PROGRESSIVE CORP/OH/ (Form: 8-K, Received: 03/26/2020 11:11:58)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 26, 2020 (March 23, 2020)

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)



Ohio			001-09518	34-0963169
(State or other jurisdiction of incorporation)			(Commission File Number)	(IRS Employer Identification No.)

6300 Wilson Mills Road,	Mayfield Village,	Ohio		44143
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code (440) 461-5000

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 Par Value	PGR	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) On March 23, 2020, the Compensation Committee of the Board of Directors approved awards of restricted stock units to the company’s named executive officers and certain other senior employees of the company, under The Progressive Corporation 2015 Equity Incentive Plan. Consistent with prior years, the awards granted to named executive officers were a combination of time-based restricted stock unit awards and performance-based restricted stock unit awards. No significant changes were made to the terms of these awards, compared to similar awards described in the company’s proxy statement dated March 29, 2019, except that with respect to time-based restricted stock unit awards granted to a named executive officer who is eligible for a qualified retirement will now vest with respect to 50% of the unvested award when the executive retires. Under past time-based restricted stock awards, the executive vested with respect to 50% of unvested awards when the executive reached the age and service requirements for a qualified retirement and vested 50% with respect to future awards shortly after the award was granted.

The form of award agreements for the March 2020 restricted stock unit awards are attached hereto as exhibits.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

See exhibit index on page 4.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Date:	March 26, 2020
		THE PROGRESSIVE CORPORATION


		By: /s/ Mariann Wojtkun Marshall
		Name: Mariann Wojtkun Marshall
		Title: Vice President and Chief Accounting Officer

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EXHIBIT INDEX



Exhibit No. Under Reg. S-K Item 601	Form 8-K Exhibit No.	Description
10	10.1	Form of Restricted Stock Unit Award Agreement for 2020 Time-Based Awards (Executive Officers) under The Progressive Corporation 2015 Equity Incentive Plan (for 2020)
10	10.2	Form of Restricted Stock Unit Award Agreement for 2020 Time-Based Awards under The Progressive Corporation 2015 Equity Incentive Plan (for 2020)
10	10.3	Form of Restricted Stock Unit Award Agreement for 2020 Performance-Based Awards (Performance Versus Market) under The Progressive Corporation 2015 Equity Incentive Plan (for 2020)
10	10.4	Form of Restricted Stock Unit Award Agreement for 2020 Performance-Based Awards (Investment Results) under The Progressive Corporation 2015 Equity Incentive Plan (for 2020)
104	104	Cover Page Interactive Data File (the cover page tags are embedded within the Inline XBRL document).

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Exhibit 10.1

RESTRICTED STOCK UNIT AWARD AGREEMENT

(2020 Executive Officer Time-Based Award)

This Agreement (“Agreement”) is made this <Grant Date> (“Grant Date”) by and between

<Participant Name> (“Participant”) and The Progressive Corporation (the “Company”).

2.Award of Restricted Stock Units. The Company grants to Participant an award (the “Award”) consisting of <# of Units> restricted stock units (the “Restricted Stock Units” or “Units”), pursuant to, and subject to, the terms of the Plan.

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 the Units shall vest, if at all, according to the following schedule (with such modifications as may be necessary or appropriate, in the Company’s sole discretion, to eliminate or minimize fractional Units from the following vesting schedule):


a.	One-third of the Units shall vest on January 1, 2023;


b.	One-third of the Units shall vest on January 1, 2024; and


c.	One-third of the Units shall vest on January 1, 2025.

The Restricted Stock Units awarded under this Agreement shall vest in accordance with the schedule set forth above unless, prior to the vesting date set forth above, the Award and the applicable Units are forfeited or have become subject to accelerated vesting under the terms and conditions of the Plan or this Agreement.

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, as the Restricted Stock Units to which they relate; provided, however, that (i) if the Restriction Period for any Restricted Stock Unit ends after the record date for, but before the payment date of, a dividend, then any Dividend Equivalents related to such dividend and to Units for which the Restriction Period is ending 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, and (ii) if Paragraph 8(d) below is applicable and a record date for any dividend occurs after the applicable vesting date but before the applicable Delivery Date (as defined in Paragraph 8(d) below), then any Dividend Equivalents related to such dividend will be paid in cash or in Stock, in the sole discretion of the Company, on or as soon as practicable following the Delivery Date.

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 9), 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.

(a)Except as otherwise provided in the Plan 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.

(b)Notwithstanding Paragraph 8(a) above, in the event that Participant’s employment terminates as a result of Participant’s death prior to the Participant’s Qualified Retirement Eligibility Date, then the Restricted Stock Units (and any related Dividend Equivalents) will vest to the extent that the Award would have vested if Participant had remained employed for one year following the date of death, and the balance of the Award, if any, shall be forfeited. The Company will process any vesting pursuant to the terms of the immediately preceding sentence within 30 days following its receipt of notice of Participant’s death.

(c)Notwithstanding Paragraph 8(a) above, in the event that Participant’s employment terminates as a result of Participant’s death on or after the Participant’s Qualified Retirement Eligibility Date, then fifty percent (50%) of each Award Installment (and any related Dividend Equivalents) that is unvested on the date of death will vest and the balance of the Award shall be forfeited. The Company will process any vesting pursuant to the terms of the immediately preceding sentence within 30 days following its receipt of notice of Participant’s death.

(d)Notwithstanding Paragraph 8(a) above, in the event that Participant’s employment terminates as a result of Participant’s Qualified Retirement, then fifty percent (50%) of each Award Installment (and any related Dividend Equivalents) that is unvested on the Participant’s Qualified Retirement Date will vest immediately after such Qualified Retirement, except that the distribution of Stock deliverable upon such vesting shall not occur until the date that is six (6) months plus one (1) day after such Qualified Retirement Date (the “Delivery Date”). The remaining fifty percent (50%) of each unvested Award Installment (and any related Dividend Equivalents) shall terminate immediately after such Qualified Retirement.


(e)	For purposes of this Paragraph 8:

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


(x)	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


(y)	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 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(e)(i);

ii. “Qualified Retirement Eligibility Date” shall mean 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(e)(i) above; and

iii. “Qualified Retirement Date” means the date as of which Participant’s employment with the Company or its Subsidiaries or Affiliates terminates pursuant to a Qualified Retirement as defined in Paragraph 8(e)(i) above.

(f)Nothing in this Paragraph 8 will be interpreted as altering in any way the provisions of Section 11 of the Plan.

9.Delivery at Vesting. Subject to the provisions of the Plan and this Agreement (including Paragraph 8(d)), 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 the applicable Restricted Stock Units (and any related 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.

10.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. A violation of Paragraph 12 below, and any violation of any non-competition agreement between Participant and the Company or any of its subsidiaries or Affiliates, 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.

11.Taxes. No later than the date as of which Taxes become due, 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 (or Delivery Date, if applicable) of any Award Installment, Restricted Stock Units and any related Dividend Equivalent Units vesting on such vesting date (or being distributed on such Delivery 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”) either (a) by surrendering to the Company Restricted Stock Units that are then vesting or being distributed (or shares of Stock issuable upon such event) with a value sufficient to satisfy the Minimum Withholding Obligations, or (b) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument. Unless Participant advises the Company of his or her election to use an alternative payment method, Participant shall be deemed to have elected to surrender to the Company Restricted Stock Units that are then vesting or being distributed (or shares of Stock issuable upon such event) 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 being distributed on such Delivery Date) 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.

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, "Separation Date" means the date on which Participant's employment with the Company or one of its Subsidiaries or Affiliates terminates for any reason. 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.Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to this 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.

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

15.Acknowledgments. Participant: (i) 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; (ii) accepts this Agreement and the Award subject to all provisions of the Plan and this Agreement; and (iii) 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 10.2

RESTRICTED STOCK UNIT AWARD AGREEMENT

(2020 Time-Based Award)

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

2. Award of Restricted Stock Units. The Company grants to Participant an award (the “Award”) consisting of <# of Units> restricted stock units (the “Restricted Stock Units” or “Units”), pursuant to, and subject to, the terms of the Plan.

4. Restrictions; Vesting.


(a)	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 the Units shall vest, if at all, according to the following schedule (with such modifications as may be necessary or appropriate, in the Company’s sole discretion, to eliminate or minimize fractional Units from the following vesting schedule):

i. One-third of the Units shall vest on January 1, 2023;

ii. One-third of the Units shall vest on January 1, 2024; and

iii. One-third of the Units shall vest on January 1, 2025.


(b)	Notwithstanding Paragraph 4(a) above:


i.	If Participant’s Qualified Retirement Eligibility Date (within the meaning of Paragraph 4(b)(vi) below) occurred prior to the Grant Date, then fifty percent (50%) of each Award Installment shall vest on the Specified Date (defined below) and the remaining fifty percent (50%) of each Award Installment shall remain unvested and subject to the terms of this Agreement;


ii.	If Participant’s Qualified Retirement Eligibility Date occurs after the Grant Date but prior to the Specified Date:

If Participant’s employment terminates as a result of a Qualified Retirement (within the meaning of Section 4(b)(v) below) prior to the Specified Date, then on Participant’s Qualified Retirement Date (within the meaning of Section 4(b)(vii) below), fifty percent (50%) of each Award Installment shall vest and the remaining fifty percent (50%) of each Award Installment shall terminate automatically;


B.	If Participant’s employment terminates for any reason other than a Qualified Retirement prior to the Specified Date, the provisions of Section 8 below shall apply to such termination; or


C.	If Participant’s employment does not terminate prior to the Specified Date, then fifty percent (50%) of each Award Installment shall vest on the Specified Date and the remaining fifty percent (50%) of each Award Installment shall remain unvested and subject to the terms of this Agreement; and

iii.

If Participant’s Qualified Retirement Eligibility Date occurs on or after the Specified Date but prior to any vesting date specified in Paragraph 4(a) above, then fifty percent (50%) of each unvested Award Installment shall vest on the Participant’s Qualified Retirement Eligibility Date and the remaining fifty percent (50%) of each unvested Award Installment shall remain unvested and subject to the terms of this Agreement.

iv.

For purposes of this Paragraph 4(b), Specified Date shall mean: May 1, 2020 if the Grant Date is in March 2020; August 1, 2020 if the Grant Date is in July 2020; November 1, 2020 if the Grant Date is in October 2020; and February 1, 2021 if the Grant Date is in January 2021; and on the first day of the month that immediately follows the Grant Date if the Grant Date is at any other time; provided, however, in each case, that if no sale of Stock occurs on the New York Stock Exchange (the “NYSE”) on such date, then the next succeeding day on which the Stock is traded on the NYSE shall be the Specified Date.

For purposes of this Paragraph 4(b), “Qualified Retirement” shall mean any termination of Participant’s employment with the Company or its Subsidiaries or Affiliates for any reason (including death, but excluding an involuntary termination for Cause) that (a) qualifies as a “separation from service” within the meaning of Section 409A, and (b) 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;


vi.	For purposes of this Paragraph 4(b), “Qualified Retirement Eligibility Date” shall mean 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 4(b)(v) of this Agreement.


vii.	For purposes of this Paragraph 4(b), “Qualified Retirement Date” means the date as of which Participant’s employment with the Company or its Subsidiaries or Affiliates terminates pursuant to a Qualified Retirement as defined in Paragraph 4(b)(v) of this Agreement.

5. Dividend Equivalents. Subject to this Paragraph 5, with respect to dividends for which a record date occurs during the Restriction Period applicable to any Units, Participant shall be credited with a Dividend Equivalent with respect to each outstanding Restricted Stock Unit, and with respect to any 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, in the number of Dividend Equivalent 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, 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, as the Restricted Stock Units to which they relate; provided, however, that if the Restriction Period for any Restricted Stock Unit ends after the record date for, but before the payment date of, a dividend, then any Dividend Equivalents related to such dividend and to Units for which the Restriction Period is ending 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.

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 9), 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, 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, in the event that Participant’s employment terminates as a result of Participant’s death prior to the Participant’s Qualified Retirement Eligibility Date, then the Restricted Stock Units (and any related Dividend Equivalents) will vest to the extent that the Award would have vested if Participant had remained employed for one year following the date of death, and the balance of the Award, if any, shall be forfeited. The Company will process any vesting pursuant to the terms of the immediately preceding sentence within 30 days following its receipt of notice of Participant’s death. If the provisions of Paragraph 4(b)(i) of this Agreement are applicable to Participant and this Award and Participant’s employment terminates prior to the Specified Date as a result of Participant’s Qualified Retirement, then the provisions of this Paragraph 8 shall not apply to Units (and any related Dividend Equivalents) that are scheduled to vest on the Specified Date; however, all other Units (and related Dividend Equivalents) will be forfeited automatically, as of Participant’s Qualified Retirement Date, in accordance with this Paragraph 8. Nothing in this Paragraph 8 will be interpreted as altering in any way the provisions of Section 11 of the Plan.

9. 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 the applicable Restricted Stock Units (and any related 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. Notwithstanding the foregoing, as to any Participant who is a “specified employee” as defined in Section 409A of the Code, any delivery of Common Shares will be delayed for six (6) months plus one (1) day after the vesting date if, and to the extent, that such delay is required by Section 409A.

10. 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. A violation of Paragraph 12 below, and any violation of any non-competition agreement between Participant and the Company or any of its subsidiaries or Affiliates, 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.

11. Taxes. No later than the date as of which an amount relating to any Award Installment 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 of any Award Installment, Restricted Stock Units and any related Dividend Equivalent Units vesting on such vesting 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”) either (a) by surrendering to the Company Restricted Stock Units that are then vesting (or shares of Stock issuable upon vesting) with a value sufficient to satisfy the Minimum Withholding Obligations, or (b) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument. Unless Participant advises the Company of his or her election to use an alternative payment method, Participant shall be deemed to have elected to surrender to the Company Restricted Stock Units that are then vesting (or shares of Stock issuable upon 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, "Separation Date" means the date on which Participant's employment with the Company or one of its Subsidiaries or Affiliates terminates for any reason. 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. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to this 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.

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

15. Acknowledgments. Participant: (i) 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; (ii) accepts this Agreement and the Award subject to all provisions of the Plan and this Agreement; and (iii) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Award.

THE PROGRESSIVE CORPORATION

By: /s/ Daniel P. Mascaro

Vice President & Secretary

Exhibit 10.3

RESTRICTED STOCK UNIT AWARD AGREEMENT

(2020 Performance-Based Award – Performance versus Market)

This Agreement (“Agreement”) is made this <Grant Date> (“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”). Financial and operational terms used in this Agreement (e.g., references to business lines, units or segments) are used consistently with the use of those terms in the Company’s Form 10-K (including exhibits and other documents incorporated therein) for the fiscal year ended December 31, 2019 (the “Form 10-K”). It is understood that references herein to any performance results of the Company mean the applicable operating results of the Company and its Subsidiaries and Affiliates.

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 and one-half (2.5) 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 as was in effect during November 2017.

4. Restrictions; Vesting. Subject to the terms and conditions of the Plan and this Agreement, including the provisions of Paragraph 9 below, Participant’s rights in and to Restricted Stock Units shall vest, if at all, as follows:

a. Growth Evaluation Period. The “Growth Evaluation Period” shall be the three-year period comprised of the years 2020, 2021 and 2022.

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

i. the extent to which the Company’s performance results have satisfied the performance criteria set forth in both Subparagraphs c. and d. below; and

ii. the Performance Factor (defined below) to be multiplied by 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 Growth Evaluation Period (the date of such certification, the “Certification Date”), but in any event must occur (if at all) on or before January 31, 2025 (the “Expiration 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. Profitability Requirement. The Award shall not vest unless the Company has achieved a combined ratio of 96 or less, calculated by reference to the Company’s financial results, prepared in accordance with generally accepted accounting principles applicable in the United States (“GAAP”), for the twelve (12) fiscal month period immediately preceding the date of the certification described in Subparagraph b. above (the “Profitability Requirement”). This section is qualified by the provisions of subparagraph e. below. If the Profitability Requirement has not been satisfied with respect to the Award prior to the Expiration Date, none of the Award shall vest, and the Award shall be forfeited in its entirety.

d. Number of Units Vesting. Provided that the Profitability Requirement has been satisfied, the number of Restricted Stock Units (if any) that vest in connection with the Award will be determined as follows:

i. Performance scores reflecting the Company’s compounded annual rate of growth in Earned Premiums (defined below) for the Growth Evaluation Period (“Company Growth Rate”) for each of the Company’s (x) Private Passenger Auto, (y) Commercial Auto and (z) Homeowners Multiple Peril businesses (each a “Business Line” and, collectively, the “Business Lines”) will be compared to the compounded annual rate of growth for the Growth Evaluation Period (the “Market Growth Rate”) of the market for the applicable Business Line, in each case determined as provided below.

The performance score for each of Private Passenger Auto, Commercial Auto and Homeowners Multiple Peril will be determined by the following calculation:



Performance vs. Market	Determination of the Performance Score for the Business Line
If the Company Growth Rate for the Business Line exceeds the Market Growth Rate by the Maximum Measure for that Business Line or more	2.50 (i.e., the Maximum Performance Score)
If the Company Growth Rate for the Business Line exceeds the Market Growth Rate by more than the Target Measure for that Business Line but less than the Maximum Measure for that Business Line	For Private Passenger Auto and Commercial Auto: 1 + (Company Growth Rate – Market Growth Rate – 2.00) Example: Private Passenger Auto Company Growth Rate = 2.50%; Private Passenger Auto Market Growth Rate = 0.10%; Performance Score = 1 + (2.50 - 0.10 - 2.00) = 1.40
	For Homeowners Multiple Peril: 1 + ((Company Growth Rate – Market Growth Rate – 7.00)/ 2) Example: Homeowners Multiple Peril Company Growth Rate = 9.00%; Homeowners Multiple Peril Market Growth Rate = 1.50% Performance score = 1+((9.00-1.50-7.00)/2.00) = 1.25
If the Company Growth Rate for the Business Line exceeds the Market Growth Rate by exactly the Target Measure for that Business Line	1.00 (i.e., Target Performance Score)
If the Company Growth Rate for the Business Line exceeds the Market Growth Rate by less than the Target Measure for that Business Line	(Company Growth Rate – Market Growth Rate) / Target Measure for that Business Line Example: Homeowners Multiple Peril Company Growth Rate = 13%; Homeowners Multiple Peril Market Growth Rate = 10%; Performance Score = ((13–10)/7.00) = 0.43
If the Company Growth Rate for the Business Line is equal to or less than the Market Growth Rate for that Business Line	Zero

ii. The Target Measure and Maximum Measure for each Business Line is as follows:



Business Line	Target Measure	Maximum Measure
Private Passenger Auto	2 percentage points	3.5 percentage points
Commercial Auto	2 percentage points	3.5 percentage points
Homeowners Multiple Peril	7 percentage points	10 percentage points

iii. The resulting performance score for each of the Business Lines will then be multiplied by a weighting factor, which shall be a fraction or decimal equivalent,

determined by dividing the Earned Premiums generated by such Business Line during the Growth Period by the Earned Premiums generated by all of the Business Lines in the aggregate during the Growth Period to produce a weighted performance score. Subject to subparagraph (f), the sum of these weighted performance scores will be the performance factor (the “Performance Factor”). The number of Restricted Stock Units vesting will be determined by multiplying the Target Award Units by the Performance Factor. In no event will the Performance Factor be more than 2.50. If the Performance Factor is zero, none of the Award shall vest, and the Award shall be forfeited in its entirety.

iv. For purposes of these determinations:

A. Subject to the provisions of Subparagraphs B., C. and D. below:

1. “Earned Premiums” shall mean Direct Premiums Earned, as that term is used in the A.M. Best annual report currently known as the “A2 Report”;

2. The Company Growth Rate for each Business Line will be the compounded annual rate of growth in Earned Premiums for such Business Line during the Growth Evaluation Period, determined by comparing (a) the annual aggregate Earned Premiums of the Company for such Business Line for 2022, as reported by A.M. Best in its initial annual report currently known as the “A2 Report,” with (b) such Earned Premiums of the Company for such Business Line for 2019 as reported in A.M. Best’s A2 Report; and

3. The Market Growth Rate for Private Passenger Auto, Commercial Auto or Homeowners Multiple Peril, as applicable, will be the compounded annual rate of growth in Earned Premiums during the Growth Evaluation Period, determined by comparing (a) the aggregate Earned Premiums of the U.S. Private Passenger Auto market, the Commercial Auto market or the Homeowners Multiple Peril market, as applicable, for 2022, as reported in A.M. Best’s A2 Report, with (b) such Earned Premiums for 2019 as reported in A.M. Best’s A2 Report, but excluding (in each case) the applicable Earned Premiums of the Company for the applicable Business Line;

B. If either 2019 or 2022 is a 53-week year under the Company’s fiscal calendar, then in determining the Company Growth Rate as set forth in Subparagraph A. above, the aggregate Earned Premiums for such year (for any product other than a product in Homeowner’ Multiple Peril that is written by a direct or indirect subsidiary of ARX Holding Corp. (“ARX”)) will be reduced by an amount equal to twenty percent (20%) of the Earned Premiums of the Company for such product(s) in fiscal December 2019 or 2022, as applicable, in its Private Passenger Auto, Commercial Auto and/or Homeowners Multiple Peril, as applicable. If 2022 is a 53-week year under ARX’s fiscal calendar, then in determining the Company Growth Rate as set forth in Subparagraph A. above, the aggregate Earned Premiums for such year with respect to any product written by a subsidiary of ARX will be reduced by an amount equal to twenty percent

(20%) of the Earned Premiums of the Company for such product(s) in fiscal December 2022 in its Private Passenger Auto, Commercial Auto and/or Homeowners Multiple Peril, as applicable.

C. In making the calculations required under this Agreement, (x) Company Growth Rate for each Business Line, Market Growth Rate and the performance score for each Business Line shall each be rounded to the nearest thousandth of a whole percentage point, (y) the Performance Factor will be rounded to the nearest one-hundredth, and (z) if applicable, the number of Restricted Stock Units vesting shall be rounded to the nearest thousandth of a whole Unit (or, in each case, as otherwise reasonably determined by the Company); and

D. In the event that A.M. Best ceases to publish the A2 Report, or modifies the A2 Report 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 industrywide data as may be then available from A.M. Best in any successor or replacement report or publication, or such comparable data as may be available from another nationally recognized provider of insurance industry data, in each case as the Committee may approve in its sole discretion.

e. Exclusions. For purposes of determining whether the Profitability Requirement is satisfied, to the extent permitted under Section 162(m), as the same was in effect during November 2017, the following items will be excluded from, to the extent that any such item would otherwise be included in, the calculation of the Company’s combined ratio: (1) the financial results (if such results can be separately determined) attributable to the operations of an entity, business, product line or product that (x) is acquired or disposed of by the Company, or any of its Subsidiaries or Affiliates, during the Performance Period and (y) is not a part of the Company’s Earned Premiums for any business line for which premiums are reflected in Private Passenger Auto, Commercial Auto or Homeowners Multiple Peril in the A.M. Best A2 Report; and (2) all other items of gain, loss or expense determined to be extraordinary or unusual in nature under GAAP that are recognized or incurred during the period over which the Profitability Requirement is being calculated.

f. 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 terminated or been forfeited under the terms and conditions of the Plan or this Agreement.

5. Expiration of Award. Notwithstanding anything to the contrary in this Agreement, if Participant’s rights in and to the Award have not vested in accordance with Paragraph 4 of this Agreement on or before the Expiration Date, this Award shall expire at 11:59 p.m. on the Expiration Date. Upon such expiration, the Award shall terminate automatically, and Participant shall have no further rights with respect to the Award.

6. Dividend Equivalents. Subject to this Paragraph 6, 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 6 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.

7. 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.

8. 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 11), 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.

9. Termination of Employment. Except as otherwise provided in the Plan, or in this Paragraph 9, 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 earlier to occur of (x) the expiration of such one (1) year period and (y) the Expiration Date. 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 Growth Evaluation Period but prior to the “first opportunity to certify results” (defined below), the Award shall not be forfeited at the time of Participant’s termination, and:

i.if the termination is a result of Participant’s death before his or her Qualified Retirement Eligibility Date, the provisions of Paragraph 9(a) of this Agreement will continue to apply to the Award;

ii.if the termination occurs prior to the Participant’s Qualified Retirement Eligibility Date for any reason other than Participant’s death, Participant shall be eligible to participate in the vesting of Restricted Stock Units (and any related Dividend Equivalents) under this Agreement only to the extent certified by the Committee at the time of such first opportunity to certify results, but if certification does not occur upon such first opportunity to certify results, the Award shall be forfeited automatically; and

iii.if the termination occurs on or after the Participant’s Qualified Retirement Eligibility Date, then Participant shall be eligible to participate in the vesting of Restricted Stock Units under this Agreement only to the extent certified by the Committee at the time of such first opportunity to certify results, but if certification does not occur upon such first opportunity to certify results, then the Award will be governed by Paragraph 9(c) of this Agreement as if Participant had terminated employment as a result of a Qualified Retirement on the date of the first opportunity to certify results.

c. In the event that any such termination of employment occurs as a result of Participant’s Qualified Retirement, the Award (A) shall remain in effect with respect to fifty percent (50%) of the Award, which shall vest after the Committee’s certification of the achievement of the performance measures identified in Paragraph 4 (unless such performance measures are not achieved prior to the Expiration Date, in which event the Award will terminate, and the Award will be forfeited, as of such Expiration Date), 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 9:

the phrase “first opportunity to certify results” means the date which is the earlier to occur of: (A) the last day of the calendar month immediately following the month in which A.M. Best publishes the A2 Report (or, if applicable, the calendar month immediately following the month in which the successor or replacement report or data described in Subparagraph 4.d.iii.D. above is published) for the third year of the Growth Evaluation Period, or (B) a meeting of the Compensation Committee is held at which such report or data is reviewed (whether or not a certification occurs) or a written action is executed by the Committee in lieu of such a meeting;


ii.	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 9(c) of this Agreement: the Chief Executive Officer and any executive officers who are members of the Chief Executive Officer’s Direct Reporting Group;

iii.

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;

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 9(d)(iii); and


iv.	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 9(d)(iii) of this Agreement.

e. Nothing in this Paragraph 9 will be interpreted as altering in any way the provisions of Section 11 of the Plan.

10. 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. A violation of Paragraph 13 below, and any violation of any non-competition agreement between Participant and the Company or any of its subsidiaries or Affiliates, 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.

11. 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.

12. 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.

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 8 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.

13. 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 13, "Separation Date" means the date on which Participant's employment with the Company or one of its Subsidiaries or Affiliates terminates for any reason. The provisions of this Paragraph 13 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.

14. 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 14 are in addition to the rights of the Company as set forth in Section 14(h) of the Plan.

15. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the Award and, except as provided in Paragraph 13, 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.

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

17. 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.

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 10.4

RESTRICTED STOCK UNIT AWARD AGREEMENT

(2020 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 as was in effect during November 2017.

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 2020, 2021 and 2022.

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 multiplied by 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 by the Committee 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 provide 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 beginning with 2019 and 100% of such benefit for 2018 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
25^th Percentile	50^th Percentile	75^th 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 1^st of the year immediately following the Evaluation Period. In all events, distributions under this Agreement must be made on or before March 15^th 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 investment return data for comparable firms 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.

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 any executive officers who are members of the Chief Executive Officer’s Direct Reporting Group;

ii.


(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.

e. Nothing in this Paragraph 8 will be interpreted as altering in any way the provisions of Section11 of the Plan.

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. A violation of Paragraph 12 below, and any violation of any non-competition agreement between Participant and the Company or any of its subsidiaries or Affiliates, 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.

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.

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.

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. 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.

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 each applicable 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 1^st 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.