<PAGE>   1
                                 EXHIBIT 4(b)
                                 ------------

        Trust Agreement dated January 1, 1999 between the Registrant and
American Express Trust Company, as amended on March 11, 1999
<PAGE>   2


                               TRUST AGREEMENT

                                   BETWEEN

                         THE PROGRESSIVE CORPORATION

                                     AND

                        AMERICAN EXPRESS TRUST COMPANY

                                     FOR

              THE PROGRESSIVE RETIREMENT SECURITY PROGRAM TRUST

                         DATED AS OF JANUARY 1, 1999


<PAGE>   3

<TABLE>
<CAPTION>


                                TABLE OF CONTENTS
                                -----------------

SECTION                                                                                          PAGE
-------                                                                                          ----
<S>                                                                                             <C>
1.       Trust ......................................................................            1

2.       Exclusive Benefit and Reversion of
           Sponsor Contribution .....................................................            2

3.       Contributions to and Distributions from the Trust ..........................            2

4.       Investment of Trust ........................................................            2-7

5.       Recordkeeping and Reports ..................................................            7

6.       Agents, Attorneys, Actuaries, Accountants and
           Brokers; Trustee Compensation and Expenses; Taxes ........................            7-8

7.       Directions .................................................................            8-9

8.       Resignation or Removal of Trustee ..........................................            9

9.       Successor Trustee ..........................................................            9

10.      Termination ................................................................            9

11.      Continuing Assistance ......................................................            10

12.      Notices ....................................................................            10

13.      Duration ...................................................................            10

14.      Amendment or Modification ..................................................            10

15.      Loans to Participants. .....................................................            10

16.      General ....................................................................            11

17.      Governing Law. .............................................................            11

18.      Transferred Assets; Administration of Transferred Assets;
           Powers and Duties of Trustee .............................................            11-12
</TABLE>


<PAGE>   4
         TRUST AGREEMENT, dated as of the 1st day of January, 1999, between The
Progressive Corporation, an Ohio corporation, having an office at 6300 Wilson
Mills Road, Mayfield Village, Ohio 44143 (the "Sponsor"), and American Express
Trust Company, having an office at 1200 Northstar West, P.O. Box 534,
Minneapolis, Minnesota 55440-0534 (the "Trustee").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Sponsor is the sponsor (within the meaning of Section
3(16)(B) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and a fiduciary of The Progressive Retirement Security Program (the
"Plan"); and

         WHEREAS, Progressive Casualty Insurance Company ("Administrator") has
been designated as administrator (within the meaning of Section 3(16)(A) of
ERISA) of the Plan; and

         WHEREAS, Administrator has retained American Express Trust Company to
provide certain administrative services with respect to the Plan pursuant to an
Administrative Services Agreement dated January 1, 1999 (the "Services
Agreement"); and

         WHEREAS, American Express Trust Company, in its capacity as a provider
of services under the Services Agreement, is referred to hereinafter in this
Agreement as the "Contract Administrator"; and

         WHEREAS, the Sponsor wishes to establish a trust to hold and invest
contributions under the Plan for the exclusive benefit of Participants in the
Plan and their Beneficiaries; and

          WHEREAS, the Trustee is willing to hold and invest the aforesaid
contributions in trust;

         NOW, THEREFORE, Trustee and Sponsor hereby agree as follows:

         SECTION 1. TRUST. The Sponsor hereby establishes a trust (the "Trust")
with the Trustee. The Trust shall consist of an initial transfer of assets from
the prior trustee of the Plan, such additional sums of money as shall from time
to time be delivered to the Trustee under the Plan, all investments made
therewith and proceeds thereof, and all earnings and profits thereon, less the
payments that are made by the Trustee as provided herein. The Trustee hereby
accepts the Trust on the terms and conditions set forth in this Agreement. In
accepting this Trust, the Trustee shall be accountable for the assets received
by it, subject to the terms and conditions of this Agreement. The Sponsor and
the Trustee acknowledge and agree that each is a fiduciary of the Plan to the
extent provided under Section 3(21) of ERISA. Except as otherwise expressly
provided herein, all capitalized terms used in this Agreement shall have the
meanings ascribed to them in the Plan, as in effect from time to time.




                                       1
<PAGE>   5

          SECTION 2. EXCLUSIVE BENEFIT AND REVERSION OF SPONSOR CONTRIBUTIONS.

         (a) Except as provided in the Plan and as permitted under ERISA, no
part of the Trust may be used for, or diverted to, purposes other than (i) the
exclusive benefit of the Participants in the Plan or their Beneficiaries and
(ii) payment of reasonable expenses of administering the Plan.

          SECTION 3. CONTRIBUTIONS TO AND DISTRIBUTIONS FROM THE TRUST.

         (a) RECEIPT OF CONTRIBUTIONS. The Trustee shall receive and hold as
part of the Trust such assets of the Plan as may be transferred to it from time
to time and any contributions to the Plan made to the Trust from time to time.
The Trustee shall not be required to determine that any contributions are in
compliance with the Plan, ERISA or the Code, and shall be accountable only for
the funds actually received by it. In the case of assets transferred from
another trustee or any other fiduciary, the Trustee shall not be responsible for
any actions or inactions of such trustee or other fiduciary either prior to or
after the transfer of Trust assets. Company represents that any assets, from
time to time so transferred, were part of a qualified trust at the time of the
transfer.

         (b) DISTRIBUTIONS TO PARTICIPANTS. The Trustee shall make distributions
from the Trust to such persons, in such manner, in such amounts (but not
exceeding the then value of the Trust), for such purposes and subject to such
tax withholding and other deductions as may be specified in the Services
Agreement.

                  The Trustee shall not be liable for making any distribution,
failing to make any distribution, or discontinuing any distribution to the
extent required by the Services Agreement. The Trustee shall not be required to
determine or make any investigation to determine the identity or mailing address
of any person entitled to benefits under the Plan, and shall be discharged of
any obligation in that respect when the Trustee shall have sent checks and other
papers by regular mail, postage prepaid, to such persons and at such addresses
as may be furnished to the Trustee, provided that the Trustee shall promptly
advise the Administrator of all returned checks and correspondence. In addition,
the Trustee will promptly notify the Administrator of each uncashed check that
is at least six (6) months old.

         (c) If the Trustee makes a duplicate disbursement in distributing Stock
or cash from the Trust and such error is not the result of a force majeure or
Act of God or duplicate instructions from the Administrator, the Trustee shall
promptly correct the error at its expense and shall promptly reimburse the Trust
for any overpayment.

          SECTION 4. INVESTMENT OF TRUST.

         (a) The Trustee is vested with title to all the assets of the Trust and
shall have full power and authority to do all acts necessary to carry out its
duties hereunder. Participants and Beneficiaries shall not have any right or
interest in the Trust except as provided in the Plan. Prior to the time of
distribution, neither a Participant nor a Beneficiary (nor a legal
representative of a Participant or a Beneficiary) shall have any right, by way
of anticipation or otherwise, to assign, encumber, or in any manner dispose of
any interest in the Trust except as permitted under the Plan or as required by
applicable law or directed by a court of competent jurisdiction.




                                       2
<PAGE>   6

         (b) The Sponsor will direct the Trustee as to the Investment Funds to
be established for investment of Trust assets in accordance with the provisions
of the Plan. The Trustee does not have any duty to question any such direction,
to review any Investment Fund, or to make any suggestions in connection
therewith. The Trustee will promptly comply with any direction given by the
Administrator.

         (c) The Trustee shall invest in the Investment Funds in accordance with
investment directions given by the Participants and Beneficiaries for whose
accounts such assets are held, to the extent so provided for in the Plan. All
such directions by the Participants or Beneficiaries to the Trustee will be made
in writing or by telephone or in such other manner as is mutually agreed by the
Sponsor and the Trustee. Participants and Beneficiaries will be deemed
fiduciaries for purposes of such investment selection.

         (d) Where a Participant, a Beneficiary or an Investment Manager (except
the Trustee as Investment Manager of any assets as provided herein), has the
power and authority to direct the investment of any assets of the Trust, the
Trustee does not have any duty to question any direction, to review any
securities or other property, or to make any suggestions in connection
therewith. The Trustee will promptly comply with any direction given by a
Participant, a Beneficiary or an Investment Manager.

         (e) The Trustee will not be liable in any manner or for any reason for
any loss or other unfavorable investment results arising from its compliance
with direction under this Section, nor be liable for failing to invest any
assets of the Trust under the management and control of a Participant, a
Beneficiary or an Investment Manager in the absence of investment directions
regarding such assets.

         SECTION 4A.  INVESTMENT MANAGERS.

         (a) The Sponsor has the power and authority to appoint one or more
Investment Managers as defined in and subject to the requirements of ERISA. Each
Investment Manager so appointed will have the power and authority to invest,
acquire, manage or dispose of the assets of the Trust under its management and
to direct the Trustee with respect to the investment, reinvestment and sale of
such assets.

         (b) If the Sponsor elects to delegate investment authority for the
assets of all or any portion of the Trust to an Investment Manager pursuant to
subsection (a), the Sponsor will inform the Trustee in writing of such
designation and such written notice shall describe the portion of the Trust
affected. Upon receipt of such notice, the Trustee will be obligated to follow
the investment directions of the Investment Manager with respect to the assets
of the specified portion of the Trust until the Trustee receives written notice
that such Investment Manager has resigned or has been removed or replaced by the
Sponsor. The Trustee will not be a party to any agreement between the Sponsor
and an Investment Manager, and will have no responsibility with respect to the
terms and conditions of such agreement.

         (c) In exercising its authority to delegate investment authority to an
Investment Manager, the Sponsor shall have the duty, responsibility and power to
(i) examine and analyze the performance of prospective Investment Managers; (ii)
select an Investment Manager or




                                       3
<PAGE>   7

Managers; (iii) determine the portion of the Trust that will be under the
management of each Investment Manager; (iv) issue appropriate instructions to
the Trustee and to each Investment Manager regarding the allocation of
investment authority; (v) review the performance of each Investment Manager at
periodic intervals; and (vi) remove any Investment Manager when the Sponsor
deems such removal to be necessary or appropriate.

         (d) All directions by an Investment Manager to the Trustee concerning
the investment, reinvestment, sale or management of assets of the Trust will be
made in writing or in such other manner as is acceptable to the Trustee, by such
person or persons as the Investment Manager designates in writing to the Trustee
from time to time.

         (e) An Investment Manager who engages any investment advisor or
investment counselor that it deems necessary or appropriate, may provide that
directions concerning the investment and reinvestment of the assets of the Trust
under its management and control to be made directly to the Trustee by such
advisor or counselor as the Investment Manager's agent; provided, however, that
prior to any such direction by the investment advisor or investment counselor,
the Trustee receives written notice from the Investment Manager that the
directions of such agent will be considered the directions of the Investment
Manager and that the Investment Manager will be responsible for the directions
of such agent.

         (f) If an Investment Manager resigns or is removed by the Sponsor, the
Sponsor will notify the Trustee in writing of such resignation or removal. Upon
actual receipt of such notice, the power and authority to invest and reinvest
the assets of the Trust formerly under the control and management of the
Investment Manager will return to the Sponsor unless the Sponsor indicates that
a successor Investment Manager has been appointed with respect to such assets.

         (g) The fees and expenses of each Investment Manager, except to the
extent paid by the Sponsor, shall be paid from the Trust, provided that no fees
not expressly provided for in this Agreement shall be paid to the Trustee with
respect to its activities as an Investment Manager under Section 4C.

         SECTION 4B.  INVESTMENT IN COLLECTIVE FUNDS.

         When so directed by the Administrator or pursuant to investment
directions given by Participants or Beneficiaries pursuant to Section 4, the
Trustee shall invest and reinvest all or a portion of the Trust through any
common or collective trust fund or pooled investment fund, including collective
investment funds maintained by American Express Trust Company or its successor,
for the collective investment of funds held by it in a fiduciary capacity. The
1998 Amended and Restated Declaration of Trust creating the American Express
Trust Collective Investment Funds for Employee Benefit Trusts ("Declaration of
Trust") is hereby incorporated by reference and made a part of this Agreement.
Notwithstanding any other provision of this Agreement, the Trustee may commingle
the designated assets from the Trust with the money of trusts created by others,
by causing such assets to be invested as a part of any one or more of the
collective funds created by the Declaration of Trust and assets of this Trust so
added to any of the collective funds at any time shall be subject to all of the
provisions of the Declaration of Trust as it is amended from time to time.
Notwithstanding the foregoing, the provisions of this Section shall apply only
as long as such collective or pooled investment fund remains exempt from



                                       4
<PAGE>   8

taxation under Section 501(a) of the Code and the qualified status of the Plan
and the tax exempt status of the Trust are not thereby affected adversely.

         SECTION 4C.  TRUSTEE AS INVESTMENT MANAGER

         The Sponsor hereby appoints Trustee to serve as Investment Manager with
respect to the Investment Funds set forth in Exhibit A, which Exhibit may be
amended from time to time by mutual agreement of the parties (said Investment
Funds hereinafter referred to as the "Account"):

         Trustee shall have full discretionary authority to formulate and
execute an investment program for the management and investment of the Account,
including the authority to:

         (a) buy, sell, exchange, convert or otherwise trade in any stocks,
bonds and other investments including money market instruments and investment
contracts; and

         (b) place orders for the execution of such investment transactions with
or through such brokers, dealers or issuers as Trustee may select; and

         (c) request the issuance of average price confirmations by
participating brokers.

         Such authority shall be subject to the terms and conditions of this
Agreement, the provisions of the Declaration of Trust with respect to any assets
in the collective funds as provided in Section 4B. of this Trust Agreement and
any written investment objectives and guidelines that are executed by the
Sponsor and accepted by the Trustee. Such guidelines are incorporated herein by
reference.

         To the extent the Trustee is an Investment Manager, it shall invest and
reinvest the principal and income of the Account with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.

         SECTION 4D.  OTHER INVESTMENT PROVISIONS.

         (a) Purchases and sales of Company Stock may be made to, from or
through any source, provided that such purchases from, or sales to, a party in
interest (as defined in Section 3(14) of ERISA) shall comply with the
requirements of Section 408(c) of ERISA. Rights, options or warrants offered to
purchase Company Stock shall be exercised by the Trustee to the extent that
there is cash available for the investment; to the extent cash is not available,
the same shall be sold on the open market.

         (b) Neither the Trustee, the Sponsor nor the Administrator shall be
liable for any loss which arises from any Participant's directions, investment
elections, investment election changes, transfers or exercise or non-exercise of
rights under the Plan pertaining to the assets in the Participant's Accounts.

         (c)      The Trustee shall have the following powers and authority:


                                       5
<PAGE>   9

                  (i) Subject to the preceding provisions of this Agreement, to
sell, exchange, convey, transfer, or otherwise dispose of any property held in
the Trust, by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or other
property delivered to the Trustee or to inquire into the validity, expediency,
or propriety of any such sale or other disposition.

                  (ii) To cause any securities or other property held as part of
the Trust to be registered in the Trustee's own name, in the name of one or more
of its nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments are,
and such investments shall at all times be, part of the Trust.

                  (iii) To make, execute, acknowledge and deliver any and all
documents of transfer or conveyance necessary to carry out the powers herein
granted.

                  (iv) With the Sponsor's prior written consent (which shall not
be unreasonably withheld) (1) to settle, compromise or submit to arbitration any
claims, debts or damages due to or arising from the Trust, (2) to commence or
defend suits or legal or administrative proceedings, (3) to represent the Trust
in all suits and legal and administrative hearings, and (4) to pay all
reasonable expenses arising from any such action from the Trust, if not paid by
the Sponsor; provided that the Trustee has given the Sponsor prompt notice of
all such matters and has permitted the Sponsor to participate in all related
activities. Notwithstanding the foregoing provisions of this Section 4D(e)(v),
where the Trustee must take an action with respect to a claim, suit, or other
legal, administrative or regulatory proceeding in order to fulfill its fiduciary
responsibilities under ERISA, the Trustee need not obtain the Sponsor's prior
written consent as provided above, but the Trustee shall give the Sponsor as
much prior notice of the Trustee's proposed actions as circumstances permit.

                  (v) To borrow money from any lender to cover temporary
overdrafts to the extent such overdrafts are necessary to facilitate transfers
among, or distributions from, any of these Investment Funds.

                  (vi) To hold any part of the Trust assets in cash without
liability for interest, pending the payment of expenses or making of
distributions therewith, notwithstanding the Trustee's receipt of "float" from
such uninvested cash.

                  (vii) To do all other acts although not specifically mentioned
herein, as the Trustee may deem necessary to carry out any of the foregoing
powers and the purposes of the Trust.

         (d) The Administrator has assigned to the Participants the right to
vote proxies or exercise other rights of ownership with respect to all
Investment Funds except Investment Funds for which American Express Trust
Company is the Investment Manager. Unless otherwise agreed in writing: (i) the
Administrator shall be responsible for distributing proxies and proxy related
materials to the Participants and (ii) the Trustee shall deliver or cause to be
delivered to the Administrator or the designated Investment Manager, all
notices, prospectuses and finance statements relating to investments held
hereunder. Except for those Trust assets for which American Express Trust
Company is the Investment Manager, the Trustee shall not vote any proxy or
tender offer election, participate in any voting trust, exercise any option, or
subscription



                                       6
<PAGE>   10

right or join in, dissent from or oppose any merger, reorganization,
consolidation, liquidation or sale with respect to any asset held hereunder
except in accordance with the timely written instructions of the Participants.
Solely for this purpose, each Participant shall act as the Named Fiduciary, as
defined in ERISA, in providing direction to the Trustee. Unless contrary to the
terms of the Plan, and to the extent practicable, all unallocated assets or
investments held hereunder, and all assets or investments for which the Trustee
has not received instructions, shall, solely for the purposes of this Section be
allocated to the account of each Participant who has issued instructions to the
Trustee, in the same proportion as such Participant's allocated proportion of
assets or investments bear to the aggregate of all like assets or investments
for which instructions have been issued by the Participant to the Trustee.

         SECTION 5. RECORDKEEPING AND REPORTS.

         (a) The Trustee shall keep accurate accounts of all investments,
receipts, disbursements and other transactions hereunder. All records generated
by the Trustee shall be open to inspection and audit, during the Trustee's
regular business hours prior to the termination of this Agreement, by the
Sponsor, the Administrator or any person designated by the Sponsor. If the
Sponsor or the Administrator becomes aware of any errors or discrepancies in
such records, it will promptly advise the Trustee.

         (b) Except as otherwise required by law, the Contract Administrator
shall be responsible for the preparation and filing of all returns, reports and
information required of the Trust or Plan by law. The Trustee promptly shall
provide the Contract Administrator with such information in the Trustee's
possession or control as the Contract Administrator may reasonably request to
make these filings.

         SECTION 6. AGENTS, ATTORNEYS, ACTUARIES, ACCOUNTANTS AND BROKERS;
TRUSTEE COMPENSATION AND EXPENSES; TAXES.

         (a) The Trustee, the Sponsor and the Administrator are empowered to
employ such agents, attorneys (including attorneys who may be counsel for the
Sponsor), actuaries, accountants and brokers as they, or any of them, may deem
necessary or proper in connection with the maintenance and administration of the
Trust. The Trustee shall pay out of the Trust the reasonable compensation and
expenses of such agents, attorneys, actuaries, accountants and brokers, except
to the extent such compensation and expenses are paid by the Sponsor or the
Administrator; provided that the Trustee, the Sponsor and the Administrator
shall be responsible for their own attorneys fees and expenses incurred in the
negotiation and preparation of this Agreement and further provided that, in the
case of agents, attorneys, actuaries, accountants and brokers employed by the
Sponsor or Administrator, such payments will only be made by the Trustee as
directed by the Sponsor or Administrator.

         (b) The Trustee shall be entitled to such reasonable compensation for
its services as is provided for in the Services Agreement. The Trustee will, as
part of its compensation for services provided to the Plan, receive the earnings
from any uninvested cash awaiting investment into or distribution from the
Trust. The Company agrees that the Trust may hold such uninvested cash without
incurring any liability for the payment of earnings on such uninvested cash.



                                       7
<PAGE>   11

         (c) As directed by the Sponsor or Administrator, the Trustee is
empowered to pay out of the Trust, as a general charge thereon, any and all
taxes of whatsoever nature assessed on or in respect to the Trust; provided,
however, that, if the Sponsor notifies the Trustee in writing that in the
opinion of the Sponsor's counsel any such tax is not lawfully assessed, the
Trustee, if so requested by the Sponsor, shall contest the validity of such tax
in any manner deemed appropriate by the Sponsor or its counsel. The word
"taxes", as used herein, shall be deemed to include any interest or penalties
assessed in respect to such taxes. Unless the Trustee first shall be indemnified
to its reasonable satisfaction by the Sponsor, the Trustee shall not be required
to contest the validity of any tax, to institute, maintain or defend against any
other action or proceeding or to incur any other expense in connection with the
Trust, except to the extent that the Trust is sufficient therefor.

         SECTION 7. DIRECTIONS.

         (a) Except as otherwise agreed in writing between the Trustee and the
Sponsor or Administrator, any action under this Agreement required to be taken
by the Sponsor or the Administrator shall be by written direction of any
individual authorized by the Sponsor's Chairman, President, Chief Executive
Officer, Chief Human Resources Officer, Chief Financial Officer or Chief Legal
Officer in substantially the form of Exhibit B attached hereto, unless the
Trustee has received actual written notice from any of such officer that such
individual's authority has been withdrawn. The Trustee may rely on any such
written direction which it reasonably believes to bear the genuine signature of
the authorized individual, which writing may include a facsimile transmission.
Notwithstanding anything herein to the contrary, the Sponsor or the
Administrator may delegate any of its responsibilities hereunder to a
representative by giving to the Trustee in writing a letter which identifies the
representative and sets forth the list of the Trustee's responsibilities under
this Agreement that the Trustee has authorized the representative to carry out.

         (b) The Sponsor shall indemnify the Trustee against, and hold the
Trustee harmless from, any and all loss, damage, penalty, liability, cost,
expense and reasonable attorneys' fees and disbursements, that may be incurred
by, imposed upon or asserted against the Trustee by reason of any claim,
regulatory proceeding or litigation arising from any act done or omitted to be
done by any individual or person with respect to the Plan or Trust, excepting
only any and all loss, damage, penalty, liability, cost, expense, and reasonable
attorneys' fees and disbursements, to the extent arising from the Trustee's
negligence in performing or failing to perform any of the duties specifically
allocated to the Trustee under the terms of this Agreement or from the Trustee's
willful misconduct or bad faith.

                  The Trustee agrees to indemnify and hold the Sponsor and
Administrator harmless from and against any loss, damage, penalty, liability,
cost and expense and reasonable attorneys' fees and disbursements incurred by
the Sponsor or Administrator to the extent arising from the Trustee's negligence
in performing or failing to perform any of the duties specifically allocated to
the Trustee under the terms of this Agreement or from the Trustee's willful
misconduct or bad faith.



                                       8
<PAGE>   12

         (c) Notwithstanding the foregoing, nothing in this Agreement shall
limit the liability of American Express Trust Company in its capacity as
Contract Administrator under the Services Agreement.

         (d) The provisions of this Section 7 shall survive the termination of
this Agreement.


         SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE.

         (a) The Trustee may resign at any time upon three hundred sixty-five
(365) days' notice in writing to the Sponsor, unless a shorter period of notice
is agreed upon by the Sponsor.

         (b) The Sponsor may remove the Trustee at any time upon one hundred
eighty (180) days' notice in writing to the Trustee, unless a shorter period of
notice is agreed upon by the Trustee.

         SECTION 9. SUCCESSOR TRUSTEE.

         (a) If the office of Trustee becomes vacant for any reason, the Sponsor
may in writing appoint a successor trustee under this Agreement. The successor
trustee shall have all of the rights, powers, privileges, obligations, duties,
liabilities and immunities granted to the Trustee under this Agreement. The
successor trustee and predecessor trustee shall not be liable for the acts or
omissions of the other with respect to the Trust.

         (b) When the successor trustee accepts its appointment under this
Agreement, title to and possession of the Trust assets shall immediately vest in
the successor trustee without any further action on the part of the predecessor
trustee. The predecessor trustee shall execute all instruments and do all acts
that reasonably may be necessary or reasonably may be requested in writing by
the Sponsor or the successor trustee to vest title to all Trust assets in the
successor trustee or to deliver all Trust assets to the successor trustee as
promptly as possible.

         (c) Any successor of the Trustee or successor trustee, through sale or
transfer of the business or trust department of the Trustee or successor
trustee, or through reorganization, consolidation, or merger, or any similar
transaction, shall, upon consummation of the transaction, become the successor
trustee under this Agreement.

         SECTION 10. TERMINATION. This Agreement may be terminated at any time
by the Sponsor upon sixty (60) days' notice in writing to the Trustee. On the
date of the termination of this Agreement, the Trustee shall forthwith transfer
and deliver to such individuals or entities as the Sponsor shall designate, all
cash and assets then constituting the Trust. If, by the termination date, the
Sponsor has not notified the Trustee in writing as to whom the assets and cash
are to be transferred and delivered, the Trustee may bring an appropriate action
or proceeding for leave to deposit the assets and cash in a court of competent
jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and
expenses of the action or proceeding including, without limitation, reasonable
attorneys' fees and disbursements.



                                       9
<PAGE>   13

         SECTION 11. CONTINUING ASSISTANCE. Following the appointment of a
successor trustee under Section 9 or the termination of this Agreement under
Section 10, the Trustee shall provide such follow-up and transition assistance
as the Sponsor may reasonably request, including, but not limited to, providing
additional copies of Form 1099Rs and cashed distribution checks, related to
activity occurring during the years that the Trustee was trustee, provided
however, the Trustee shall not be required to produce any information, accounts
or copies of Form 1099Rs or checks which are more than seven years old.

         SECTION 12. NOTICES. Except as otherwise expressly provided herein, all
notices required or permitted to be given under this Agreement must be in
writing and mailed to the party to which the notice is being given by certified
or registered mail, return receipt requested, or overnight courier with next day
delivery guaranteed, to the Sponsor at 6300 Wilson Mills Road, Mayfield Village,
Ohio 44143, Attn: Marilyn A. Muzic, with a copy to Michael R. Uth, Progressive
Casualty Insurance Company, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143
and to the Trustee at 1200 Northstar West, P.O. Box 534, Minneapolis, Minnesota
55440-0534, Attn: Team for Progressive Corp., or to such other persons and
addresses as the parties provided notice in the foregoing manner.

         SECTION 13. DURATION. This Trust shall continue in effect without limit
as to time, subject, however, to the provisions of this Agreement relating to
amendment, modification and termination thereof.


         SECTION 14. AMENDMENT OR MODIFICATION. Subject to the provisions of
Section 2, this Agreement may be amended at any time and from time to time only
by an instrument executed by both the Sponsor and the Trustee. Any such
amendment shall be approved on behalf of the Sponsor by its Board of Directors;
provided, however, that any such amendment which is required by law to be made
or which will not require the Sponsor or any Employer to make contributions
other than compensation reduction contributions in respect of the Plan may be
approved by the Sponsor's Chairman, President or Chief Executive Officer and
such officer's execution of such amendment shall be deemed to be conclusive
evidence that any and all requisite approvals in respect of such amendment have
been obtained.

         SECTION 15. LOANS TO PARTICIPANTS. Loans to Participants as provided
for in the Plan shall be granted and administered by the Contract Administrator
in accordance with guidelines provided from time to time by the Administrator.
The Trustee shall distribute cash to such Participants who are granted loans in
such amount and at such times as the Contract Administrator shall from time to
time direct. Loan payments collected by the Sponsor or Contract Administrator
shall be forwarded to the Trustee. The Contract Administrator shall give the
Trustee instructions on how to handle loan disbursements and repayments. The
Trustee shall have no responsibility to ascertain whether a loan complies with
the provisions of the Plan, for the decision to grant a loan or for the
collection and repayment of a loan. The Contract Administrator shall maintain
the market value of the outstanding loans and the Trustee shall have no
responsibility with respect thereto.



                                       10
<PAGE>   14

         SECTION 16.  GENERAL.

         (a) ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon between the parties with respect to the subject matter hereof.

         (b) WAIVER. No waiver by either party of any failure or refusal to
comply with any obligation hereunder shall be deemed a waiver of any other or
subsequent failure or refusal to so comply.

         (c) SUCCESSORS AND ASSIGNS. The stipulations in this Agreement shall
inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.

         (d) PARTIAL INVALIDITY. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
held invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.

         (e) SECTION HEADINGS. The headings of the various sections and
subsections of this Agreement have been inserted only for the purposes of
convenience of reference and are not part of this Agreement and shall not be
deemed in any manner to modify, explain, expand or restrict any of the
provisions of this Agreement.

         SECTION 17.  GOVERNING LAW.

         (a) The validity, construction, effect and administration of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Minnesota, except to the extent those laws are superseded by ERISA.

         (b) The Trustee is not a party to the Plan and in no event shall the
terms of the Plan, either expressly or by implication, be deemed to impose upon
the Trustee any power or responsibility other than those set forth in this
Agreement. The Trustee may assume until advised to the contrary that the Plan is
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended,
or under corresponding provision of subsequent federal tax laws. The Trustee
shall be accountable for contributions made to the Plan and included among the
assets of the Trust but shall have no duty to determine whether the
contributions comply with the provisions of the Plan or of ERISA.

         SECTION 18. TRANSFERRED ASSETS; ADMINISTRATION OF TRANSFERRED ASSETS;
                     POWERS AND DUTIES OF TRUSTEE.

         (a) There will, from time to time, subsequent to December 31, 1997, be
delivered to the Trustee certain assets ("Midland Assets") previously held
pursuant to the Midland Companies' Employee Savings Plan ("Midland Plan"). All
such Midland Assets shall be held, administered



                                       11
<PAGE>   15

and disbursed by the Trustee as part of the Trust, pursuant to the provisions of
this Agreement, as in effect from time to time once received by the Trustee.

         (b) The Trustee will have no duty to verify whether the amount of any
such Midland Assets delivered to it is correct, and shall have no duty of
inquiry into the prior administration of the Midland Plan or funding for the
Midland Plan.

         (c) Such Midland Assets shall be invested in such investment funds as
the Sponsor shall direct, based on each Participant's investment election then
in effect pursuant to the Plan, if any, and if no investment election is then in
effect as to any Participant, such Midland Assets relating to such Participant
shall be invested in an investment fund consisting of guaranteed investment
contracts or a similar successor investment fund until the Sponsor directs
otherwise based on a subsequent investment election of the Participant.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

                                        THE PROGRESSIVE CORPORATION

                                        By:  /s/ DAVID M. SCHNEIDER
                                             -----------------------------------
                                        Title: Secretary
                                               ---------------------------------



                                        AMERICAN EXPRESS TRUST COMPANY

                                        By:  /s/ TARA L. STONEHOUSE
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------
                                               12/17/98



                                       12
<PAGE>   16


                                                                       EXHIBIT A

Pursuant to Section 4C hereof, American Express Trust is appointed as Investment
Manager of the following Funds:

American Express Trust Stable Capital Fund II
American Express Trust Short - Term Horizon (25:75) Fund
American Express Trust Bond Index Fund II
American Express Trust Medium - Term Horizon (50:50) Fund
American Express Trust Long - Term Horizon (80:20) Fund
American Express Trust Equity Index Fund III
American Express Trust Small Cap Equity Index Fund II


<PAGE>   17


                                   EXHIBIT "B"

_______________________________
_______________________________
_______________________________
_______________________________

Re:      The Progressive Retirement Security Program

Dear Mr. __________________________________ :

This letter is sent to you in accordance with Section ____________ of the Trust
Agreement, dated as of _________ , 1998, between The Progressive Corporation and
American Express Trust Company. I hereby designate _____________, _____________,
and ______________________, as the individuals who may provide directions to you
pursuant to the Agreement. Only one such individual need provide any direction.
The signature of each designated individual is set forth below and certified to
be such.

You may rely upon each designation and certification set forth in this letter
until you receive a written notice of the termination of authority of a
designated individual.

                                           Very truly yours,

                                           __________________________________

                                           By:__________________________________

                                           Title:_______________________________




[signature of designated individual]
 -----------------------------------
[name of designated individual]
 ------------------------------


[signature of designated individual]
 -----------------------------------
[name of designated individual]
 ------------------------------

[signature of designated individual]
 -----------------------------------
[name of designated individual]
 ------------------------------




<PAGE>   18


                                AMENDMENT NO. 1
                                     TO THE
              TRUST AGREEMENT BETWEEN THE PROGRESSIVE CORPORATION
                                      AND
                         AMERICAN EXPRESS TRUST COMPANY
                                    FOR THE
                 PROGRESSIVE RETIREMENT SECURITY PROGRAM TRUST

         This Amendment No.1 to the Trust Agreement between The Progressive
Corporation and American Express Trust Company for the Progressive Retirement
Security Program Trust is made and entered into this 11 day of March 1999, by
and between American Express Trust Company, a Minnesota trust company,
("American Express Trust"), and The Progressive Corporation, a corporation
organized under the laws of the State of Ohio (the "Company").

                                WITNESSETH THAT:
                                 ---------------

         WHEREAS, American Express Trust and the Company are parties to Trust
Agreement made effective, initially, January 1, 1999, with respect to the
Progressive Retirement Security Program (the "Plan"); and

         WHEREAS, the Company has maintained and continues to maintain the Plan
for the benefit of certain of its employees; and

         NOW THEREFORE, in consideration of the mutual covenants set forth in
the Trust Agreement, it is agreed by the parties hereto that the Trust Agreement
is hereby amended as follows, effective April 1, 1999, with all other provisions
which are not herein amended, remaining in full force.

FIRST: A new Section 19 is hereby added to the Trust Agreement, as follows:

"SECTION 19.  DIRECTED BROKERAGE ACCOUNTS

(a)      Notwithstanding anything to the contrary, this Section 19 supercedes
         any conflicting provision as it relates to a Participant's Directed
         Brokerage Account.

(b)      The Company directs the Trustee to deduct the brokerage fee and other
         related fees and expenses charged to each Participant from the
         Participant's Directed Brokerage Account.

(c)      In the case of a class action lawsuit, proceeds from the class action
         for any Participant or former Participant who no longer has an account
         in the Plan shall be held in the default investment fund in a
         segregated or separate account.



                                       1
<PAGE>   19

(d)      The Trustee shall have no responsibility for any proxy or tender offer
         relating to securities held in the Directed Brokerage Account. Each
         Participant in a Directed Brokerage Account shall be responsible for
         completing the appropriate proxy or tender offer materials and
         returning them directly to the proxy solicitor or the entity stated in
         the tender offer materials respectively, for tabulation and vote
         submission. If no proxy or tender offer materials are timely received,
         such election or tender offer shall not be voted or exercised. The
         Trustee shall not bear any responsibility for the tabulation, voting,
         submission, recordation or maintenance of records relative to the proxy
         vote or tender offer.

(e)      The Trustee will not act as trustee of any assets in a Participant's
         Directed Brokerage Account which consist of any of the following:

                  i)   securities that do not have a stated market value, such
                       as closely held stock;
                  ii)  debt instruments (bonds, preferred stock) of American
                       Express Company;
                  iii) limited partnerships;
                  iv)  assets that require an advance or loan, including but not
                       limited to a margin account;
                  v)   securities issued by the Company or its affiliates;
                  vi)  options."

SECOND:  Section 3(c) is hereby deleted and replaced with the following:

(c) If the Trustee makes a duplicate disbursement in distributing cash, Stock,
or other securities from the Trust and such error is not the result of a force
majeure or act of God or duplicate instructions from the Administrator, the
Trustee shall promptly correct the error at its expense and shall promptly
reimburse the Trust for any overpayment.

         IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
the Trust Agreement between the Progressive Corporation and American Express
Trust Company for the Progressive Retirement Security Program Trust as of the
date first written above.

THE PROGRESSIVE CORPORATION                   AMERICAN EXPRESS TRUST COMPANY

SIGNED: /S/ DAVID M. SCHNEIDER                SIGNED: /S/ TARA L. STONEHOUSE
       --------------------------------               ------------------------

TITLE:   Secretary                            TITLE:  Vice President
       ---------------------------------              ------------------------
                                              PRESIDENT

DATE:   3/11/99                                        DATE:  4/5/99
      ---------------------------------                -----------------------



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