EX-10.3



 





Exhibit 10.3




THE PROGRESSIVE CORPORATION

DIRECTORS RESTRICTED STOCK DEFERRAL PLAN

(2008 Amendment and Restatement)




     WHEREAS, The Progressive Corporation (“Company”) maintains The Progressive Corporation
Directors Restricted Stock Deferral Plan pursuant to a plan document dated February 1, 2004, and
one amendment thereto; and



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



     NOW, THEREFORE, effective January 1, 2008, the Plan is hereby amended and restated in its
entirety to provide as follows:



ARTICLE I




PURPOSE; PARTICIPATION




          1.1 Purpose. The purpose of this plan, which shall be known as The Progressive
Corporation Directors Restricted Stock Deferral Plan (the “Plan”) is to provide directors of the
Company who are not employees of the Company or its subsidiaries with an opportunity to defer the
receipt of Common Shares with respect to Eligible Restricted Stock Awards.




ARTICLE II




DEFINITIONS




          For purposes of this Plan, the following terms shall have the following meanings:




          “Board” means the Board of Directors of the Company.




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          “Change in Control” means a change in the ownership of the Company, a change in effective
control of the Company or a change in the ownership of a substantial portion of the Company’s
assets, each as determined in accordance with Section 409A of the Code.




          “Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated
pursuant thereto.




          “Committee” means the Compensation Committee of the Board.




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




          “Company Directors Equity Plan” means any equity compensation plan for directors who are not
employees of the Company or its subsidiaries maintained by the Company providing for the award of
Restricted Stock, including but not limited to, The Progressive Corporation 2003 Directors Equity
Incentive Plan.




          “Deferral Election” means an election, filed with the Committee, pursuant to which a
Participant elects to have all or part of an Eligible Restricted Stock Award converted into Stock
Units under this Plan, and to have such Stock Units credited to his or her Stock Account under the
Plan pursuant to Section 4.2 hereof.




          “Designated Deferral Period” shall mean the deferral period selected by the Participant with
respect to an Eligible Restricted Stock Award, which deferral period shall specify the date on
which distribution of Shares with respect to such Eligible Restricted Stock Award shall be made or
begin.




          “Dividend Equivalent Amounts” means the amount of dividends or other distributions to
shareholders of the Company that a Participant would have received had the



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Participant’s Stock Units been actual Shares as of the date of a dividend or other
distribution by the Company.




          “Eligible Restricted Stock Award” means an award of Restricted Stock made, or to be made,
under a Company Directors Equity Plan.




          “Participant” means any director of the Company who is not an employee of the Company or its
subsidiaries and who participates in this Plan by timely completing a Deferral Election.




          “Plan Year” means each calendar year during the term of this Plan.




          “Restricted Stock” means Shares awarded, or to be awarded, to a Participant in the form of
restricted stock under and pursuant to the terms of a Company Directors Equity Plan.




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




          “Stock Account” means an individual bookkeeping account established for each Participant
pursuant to Section 4.3 hereof, with respect to Stock Units credited to the Participant.




          “Stock Units” means the units credited to a Participant’s Stock Account, as described in
Sections 4.2 and 4.4 hereof. Each Stock Unit credited to a Participant’s Stock Account shall
represent the right, subject to the terms and conditions of this Plan, to receive one (1) Share at
the end of the Participant’s Designated Deferral Period or at such other time as this Plan may
specify for distribution to be made or begin.




ARTICLE III




PARTICIPATION




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          3.1 Eligibility and Participation. Directors who shall be eligible to participate in
this Plan shall be those directors who are not employees of the Company or its subsidiaries.




ARTICLE IV




DEFERRAL ELECTIONS




          4.1 Deferral Elections. Each eligible director who elects to participate in this Plan
for any Plan Year shall file a Deferral Election with the Committee before the beginning of such
Plan Year, provided that any director who was not a director during the previous two Plan Years may
file a Deferral Election with the Committee (i) within thirty (30) days after he/she is elected to
the Board and (ii) prior to the grant of Restricted Stock which is the subject of such Deferral
Election . The Deferral Election shall be in the form prescribed by the Committee, and in
accordance with such rules and procedures as may be established by the Committee in its sole
discretion. Once made, a Participant’s Deferral Election shall be irrevocable. A Deferral
Election shall be deemed to have been made when the completed and executed election form is
received and accepted by the Committee or its designated agent. A separate Deferral Election shall
be made by a Participant with respect to all or part of each Eligible Restricted Stock Award to be
subject to a Deferral Election during such Plan Year. If an eligible Participant fails to file an
appropriate election form with respect to any Eligible Restricted Stock Award before the deadline
provided in the first sentence of this Section, he or she shall be deemed to have elected not to
make a Deferral Election for such Plan Year.




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          4.2 Effect of Deferral Election. If a Participant timely files a Deferral Election
with the Committee with respect to an Eligible Restricted Stock Award, each share of Restricted
Stock subject to a Deferral Election will be automatically cancelled immediately prior to vesting
and will be replaced with a corresponding Stock Unit credited to the Participant’s Stock Account in
accordance with Section 4.3. A timely Deferral Election with respect to an Eligible Restricted
Stock Award will defer the delivery to the Participant of the Shares subject thereto until the end
of the Participant’s Designated Deferral Period or such other time as this Plan may specify for
distribution to be made or begin.




          4.3 Stock Accounts.




          The Committee shall establish and maintain a separate bookkeeping account in the name of each
Participant who makes a Deferral Election during the course of his or her participation in the
Plan. Each Participant’s Stock Account shall consist of the sum of the Stock Units credited to
such Participant’s Stock Account. Each Participant’s Stock Account shall be adjusted as follows:





     (a) As of the date of vesting of an Eligible Restricted Stock Award to which a
Participant’s Deferral Election is applicable, the Participant’s Stock Account shall
be credited with that number of Stock Units equal to the number of Shares to which
the Deferral Election relates;




     (b) As of the date on which a dividend is paid on (or any other distribution is
made on account of) Shares, the Stock Account shall be credited with that number of
Stock Units and fraction thereof equal to the number of Shares and fraction thereof
that the Dividend Equivalent Amount would have purchased on that date based on the
average of the high and low trading prices of the Shares on that date.




     (c) As of the date on which Shares are distributed to the Participant in
accordance with Section 4.5, the Participant’s Stock Account shall be reduced by an
equal number of Stock Units, and fractions thereof, if applicable.


In the event of any stock split, reverse split, combination or other changes that impact the
Company’s capital structure, or Share status, each Participant’s Stock Account and the number



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of Stock Units credited thereto shall be equitably adjusted by the Committee in its sole discretion
in a manner consistent with the treatment of outstanding equity awards pursuant to the Company
Directors Equity Plan.




          4.4 Dividend Equivalent Amounts. Dividend Equivalent Amounts with respect to the
Participant’s Stock Units shall result in the Participant’s Stock Account being credited with an
additional number of Stock Units and/or fraction thereof equal to the Dividend Equivalent Amount
divided by the average of the high and low trading prices of Shares on the date specified in
Section 4.3(b) and shall become subject to the Deferral Election applicable to the Stock Units to
which the Dividend Equivalent Amount relates.




          4.5 Distribution of Shares from Stock Accounts. Subject to any limitation set forth
in this Plan or any other limitations as may be established by the Committee in its sole
discretion, each Deferral Election shall specify the method of distribution with respect to the
Eligible Restricted Stock Award which is subject to the Deferral Election. A Participant may elect
to have his or her Stock Units with respect to any Eligible Restricted Stock Award which is subject
to a Deferral Election distributed in any of the following number of installments following the
earlier of (i) termination of the Participant’s service as a director of the Company or (ii)
expiration of the Participant’s Designated Deferral Period with respect to such Eligible Restricted
Stock Award:




          (1) a single lump sum;




          (2) 3 equal or substantially equal annual installments;




          (3) 5 equal or substantially equal annual installments; or




          (4) 10 equal or substantially equal annual installments.



A Participant may elect a different method of distribution with respect to each Eligible Restricted
Stock Award that is subject to a Deferral Election. Distributions will be made or commence



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within thirty (30) days following expiration of the Participant’s Designated Deferral Period or
termination of the Participant’s service as a director, as the case may be.



A Participant may elect to change the Designated Deferral Period and the method of distribution set
forth in a Deferral Election. Each such change must be made in writing and on such forms as the
Committee shall specify. Each such change must be delivered to the Committee at least one (1) year
prior to the expiration of the Designated Deferral Period and shall delay the payment or
commencement of the distribution for a period of at least five (5) years following the date the
Designated Deferral Period otherwise would have expired. In the case of a distribution to be made
in installments, the provisions of this paragraph will apply to each installment payment as if each
such installment payment were a separate distribution.



Notwithstanding the foregoing, if a Change in Control occurs or a Participant dies, a distribution
with respect to all the Stock Units then held in the Participant’s Stock Account shall be made to
him/her or his/her beneficiaries in a single lump sum within thirty (30) days following the Change
in Control or the date the Committee receives written notice of his/her death.
Distributions with respect to the Stock Units credited to a Participant’s Stock Account under this
Plan shall in all cases be satisfied by the delivery by the Company of a number of Shares equal to
the number of Stock Units with respect to which such distribution is being made, except that any
portion of such distribution that is derived from Dividend Equivalent Amounts or fractional shares
shall be satisfied in cash, based on the average of the high and low trading prices of Shares on
the business day immediately preceding such distribution.
If a Participant is receiving a distribution in installments, Dividend Equivalent Amounts will
continue to be credited with respect to the undistributed Stock Units remaining in such
Participant’s Stock Account until all such Stock Units have been distributed.




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ARTICLE V




MISCELLANEOUS




          5.1 Beneficiaries. Each Participant shall have the right to designate in writing one
or more beneficiaries to receive distributions in the event of the Participant’s death by filing
with the Company a beneficiary designation on a form provided by the Committee. The designated
beneficiary or beneficiaries may be changed by a Participant at any time prior to his or her death
by the delivery to the Committee of a new beneficiary designation form. The change shall become
effective only when the new beneficiary designation form is received and accepted by the Committee;
provided, however, any beneficiary designation form received by the Committee after the designating
Participant’s death will be disregarded. If no beneficiary shall have been designated, or if no
designated beneficiary shall survive the Participant, distribution pursuant to this provision shall
be made to the Participant’s estate.




          5.2 Administration. Except for those powers and duties expressly reserved for the
Board hereunder, 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 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 determine the amount of distributions to be made to each Participant and
beneficiary or other person in accordance with the provisions of the Plan;




               (d) To authorize distributions under the Plan;




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



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               (f) To appoint such agents, counsel, accountants and consultants as may be
desirable 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 to one or more
designated officers or employees of the Company or other persons.



          All decisions of the Committee or its designees shall be binding upon all Participants and
their respective legal representatives, successors and assigns, and any and all persons claiming
under or through any of them. No member of the Committee or any of its designees shall be liable
to any Participant or to the Company for any determination made within the scope of the
administrative and interpretive functions provided in this Plan. No member of the Committee shall
participate in any discussion or determination involving his or her own rights, benefits or
obligations under this Plan.




          5.3 Reports. Until a Participant’s entire Stock Account shall have been distributed
in full, the Company will furnish or make available to the Participant a written or electronic
report, at least annually, setting forth any changes in such Account and the amounts credited to
such Account.




          5.4 Assignment and Alienation of Benefits. The right of each Participant to any
account, benefit, Stock Unit, right or distribution hereunder shall not, to the extent permitted by
law, be subject in any manner to attachment or other legal process for the debts of such
Participant, and no account, benefit, Stock Unit, right or distribution shall be subject to
anticipation, alienation, sale, pledge, transfer, assignment or encumbrance; provided, however, the
Company shall have the unrestricted right to set off against or recover out of any distributions
due a Participant, beneficiary or other person at the time such distributions would otherwise have



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been made hereunder, any amounts owed the Company or any subsidiary of the Company by such
Participant, beneficiary or other person.




          5.5 Director and Shareholder Status. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or its shareholders to terminate any Participant’s
service as a director, at any time, nor confer upon any Participant any right to continue as a
director of the Company or to be nominated for election to the Board at any time. The Plan will
not give any person any right or claim to any benefits under the Plan unless such right or claim
has specifically accrued under the terms of the Plan. Participation in the Plan shall not create
any rights in a Participant (or any other person) as a shareholder of the Company until Shares are
registered in the name of, and distributed to, the Participant (or such other person).




          5.6 Assets. No assets shall be segregated or earmarked in respect of any Stock Units,
Dividend Equivalent Payments or Stock Accounts. The Plan and the crediting of Stock Accounts
hereunder shall not constitute a trust and shall be structured solely for the purpose of recording
an unsecured contractual obligation. All amounts payable pursuant to the terms of this Plan shall
be paid from the general assets of the Company 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.




          5.7 Taxes. The Company shall not be responsible for the tax consequences under
federal, state or local law of any election made by any Participant under the Plan. The Company
shall have the right to make required information reporting and/or to withhold or deduct from any
distribution to be made pursuant to this Plan, or to otherwise require prior to the distribution of
any amount hereunder, payment by the Participant of any federal, state or local taxes required by
law to be withheld with respect to any such distribution to the Participant. In



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addition, to the extent the Company shall be required, prior to the date on which
distributions are to be made to a Participant under this Plan, to withhold any taxes in connection
with any Stock Units or Dividend Equivalent Amounts credited to a Participant’s accounts under this
Plan, the Participant agrees that the Company shall have the right to make such withholding or to
require direct payment of such withholding taxes by the Participant to the Company.




          5.8 Amendment. Notwithstanding any other provision of this Plan, the Board may amend
this Plan at any time for any reason without liability to any Participant, beneficiary or other
person for any such amendment or for any other action taken pursuant to this Section 5.8, 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.




          5.9 Termination. Notwithstanding any other provision of this Plan, the Board may
terminate this Plan at any time for any reason without any liability to any Participant,
beneficiary or other person for any such termination or for any other action taken pursuant to this
Section 5.9. Following termination of this Plan, and notwithstanding the provisions of any
Deferral Election entered into prior to such termination, no additional deferrals may be made
hereunder, but all existing Stock Accounts shall be administered in accordance with this Plan, as
in effect immediately prior to termination, and shall be distributed in accordance with the terms
of this Plan and the applicable Deferral Elections, unless and until the Board elects to accelerate
distributions as provided below. Subject to the limitations and conditions provided for in this
Section 5.9, at any time on or after the effective date of termination of this Plan, the Board, in
its sole discretion, may elect to accelerate the distribution with respect to all Stock Units in
all Stock



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Accounts to the extent permitted under Section 409A of the Code; provided, that (a) the
termination of this Plan is not proximate to a downturn of the Company’s financial health; (b) the
Company terminates and liquidates all plans, programs, agreements, and other arrangements (“Other
Program”) that must be aggregated with this Plan in accordance with Treasury Regulation Section
1.409A-1(c) if a Participant participated in the Other Program; and (c) the Company shall not adopt
a new Other Program that would be required to be aggregated with this Plan in accordance with
Treasury Regulation Section 1.409A-1(c) if a Participant participated in the Other Program within
three (3) years following termination of the Plan. Such accelerated distributions shall be made in
a lump sum at a time selected by the Company in accordance with Section 409A of the Code; provided,
that no accelerated distributions, other than those that could be made under the terms of the Plan
absent its termination, shall be made earlier than twelve (12) months from the date that the
Company takes all actions necessary to irrevocably terminate the Plan and cause all distributions
to be made thereunder and all distributions shall be made no later than twenty-four (24) months
from the date the Company takes all actions necessary to irrevocably terminate the Plan and cause
all distributions to be made thereunder. Upon 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 this Plan.




          5.10 Notices to Committee. The Committee shall designate one or more addresses to
which notices and other communications to the Committee shall be sent with respect to this Plan.
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.




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          5.11 No Liability. Participation in the Plan is entirely at the risk of each
Participant. Neither the Company, the Committee, the Board nor any other person associated with
this Plan shall have any liability for any loss or diminution in the value of Stock Accounts, or
for any failure of this Plan to effectively defer recognition of income or to achieve any
Participant’s desired tax treatment or financial results.




          5.12 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 any 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 and the Board.




          5.13 Securities Law Provisions. The issuance and distribution of Shares pursuant to
this Plan will not be registered under the Federal or any state securities laws. The Shares will
be “restricted securities” as that term is defined under Rule 144 of the Securities Act of 1933
(the “Securities Act”) and may not be sold or transferred absent registration under the Securities
Act or in accordance with an applicable exemption.




          5.14 Applicable Law. This Plan shall be interpreted under the laws of the State of
Ohio.




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          IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly
authorized officer as of the ___ day of ___, 2007.




	 	 	 	 	 	 	 
	 	 	THE PROGRESSIVE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 






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