 Fixed Deferral Periods.

If an Eligible Executive wishes to defer receipt of all or a portion of any
Award for a fixed period of time (“Fixed Deferral Period”), then his/her
Deferral Agreement relating to such Award shall specify that Fixed Deferral
Period. Such Fixed Deferral Period shall not be less than three (3) years
following (i) in the case of a deferral of all or a portion of a Gainsharing
Award, the end of the Plan Year in which the Gainsharing Award will be earned
and (ii) in the case of a deferral of a Restricted Stock Award, the end of the
Plan Year in which the last of the restrictions applicable to the Restricted
Stock Award expire, and, as to all Awards, shall end on the date the Eligible
Executive attains age 43, 47, 51, 55 or 59, as elected by the Eligible Executive
in his/her Deferral Agreement. In the case of a Restricted Stock Award as to
which restrictions expire in installments, the Fixed Deferral Period must end on
the same date for all installments. Notwithstanding the preceding provisions of
this Section 2.3, Eligible Executives may not elect a Fixed Deferral Period with
respect to the deferral of any Performance-Based Restricted Stock Award.

 

- 5 -

--------------------------------------------------------------------------------

ARTICLE 3

DISTRIBUTIONS AND WITHDRAWALS

3.1 Date of Distribution.

Distribution of the balance of each Deferral Account of a Participant shall be
made or shall commence within thirty (30) days following the earlier of (i) the
date a Distribution Event occurs, (ii) the date on which the Fixed Deferral
Period, if any, applicable to such Account expires, or (iii) the date, if any,
selected by the Company, in its sole discretion, pursuant to Section 9.2. If
distribution is to be made in installments, payment of installments following
the first installment shall be made within thirty (30) days following each
anniversary of the date referred to in clause (i) or (ii) of the preceding
sentence, as applicable, until all installments have been paid. The Committee,
in its sole discretion, may also permit distribution of the balance of all of a
Participant’s Deferral Accounts to be made or commence at any time following the
date the Participant is determined by the Committee to be Disabled. If the
Committee approves such a Disability distribution, no further Deferrals shall be
made with respect to the Disabled Participant following the date of the
Committee’s approval, and each Deferral Agreement to which such Participant is a
party shall be of no further effect.

3.2 Method of Distribution.

Each distribution of the balance of a Deferral Account shall be made to the
Participant, except that any such distribution made on account of the
Participant’s death shall be made to the Participant’s Beneficiary. Each
distribution made on account of the Participant’s death, termination of the Plan
or a Change in Control shall be paid in a lump sum. Each distribution made on
account of the Participant’s Termination of Employment or expiration of a Fixed
Deferral Period shall be paid in either a lump sum or installments, as specified
in the applicable Deferral Agreement. Each distribution made on account of the
Participant’s Disability shall be paid in either a lump sum or installments, as
determined by the Committee in its sole discretion. If a Participant elects to
receive (or, in the case of Disability, begins receiving) payment in
installments and dies prior to payment of all installments, the balance
remaining unpaid at his/her death shall be paid to his/her Beneficiary in a lump
sum. Installment payments shall be paid in three (3) annual installments, in
five (5) annual installments or in ten (10) annual installments, as specified in
the applicable Deferral Agreement. Notwithstanding the preceding provisions of
this Section 3.2, a Participant may elect to change the method of distribution
elected in respect of any distribution to be made on account of Termination of
Employment or expiration of a Fixed Deferral Period to any of the four
permissible options (lump sum, in three (3) annual installments, in five
(5) annual installments or in ten (10) annual installments). Each such change
must be made in writing on such forms as the Committee shall specify and must be
delivered to the Committee at least one (1) year prior to Termination of
Employment or expiration of the Fixed Deferral Period.

 

- 6 -

--------------------------------------------------------------------------------

3.3 Amount of Distribution.

The amount of each lump sum payment shall be equal to the balance of the
Deferral Account, as of the Valuation Date immediately preceding the date of
distribution. The amount of each installment payment shall be equal to the
balance of the Deferral Account as of the Valuation Date immediately preceding
the date of payment multiplied by a fraction, the numerator of which is one and
the denominator of which is the number of years remaining in the period over
which installments are to be paid. Installment distributions to be made in Stock
shall be rounded to the nearest whole share. Notwithstanding anything in the
Plan to the contrary, all distributions, except those made on account of a
Change in Control, are subject to the Deduction Limitation.

3.4 Form of Distribution.

All distributions shall be made in cash, except that a distribution representing
amounts invested in the Company Stock Fund shall be made in Stock with any
fractional shares of Stock to be made in cash.

3.5 Withdrawal Election.

A Participant may elect at any time to withdraw all of his/her Deferral Account
balances, less a withdrawal penalty equal to 10% of such amount (the net amount
shall be referred to as the “Withdrawal Amount”). This election can be made at
any time before or after Disability, death or Termination of Employment, and
whether or not the Participant is in the process of being paid pursuant to an
installment payment schedule. No partial withdrawals of the Withdrawal Amount
shall be allowed. The Withdrawal Amount shall be paid in a lump sum, except to
the extent the Deduction Limitation requires otherwise. The Participant shall
make a withdrawal election by giving the Committee advance written notice of the
election in a form specified by the Committee. The election shall be
irrevocable. The Participant shall be paid (or, if the Deduction Limitation
applies, commence to be paid) the Withdrawal Amount within 30 days after the
Committee’s receipt of his/her election. Once the Withdrawal Amount is paid, or
commences to be paid, the Participant’s participation in the Plan shall
terminate and the Participant shall not be eligible to participate in the Plan
thereafter. If the Deduction Limitation applies, the entire balance of all of
the Participant’s Deferral Accounts shall be reduced by the 10% withdrawal
penalty effective on the date that payment of the Withdrawal Amount is to
commence, even though final payment of the last portion of the Withdrawal Amount
will not be made until permitted by the Deduction Limitation provisions. Any
portion of the Withdrawal Amount not paid immediately shall continue to be
deemed to be invested as provided in Article 5. If a Participant dies prior to
payment of any portion of a Withdrawal Amount, the remaining portion shall be
paid to his/her Beneficiary in a lump sum, subject to the Deduction Limitation.
The provisions of Section 3.4 shall apply to all withdrawals under this
Section 3.5.

 

- 7 -

--------------------------------------------------------------------------------

ARTICLE 4

ACCOUNTS

4.1 Establishment of Deferral Accounts.

The Committee shall establish a Deferral Account in the name of each Participant
for each Gainsharing Award, or portion thereof, and each Restricted Stock Award
that is the subject of a Deferral Agreement. As to Deferrals of Gainsharing
Awards, each such Account shall be established as of the first date that such
Gainsharing Award, or portion thereof, otherwise would have been paid to the
Participant. As to deferrals of Restricted Stock Awards, each such Account shall
be established as of the date that the restrictions applicable to such
Restricted Stock Award expire. In the case of a Restricted Stock Award as to
which the restrictions expire at different times for different portions of the
Award, such Account shall be established as of the date the first of such
restrictions expires. Each Deferral Account shall be credited with the deferred
portion of such Award at the time the Account is established, or, in the case of
a Restricted Stock Award as to which the restrictions expire at different times
for different portions of the Award, from time-to-time as such restrictions
expire. Thereafter, all Deferral Accounts shall be valued and administered as
provided in this Article. Notwithstanding anything in the Plan to the contrary,
the Trustee may combine two (2) or more of any Participant’s Deferral Accounts
into a single Account, if the Deferral Accounts to be combined (i) are subject
to Fixed Deferral Periods ending on the same date or (ii) are not subject to
Fixed Deferral Periods at all.

4.2 Investment of Accounts.

All credits to a Deferral Account of a Participant shall be deemed to be
invested in such Investment Fund or Funds as the Participant shall elect from
time to time in accordance with Article 5. The number of shares of Stock to be
credited to a Participant’s Account by virtue of a Participant’s initial
election to invest a portion of a Deferral in the Company Stock Fund shall be
determined on the date of the Deferral in accordance with such procedures as the
Committee shall establish, based on the weighted average price paid for all
shares of Stock purchased by the Trustee and deposited in the Trust on that date
pursuant to Article 6. Notwithstanding the preceding provisions of this
Section 4.2 all credits to a Deferral Account of a Participant relating to a
deferred Restricted Stock Award shall be deemed to be invested in the Company
Stock Fund until six (6) months and one (1) day following the expiration of the
restrictions applicable to such Award, unless otherwise determined by the
Committee at or after the deferral of such Award. Thereafter, the preceding
provisions of this Section 4.2 shall apply.

4.3 Valuation of Investment Funds.

As of each Valuation Date, the Trustee shall compute the value of each
Investment Fund from which shall be determined the net gain or loss of such
Investment Fund since the immediately preceding Valuation Date. The net gain or
loss shall include any unrealized and realized profits and losses, and any
dividends, interest or other income and any expenses which are due or accrued,
but shall not include distributions from such Investment Fund. In determining
the value of each Investment Fund, the Trustee shall use the following values:

 

- 8 -

--------------------------------------------------------------------------------

securities listed on any nationally recognized securities exchange shall be
valued at the closing price reported on any such exchange on the Valuation Date,
or, if there were no sales on the Valuation Date, then at the last quoted bid
price on the Valuation Date. Securities not listed on a recognized securities
exchange shall be valued at the last quoted closing bid price on the Valuation
Date. A unit of participation in a common trust fund maintained by the Trustee
or a share in a mutual fund shall be valued at the unit value, or share price
respectively, in effect at the close of business on the Valuation Date.
Securities with respect to which there were no available sale prices or bid
prices on the Valuation Date, and any other investments, shall be valued at
prices deemed by the Trustee to represent the fair market value thereof on the
Valuation Date.

4.4 Valuation of Accounts.

As of each Valuation Date, the net gain or loss of each Investment Fund shall be
allocated among the appropriate Deferral Accounts in accordance with such
procedures as the Committee shall establish, which procedures shall apply
uniformly to all Participants.

4.5 Nature of Accounts.

All credits to each Deferral Account of each Participant shall be recorded as a
liability on the books of the Company. However, no Participant or Beneficiary
shall have any proprietary rights of any nature with respect to any Account of
any Participant or with respect to any funds, securities or other property owned
by the Company or any Affiliated Company that is held in the Trust or that
otherwise may be represented from time to time by Investment Funds. All payments
under the Plan shall be made from the Trust or from the Company’s general funds
and in no event shall any Participant or Beneficiary have any claims or rights
to any payment hereunder that are superior to any claims or rights of any
general creditor of the Company.

4.6 Account Statements.

The Committee will furnish each Participant, or make available to each
Participant on-line, periodic statements of the value of each of his/her
Deferral Accounts.

ARTICLE 5

INVESTMENT FUNDS

5.1 Investment Funds.

The Committee shall establish and maintain the Company Stock Fund and such other
Investment Funds as are specified from time to time by the Company. In this
regard, the Company may choose to offer as Investment Funds any investment
vehicles, including without limitation: (i) securities issued by investment
companies advised by affiliates of the Trustee, (ii) guaranteed investment
contracts recommended by the Trustee, and (iii) collective investment trusts
maintained by the Trustee.

 

- 9 -

--------------------------------------------------------------------------------

5.2 Investment Elections of Participants.

Each Participant shall make an investment election in the manner prescribed by
the Committee, directing the manner in which his/her Deferrals shall be deemed
to be invested. Each investment election must be made at the time the applicable
Deferral Agreement is signed and may be changed upon notice to the Committee at
any time prior to the deemed deposit of the applicable Deferral into one or more
Investment Funds. Such elections and notices to the Committee must be made in
writing or through the Company’s electronic mail system in accordance with such
procedures as the Committee may prescribe. Each Participant may make a separate
investment election for each of his/her Deferral Accounts. Each investment
election shall specify that Deferrals shall be deemed to be deposited in one or
more of the Investment Funds in percentages that are each an integral multiple
of 1% and that in the aggregate equal 100% of the Deferral.

5.3 Transfers. Amounts deemed to be invested in an Investment Fund pursuant to
this Section may be transferred to another Investment Fund in accordance with
such procedures and limitations as the Committee shall prescribe. The procedures
and limitations prescribed by the Committee may include, without limitation,
provisions which (i) limit transfers to specified dollar amounts or percentages
(ii) limit the number of transfers that each Participant may make each Plan year
(iii) limit the dates as of which transfers may become effective and (iv) impose
waiting periods or other restrictions in connection with multiple transfers in
and out of the same Investment Fund. All such procedures and limitations shall
apply uniformly to similarly situated Participants.

5.4 Special Rule for Restricted Stock Awards. Notwithstanding the preceding
provisions of this Article 5, each Deferral of a Restricted Stock Award shall be
deemed to be invested in the Company Stock Fund until six (6) months and one
(1) day following the date the restrictions applicable to such Restricted Stock
Award expire, unless otherwise determined by the Committee at or after the
deferral of such Award. Thereafter, the Participant may transfer all or a
portion of such Deferral to another Investment Fund in accordance with the
preceding provisions of this Article 5.

5.5 Nature of Investment Funds.

Notwithstanding anything in the Plan, Trust or any Deferral Agreement to the
contrary, no Participant shall have any rights or interests in any particular
funds, securities or property of the Company, any Affiliated Company or the
Trust, or in any investment vehicle in which Deferrals are deemed to be
invested, by virtue of any investment election made by the Participant under the
Plan, any deemed investment under the Plan or any transactions engaged in by the
Trust. Each Deferral Account, however, shall be credited/charged in accordance
with Article 4 with gains/losses as if the Participant in fact had made a
corresponding actual investment.

5.6 Liquidation of Investment Funds.

If any Investment Fund is liquidated or otherwise ceases to exist without a
successor, then that portion of each Account balance that previously has been
deemed to have been invested in that Investment Fund shall be deemed to have
been transferred to an

 

- 10 -

--------------------------------------------------------------------------------

Investment Fund consisting of money market instruments, or, if none, such other
Investment Fund selected by the Committee.

ARTICLE 6

TRUST

6.1 Establishment of Trust.

The Company shall establish and maintain a Trust to provide a source of funds to
assist the Company in meeting its liabilities under the Plan. Within thirty
(30) days following the end of each Plan Year ending after the Trust has become
irrevocable pursuant to the Trust Agreement, the Company shall be required to
irrevocably deposit additional cash or other property to the Trust in an amount
sufficient to pay each Participant or Beneficiary the benefits payable pursuant
to the terms of the Plan as of the close of that Plan year.

The principal of the Trust, and any earnings thereon, shall be held separate and
apart from other funds of Company and shall be used exclusively for the uses and
purposes of Plan Participants and general creditors of the Company as set forth
herein and in the Trust Agreement. Plan Participants and their Beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plan and the Trust Agreement
shall be mere unsecured contractual rights of Plan Participants and their
Beneficiaries against Company. Any assets held by the Trust will be subject to
the claims of the Company’s general creditors under federal and state law in the
event of Insolvency, as defined in the Trust Agreement. All assets deposited in
the Trust shall be held, administered and distributed by the Trustee in
accordance with the Trust Agreement. The Company shall pay directly, or
reimburse the Trustee for, all taxes due in respect of any income or gains on
Trust assets.

ARTICLE 7

PLAN OPERATION AND ADMINISTRATION

7.1 Powers of Committee.

The Committee will have full power to administer the Plan. Such power includes,
but is not limited to, the following authority:

 

(a) to make and enforce such rules and regulations as it deems necessary or
proper for the efficient administration of the Plan;

 

(b) to interpret the Plan and to decide all matters arising thereunder,
including the right to resolve or remedy any ambiguities, errors,
inconsistencies or omissions. All such interpretations shall be final and
binding on all parties;

 

(c) to compute the amounts payable to any Participant or Beneficiary or other
person in accordance with the provisions of the Plan;

 

- 11 -

--------------------------------------------------------------------------------

(d) to authorize disbursements from the Trust or the Plan;

 

(e) to keep such records and submit such filings, elections, applications,
returns or other documents or forms as may be required under ERISA, the Code or
other applicable law;

 

(f) to appoint such agents, counsel, accountants and consultants as may be
desirable to assist in administering the Plan;

 

(g) To exercise the other powers that are expressly granted to it herein, or
that are impliedly necessary for it to carry out any of its responsibilities
hereunder; and

 

(h) by written instrument, to delegate any of the foregoing powers.

7.2 Nondiscriminatory Exercise of Authority.

The Committee shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.

7.3 Reliance on Tables, etc.

The Committee will be entitled, to the extent permitted by law, to rely
conclusively on all tables, valuations, certificates, opinions and reports which
are furnished by any accountant, Trustee, counsel or other expert retained by
the Committee to assist it in administering the Plan.

7.4 Indemnification.

In addition to whatever rights of indemnification to which employees, officers
and directors of the Company and the Affiliated Companies may be entitled under
the articles of incorporation, regulations or bylaws of the Company or the
Affiliated Companies, under any provision of law, or under any other agreement,
the Company shall satisfy any liabilities actually and reasonably incurred by
any such employee, officer or director, including expenses, attorneys’ fees,
judgments, fines and amounts paid in settlement, in connection with any
threatened, pending, or completed action, suit, or proceeding which is related
to the exercise or failure to exercise by such person or persons of any of the
powers, authority, responsibilities, or discretion of the Company, the
Affiliated Companies or the Committee provided under the Plan or the Trust
Agreement, or reasonably believed by such person or persons to be provided
thereunder, and any action taken by such person or persons in connection
therewith.

7.5 Notices to Committee.

The Committee shall designate one or more addresses to which notices and other
communications to the Committee shall be sent. No notice or other communication
shall be considered to have been given to or received by the Committee until it
has been delivered to the Committee’s attention at one of such designated
addresses.

 

- 12 -

--------------------------------------------------------------------------------

ARTICLE 8

CLAIMS PROCEDURES

8.1 Establishment of Claims Procedures

The Committee shall establish reasonable procedures under which a claimant, who
may be a Participant, or Beneficiary, or his/her duly authorized representative,
may present a claim for benefits under this Plan.

8.2 Claims Denials

Unless such claim is allowed in full by the Committee, written notice of the
denial shall be furnished to the claimant within ninety (90) days (which may be
extended by a period not to exceed an additional ninety (90) days if special
circumstances so require and written notice to the claimant is given prior to
the expiration of the initial ninety (90) day period describing such
circumstances and indicating the date by which the Committee expects to render
its determination) setting forth the following in a manner calculated to be
understood by the claimant:

 

  (i) The specific reason(s) for the denial;

 

  (ii) Specific reference(s) to any pertinent provision(s) of the Plan or rules
promulgated pursuant thereto on which the denial is based;

 

  (iii) A description of any additional information or material as may be
necessary to perfect the claim, together with an explanation of why it is
necessary;

 

  (iv) A description of the Plan’s claims review procedures and the time limits
applicable to such procedures, including a statement of the claimant’s right to
bring a civil action under Section 502(a) of ERISA following an adverse benefit
determination on review; and

 

  (v) An explanation of the steps to be taken if the claimant wishes to resubmit
his/her claim for review.

8.3 Appeals of Denied Claims

Within a reasonable period of time after the denial of the claim, but in any
event, not to be more than sixty (60) days, the claimant or his/her duly
authorized representative may make written application to the Committee for a
review of such denial. The claimant or his/her representative, may, upon request
and free of charge, review or receive copies of documents, records and other
information relevant to the claimant’s claim for benefits, and may submit
written comments, documents, records and other information relating to the claim
for benefits.

 

- 13 -

--------------------------------------------------------------------------------

8.4 Review of Appeals

If an appeal is timely filed, the Committee shall conduct a full and fair review
of the claim and mail or deliver to the claimant its written decision within
sixty (60) days after the claimant’s request for review (which may be extended
by a period not to exceed an additional sixty (60) days if special circumstances
or a hearing so require and written notice to the claimant is given prior to the
expiration of the initial sixty (60) day period describing such special
circumstances and indicating the date by which the Committee expects to render
its determination). In conducting its review, the Committee shall take into
account all comments, documents, records and other information submitted by the
claimant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination. The Committee’s
decision on review shall:

 

  (i) Be written in a manner calculated to be understood by the claimant;

 

  (ii) State the specific reason(s) for the decision;

 

  (iii) Make specific reference to pertinent provision(s) of the Plan;

 

  (iv) State that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant to the claimant’s claim for benefits; and

 

  (v) Include a statement of the claimant’s right to bring a civil action under
Section 502(a) of ERISA.

8.5 Extensions

If a period of time is extended, as permitted under Sections 8.2 and 8.4 above,
due to a claimant’s failure to submit information to decide a claim, the period
for making the benefit determination on review shall be tolled from the date on
which the notification of the extension is sent to the claimant until the date
on which the claimant responds to the request for additional information.

ARTICLE 9

AMENDMENT AND TERMINATION OF THE PLAN

9.1 Amendment.

The Company may amend the Plan and Trust Agreement in any respect at any time
for any reason by action of the Committee without liability to any Participant,
Beneficiary or other person for any such amendment or for any other action taken
pursuant to this Section 9.1, provided that any amendment required to be
approved by the Company’s shareholders pursuant to Section 162(m) of the Code
shall not be effective until approved by the

 

- 14 -

--------------------------------------------------------------------------------

Company’s shareholders in accordance with the requirements of Section 162(m) and
further provided that no such amendment shall be made retroactively in a manner
that would deprive any Participant of any rights or benefits which have accrued
to his/her benefit under the Plan as of the date such amendment is proposed to
be effective, unless such amendment is necessary to comply with applicable law.

9.2 Termination.

The Company may terminate the Plan at any time for any reason by action of the
Committee without any liability to any Participant, Beneficiary or other person
for any such termination or for any other action taken pursuant to this
Section 9.2. Following termination of the Plan, and notwithstanding the
provisions of any Deferral Agreement entered into prior to such termination, no
additional Deferrals may be made hereunder, but all existing Accounts shall
continue to be administered in accordance with the Plan, as in effect
immediately prior to termination, and shall be distributed in accordance with
such terms of the Plan and the applicable Deferral Agreements, unless and until
the Company elects to accelerate distribution as provided below. At any time on
or after the effective date of termination of the Plan, the Company, in its sole
discretion, may elect to accelerate the distribution of the entire balance of
each Participant’s Accounts. Such accelerated distributions shall be made in
accordance with Article 3, except that all distributions shall be made in a lump
sum based on the value of the Accounts, determined as of the Valuation Date
immediately preceding the date of distribution. Upon the completion of
distributions to all Participants or Beneficiaries, as the case may be, no
Participant, Beneficiary or person claiming under or through them, will have any
claims in respect of the Plan.

9.3 Liquidation of the Trust.

The Trust shall continue in existence after the termination of the Plan for such
period of time as may be required to complete the liquidation thereof in
accordance with the terms of this Article 9.

ARTICLE 10

MISCELLANEOUS PROVISIONS

10.1 Headings.

The headings of the Plan have been inserted for convenience of reference only
and are not to be deemed controlling in any constructions of the provisions
herein (other than with respect to defined terms).

10.2 Plan Not Contract of Employment.

The existence of the Plan shall not create, evidence or change any contract of
employment with any Participant. The right of the Company and all Affiliated
Companies to take corrective, disciplinary or other action with respect to their
employees, including terminating their respective employment at any time for any
reason, shall not be affected by any

 

- 15 -

--------------------------------------------------------------------------------

provision of this Plan, and the Company and the Affiliated Companies will not be
deemed responsible to provide continuing employment for any reason, at any time
solely by reason of this Plan.

10.3 Severability.

If any provision of the Plan shall be invalid, such provision shall be fully
severable, and the remainder of the Plan and the application thereof shall not
be affected thereby.

10.4 Prohibition on Assignment.

No right or interest under the Plan of any Participant or Beneficiary shall be
subject at any time or in any manner to anticipation, alienation, assignment
(either at law or in equity), encumbrance (as security or otherwise),
garnishment, levy, execution, or other legal or equitable process, and no
Participant or Beneficiary shall have the power at any time or in any manner to
anticipate, transfer, assign (either at law or in equity), alienate, or subject
to attachment, garnishment, levy, execution or other legal or equitable process,
or in any way encumber, such Participant’s or Beneficiary’s rights or interests
under the Plan, and any attempt to do so shall be void; provided, however, that
the Company shall have the unrestricted right to set off against or recover out
of any payments due a Participant or Beneficiary at the time such payments would
have otherwise been payable hereunder, any amounts owed the Company or any
Affiliated Company by such Participant or Beneficiary.

10.5 Number and Gender.

Any use of the singular shall be interpreted to include the plural and the
plural the singular. Any use of the masculine, feminine or neuter shall be
interpreted to include the masculine, feminine and neuter, as the context shall
require.

10.6 Governing Law.

To the extent not preempted by Federal law, the provisions of the Plan shall be
construed, regulated and administered under the laws of the State of Ohio.

10.7 Satisfaction of Claims.

Any payment to any Participant or Beneficiary in accordance with the terms of
the Plan shall, to the extent thereof, be in full satisfaction of all claims
hereunder, whether they be against the Company, the Committee, or the Trustee,
any of whom may require the Participant or Beneficiary (or legal
representative), as a condition precedent to such payment to execute a release
and receipt therefor.

10.8 No Liability.

Participation in the Plan is entirely at the risk of each Participant. Neither
the Company, any Affiliated Company, the Committee, the Trustee nor any other
person associated with the Plan shall have any liability for any loss or
diminution in the value of Accounts, or for any

 

- 16 -

--------------------------------------------------------------------------------

failure of the Plan to effectively defer recognition of income or to achieve any
Participant’s desired tax treatment or financial results.

10.9 Tax Withholding.

All payments under the Plan shall be subject to federal, state and local income
tax withholding and other legally required deductions.

10.10 Facility of Payment.

If the Committee determines that a Participant or Beneficiary entitled to
receive a payment under this Plan is (at the time such payment is to be made) a
minor or physically, mentally or legally incompetent to receive such payment and
that another person or an institution has legal custody of such minor or
incompetent individual, the Committee may cause payment to be made to such
person or institution having custody of such Participant or Beneficiary. Such
payment, to the extent made, shall operate as a complete discharge of obligation
by the Committee, the Company, the Trustee and the Trust.

10.11 Repayment of Awards.

If any amount credited to a Deferral Account represents a portion of an Award
that is subsequently found to be repayable by the Participant to the Company or
any Affiliated Company pursuant to the plan pursuant to which the Award was
made, the amount of that credit shall nevertheless remain unaffected by that
repayment obligation, and the Participant shall make the required repayment out
of his/her own funds.

10.12 Stock Subject to the Plan.

Subject to adjustment as provided below, the total number of shares of Stock
reserved and available for issuance in connection with the Plan is 848,598. Any
Stock issued hereunder may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If there is a merger, reorganization,
consolidation, recapitalization, share dividend, share split, reverse 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, and in
the number of shares deemed to be held in any Account, as may be approved by the
Committee in its sole discretion.

10.13 The Addendum attached hereto entitled “Addendum to The Progressive
Corporation Executive Deferred Compensation Plan (“Plan”) Re: Former
Participants under the Midland Companies Amended and Restated Director and
Executive Cash or Deferred Compensation Plan” is hereby incorporated herein by
reference and made a part hereof.

 

- 17 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers as of this 1st day of March, 2003.

 

THE PROGRESSIVE CORPORATION By:  

Charles E. Jarrett

Title:  

Chief Legal Officer

 

- 18 -