Document:

Exhibit

Exhibit 10.4
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. 
“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 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 
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. 

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 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 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.
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; 
(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 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 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 

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. 
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. 

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:Exhibit

Exhibit 10.2

Restricted Stock UNIT Award Agreement
(2019 Performance-Based Award - Investment Results)

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

1.    Definitions.  Unless otherwise defined or expressly given a different meaning in this Agreement, each capitalized term in this Agreement shall have the meaning given to it in The Progressive Corporation 2015 Equity Incentive Plan (the “Plan”).  References herein to performance results of the Company mean the applicable results achieved by the Subsidiaries and mutual company and other affiliates of the Company in the portfolio(s) to the extent directly managed by Progressive Capital Management Corp. (“PCM”) during the Evaluation Period (“Managed Portfolios”).

2.    Award of Restricted Stock Units.  The Company grants to Participant an award (the “Award”) of performance-based restricted stock units (“Restricted Stock Units” or “Units”), pursuant to, and subject to, the terms of the Plan.  The Award is based on a target award value of <# of Units> Units (the “Target Award Units”).  The number of Restricted Stock Units that are ultimately earned pursuant to the Award (if any) will be determined based on the Target Award Units and the procedures and calculations set forth in this Agreement.  Under the calculations set forth below, the maximum potential Award is a number of Units equal to two (2.0) times the sum of Target Award Units plus any related Dividend Equivalent Units (the “Maximum Award Units”).  The Award is not intended to qualify as “performance-based compensation” under Section 162(m)(4)(C) of the Code.

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

4.    Restrictions; Vesting.  Subject to the terms and conditions of the Plan and this Agreement, including the provisions of Paragraph 8 below, Participant’s rights in and to Restricted Stock Units shall vest, if at all, as follows: 

a.    Evaluation Period.  The “Evaluation Period” shall be the three-year period comprised of the calendar years 2019, 2020 and 2021.

b.    Certification.  The Award shall vest (if at all) only if, to the extent, and when the Committee certifies: 

i.     the Performance Ranking of the Company’s Fixed-Income Portfolio (as each of those terms are defined in Subparagraph c. below); and 

ii.     the Performance Factor (rounded to the nearest one-hundredth) to be applied to the Target Award Units (and any related Dividend Equivalent Units) to determine the number of Restricted Stock Units (if any) that have vested as a result of such performance. 

Such certification shall occur as soon as practicable after the end of the Evaluation Period (the date of such certification, the “Certification Date”).   If the Committee certifies the vesting of a number of Units that is less than the Maximum Award Units, then with respect to all other Units

 that could have been earned under this Agreement, the Award will terminate and be forfeited automatically.

c.    Number of Units Vesting.  The number of Restricted Stock Units (if any) that vest in connection with the Award will be determined by application of the following formula:

Number of Units Vesting = Target Award Units (plus related Dividend Equivalent Units) x Performance Factor

i.    The Performance Factor will be determined after the expiration of the Evaluation Period based on the fully taxable equivalent total return of the segment(s) of the Company’s fixed-income investment portfolio that constitute(s) Managed Portfolios (the “Fixed-Income Portfolio” or “Portfolio”), in comparison to the total returns of the group of comparable investment firms identified by the Independent Data Source (the “Investment Benchmark”), each calculated for the three calendar years comprising the Evaluation Period.  For purposes of this Agreement, the “Independent Data Source” shall be a third party independent data source determined by the Committee and, initially and until further action of the Committee, shall be Investment Metrics. After the end of the Evaluation Period, the Independent Data Source will determine the firms that are included in the Investment Benchmark in accordance with the criteria specified on Exhibit I hereto.  The Independent Data Source will also supply to the Company the monthly total return data for each of the Investment Benchmark firms for the three-year period ending on the last day of the Evaluation Period.  

Investment results for the Fixed-Income Portfolio will be marked to market, including 50% of the benefit of any state premium tax abatements for municipal securities held in the Portfolio that are realized by the Company during the Evaluation Period, in order to calculate the Portfolio’s fully taxable equivalent total return, compounded on a monthly basis, for the Evaluation Period.  The investment performance achieved by the Fixed-Income Portfolio for the Evaluation Period will then be compared against the total returns of the firms included in the Investment Benchmark for the same period, also compounded on a monthly basis, as determined by the Company from the monthly performance data supplied by the Independent Data Source for each firm in the Investment Benchmark, to determine where the Fixed-Income Portfolio’s performance falls on a percentile basis when compared to the firms in the Investment Benchmark, as further described in Exhibit II hereto (“Performance Ranking”).  

The Portfolio’s Performance Ranking will be used to determine a performance score of between 0.00 and 2.00 for the Evaluation Period, based on the following schedule:

	
			
	Score = 0.00
Rank at or below
	Score = 1.00
Rank equal to
	Score = 2.00
Rank at or above

	

25th Percentile
	

50th Percentile
	

75th Percentile

  
A Performance Ranking between the values identified in the schedule will be interpolated on a straight-line basis to generate the Performance Factor, as further described on Exhibit II.  

ii.    The Company will work with the Independent Data Source to ensure, to the extent practicable, that the list of firms comprising the Investment Benchmark and all data necessary to calculate the Performance Ranking and the Performance Factor are received by March 1st of the year immediately following the Evaluation Period.  In all events, distributions under this Agreement must be made on or before March 15th of the year immediately following the Evaluation Period.  

iii.    In the event that the Independent Data Source (or its successors or assigns) ceases to provide or publish the information required to calculate the Performance Factor, or modifies the information in such a way as to render the comparisons required by this Agreement to be not meaningful, in the Committee’s sole judgment, the determinations required above shall be made using such comparable Company and other investment data as may be available from another recognized provider of investment industry data as the Committee may approve in its sole discretion.

iv.    Notwithstanding any other provision of this Agreement, the Managed Portfolios and Fixed-Income Portfolio shall not include any portfolio managed by, or any investment made at the direction of, any business unit or area other than PCM. 

d.    Committee Discretion.  Notwithstanding anything to the contrary contained in this Agreement, at or prior to the time of vesting, the Committee, in its sole discretion, may reduce the number of Restricted Stock Units that otherwise would vest according to this Agreement, or eliminate the Award in full.  The Committee, in its sole discretion, may treat Participant differently than other individuals for these purposes.  Any such determination by the Committee shall be final and binding on Participant.  Under no circumstances shall the Committee have discretion to increase the award to Participant in excess of the number of Units that would have been awarded at vesting based on this Paragraph 4 (excluding adjustments required by Section 3(c) and/or Section 11 of the Plan).

The Award shall vest in accordance with and subject to the foregoing except to the extent that, prior to the Certification Date, the Award has been forfeited under the terms and conditions of the Plan or this Agreement.   

5.    Dividend Equivalents.   Subject to this Paragraph 5, with respect to dividends for which a record date occurs during the Restriction Period, Participant shall be credited with a Dividend Equivalent with respect to each outstanding Restricted Stock Unit, and with respect to any related Dividend Equivalent Unit (defined below) resulting from prior reinvestments of Dividend Equivalents as provided in this Paragraph.  All Dividend Equivalents so credited will be deemed to be reinvested in Restricted Stock Units on the date that the applicable dividend or distribution is made to the Company’s shareholders, based on the Target Award Units and any Dividend Equivalent Units resulting from prior reinvestments of Dividend Equivalents, in the number of Units determined by dividing the aggregate value of the Dividend Equivalents by the Fair Market Value of the Stock on such date (rounded to the nearest thousandth of a whole Unit or as otherwise reasonably determined by the Company); provided, however, that if Dividend Equivalents cannot be reinvested in Units due to the operation of Section 3(a) of the Plan, such Dividend Equivalents will be credited to Participant as a cash value based on the Target Award Units and any Dividend Equivalent Units resulting from prior reinvestments of Dividend Equivalents, which cash value shall be held by the Company (without interest) subject to this Agreement. Any Units resulting from the deemed reinvestment of dividends in accordance with this Paragraph 5 are referred to herein as “Dividend Equivalent Units.”  Dividend Equivalents shall be subject to the same terms and conditions, and shall vest or be forfeited (as applicable) at the same time, upon the same

conditions, and in the same proportion, as the Target Award Units set forth in this Award; provided, however, that if the Award vests after the record date for, but before the payment date of, a dividend, then the Dividend Equivalents related to such dividend and to Units vesting on the vesting date will be paid in cash or in Stock, in the sole discretion of the Company, as soon as practicable following the payment date for such dividend.

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

7.    Executive Deferred Compensation Plan.  If Participant is eligible, and has made the appropriate election, to defer the Award into The Progressive Corporation Executive Deferred Compensation Plan (the “Deferral Plan”), and the Award is eligible for deferral under the Deferral Plan, then at the time of vesting, the Restricted Stock Units that would otherwise vest under this Agreement (but not any Dividend Equivalents, which shall be delivered to Participant in accordance with Paragraph 10), instead of being delivered to Participant shall be credited to Participant’s account under the Deferral Plan, subject to and in accordance with the terms and conditions of the Deferral Plan and any related deferral agreement.

8.    Termination of Employment.  Except as otherwise provided in the Plan, including Section 11 (Change in Control Provisions) and Section 14(d) thereof, or in this Paragraph 8, or as otherwise determined by the Committee, if Participant’s employment with the Company or any Subsidiary or Affiliate terminates for any reason, the Award and all Restricted Stock Units (and any related Dividend Equivalents) held by Participant that are unvested or subject to restriction at the time of such termination shall be forfeited automatically immediately after such termination.  Notwithstanding the foregoing:

a.    In the event that Participant’s employment terminates as a result of Participant’s death prior to Participant’s Qualified Retirement Eligibility Date, then this Agreement will remain effective for up to one year after the date of Participant’s death and the Restricted Stock Units (and Dividend Equivalents) will vest if, when and to the extent, that the performance measures identified in Paragraph 4 above are achieved and certified by the Committee pursuant to Paragraph 4 prior to the expiration of such one (1) year period.  The balance of the Award, if any, shall be forfeited;

b.    In the event that any such termination of employment occurs, for any reason other than for Cause, after the end of the Evaluation Period but prior to the Certification Date, the Award shall not be forfeited at the time of Participant’s termination and Participant shall be eligible to participate in the vesting of Restricted Stock Units (and any related Dividend Equivalents) under this Agreement to the extent certified by the Committee; and

c.    In the event that any such termination of employment occurs as a result of Participant’s Qualified Retirement before the end of the Evaluation Period, the Award (A) shall remain in effect with respect to fifty percent (50%) of the Award, which shall vest after the Committee’s certification that, and the extent to which,  performance measures identified in paragraph 4 have been achieved and (B) shall terminate, effective as of the date of and immediately after the Qualified Retirement, with respect to the remaining fifty percent (50%) of the Award; provided that, with respect to any member of the Company’s Senior Management

Group, and any other Participant specified in writing by the Compensation Committee (if the Participant is, at the time of such specification, an executive officer of the Company) or by the Company’s Chief Executive Officer and Chief Human Resource Officer (for all other Participants), if such individual (i) becomes eligible, after such individual’s Qualified Retirement Eligibility Date, to receive benefits under the Company’s long-term disability benefits plan provided to its employees, or (ii)  has given the Company’s Chief Executive Officer (or Chairperson of the Board, if such individual is the Chief Executive Officer) written notice of his or her intended retirement date at least twelve months but not more than eighteen months prior to such date and if such individual in fact terminates on such intended retirement date (or such earlier or later date as the Company’s Chief Executive Officer and such individual (or the Company’s Chairperson of the Board and such individual, if such individual is the Company’s Chief Executive Officer) may agree in writing and with such conditions as the Company may deem appropriate and state in such writing), then upon any Qualified Retirement of such individual consistent with such document(s), no portion of the Award will terminate on such termination date, but the Award will remain in effect in full and shall vest after the Committee certifies that, and to the extent that, the  performance measures identified in paragraph 4 have been achieved (unless such performance measures are not achieved prior to the Expiration Date, in which event the Award will terminate and be forfeited, as of the Expiration Date).

d.    For purposes of this Paragraph 8:

		
	i.
	the term “Senior Management Group” means those individuals holding the following titles or positions at the time that written notice of retirement is given by such individual in accordance with Section 8(c) of this Agreement:  Chief Executive Officer, and executive officers who are members of the Chief Executive Officer’s Direct Reporting Group;

		
	ii.
	the term “Qualified Retirement” means any termination of a Participant’s employment with the Company or its Subsidiaries or Affiliates for any reason (including death, but excluding an involuntary termination for Cause) that (x) qualifies as a “separation from service” within the meaning of Section 409A, and (y) occurs on or after the first day of the calendar month in which either of the following conditions are scheduled to be satisfied:

        
		
	(A)
	the Participant is 55 years of age or older and has completed at least fifteen (15) years of service as an employee of the Company or one or more of its Subsidiaries or Affiliates; or

		
	(B)
	the Participant is 60 years of age or older and has completed at least ten (10) years of service as an employee of the Company or one or more of its Subsidiaries or Affiliates;

provided, however, that if Participant provided any service as an employee to any entity (or one or more of its subsidiaries or affiliates) that became a Subsidiary or Affiliate of the Company as a result of the Company’s acquisition, directly or indirectly, of the assets of such entity (and/or of one or more of its subsidiaries or affiliates) or all or a controlling interest in such entity’s capital stock or other equity interests (such entity being the “Acquired Entity), then Participant’s service as an employee of the Acquired Entity (or one or more subsidiaries or affiliates of the Acquired Entity) prior to the date of such acquisition by the Company shall not be treated as “service as an employee of the Company or one

 or more of its Subsidiaries or Affiliates” for purposes of this Paragraph 8(d)(ii); and

		
	iii.
	the term “Qualified Retirement Eligibility Date” means the first day of the earliest calendar month in which the Participant is scheduled to satisfy either of the age and years-of-service requirements for a Qualified Retirement as defined in Paragraph 8(d)(ii) of this Agreement. 

9.    Disqualifying Activity.  Notwithstanding any other provision of this Agreement, if the Committee determines that Participant is engaging in, or has engaged in, a Disqualifying Activity, the provisions of Section 10(b) of the Plan will apply. 

10.    Delivery at Vesting. Subject to the provisions of the Plan and this Agreement, upon vesting of all or part of the Award, the Company shall deliver to Participant one share of Stock in exchange for each such vested Restricted Stock Unit and for each Dividend Equivalent Unit related thereto and cash in the amount of any other related Dividend Equivalents, and all Restricted Stock Units and Dividend Equivalents) shall be cancelled.  Unless determined otherwise by the Company at any time prior to the applicable delivery, each fractional Restricted Stock Unit (and related Dividend Equivalent Unit) shall vest and be settled in an equal fraction of a share of Stock.  The delivery of such shares of Stock shall be on or as soon as practicable following the Certification Date, but in no event later than March 15 of the calendar year following the year in which the Certification Date occurred.

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

Unless otherwise determined by the Committee, Participant must satisfy the minimum statutory tax withholding obligations resulting from the vesting of Restricted Stock Units and related Dividend Equivalents (“Minimum Withholding Obligations”) by surrendering to the Company Restricted Stock Units and/or Dividend Equivalents that are then vesting (or shares of Stock issuable as a result of the vesting) with a value sufficient to satisfy the Minimum Withholding Obligations.   

Under no circumstances will Participant be entitled to satisfy any Minimum Withholding Obligations by surrendering Restricted Stock Units that are not then vesting or any Restricted Stock Units that Participant has elected to defer under Paragraph 7 above.  Any request by Participant to satisfy Minimum Withholding Obligations by surrendering shares of Stock owned by Participant prior to the date of such satisfaction must be specifically approved in advance by the Committee.  All payments and surrenders of Units or shares of Stock and any requests for approval of alternative payment arrangements must be made by Participant in accordance with such procedures as may be adopted by the Company in connection therewith, and subject to such rules as have been or may be adopted by the Committee.  

12.    Non-Solicitation.  In consideration of the Award made to Participant under this Agreement, starting on the Grant Date and ending on the date that is exactly twelve (12) months after Participant's “Separation Date” (defined below), Participant shall not directly or indirectly recruit or solicit for hire, or hire, or assist in any manner in the recruitment, solicitation for hire or hiring, of any employee or officer of the Company or any of its Subsidiaries or Affiliates, in each case involving

 employment by any individual, business or entity other than the Company or one of its Subsidiaries or Affiliates, or in any way induce any such employee or officer to terminate his or her employment with the Company or any of its Subsidiaries or Affiliates.  For purposes of this Paragraph 12, "Separation Date" means the date on which Participant's employment with the Company or one of its Subsidiaries or Affiliates terminates for any reason.  A violation of this Paragraph 12 by Participant shall constitute a “material violation” of an “agreement between the Participant and the Company” within the meaning of clause (iii) of the definition of Disqualifying Activity.  The provisions of this Paragraph 12 shall be in addition to, and shall not supersede or replace, the provisions of any employment or other agreement between Participant and the Company or any of its Subsidiaries or Affiliates that contains similar or additional restrictions on Participant.

13.    Recoupment.  If the Securities and Exchange Commission adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to the Company’s continued listing on a national securities exchange (“Exchange”), that the Company develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to Participant and the Award granted pursuant to this Agreement, then the Award shall be subject to recoupment pursuant to the terms of the rules of the Securities and Exchange Commission and any applicable Exchange and any policy of the Company adopted in response to such rules.  The provisions of this Paragraph 13 are in addition to the rights of the Company as set forth in Section 14(h) of the Plan.

14.    Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the Award and, except as provided in Paragraph 12, supersedes and cancels any other agreement, representation or communication, whether oral or in writing, between the parties relating to the Award, provided that the Agreement shall be at all times subject to the Plan. 

15.    Amendment.   The Committee may amend the terms of this Award to the fullest extent permitted by Section 12 of the Plan.

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

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

THE PROGRESSIVE CORPORATION

By:  /s/     Daniel P. Mascaro 
Vice President & Secretary

EXHIBIT I

INVESTMENT BENCHMARK CRITERIA

After the end of the Evaluation Period, the Independent Data Source will determine the firms comprising the Investment Benchmark for the Plan year from its records and will supply to the Company the monthly total returns and any other relevant data for each of those firms for the Evaluation Period.  

A firm will be included in the Investment Benchmark if the Independent Data Source is able to determine from its records that:
    
		
	1.
	The firm has provided monthly data  regarding its holdings and investment return, as necessary to determine or calculate such firm’s monthly total return, and to evaluate such firm’s compliance with each of the criteria set forth below, for the entire Evaluation Period; and 

		
	2.
	At all times during the Evaluation Period, the information provided by the firm shows, or the Independent Data Source is able to calculate, that such firm’s investment portfolio satisfies each of the following criteria:

Duration:             Effective Duration between 1.5 years and 5.0 years
Credit Quality Average         = A, or = AA, or = AAA, or = AAA+
Convexity (%)             >= -1
Sector Allocation:         U.S. High-Yield Corporate Debt <= 10%
Sector Allocation:         Mortgages <= 60%
Sector Allocation:         U.S. Investment-Grade Corporate Debt <= 60%
Sector Allocation:         CMBS <= 60%
Sector Allocation:         ABS <= 60%
Sector Allocation:         Emerging Markets Debt <= 5%

		
	3.
	The Company will have no discretion to alter the Investment Benchmark list after it is finalized by the Independent Data Source.

EXHIBIT II

DETERMINATION OF PERFORMANCE RANKING 
AND PERFORMANCE FACTOR

Once all the total returns are calculated, the data is sorted in descending order from highest to lowest total return. From here, the process to compute the Performance Factor is as follows:

INTERPOLATED VALUES FOR SETTING TOP AND BOTTOM 25% LEVELS 
The top 25% and bottom 25% total return rankings are computed based on the total number of firms in the Investment Benchmark, excluding the PCM Fixed-Income Portfolio return. For example, if there were 279 participants, the return required to earn a 2.00 portfolio performance factor would be determined by interpolating between the sixty-ninth and seventieth firm’s returns, since 25% of 279 = 69.75. The same procedure would be used to determine the 0.00 portfolio performance factor. 

The total returns, computed by Investment Accounting, for the interpolated positions are calculated as follows (continuing to use an example of 279 survey firms):

Interpolated Value = Firm 69 return - ((Firm 69 Return - Firm 70 Return)*0.75) 
Firm 69 = 18.35%
Firm 70 = 18.23%

Firm 69.75 (Interpolated Value) = 18.35% - ((18.35%-18.23%)*0.75) = 18.26%.

In this case, the PCM Performance Factor will equal 2.00 if its total return equals the interpolated value for Firm 69.75 or 18.26%.  A similar calculation is then used to determine the bottom 25% group and interpolated value for a 0.00 performance score.  

Once the two groups are computed, top and bottom 25%, the remainder of the performance scores are calculated as follows:

Performance score variance =  (2.00) / Number of positions from first participant after the top 25% ranking to the 1st participant in the bottom 25% ranking. In the case of 279 participants, the number of positions to divide the 2.00 performance factors by would be 142. 

The calculation for the performance score variance from 2.00 - 0.00 would be:

2.00 / 142 = .014085 per position for 279 firms

In the case of a tie in total returns between firms, each firm will have the same performance score, one step under the next higher position. The next lowest position would then be stepped down by a factor based on the number of participants who tie. In the case of a tie between two firms, the step down will be twice the performance score variance to maintain the proper stepping to the 0.00 performance score level. 

Example: If firms 70 and 71 each had the same total return in the 279 firm example, then firms 70 and 71 would each have a Performance Factor of 1.985915, which is 2.00 - .014085. The number 72 position in this example would have a performance score of 1.957746, which is the required step down from 70 to 72. 

In addition, if the returns are tied between the interpolated value set for the 2.00 performance score and any position below the 2.00 level, those lower positions will also be set to a 2.00 performance score. The step down factor in the performance score will work similarly as noted in the example above. For the last 25% group, all firms with total returns equaling the last interpolated total return value would have the same performance score as the last interpolated value (.014085), and all others in the last 25% group would have a 0.00 Portfolio Performance Factor. 

Once all the performance scores have been created, from 2.00 to 0.00, PCM’s return is compared to the rankings to determine its Performance Factor. If the PCM return is not in the top or bottom 25% and does not match the return of any participant, then PCM’s Performance Factor is an interpolated value between the firms with the next highest and next lowest returns.

The interpolation computation for the Performance Factor based on PCM’s return is as follows:

Performance score of firm below PCM return + (PCM’s Return - Return below PCM) / (Return above PCM - Return below PCM) * (Performance score of firm above PCM - Performance score of firm below PCM)

Assuming the following data, using the 279 firm example:

	
			
	Firm
	Performance score
	Total return

	Firm above PCM
	.90
	13.61

	PCM
	 
	13.39

	Firm below PCM
	.89
	13.34

The calculation of PCM’s Performance Factor is:

0.89 + (13.39-13.34) / (13.61-13.34) * (0.90-0.89) = 0.89 
    
The performance scores and the final Performance Factor are rounded to the nearest one-hundredth, if necessary.

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