EX-10.2



 





Exhibit 10.2




THE PROGRESSIVE CORPORATION

DIRECTORS DEFERRAL PLAN

(2008 Amendment and Restatement)





	1.	 	Purposes of the Plan.
	 
	 	 	The purposes of this Plan are to attract and retain qualified Directors and to provide
incentives to these Directors through the ability to defer their receipt of Fees and by
providing Directors with the opportunity to participate in the Company’s growth.
	 
	2.	 	Definitions.






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




(b) “ 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.




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




(d) “Common Shares” means units equivalent in value and dividend rights to Common
Shares, $1.00 par value, of the Company.




(e) “Company” means The Progressive Corporation.




(f) “Deferred Account” means the account established by the Company for each
Director who elects to defer the Fees payable to him as a Director.




(g) “Director” means any director of the Company who is not an employee of the
Company.




(h) “Election Agreement” means the written election to defer Fees signed by the
Director and in the form provided by the Chief Financial Officer of the Company.




(i) “Fees” means any fees payable in cash to a Director by reason of his or her
serving on the Board and includes both “Retainer Fees” and “Meeting and Service Fees.”
“Retainer Fees” means those Fees which are payable in cash to a Director by reason of his or
her serving on the Board (without regard to attendance at meetings). “Meeting and Service
Fees” means those Fees which are payable in cash to a Director (i) by reason of his or her
attendance at meetings of the Board or any committee thereof, or (ii) for participation in
meetings of the Company’s management, or other Board-related activities, for which such
Director is entitled to receive compensation, as determined in the sole discretion of the
Chairman of the Board.




(j) “Market Price” means the average of the high and low price at which a share of
the
Company’s Common Stock, $1.00 par value, is traded on the NYSE on a given date.




(k) “Member” means any Director who has at any time deferred the receipt of
Fees in accordance with this Plan.




(l) “Plan” means The Progressive Corporation Directors Deferral Plan (2008
Amendment and Restatement), as set forth herein and as it may be amended from time to time.




(m) “Term” means the duration of the term for which a Director is elected.




(n) “Year” means the calendar year.




(o) Whenever appropriate, words used herein in the singular may be read as the
plural
and the plural may be read as the singular.




(p) Masculine pronouns used herein shall be deemed to refer to both women and men.



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	3.	 	Election to Defer Fees.






(a) Eligibility.




A Director may elect to defer receipt of all or a portion of his Fees for any Year in
accordance with Paragraph 3(b) hereof.




(b) Time of Election.




A Director desiring to defer all or a portion of his Fees for the upcoming Year must submit
an Election Agreement to the Chief Financial Officer of the Company no later than the last
day of the Year prior to the Year for which the election is to be
effective.

Any Director who was not a Director during the previous Year may make an election to defer
all or a portion of the Fees for the Year in which the Director is elected to the Board by
delivering an Election Agreement to the Chief Financial Officer of the Company within thirty
(30) days of such election to the Board. A Director fulfilling the above requirements shall
be considered a “Member” for purposes of this Plan.




(c) Duration and Nature of Election.




Subject to the following sentence, a Member’s election to defer Fees shall continue in
effect from Year to Year unless modified or revoked by the Member through written notice to
the Chief Financial Officer of the Company prior to the beginning of the Year for which the
revocation or modification is to apply. Modifications or revocations shall not apply
retroactively, and once a Member has made, or is deemed to have made, an election to defer
all or a portion of his Fees for a given Year, such election may not be modified or revoked.




	4.	 	The Amount and Date of Deferral.






The Election Agreement of the Member shall indicate the amount of Fees to be deferred and
the date to which the Fees are to be deferred. The deferral of Retainer Fees shall be
subject to Paragraph 7 hereof; the deferral of Meeting and Service Fees shall be to the
earlier of (1) the date selected by the Member in an Election Agreement, which date shall
not be earlier than six months and one day after the date on which such Fees are credited to
the Member’s Deferred Account or (2) the date of the death of the Member. Subject to the
preceding sentence, a Member may (i) select a lump-sum distribution or a series of
distributions or installments and (ii) choose the date on which the lump sum shall be paid
or the installments shall commence. The installments may not be more frequent than
quarterly and may not consist of more than forty (40) quarterly or ten (10) annual
installments. All payments will be made on or promptly after the first business day of a
calendar quarter. In the case of the death of the Member, distribution of the deferred Fees
shall be made in accordance with Paragraph 8.




	5.	 	Deferral Accounts.






(a) Accounts.








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The Company shall establish and preserve one or more accounts for each Member. A Member
shall designate on the Election Agreement whether to have the account valued on the basis of
the Common Shares of the Company in accordance with Paragraph 5(b) hereof or on the basis of
cash in accordance with Paragraph 5(c) hereof. A Member may defer a portion of his Fees
into each type of account. The Company may establish separate accounts for a Member to
properly account for amounts deferred under the two alternatives or during different years.
An account valued on the basis of the Company’s Common Shares shall be known as a “Stock
Account” and an account valued on the basis of cash shall be known as a “Cash Account.”
Amounts held in a Stock Account may not be transferred to a Cash Account and vice versa.




(b) Stock Account.




Each Member’s Stock Account shall be credited as follows:




     (i) Fees. On the last day of each calendar quarter, the Stock Account
shall be credited with the number of Common Shares (whole or fractional, rounded to the
nearest thousandth of a share) determined by dividing (A) the sum of the Fees that the
Member elects to defer (or that he or she is deemed to have elected to defer under
Paragraph 7 hereof) to his or her Stock Account that otherwise would have been paid to
him or her during the quarter, by (B) the Market Price of the Company’s Common Shares,
$1.00 par value, on the last business day of such quarter.




     (ii) Dividends. Except as provided in the final sentence of
Paragraph 6
hereof, on the date on which a dividend is paid on (or any other distribution is made
on account of) the Company’s Common Shares, $1.00 par value, the Stock Account shall be
credited with the number of Common Shares (whole or fractional, rounded to the nearest
thousandth of a share) determined by dividing (A) the dollar amount that the Member
would have received with respect to the number of Common Shares held in his or her
Stock Account on the applicable record date if such Common Shares had
been actual shares of the Company’s Common Shares, $1.00 par value, by (B) the Market Price of the
Company’s Common Shares, $1.00 par value, on the date on which such dividend is paid.




(c) Cash Account.




If a Member elects to have a portion of his Fees deferred into a Cash Account, there will be
credited to his Cash Account, on the last day of each quarter, an amount equal to the sum of
(i) the Fees he elects to defer to his Cash Account which otherwise would have been paid to
him during the quarter and (ii) interest on the balance in the Cash Account on the first day
of such quarter at a rate based on the rate of interest offered by National City Bank,
Cleveland, Ohio, on the last business day of such quarter on new three-month certificates of
deposit.




(d) Claims of General Creditors.



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All compensation deferred and amounts credited to the Cash and Stock Accounts under this
Plan shall remain a part of the general assets of the Company. Accordingly, the
compensation deferred under this Plan is subject to the claims of the Company’s general
creditors.




	6.	 	Payment of Accounts.






The accounts established and maintained for each Member shall be distributed in a lump sum
or installments. The selection of the distribution date(s) and the method of distribution
are to be indicated on the Election Agreement to be submitted by the Member.




A Member may elect to change the distribution date(s) and method of distribution set forth
in an Election Agreement governing fees deferred in past years. Each such change must be
made in writing and on such forms as the Company shall specify. Each such change must be
delivered to the Company at least one (1) year prior to the distribution date being changed
and shall delay the payment or commencement of the distribution for a period of at least
five (5) years following the date such distribution otherwise would have been made or would
have commenced. In the case of a distribution to be made in installments, the provisions of
this paragraph shall apply to each installment payment as if each such installment payment
were a separate distribution.




Changes in the method of and time for payment of the amount of an account may be effected as
to Fees deferred for future Years by notifying the Chief Financial Officer in writing prior
to the beginning of the Year for which the modification is to apply in accordance with
Paragraph 3 above.




Notwithstanding the foregoing, if a Change in Control occurs, each Member’s entire account
balance shall be distributed to such Member within thirty (30) days following the Change in
Control.




With respect to all distributions to be made under the Plan, the following rules shall
apply:




(i) All distributions, whether from a Stock Account or a Cash Account, shall be paid in cash
subject to withholding or deduction by the Company of any taxes, contributions, payments and
assessments which the Company is now or may hereafter be required or authorized by law to
withhold or deduct from distributions;




(ii) The amount of the distribution from the Stock Account shall be valued based on the
Market Price of the Company’s Common Shares, $1.00 par value, on the last business day of
the calendar quarter immediately preceding the distribution date; and




(iii) The amount of the distribution from the Cash Account shall be valued based on the
value of the Cash Account on the last business day of the calendar quarter immediately
preceding the distribution date.




In the event a Member elects to receive installment payments, the following rules shall
apply:



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(i) The balance of the Stock Account shall be credited, pursuant to Paragraph 5(b) above,
with additional Common Shares upon the payment of dividends until the Stock Account is
completely distributed;




(ii) The balance of the Cash Account shall be credited, pursuant to Paragraph 5(c) above,
with interest quarterly until the Cash Account is completely distributed; and




(iii) The amount of each installment shall be determined by dividing the value of the
Stock Account, the Cash Account, or both, by the number of installments remaining to be paid
to the Member.




Notwithstanding anything to the contrary contained herein, if:




	 	(a)	 	a Member would otherwise be entitled to have an amount equal to a
dividend (or other distribution) credited to his or her Stock Account under
Paragraph 5(b) hereof in respect of Common Shares held in such Stock Account on the
record date for such dividend (or other distribution);
	 
	 	(b)	 	the cash equivalent of such Common Shares (or a portion of
such Common Shares) was distributed hereunder to the Member after the record date but
before the payment date for such dividend (or other distribution); and
	 
	 	(c)	 	such distribution from the Stock Account was either a lump sum
distribution or the final payment of an installment distribution hereunder,






then the amount equal to such dividend (or other distribution) in respect of the Common
Shares that were so distributed shall not be credited to the Member’s Stock Account, and
such amount shall be distributed to the Member in cash as soon as practicable after the
payment date for such dividend.




	7.	 	Minimum Deferral.






Retainer Fees shall be deferred as provided in this Paragraph 7. Absent the filing by a
Director of an Election Agreement deferring into a Stock Account all Retainer Fees which are
payable to such Director until a date which is on or after the Retainer Fee Minimum Deferral
Date (as herein defined), the Director shall be deemed to have filed an election deferring
such Fees until the Retainer Fee Minimum Deferral Date, electing to have such Fees deposited
to a Stock Account and indicating that such Fees shall be distributed in a lump sum on the
first day of the calendar quarter immediately following the Retainer Fee Minimum Deferral
Date. For purposes hereof, the Retainer Fee Minimum Deferral Date shall be the later of (a)
the date which is six (6) months and one day after the date upon which the Retainer Fees are
credited to a Stock Account or (b) the date of the expiration of the Director’s then current
Term.




	8.	 	Death of Member.






A Member may, in the Election Agreement described in Paragraph 3 above, provide that, in the
event of his death prior to the date or dates on which his account balance is distributable,
the account balance shall be distributed to his estate or designated
beneficiary



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in a single distribution. This election shall be made at the time of the
election contemplated by Paragraph 3 above. If no such election is made, the account balance
shall be distributed to the estate of the deceased Member in a single distribution as soon as
administratively feasible following the Member’s death.




	9.	 	Valuation of Accounts.






Each account shall be valued as of the last day of each calendar quarter until payment of the
account in full to the Member in accordance with Paragraph 6. Each Member shall receive a
statement of his accounts not less than annually.




	10.	 	Capital Changes.






In the event of any change in the number of outstanding Common Shares, $1.00 par value, of
the Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares or a similar
corporate change, the Board shall determine, in its sole discretion, the extent to which such
change equitably requires an adjustment in the number of Common Shares held in the Stock
Accounts and such adjustment shall be made by the Company and shall be conclusive and binding
on all Members of the Plan.




	11.	 	Deferred Vesting of Common Shares.






Retainer Fees credited to a Member’s Stock Account (whether as a result of filing an election
under Paragraph 3(b) or a deemed election under Paragraph 7) shall not vest upon their being
credited to the Member’s Stock Account, but shall become vested only upon the expiration of
the Term of such Director to which the Fees relate or upon such Director’s earlier death,
resignation due to disability or removal without cause. If a Director ceases to be a
Director for any reason other than death, resignation due to disability or removal without
cause, the Director shall forfeit all Retainer Fees credited to his Stock Account during his
unexpired Term, along with any dividends attributable thereto, and the Member’s Stock Account
shall be reduced accordingly.




	12.	 	Administration.






This Plan shall be administered by the Board or by an appropriate Committee of Directors
selected by the Board. The Board or the appropriate Committee shall have the sole right and
authority to interpret and construe the provisions of this Plan, and its decisions on any
matter or dispute arising under the Plan shall be binding and conclusive upon the Members.
If a Member is part of the Board or Committee that administers this Plan, he shall not
participate in any deliberations or actions of the Board or such Committee relating
exclusively to his membership or participation in this Plan.




	13.	 	Termination.






Notwithstanding any other provision of the Plan, the Board may terminate the Plan at any time
for any reason without any liability to any Member, beneficiary or other person for any such
termination or for any other action taken pursuant to this Paragraph 13. Following
termination of the Plan, and notwithstanding the provisions of any Election



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Agreement entered into prior to such termination, no additional deferrals may be made
hereunder, but all existing Deferred Accounts shall be administered in accordance with the
Plan, as in effect immediately prior to termination, and shall be distributed in accordance
with the terms of the Plan and the applicable Election Agreements, unless and until the Board
elects to accelerate distributions as provided below. Subject to the limitations and
conditions provided for in this Paragraph 13, at any time on or after the effective date of
termination of the Plan, the Board, in its sole discretion, may elect to accelerate the
distribution with respect to all Deferred Accounts to the extent permitted under Section 409A
of the Code; provided, that (a) the termination of the 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 the Plan in
accordance with Treasury Regulation Section 1.409A-1(c) if a Member participated in the Other
Program; and (c) the Company shall not adopt a new Other Program that would be required to be
aggregated with the Plan in accordance with Treasury Regulation Section 1.409A-1(c) if a
Member 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
Members, or beneficiaries, as the case may be, no Member, beneficiary or person claiming under
or through them, will have any claims in respect of the Plan.




	14.	 	Non-alienation.






The amounts credited to any accounts maintained under the Plan may not be pledged, assigned,
or transferred by the Director for whom such account is maintained or by any other
individual, and any purported pledge, assignment, or transfer shall be void and
unenforceable.




	15.	 	Claims of Other Persons.






The provisions of the Plan shall in no event be construed as giving any person, firm or
corporation any legal or equitable right as against the Company or any subsidiary, or the
officers, employees, or directors of the Company or any subsidiary, except any such rights as
are specifically provided for in the Plan or are hereafter created in accordance with the
terms and provisions of the Plan.




	16.	 	Severability.






The invalidity and unenforceability of any particular provision of the Plan shall not affect
any other provision hereof, and the Plan shall be construed in all respects as if such
invalid or unenforceable provisions were omitted herefrom.



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	17.	 	Governing Law.






The provisions of the Plan shall be governed by and construed in accordance with the laws of
the State of Ohio.



          IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officer as of
the                     day
of                    , 2007, effective January 1, 2008.




	 	 	 	 	 
	 	 	THE PROGRESSIVE CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
 






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