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EXHIBIT NO. 10(P)
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THE PROGRESSIVE CORPORATION
EXECUTIVE DEFERRED COMPENSATION TRUST
(December 1, 1998 Amendment and Restatement)
WHEREAS, The Progressive Corporation Executive Deferred Compensation Trust
is currently maintained pursuant to a January 1, 1997 Amendment and Restatement
between The Progressive Corporation ("Company") and The Northern Trust Company
("Northern Trust") as trustee; and
WHEREAS, Northern Trust has been removed as trustee effective upon the
close of business on December 1, 1998; and
WHEREAS, Company has designated American Express Trust Company ("Trustee")
as the new trustee of the Plan effective December 1, 1998; and
WHEREAS, Company and Trustee desire to amend and restate the Trust
Agreement to reflect the designation of American Express Trust Company as
Trustee and to make certain other changes in the Trust;
NOW, therefore, effective December 1, 1998, Company and Trustee hereby
amend and restate the Trust Agreement in its entirety to provide as follows:
SECTION 1. Establishment of Trust
(a) Company hereby deposits with Trustee in trust Ten Dollars ($10.00),
which shall become the principal of the Trust to be held, administered
and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan participants
and their beneficiaries against Company. Any assets held by the Trust will
be subject to the claims of Company's general creditors under federal and
state law in the event of Insolvency, as defined in Section 3(a) herein.
Any assets held by the Trust will also be subject to the federal and state
law claims of general creditors of each subsidiary of Company that employs
Plan participants ("Subsidiary") in the event of Insolvency, as defined in
Section 3(a) herein, but only to the extent of the amounts due under the
Plan to participants attributable to the period that such participants were
employed by such Subsidiary.
(e) Within 30 days following the end of the Plan year(s), ending after the
Trust has become irrevocable pursuant to Section 1(b) hereof, Company shall
be required to irrevocably deposit additional cash or other
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property to the Trust in an amount sufficient to pay each Plan participant
or beneficiary the benefits payable pursuant to the terms of the Plan as of
the close of the Plan year(s). Trustee shall have no duty to enforce any
funding obligations of Company and the duties of Trustee shall be governed
solely by the terms of the Trust without reference to the Plan.
SECTION 2. Payments to Plan Participants and Their Beneficiaries
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(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant (and
his or her beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the
Plan, and the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment
Schedule. Company shall have the sole responsibility for all tax
withholding, filings and reports. Trustee shall withhold such amounts from
distributions as Company may direct and shall follow the instructions of
Company with respect to remission of such withheld amounts to appropriate
governmental authorities.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with
the terms of the Plan, Company shall make the balance of each such payment
as it falls due. Trustee shall notify Company where principal and earnings
are not sufficient to make a payment then due under the Payment Schedule.
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SECTION 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
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When Company is Insolvent.
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(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company, or any subsidiary that ever employed such
participants, is Insolvent, subject to the provisions of Section 3(b)
below. Company or a Subsidiary shall be considered "Insolvent" for purposes
of this Trust Agreement if (i) Company or such Subsidiary is unable to pay
its debts as they become due, or (ii) Company or such Subsidiary is subject
to a pending proceeding as a debtor under the United States Bankruptcy
Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company and, to the extent provided in
Section 1(d), each Subsidiary, under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's or any
Subsidiary's Insolvency. If a person claiming to be a creditor of Company
or a Subsidiary alleges in writing to Trustee that Company or such
Subsidiary has become Insolvent, Trustee shall determine whether Company or
such Subsidiary is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's or any Subsidiary's
Insolvency, or has received notice from Company or a Subsidiary or a person
claiming to be a creditor alleging that Company or a Subsidiary is
Insolvent, Trustee shall have no duty to inquire whether Company or a
Subsidiary is Insolvent. Trustee may in all events rely on such evidence
concerning Company's or any Subsidiary's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's or any Subsidiary's solvency. Trustee
may appoint an independent accounting or consulting firm to make any
determination required by Trustee under this Section 3, in which event
Trustee may conclusively rely upon the determination by such firm and shall
be responsible only for the prudent selection of the firm.
(3) If at any time Trustee has determined that Company or a Subsidiary is
Insolvent, Trustee shall discontinue payments to all Plan participants and
their beneficiaries (if Company is Insolvent) or Plan participants who were
ever employed by such Subsidiary (if such Subsidiary is Insolvent), and
shall hold the assets of the Trust for the benefit of Company's or such
Subsidiary's general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of Plan participants or their beneficiaries to
pursue their rights as general creditors of Company with respect to
benefits due under the Plan or otherwise. Company shall be responsible for
furnishing Trustee with current information regarding identities of
Subsidiaries and participants who were ever employed by each such
Subsidiary.
(4) Trustee shall resume the payment of benefits to Plan participants or
their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Company, or a Subsidiary as the case
may be, is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such period of
discontinuance, all in accordance with the Payment
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Schedule, which shall be modified by Company as necessary to comply with
the provisions of this paragraph (c).
SECTION 4. Payments to Company.
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Except as provided in Section 3 hereof, after the Trust has become irrevocable,
Company shall have no right or power to direct Trustee to return to Company or
to divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
SECTION 5. Investment Authority.
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(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. Except as provided below
and in Section 5(b), all rights associated with assets of the Trust shall
be exercised by Trustee or the person designated by Trustee, and shall in
no event be exercisable by or rest with Plan participants, except that
voting rights with respect to Trust assets will be exercised by Company.
Company shall have the right at anytime, and from time to time in its sole
discretion, to substitute assets of equal fair market value for any asset
held by the Trust. This right is exercisable by Company in a nonfiduciary
capacity without the approval or consent of any person in a fiduciary
capacity. Trustee shall have no responsibility for determining whether such
right has been properly exercised or for any investment losses that may
result from its exercise.
(b) Company may by notice to Trustee create one or more investment funds
in which Trust assets are to be invested and shall in such event direct
Trustee with respect to allocation of assets to such funds and transfers
among such funds. Company shall be responsible for the initial selection of
mutual funds or other investment vehicles which are to comprise the
investment funds and for retaining the availability of or terminating the
use of any such investment vehicles.
SECTION 6. Disposition of Income.
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(a) During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7. Accounting by Trustee.
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(a) Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 60 days following the close of each calendar
year and within 60 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth
all investments, receipts, disbursements and other transactions effected by
it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of such year or
as of the date of such removal or resignation, as the case may be.
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SECTION 8. Responsibility of Trustee.
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(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken
pursuant to a direction, request, or approval given by Company which is
contemplated by, and in conformity with, the terms of this Trust and is
given in writing by Company. In the event of a dispute between Company and
a party, Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations
hereunder.
(c) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any
of its duties or obligations hereunder.
(d) Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of
the policy to a different form) other than to a successor Trustee, or to
loan to any person the proceeds of any borrowing against such policy and
shall act with respect to any such policy only as directed by Company.
(e) However, notwithstanding the provisions of Section 8(d) above,
Trustee may loan to Company the proceeds of any borrowing against an
insurance policy held as an asset of the Trust.
(f) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue
Code.
SECTION 9. Compensation and Expenses of Trustee.
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Company shall pay all administrative and Trustee's fees and expenses. If not so
paid, the fees and expenses shall be paid from the Trust. The Trustee will, as
part of its compensation for services, receive interest earned on any uninvested
cash awaiting investment into or distribution from the Trust.
SECTION 10. Resignation and Removal of Trustee.
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(a) Trustee may resign at any time by written notice to Company, which shall
be effective not less than 365 days after receipt of such notice unless
Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on not less than 180 days notice or
upon shorter notice accepted by Trustee.
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(c) If Trustee resigns or is removed within two years after a Change of
Control, as defined herein, Company shall apply to a court of competent
jurisdiction for the appointment of a successor trustee or for
instructions.
(d) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 60 days after receipt of
notice of resignation, removal or transfer, unless Company extends the
time limit.
(e) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation
or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall be allowed
as administrative expenses of the Trust.
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Section 11. Appointment of Successor.
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(a) If Trustee resigns or is removed in accordance with Section 10(a) or (b)
hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers
under state law, as a successor to replace Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the
new Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by Company
or the successor Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the provisions of Section
10(c) hereof and a court of competent jurisdiction appoints a successor
Trustee, the appointment shall be effective when accepted in writing by the
new Trustee. The new Trustee shall have all the rights and powers of the
former Trustee, including ownership rights in Trust assets. The former
Trustee shall execute any instrument necessary or reasonably requested by
the successor Trustee to evidence the transfer.
(c) The successor Trustee need not examine the records and acts of any prior
Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for
and Company shall indemnify and defend the successor Trustee from any
claims or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time
it becomes successor Trustee.
SECTION 12. Amendment or Termination.
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(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan or shall make the Trust revocable after
it has become irrevocable in accordance with Section 1(b) hereof. Company
shall be solely responsible for determining whether an amendment conflicts
with the terms of the Plan.
(b) The Trust shall not terminate until the date on which Plan participants and
their beneficiaries are no longer entitled to benefits pursuant to the
terms of the Plan. Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company pursuant to certification of Company
to Trustee that the conditions for termination of the Trust have been met.
(c) Upon written approval of participants or beneficiaries entitled to payment
of benefits pursuant to the terms of the Plan, Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to Company.
SECTION 13. Miscellaneous
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(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
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(c) This Trust Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.
(d) For purposes of this Trust, Change of Control shall mean a "Change in
Control" or "Potential Change in Control" within the meaning of The
Progressive Corporation 1989 Incentive Plan (amended and restated as of
April 24, 1992 and as further amended as of July 1, 1992 and February 5,
1993). Company shall notify Trustee promptly of any Change of Control and
Trustee shall have no responsibility to independently determine whether a
Change of Control has occurred.
(e) Company shall indemnify Trustee against, and hold Trustee harmless from,
any and all loss, damage, penalty, liability, cost, expense and reasonable
attorney's fees and disbursements, that may be incurred by, imposed upon or
asserted against Trustee by reason of any claim, regulatory proceeding or
litigation arising from any act done or omitted to be done by any
individual or person with respect to the Plan or Trust, excepting only any
and all loss, damage, penalty, liability, cost, expense and reasonable
attorney's fees and disbursements, to the extent arising from Trustee's
negligence in performing or failing to perform any of the duties
specifically allocated to the Trustee under the terms of this Agreement or
from the Trustee's willful misconduct or bad faith. Trustee agrees to
indemnify and hold Company harmless from and against any and all loss,
damage, penalty, liability, cost, expense and reasonable attorney's fees
and disbursements incurred by, imposed upon or asserted against Company by
reason of any claim, regulatory proceeding or litigation to the extent
arising from the Trustee's negligence in performing or failing to perform
any of the duties specifically allocated to the Trustee under the terms of
this Agreement or from the Trustee's willful misconduct or bad faith.
(f) Trustee shall not undertake or defend any litigation arising in connection
with the Trust without the express written consent of Company. If, with
Company's consent, Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees, subject to Section 13(e), to
indemnify Trustee against Trustee's costs, expenses and liabilities
(including, without limitation, attorneys' fees and expenses) relating
thereto and to be primarily liable for such payments. If Company does not
pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust.
(g) The Trustee shall deliver or cause to be executed and delivered, to the
Company, all notices, prospectuses, finance statements, proxies and proxy
soliciting materials relating to investments held hereunder. The Trustee
shall not vote any proxy or tender offer election, participate in any
voting trust, exercise any options or subscription right or join in,
dissent from or oppose any merger, reorganization, consolidation,
liquidation or sale with respect to any asset held hereunder, except in
accordance with the timely written instructions of the Company. If no such
written instructions are timely received, such proxies, elections and
voting trust shall not be voted; such options or subscription rights shall
not be exercised; and such mergers, reorganizations, consolidations,
liquidations or sales shall not be joined, dissented from or opposed.
(h) The Trustee may, in the exercise of its discretion, invest and reinvest the
assets of any trust created under this Agreement in assets issued or
distributed by American Express Financial Corporation or any of its
successors, subsidiaries or affiliates, even though American Express
Financial Corporation and its successors, subsidiaries or affiliates are
affiliated with the Trustee. Assets that the Trustee may acquire pursuant
to the authority granted by this paragraph include, but are not limited to
load and no-load mutual funds and stock of the Company. The Trustee shall
have full discretionary authority to make sales, purchases and exchanges of
assets of any trust created under this Agreement to, from, through any
securities broker/dealer owned by or affiliated with American Express
Financial Corporation, including
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but not limited to American Express Securities Services, or any of its
successors, subsidiaries or affiliates, or any unaffiliated persons,
partnerships or corporations it may select, and settle transactions in the
usual course of business.
IN WITNESS WHEREOF, Company and Trustee have hereunto caused this Trust
Agreement to be executed by their duly authorized representatives as of the date
set forth above.
THE PROGRESSIVE CORPORATION AMERICAN EXPRESS TRUST
COMPANY
By: /s/ David M. Schneider By: /s/ Tara L. Stonehouse
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Title: Secretary Title: Vice President
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