Docstoc

Put Agreement - STATE AUTO FINANCIAL CORP - 3-28-2000

Document Sample
Put Agreement - STATE AUTO FINANCIAL CORP - 3-28-2000 Powered By Docstoc
					Exhibit 10(U)

PUT AGREEMENT among STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, STATE AUTO FINANCIAL CORPORATION, and BANK ONE, NA, as Agent Dated as of November 19, 1999

PUT AGREEMENT This Put Agreement, dated as of November 19, 1999, is among State Automobile Mutual Insurance Company, a mutual insurance company duly organized and validly existing under the laws of the State of Ohio ("State Auto Mutual"), State Auto Financial Corporation, a corporation duly organized and validly existing under the laws of the State of Ohio ("State Auto Financial" and, together with State Auto Mutual, the "State Auto Obligors"), and Bank One, NA, as agent (in such capacity, together with its successors in such capacity, the "Agent") for the Lenders party to the Credit Agreement referred to below. RECITALS: A. SAF Funding Corporation (the "Borrower"), the lenders party thereto from time to time (the "Lenders") and the Agent are parties to a Credit Agreement, dated as of November 19, 1999 (as modified and supplemented and in effect from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for term loans to be made by the Lenders to the Borrower in an aggregate principal amount not exceeding $135,000,000. B. The proceeds of the term loans made to the Borrower under the Credit Agreement are to be used by the Borrower to purchase certain preferred stock of State Auto Financial pursuant to a Standby Purchase Agreement, dated as of the date hereof, among the Borrower and State Auto Financial (as modified and supplemented and in effect from time to time as permitted hereby, the "Standby Purchase Agreement"). NOW, THEREFORE, to induce the Lenders to enter into the Credit Agreement and to make loans thereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions and Accounting Terms. Capitalized terms used but not defined herein shall have the respective meanings, assigned to such terms in the Credit Agreement. In addition, as used herein, the following terms shall have the following meanings (all terms defined in this Section 1.1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa):

PUT AGREEMENT This Put Agreement, dated as of November 19, 1999, is among State Automobile Mutual Insurance Company, a mutual insurance company duly organized and validly existing under the laws of the State of Ohio ("State Auto Mutual"), State Auto Financial Corporation, a corporation duly organized and validly existing under the laws of the State of Ohio ("State Auto Financial" and, together with State Auto Mutual, the "State Auto Obligors"), and Bank One, NA, as agent (in such capacity, together with its successors in such capacity, the "Agent") for the Lenders party to the Credit Agreement referred to below. RECITALS: A. SAF Funding Corporation (the "Borrower"), the lenders party thereto from time to time (the "Lenders") and the Agent are parties to a Credit Agreement, dated as of November 19, 1999 (as modified and supplemented and in effect from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for term loans to be made by the Lenders to the Borrower in an aggregate principal amount not exceeding $135,000,000. B. The proceeds of the term loans made to the Borrower under the Credit Agreement are to be used by the Borrower to purchase certain preferred stock of State Auto Financial pursuant to a Standby Purchase Agreement, dated as of the date hereof, among the Borrower and State Auto Financial (as modified and supplemented and in effect from time to time as permitted hereby, the "Standby Purchase Agreement"). NOW, THEREFORE, to induce the Lenders to enter into the Credit Agreement and to make loans thereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions and Accounting Terms. Capitalized terms used but not defined herein shall have the respective meanings, assigned to such terms in the Credit Agreement. In addition, as used herein, the following terms shall have the following meanings (all terms defined in this Section 1.1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Affiliate" shall mean any Person that directly or indirectly controls, or is under common control with, or is controlled by, State Auto Mutual. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other

ownership interests, by contract or otherwise), provided that, in any event, any Person that owns directly or indirectly securities having 5% or more of the voting power for the election of directors or other governing body of a corporation or 5% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of State Auto Mutual or any of its Subsidiaries and (b) State Auto Mutual and its Subsidiaries shall not be deemed to be Affiliates of one another. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time. "Applicable Insurance Regulatory Authority" shall mean, when used with respect to any Insurance Entity, the insurance department or similar administrative authority or agency located in the State in which such Insurance Entity is domiciled. "Assumed Reinsurance" shall mean reinsurance assumed by any Insurance Entity from another Person (other than from another Insurance Entity).

ownership interests, by contract or otherwise), provided that, in any event, any Person that owns directly or indirectly securities having 5% or more of the voting power for the election of directors or other governing body of a corporation or 5% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of State Auto Mutual or any of its Subsidiaries and (b) State Auto Mutual and its Subsidiaries shall not be deemed to be Affiliates of one another. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time. "Applicable Insurance Regulatory Authority" shall mean, when used with respect to any Insurance Entity, the insurance department or similar administrative authority or agency located in the State in which such Insurance Entity is domiciled. "Assumed Reinsurance" shall mean reinsurance assumed by any Insurance Entity from another Person (other than from another Insurance Entity). "Capital Expenditures" shall mean, for any period, expenditures (including, without limitation, the aggregate amount of Capital Lease Obligations incurred during such period) made by State Auto Mutual or any of its Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with Agreement Accounting Principles. "Ceded Reinsurance" shall mean reinsurance ceded by any Insurance Entity to any other Person (other than to another Insurance Entity), other than Surplus Relief Reinsurance. "Environmental Claim" shall mean, with respect to any Person, any written or oral notice, claim, demand or other communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (a) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any claim by any governmental authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any and all present and future Federal, state, local and foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, -2-

distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes. "Equity Public Offering" shall mean a public issuance or sale by State Auto Mutual or any of its Material Subsidiaries after the Closing Date pursuant to a registration statement filed under the Securities Act of 1933, as amended, of any common stock. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations

distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes. "Equity Public Offering" shall mean a public issuance or sale by State Auto Mutual or any of its Material Subsidiaries after the Closing Date pursuant to a registration statement filed under the Securities Act of 1933, as amended, of any common stock. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code of which State Auto Mutual is a member and (b) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which State Auto Mutual is a member. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (a) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (b) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Farmers Casualty" means Farmers Casualty Insurance Company, an Iowa domiciled property and casualty insurance company. "Fixed Charge Coverage Ratio" means the ratio of (a) the sum of (i) the greater of (A) 10% of the aggregate amount of statutory capital and surplus of each Subsidiary of State Auto Financial which is engaged in the insurance business as of the most recently ended calendar year (determined without duplication in accordance with SAP) or (B) the aggregate net income earned by each Subsidiary of State Auto Financial which is engaged in the insurance business for the most recently ended four fiscal quarters (determined without duplication in accordance with SAP), plus (ii) cash on hand at State Auto Financial at the end of the most recently ended fiscal quarter, plus (iii) the aggregate net income of each Subsidiary of State Auto Financial which is not engaged in the insurance business for the most recently ended four fiscal quarters (determined without duplication in accordance with Agreement Accounting Principles) to (b) the sum of (i) interest payments on the Loans for the most recent four quarters, plus (ii) scheduled principal amortization payments on the Loans for the four fiscal quarters following the date of determination. "Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under -3-

any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease

any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by such Person; provided that Indebtedness shall not include (i) obligations with respect to insurance policies, annuities, guaranteed investment contracts and similar products underwritten by, or Reinsurance Agreements or Retrocession Agreements entered into by, an Insurance Entity in the ordinary course of its business and (ii) obligations with respect to Surplus Relief Reinsurance ceded by an Insurance Entity. "Insurance Entity" shall mean, collectively, State Auto Mutual and the Subsidiaries of State Auto Mutual licensed to underwrite property and casualty insurance. "Intercompany Pooling Arrangement" shall mean the pooling arrangement among State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty pursuant to which (a) State Auto P&C cedes to State Auto Mutual all of its insurance business, (b) Milbank cedes to State Auto Mutual its property and casualty insurance business, (c) Midwest Security cedes to State Auto Mutual its property and casualty insurance business, (d) Farmers Casualty cedes to State Auto Mutual its property and casualty insurance business and (e) State Auto Mutual retains its property and casualty insurance business, whereupon all such businesses are pooled and a portion thereof is then ceded from State Auto Mutual to each of State Auto P&C, Milbank, Midwest Security and Farmers Casualty and the balance thereof is retained by State Auto Mutual, as such arrangement may be modified and supplemented and in effect from time to time. "Interest Rate Protection Agreement" shall mean, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies. For purposes hereof, the "credit exposure" at any time of any Person under an Interest Rate Protection Agreement to which such Person is a party shall be determined at such time in accordance with the standard methods of calculating credit exposure under similar arrangements as prescribed from time to time by the Agent, taking into account potential interest rate movements and the respective termination provisions and notional principal amount and term of such Interest Rate Protection Agreement. -4-

"Investment" shall mean, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit with, or advance, loan or other extension of credit or capital contribution to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person), but excluding any such advance, loan or extension of credit having a term not exceeding 90 days arising in connection with the sale of inventory or supplies by such Person in the ordinary course of business; (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Interest Rate Protection Agreement. "License" shall have the meaning assigned to such term in Section 3.17 hereof.

"Investment" shall mean, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit with, or advance, loan or other extension of credit or capital contribution to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person), but excluding any such advance, loan or extension of credit having a term not exceeding 90 days arising in connection with the sale of inventory or supplies by such Person in the ordinary course of business; (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Interest Rate Protection Agreement. "License" shall have the meaning assigned to such term in Section 3.17 hereof. "Material Adverse Effect" shall mean a material adverse effect on (a) the Property, business, operations, financial condition, prospects, liabilities or capitalization of State Auto Mutual and its Subsidiaries taken as a whole, (b) the ability of State Auto Mutual to perform its obligations under this Agreement, (c) the validity or enforceability of any of the Basic Documents or (d) the rights and remedies of the Lenders and the Agent under any of the Basic Documents. "Material Subsidiary" shall mean, as at any time, any of State Auto Financial, State Auto P&C, Milbank, State Auto National Insurance Company, and any other Subsidiary of State Auto Mutual that holds, directly or indirectly, more than 5% of the consolidated assets of State Auto Mutual and its Subsidiaries at such time or that accounts for more than 5% of the consolidated revenues of State Auto Mutual and its Subsidiaries at such time. "Midwest Security" means Midwest Security Insurance Company, a Wisconsin domiciled property and casualty insurance company. "Milbank" shall mean Milbank Insurance Company, a South Dakota domiciled property and casualty insurance company. "Multiemployer Plan" shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by State Auto Mutual or any ERISA Affiliate and that is covered by Title IV of ERISA. "NAIC" shall mean the National Association of Insurance Commissioners and any successor thereto. "Net Available Proceeds" shall mean, with respect to any Equity Public Offering, the aggregate amount of all cash received by State Auto Mutual and its Material Subsidiaries in respect of such Equity Public Offering net of reasonable expenses incurred by State Auto Mutual and its Material Subsidiaries in connection therewith. -5-

"Obligations" shall have the meaning assigned to such term in Section 2.4 hereof. "Other Taxes" is defined in Section 2.7(b). "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Plan" shall mean an employee benefit or other plan established or maintained by State Auto Mutual or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Pledged Stock" shall mean the Preferred Stock pledged pursuant to the Company Pledge Agreement to the Agent for the benefit of the Lenders and all related rights in connection therewith.

"Obligations" shall have the meaning assigned to such term in Section 2.4 hereof. "Other Taxes" is defined in Section 2.7(b). "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Plan" shall mean an employee benefit or other plan established or maintained by State Auto Mutual or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Pledged Stock" shall mean the Preferred Stock pledged pursuant to the Company Pledge Agreement to the Agent for the benefit of the Lenders and all related rights in connection therewith. "Premium to Surplus Ratio" shall mean, with respect to any Person as at any date of determination thereof, the ratio (determined with respect to such Person and its Subsidiaries in accordance with SAP) of (a) net premiums written during the four consecutive calendar quarters ending on or most recently ended prior to such date of determination to (b) Statutory Surplus as at the last day of the calendar quarter ending on or most recently ended prior to such date of determination. "Put Event" shall mean one or more of the following events shall have occurred and be continuing: (a) a Default; (b) either State Auto Obligor shall default in the payment when due of any amount payable by it hereunder or State Auto Financial shall default in the payment when due of any amount payable by it under the Standby Purchase Agreement; (c) State Auto Mutual or any of its Material Subsidiaries shall default in the payment when due of any principal of or interest on any of its other Indebtedness aggregating $5,000,000 or more; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity or to have the interest rate thereon reset to a level so that securities evidencing such Indebtedness trade at a level specified in relation to the par value thereof; or State Auto Mutual or any of its Material Subsidiaries shall default in the payment when due of any amount aggregating $10,000,000 or more under any Interest Rate Protection Agreement; or State Auto Mutual or any of its Material Subsidiaries shall default under any Interest Rate Protection Agreement if the effect of such default is to cause, or (with the giving of any notice or the lapse of time or both) to permit, termination or liquidation payment or payments by State Auto Mutual or any of its Material Subsidiaries aggregating $5,000,000 or more to become due; -6-

(d) any representation, warranty or certification made or deemed made herein or in any other Basic Document (or in any modification or supplement hereto or thereto) by either State Auto Obligor party thereto, or any certificate furnished to any Lender or the Agent pursuant to the provisions hereof or thereof, shall prove to have been false or misleading as of the time made or furnished in any material respect; (e) State Auto Mutual shall default in the performance of any of its obligations under any of Sections 4.5 through 4.9 or 4.12 through 4.17 hereof, State Auto Financial shall default in the performance of any of its obligations under the Standby Purchase Agreement; or either State Auto Obligor shall default in the performance of any of its other obligations under this Agreement and such default shall continue unremedied for a period of 30 or more days after the occurrence of such default; (f) State Auto Mutual or any of its Material Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due;

(d) any representation, warranty or certification made or deemed made herein or in any other Basic Document (or in any modification or supplement hereto or thereto) by either State Auto Obligor party thereto, or any certificate furnished to any Lender or the Agent pursuant to the provisions hereof or thereof, shall prove to have been false or misleading as of the time made or furnished in any material respect; (e) State Auto Mutual shall default in the performance of any of its obligations under any of Sections 4.5 through 4.9 or 4.12 through 4.17 hereof, State Auto Financial shall default in the performance of any of its obligations under the Standby Purchase Agreement; or either State Auto Obligor shall default in the performance of any of its other obligations under this Agreement and such default shall continue unremedied for a period of 30 or more days after the occurrence of such default; (f) State Auto Mutual or any of its Material Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; (g) State Auto Mutual or any of its Material Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or (vi) take any corporate action for the purpose of effecting any of the foregoing; (h) a proceeding or case shall be commenced, without the application or consent of State Auto Mutual or any of its Material Subsidiaries, in any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of State Auto Mutual or such Material Subsidiary or of all or any substantial part of its Property or (iii) similar relief in respect of State Auto Mutual or such Material Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against State Auto Mutual or such Material Subsidiary shall be entered in an involuntary case under the Bankruptcy Code; (i) any Applicable Insurance Regulatory Authority shall appoint a rehabilitator, receiver, custodian, trustee, conservator or liquidator or the like (collectively, a "conservator") for any Insurance Entity, or cause possession of all or any substantial portion of the property of any Insurance Entity to be taken by any conservator (or any Insurance Regulatory Authority shall commence any action to effect any of the foregoing); -7-

(j) a final judgment or judgments for the payment of money of $10,000,000 or more in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or of $25,000,000 or more in the aggregate (regardless of insurance coverage) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against State Auto Mutual or any of its Subsidiaries and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and State Auto Mutual or the relevant Material Subsidiary shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; (k) an event or condition specified in Section 4.1(j) hereof shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, State Auto Mutual or any ERISA Affiliate shall incur or in the opinion of the Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any combination of the foregoing) that, in the determination of the Required Lenders, would (either individually or in the aggregate) have a Material Adverse Effect;

(j) a final judgment or judgments for the payment of money of $10,000,000 or more in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or of $25,000,000 or more in the aggregate (regardless of insurance coverage) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against State Auto Mutual or any of its Subsidiaries and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and State Auto Mutual or the relevant Material Subsidiary shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; (k) an event or condition specified in Section 4.1(j) hereof shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, State Auto Mutual or any ERISA Affiliate shall incur or in the opinion of the Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any combination of the foregoing) that, in the determination of the Required Lenders, would (either individually or in the aggregate) have a Material Adverse Effect; (l) a reasonable basis shall exist for the assertion against State Auto Mutual or any of its Subsidiaries, or any predecessor in interest of State Auto Mutual or any of its Subsidiaries or Affiliates, of (or there shall have been asserted against State Auto Mutual or any of its Subsidiaries) an Environmental Claim that, in the judgment of the Required Lenders is reasonably likely to be determined adversely to State Auto Mutual or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by State Auto Mutual or any of its Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor); (m) during any period of (i) 12 consecutive months if no Loans are outstanding or (ii) 25 consecutive months if any Loans are outstanding, a majority of the Board of Directors of State Auto Mutual, State Auto Financial or State Auto P&C, as the case may be, shall no longer be composed of individuals (x) who were members of said Board on the first day of such period, (y) whose election or nomination to said Board was approved by individuals referred to in clause (x) above constituting at the time of such election or nomination at least a majority of said Board or (z) whose election or nomination to said Board was approved by individuals referred to in clauses (x) and (y) above constituting at the time of such election or nomination at least a majority of said Board; (n) except for expiration in accordance with its terms, any material provision of this Agreement or the Standby Purchase Agreement shall for whatever reason be terminated or cease to be in full force and effect without the consent of the Lenders as specified in Section 10.17 of the Credit Agreement, or the validity or enforceability thereof shall be contested by either State Auto Obligor; -8-

(o) any "person" or "group" of "persons" (within the meaning of Section 13(d) of the Securities and Exchange Act of 1934, as amended) shall have the power, directly or indirectly, to vote or direct the voting of a greater number of the voting capital stock issued by State Auto Financial than State Auto Mutual; or State Auto Financial shall fail to own and control, beneficially (free and clear of all Liens), all of the capital stock issued by State Auto P&C (in each case irrespective of whether or not at the time securities or other ownership interests issued by State Auto Financial or State Auto P&C, as the case may be, or any other class or classes might have voting power by reason of the happening of any contingency); or (p) the rating published by A.M. Best & Co. for (i) State Auto Mutual shall be less than (x) "A", at any time prior to the date of the occurrence of the catastrophe relating to the initial Loans under the Credit Agreement, (y) "B+", at any time during the period commencing on the first anniversary of the date of the occurrence of such catastrophe to but excluding the fourth anniversary thereof, and (z) "A-", at any time thereafter, or (ii) State Auto P&C shall be less than "A" at any time prior to the date of the occurrence of such catastrophe. "Put Notice" shall mean an instrument executed by the Agent substantially in the form of Exhibit A hereto.

(o) any "person" or "group" of "persons" (within the meaning of Section 13(d) of the Securities and Exchange Act of 1934, as amended) shall have the power, directly or indirectly, to vote or direct the voting of a greater number of the voting capital stock issued by State Auto Financial than State Auto Mutual; or State Auto Financial shall fail to own and control, beneficially (free and clear of all Liens), all of the capital stock issued by State Auto P&C (in each case irrespective of whether or not at the time securities or other ownership interests issued by State Auto Financial or State Auto P&C, as the case may be, or any other class or classes might have voting power by reason of the happening of any contingency); or (p) the rating published by A.M. Best & Co. for (i) State Auto Mutual shall be less than (x) "A", at any time prior to the date of the occurrence of the catastrophe relating to the initial Loans under the Credit Agreement, (y) "B+", at any time during the period commencing on the first anniversary of the date of the occurrence of such catastrophe to but excluding the fourth anniversary thereof, and (z) "A-", at any time thereafter, or (ii) State Auto P&C shall be less than "A" at any time prior to the date of the occurrence of such catastrophe. "Put Notice" shall mean an instrument executed by the Agent substantially in the form of Exhibit A hereto. "Put Purchase Date" shall mean the date specified in a Put Notice as the date on which State Auto Mutual shall purchase all of the Loans or the Pledged Stock, as specified therein. "Reinsurance Agreement" shall mean any agreement, contract, treaty or other arrangement providing for Ceded Reinsurance by any Insurance Entity or any Subsidiary of such Insurance Entity. "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata. "Retrocession Agreement" shall mean any agreement, contract, treaty or other arrangement (other than Surplus Relief Reinsurance) whereby any Insurance Entity or any Subsidiary of such Insurance Entity cedes reinsurance to other insurers (other than to another Insurance Entity or any of its Subsidiaries). "Risk-Based Capital Ratio" shall mean, with respect to any Person as at any date of determination thereof, the ratio of (a) Total Adjusted Capital (as defined by the NAIC) for such Person as at such date of determination to (b) Authorized Control Level Risk-Based Capital (as defined by the NAIC) for such Person as at such date of determination. "SAP" shall mean, with respect to any Insurance Entity, the accounting procedures and practices prescribed or permitted by the Applicable Insurance Regulatory Authority, applied on a basis consistent with those that, in accordance with the last sentence of -9-

Section 1.2(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "State Auto P&C" shall mean State Auto Property and Casualty Insurance Company, a South Carolina corporation. "Statutory Statement" shall mean, as to any Insurance Entity, a statement of the condition and affairs of such Insurance Entity, prepared in accordance with statutory accounting practices required or permitted by the Applicable Insurance Regulatory Authority, and filed with the Applicable Insurance Regulatory Authority. "Statutory Surplus" shall mean, as at any date for any Insurance Entity, the aggregate amount of surplus as regards policyholders (determined without duplication in accordance with SAP) of such Insurance Entity. "Surplus Relief Reinsurance" shall mean any transaction in which any Insurance Entity or any Subsidiary of such Insurance Entity cedes business under a reinsurance agreement that would be considered a "financing-type"

Section 1.2(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "State Auto P&C" shall mean State Auto Property and Casualty Insurance Company, a South Carolina corporation. "Statutory Statement" shall mean, as to any Insurance Entity, a statement of the condition and affairs of such Insurance Entity, prepared in accordance with statutory accounting practices required or permitted by the Applicable Insurance Regulatory Authority, and filed with the Applicable Insurance Regulatory Authority. "Statutory Surplus" shall mean, as at any date for any Insurance Entity, the aggregate amount of surplus as regards policyholders (determined without duplication in accordance with SAP) of such Insurance Entity. "Surplus Relief Reinsurance" shall mean any transaction in which any Insurance Entity or any Subsidiary of such Insurance Entity cedes business under a reinsurance agreement that would be considered a "financing-type" reinsurance agreement as determined by the independent certified public accountants of State Auto Mutual in accordance with principles published by the Financial Accounting Standards Board or the Second Edition of the AICPA Audit Guide for Stock Life Insurance Companies (pp. 91-92), as the same may be revised from time to time. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Tax Sharing Agreement" shall mean any tax sharing or allocation agreement to which State Auto Mutual or any of its Subsidiaries is a party and all tax indemnity agreements as to which State Auto Mutual or any of its Subsidiaries is the beneficiary or obligor. "Wholly Owned Subsidiary" shall mean, with respect to any Person, any corporation, partnership or other entity of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are directly or indirectly owned or controlled by such Person or one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. "Year 2000 Program" is defined in Section 3.19. 1.2 Accounting Terms and Determinations. (a) Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Agent hereunder shall (unless otherwise disclosed to the Agent in writing at the time of delivery thereof in the manner described in subsection (b) below) be prepared, in accordance with Agreement Accounting Principals or with statutory accounting practices applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Agent hereunder (which, prior to the delivery of the first financial -10-

statements under Section 4.1 hereof, shall mean the audited, or annual statutory, financial statements as at December 31, 1998 referred to in Section 3.2 hereof). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of Agreement Accounting Principles or with statutory accounting practices applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Agent pursuant to Section 4.1 hereof (or, prior to the delivery of the first financial statements under Section 4.1 hereof, used in the preparation of the audited, or annual statutory, financial statements as at December 31, 1998 referred to in Section 3.2 hereof) unless (i) State Auto Mutual shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) the Required Lenders (through the Agent) shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements

statements under Section 4.1 hereof, shall mean the audited, or annual statutory, financial statements as at December 31, 1998 referred to in Section 3.2 hereof). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of Agreement Accounting Principles or with statutory accounting practices applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Agent pursuant to Section 4.1 hereof (or, prior to the delivery of the first financial statements under Section 4.1 hereof, used in the preparation of the audited, or annual statutory, financial statements as at December 31, 1998 referred to in Section 3.2 hereof) unless (i) State Auto Mutual shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) the Required Lenders (through the Agent) shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 4.1 hereof, shall mean the audited, or annual statutory, financial statements referred to in Section 3.2 hereof). (b) State Auto Mutual shall deliver to the Agent at the same time as the delivery of any annual or quarterly financial statement under Section 4.1 hereof (i) a description in reasonable detail of any material variation between the application of accounting principles, or statutory accounting practices, employed in the preparation of such statement and the application of accounting principles, or statutory accounting practices, employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) To enable the ready and consistent determination of compliance with the covenants set forth in Article IV hereof, State Auto Mutual will not change the last day of its fiscal year from December 31, or the last days of the first three fiscal quarters in each of its fiscal years from March 31, June 30 and September 30 of each year, respectively. -11-

ARTICLE II PUT 2.1 Put. At any time after the occurrence and during the continuance of a Put Event, the Agent may (with the approval of the Required Lenders but not otherwise), by delivering to State Auto Mutual a Put Notice, require State Auto Mutual to purchase (a) from each Lender, all (but not less than all) of such Lender's Loans, Notes and Commitment or (b) from the Agent, all (but not less than all) of the Pledged Stock. In the event that a Put Event has occurred and the Agent (with the consent of the Required Lenders) has elected to deliver a Put Notice, it shall first attempt to require State Auto Mutual to purchase the Pledged Stock; provided that if the Agent shall not be able, promptly (and in any event within 5 Business Days of any such election) after the occurrence of such Put Event, to sell the Pledged Stock to State Auto Mutual as contemplated hereby, it may deliver a Put Notice requiring the purchase of each Lender's Loans, Notes and Commitments. 2.2 Purchase of Loans. (a) If such Put Notice requires that State Auto Mutual purchase each Lender's Loans, Notes and Commitment, then, on the Put Purchase Date specified in such Put Notice (which Put Purchase Date shall be at least three Business Days after the date of delivery of such Put Notice), (i) State Auto Mutual shall purchase from each Lender, and each Lender shall sell, assign and transfer to State Auto Mutual, all of such Lender's Loans, Notes and Commitment, as specified in such Put Notice and (ii) State Auto Mutual shall pay to the Agent for account of each Lender an aggregate amount equal to the sum of (x) the aggregate outstanding principal amount of Loans of such Lender plus (y) all accrued and unpaid interest thereon to the Put Purchase Date plus (z) all other amounts then payable to such Lender under the Basic Documents in respect thereof (including all amounts that would be payable under Section 3.4 of the Credit Agreement as if such portion of such Lender's Loans were being prepaid on the Put Purchase Date) (such amounts to be determined by the Agent and notified in writing by the Agent to

ARTICLE II PUT 2.1 Put. At any time after the occurrence and during the continuance of a Put Event, the Agent may (with the approval of the Required Lenders but not otherwise), by delivering to State Auto Mutual a Put Notice, require State Auto Mutual to purchase (a) from each Lender, all (but not less than all) of such Lender's Loans, Notes and Commitment or (b) from the Agent, all (but not less than all) of the Pledged Stock. In the event that a Put Event has occurred and the Agent (with the consent of the Required Lenders) has elected to deliver a Put Notice, it shall first attempt to require State Auto Mutual to purchase the Pledged Stock; provided that if the Agent shall not be able, promptly (and in any event within 5 Business Days of any such election) after the occurrence of such Put Event, to sell the Pledged Stock to State Auto Mutual as contemplated hereby, it may deliver a Put Notice requiring the purchase of each Lender's Loans, Notes and Commitments. 2.2 Purchase of Loans. (a) If such Put Notice requires that State Auto Mutual purchase each Lender's Loans, Notes and Commitment, then, on the Put Purchase Date specified in such Put Notice (which Put Purchase Date shall be at least three Business Days after the date of delivery of such Put Notice), (i) State Auto Mutual shall purchase from each Lender, and each Lender shall sell, assign and transfer to State Auto Mutual, all of such Lender's Loans, Notes and Commitment, as specified in such Put Notice and (ii) State Auto Mutual shall pay to the Agent for account of each Lender an aggregate amount equal to the sum of (x) the aggregate outstanding principal amount of Loans of such Lender plus (y) all accrued and unpaid interest thereon to the Put Purchase Date plus (z) all other amounts then payable to such Lender under the Basic Documents in respect thereof (including all amounts that would be payable under Section 3.4 of the Credit Agreement as if such portion of such Lender's Loans were being prepaid on the Put Purchase Date) (such amounts to be determined by the Agent and notified in writing by the Agent to State Auto Mutual prior to such Put Purchase Date). Upon the occurrence of any Put Event referred to in clause (g), (h) or (i) of the definition of such term in Section 1.1 hereof, State Auto Mutual shall automatically and without any action (including, without limitation the giving of notice) on the part of any other Person be required to purchase the entire principal amount of the Loans then outstanding. (b) Such sale, assignment and transfer shall be without recourse to each Lender and without representation and warranty by such Lender, except that such Lender will represent and warrant to State Auto Mutual that, on the Put Purchase Date, such Lender is the legal and beneficial owner of such portion of such Lender's Loans, Notes and Commitment so sold, assigned and transferred, free and clear of any adverse claim. Upon such sale, assignment and transfer and to the extent thereof, State Auto Mutual shall have the obligations, rights and benefits of a "Lender" under the Credit Agreement holding the Commitment and Loans so sold, assigned and transferred and each Lender shall be released from the Commitment so sold, assigned and transferred. -12-

2.3 Purchase of Pledged Stock. If such Put Notice requires that State Auto Mutual purchase the Pledged Stock, then, on the Put Purchase Date specified in such Put Notice (which Put Purchase Date shall be at least three Business Days after the date of delivery of such Put Notice), (a) State Auto Mutual shall purchase from the Agent, and the Agent shall sell, assign and transfer to State Auto Mutual, the Pledged Stock, (b) State Auto Mutual shall pay to the Agent, for account of the Lenders, an amount equal to the aggregate liquidation preference of such Pledged Stock and all accrued but unpaid dividends thereon (such amount to be determined by the Agent and notified in writing by the Agent to State Auto Mutual prior to such Put Purchase Date) and (c) the Agent shall apply such amount to the payment of the Obligations owing to the Lenders under the Credit Documents. 2.4 Obligations Unconditional. The obligations of State Auto Mutual under Sections 2.1, 2.2, 2.3 and 5.3 hereof are absolute, unconditional and irrevocable, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower or any other Person under the Credit Agreement, the Notes, the Pledge Agreements or any other agreement or instrument referred to therein (collectively, the "Obligations"), or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise

2.3 Purchase of Pledged Stock. If such Put Notice requires that State Auto Mutual purchase the Pledged Stock, then, on the Put Purchase Date specified in such Put Notice (which Put Purchase Date shall be at least three Business Days after the date of delivery of such Put Notice), (a) State Auto Mutual shall purchase from the Agent, and the Agent shall sell, assign and transfer to State Auto Mutual, the Pledged Stock, (b) State Auto Mutual shall pay to the Agent, for account of the Lenders, an amount equal to the aggregate liquidation preference of such Pledged Stock and all accrued but unpaid dividends thereon (such amount to be determined by the Agent and notified in writing by the Agent to State Auto Mutual prior to such Put Purchase Date) and (c) the Agent shall apply such amount to the payment of the Obligations owing to the Lenders under the Credit Documents. 2.4 Obligations Unconditional. The obligations of State Auto Mutual under Sections 2.1, 2.2, 2.3 and 5.3 hereof are absolute, unconditional and irrevocable, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower or any other Person under the Credit Agreement, the Notes, the Pledge Agreements or any other agreement or instrument referred to therein (collectively, the "Obligations"), or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense available to State Auto Mutual, it being the intent of this Section 2.4 that the obligations of State Auto Mutual hereunder shall be absolute, unconditional and irrevocable under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of State Auto Mutual hereunder which shall remain absolute, unconditional and irrevocable as described above: (a) at any time or from time to time, without notice to State Auto Mutual, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of the Credit Agreement, the Notes, the Pledge Agreements or any other agreement or instrument referred to therein shall be done or omitted; (c) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement, the Notes, the Pledge Agreements or any other agreement or instrument referred to therein shall be waived or any guarantee of any of the Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (d) any change in the financial condition (including, without limitation, insolvency or bankruptcy) of the Borrower. State Auto Mutual hereby expressly waives all of the defenses referred to above and diligence, presentment, demand of payment, protest and all notices whatsoever (other than the Put Notice), and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under the Credit Agreement, the Notes, the Pledge Agreements or any other -13-

agreement or instrument referred therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. 2.5 Reinstatement. If for any reason any payment received by the Agent in respect of any of the Obligations prior to the consummation by State Auto Mutual of a purchase contemplated by Section 2.2 or 2.3 hereof is rescinded or must be otherwise restored by any Lender for any reason, whether as a result of any proceedings in bankruptcy, insolvency or reorganization or otherwise, following the consummation of such purchase, State Auto shall purchase from such Lender, and such Lender shall sell, assign and transfer to State Auto Mutual, all of the right, title and interest of such Lender in and to the payment so rescinded or otherwise restored, and upon such sale, assignment and transfer, State Auto Mutual shall pay to such Lender an amount equal to the payment so rescinded or otherwise restored. State Auto Mutual hereby agrees that it will indemnify the Agent and such Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration. 2.6 Payments.

agreement or instrument referred therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. 2.5 Reinstatement. If for any reason any payment received by the Agent in respect of any of the Obligations prior to the consummation by State Auto Mutual of a purchase contemplated by Section 2.2 or 2.3 hereof is rescinded or must be otherwise restored by any Lender for any reason, whether as a result of any proceedings in bankruptcy, insolvency or reorganization or otherwise, following the consummation of such purchase, State Auto shall purchase from such Lender, and such Lender shall sell, assign and transfer to State Auto Mutual, all of the right, title and interest of such Lender in and to the payment so rescinded or otherwise restored, and upon such sale, assignment and transfer, State Auto Mutual shall pay to such Lender an amount equal to the payment so rescinded or otherwise restored. State Auto Mutual hereby agrees that it will indemnify the Agent and such Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration. 2.6 Payments. (a) Except to the extent otherwise provided herein, all payments to be made by State Auto Mutual under this Agreement shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Agent at an account designated by the Agent to State Auto Mutual in writing, not later than 12:00 noon (Chicago time) time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). (b) The Agent may (but shall not be obligated to) debit the amount of any such payment that is not made by such time to any ordinary deposit account of State Auto Mutual with the Agent (with notice to State Auto Mutual), provided that the Agent's failure to give such notice shall not affect the validity thereof. 2.7 Taxes. (a) All payments by State Auto Mutual to or for the account of any Lender or the Agent hereunder shall be made free and clear of and without deduction for any and all Taxes. If State Auto Mutual shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.7) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) State Auto Mutual shall make such deductions, (iii) State Auto Mutual shall pay the full amount deducted to the relevant authority in accordance with applicable law and (iv) State Auto Mutual shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (b) In addition, State Auto Mutual hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution or delivery of, or otherwise with respect to, this Agreement ("Other Taxes"). -14-

(c) State Auto Mutual hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 2.7) paid by the Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor. (d) For any period during which a Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") has failed to provide the Borrower with an appropriate form pursuant to Section 3.5(d) of the Credit Agreement (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 2.7 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become

(c) State Auto Mutual hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 2.7) paid by the Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor. (d) For any period during which a Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") has failed to provide the Borrower with an appropriate form pursuant to Section 3.5(d) of the Credit Agreement (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 2.7 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under Section 3.5(d) of the Credit Agreement, State Auto Mutual shall take such steps as such Non-U.S. Lender shall reasonably request to assist such NonU.S. Lender to recover such Taxes. ARTICLE III REPRESENTATIONS AND WARRANTIES Each State Auto Obligor represents and warrants (with respect to itself and its Subsidiaries only) to the Agent and the Lenders that: 3.1 Corporate Existence. Each of such State Auto Obligor and its Material Subsidiaries: (a) is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify could (either individually or in the aggregate) have a Material Adverse Effect. 3.2 Financial Condition. (a) State Auto Mutual has heretofore furnished to each of the Lenders consolidated balance sheets of State Auto Financial and its Subsidiaries as at December 31, 1998 and the related consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Ernst & Young LLP, and the unaudited consolidated balance sheets of State Auto -15-

Financial and its Subsidiaries as at June 30, 1999 and the related consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for the three-month period ended on such date. All such financial statements present fairly in all material respects the consolidated financial condition of State Auto Financial and its Subsidiaries as at said dates and the consolidated results of their operations for the fiscal year and three-month period ended on said dates (subject, in the case of such financial statements as at June 30, 1999, to normal year-end audit adjustments), all in accordance with generally accepted accounting principles and practices applied on a consistent basis. None of State Auto Financial nor any of its Material Subsidiaries has on the date hereof any material contingent liabilities, liabilities for taxes, unusual forward or longterm commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates. Since June 30, 1999, there has been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of State Auto Financial and its Subsidiaries from that set forth in said financial statements as at June 30, 1999.

Financial and its Subsidiaries as at June 30, 1999 and the related consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for the three-month period ended on such date. All such financial statements present fairly in all material respects the consolidated financial condition of State Auto Financial and its Subsidiaries as at said dates and the consolidated results of their operations for the fiscal year and three-month period ended on said dates (subject, in the case of such financial statements as at June 30, 1999, to normal year-end audit adjustments), all in accordance with generally accepted accounting principles and practices applied on a consistent basis. None of State Auto Financial nor any of its Material Subsidiaries has on the date hereof any material contingent liabilities, liabilities for taxes, unusual forward or longterm commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates. Since June 30, 1999, there has been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of State Auto Financial and its Subsidiaries from that set forth in said financial statements as at June 30, 1999. (b) State Auto Mutual has heretofore furnished to each of the Lenders the annual Statutory Statement of each Insurance Entity for the fiscal year ended December 31, 1998, and the quarterly Statutory Statement of each Insurance Entity for the fiscal quarter ended June 30, 1999, in each case as filed with the Applicable Insurance Regulatory Authority. All such Statutory Statements present fairly in all material respects the financial condition of each Insurance Entity as at, and the results of operations for, the fiscal year ended December 31, 1998, and fiscal quarter ended June 30, 1999, in accordance with statutory accounting practices prescribed or permitted by the Applicable Insurance Regulatory Authority. Since June 30, 1999, there has been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of State Auto Mutual from that set forth in said Statutory Statement as at June 30, 1999. 3.3 Litigation. There are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge such State Auto Obligor) threatened against State Auto Mutual or any of its Subsidiaries that, if adversely determined could (either individually or in the aggregate) have a Material Adverse Effect. 3.4 No Breach. None of the execution and delivery of this Agreement and the other Basic Documents to which such State Auto Obligor is a party, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof (including, without limitation, issuance of the Preferred Stock) will conflict with or result in a breach of, or require any consent under, the charter or by-laws (or equivalent documents) of such State Auto Obligor, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which State Auto Mutual or any of its Subsidiaries is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any Property of State Auto Mutual or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. -16-

3.5 Action. Such State Auto Obligor has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under each of the Basic Documents to which it is a party and, in the case of State Auto Financial, to issue the Preferred Stock; the execution, delivery and performance by such State Auto Obligor of each of the Basic Documents to which it is a party (and, in the case of State Auto Financial, the issuance of the Preferred Stock) have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by such State Auto Obligor and constitutes, and each of the other Basic Documents to which such State Auto Obligor is a party when executed and delivered will constitute, its legal, valid and binding obligation, enforceable against such State Auto Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.6 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange (other than any authorizations, approvals, consents,

3.5 Action. Such State Auto Obligor has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under each of the Basic Documents to which it is a party and, in the case of State Auto Financial, to issue the Preferred Stock; the execution, delivery and performance by such State Auto Obligor of each of the Basic Documents to which it is a party (and, in the case of State Auto Financial, the issuance of the Preferred Stock) have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by such State Auto Obligor and constitutes, and each of the other Basic Documents to which such State Auto Obligor is a party when executed and delivered will constitute, its legal, valid and binding obligation, enforceable against such State Auto Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.6 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange (other than any authorizations, approvals, consents, filings and registrations heretofore duly made or obtained and in full force and effect), are necessary for the execution, delivery or performance by either State Auto Obligor of this Agreement or any of the other Basic Documents to which it is a party (or, in the case of State Auto Financial, for the issuance of the Preferred Stock) or for the legality, validity or enforceability hereof or thereof. 3.7 ERISA. Each Plan, and, to the knowledge of the such State Auto Obligor, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or state law, and no event or condition has occurred and is continuing as to which State Auto Mutual would be under an obligation to furnish a report to the Agent under Section 4.1(j) hereof. 3.8 Taxes. State Auto Mutual and its Subsidiaries are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which State Auto Mutual is the "common parent" (within the meaning of Section 1504 of the Code) of such group. State Auto Mutual and its Material Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by State Auto Mutual or any of its Material Subsidiaries. The charges, accruals and reserves on the books of State Auto Mutual and its Material Subsidiaries in respect of taxes and other governmental charges are, in the opinion of State Auto Mutual, adequate. State Auto Mutual has not given or been requested to give a waiver of the statute of limitations relating to the payment of any Federal, state, local and foreign taxes or other impositions. 3.9 Investment Company Act. Neither State Auto Mutual nor any of its Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. -17-

3.10 Public Utility Holding Company Act. Neither State Auto Mutual nor any of its Subsidiaries is a "holding company" or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.11 Material Agreements and Liens. (a) Part A of Schedule I hereto is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, State Auto Mutual or any of its Subsidiaries, outstanding on the date hereof the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $5,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule I.

3.10 Public Utility Holding Company Act. Neither State Auto Mutual nor any of its Subsidiaries is a "holding company" or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.11 Material Agreements and Liens. (a) Part A of Schedule I hereto is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, State Auto Mutual or any of its Subsidiaries, outstanding on the date hereof the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $5,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule I. (b) Part B of Schedule I hereto is a complete and correct list of each Lien securing Indebtedness of any Person outstanding on the date hereof the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $5,000,000 and covering any Property of State Auto Mutual or any of its Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Part B of said Schedule I. 3.12 Environmental Matters. Each of State Auto Mutual and its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization would not (either individually or in the aggregate) have a Material Adverse Effect. Each of such permits, licenses and authorizations is in full force and effect and each of State Auto Mutual and its Subsidiaries is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith would not (either individually or in the aggregate) have a Material Adverse Effect. 3.13 Capitalization. The authorized capital stock of State Auto Financial consists, on the date hereof, of an aggregate of 105,000,000 shares consisting of (a) 100,000,000 shares of common stock, no par value, of which 40,565,812 shares are duly and validly issued and outstanding, each of which shares is fully paid and nonassessable, (b) 2,500,000 shares of Class A Preferred Stock, no par value, none of which shares are issued and outstanding and (c) 2,500,000 shares of Class B Preferred Stock, no par value, none of which shares are issued and outstanding. Upon issuance, each share of Class A Preferred Stock will benefit from the Terms and Conditions of Class A Preferred Stock attached to form of Class A Preferred Stock Certificate attached to the Standby Purchase Agreement as Exhibit A. As of the date hereof, 70% of such issued and outstanding shares of common stock are owned beneficially and of record by State Auto Mutual. As of the date hereof, (i) except for this Agreement and the -18-

Standby Purchase Agreement and as set forth in Part A of Schedule III hereto, there are no outstanding Equity Rights with respect to State Auto Financial and (ii) except as set forth in Part B of Schedule III hereto, there are no outstanding obligations of State Auto Financial or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of State Auto Financial nor are there any outstanding obligations of State Auto Financial or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of State Auto Financial or any of its Subsidiaries. 3.14 Subsidiaries, Etc. (a) Set forth in Part A of Schedule II hereto is a complete and correct list of all Subsidiaries of State Auto Mutual on the date hereof and a specification of which of such Subsidiaries are Insurance Entities and which are Material Subsidiaries.

Standby Purchase Agreement and as set forth in Part A of Schedule III hereto, there are no outstanding Equity Rights with respect to State Auto Financial and (ii) except as set forth in Part B of Schedule III hereto, there are no outstanding obligations of State Auto Financial or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of State Auto Financial nor are there any outstanding obligations of State Auto Financial or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of State Auto Financial or any of its Subsidiaries. 3.14 Subsidiaries, Etc. (a) Set forth in Part A of Schedule II hereto is a complete and correct list of all Subsidiaries of State Auto Mutual on the date hereof and a specification of which of such Subsidiaries are Insurance Entities and which are Material Subsidiaries. (b) Set forth in Part B of Schedule II hereto is a complete and correct list of all Investments (other than (x) Investments disclosed in Part A of said Schedule II hereto and any other Investments existing as of the date hereof permitted under Section 4.9 hereof and (y) Guarantees of Indebtedness the aggregate principal or face amount of which Indebtedness is less than $5,000,000) held by State Auto Mutual or any of its Subsidiaries in any Person on the date hereof and, for each such Investment, (i) the identity of the Person or Persons holding such Investment and (ii) the nature of such Investment. Except as disclosed in Part B of Schedule II hereto, each of State Auto Mutual and its Subsidiaries owns, free and clear of all Liens, all such Investments. 3.15 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the State Auto Obligors to the Agent or any Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by State Auto Mutual and its Subsidiaries to the Agent and the Lenders in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to either State Auto Obligor that could have a Material Adverse Effect that has not been disclosed herein, in the other Basic Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Agent for use in connection with the transactions contemplated hereby or thereby. 3.16 No Reliance. State Auto Mutual has made, independently and without reliance upon the Agent or any Lender, and based on such documents and information as it has deemed appropriate, its own decision to enter into this Agreement and has made (and will continue to make), independently and without reliance upon the Agent or any Lender, and based -19-

on such documents and information as it has deemed appropriate (or shall deem appropriate at the time), its own legal, credit and tax analysis of the transactions contemplated hereby. 3.17 Insurance Licenses. Schedule T to the most recent Statutory Statement of each Insurance Entity described in Section 3.2(b) hereof lists, as of the date hereof, all of the jurisdictions in which each of the Insurance Entities holds active licenses (including, without limitation, licenses or certificates of authority from Applicable Insurance Regulatory Authorities), permits or authorizations to transact insurance and reinsurance business or to act as an insurance agent or broker (collectively, the "Licenses"). Each Insurance Entity is in compliance in all material respects with each license held by it. No License (to the extent material) is the subject of a proceeding for suspension or revocation or any similar proceedings, there is no sustainable basis for such a suspension or revocation, and to the knowledge of each State Auto Obligor no such suspension or revocation has been threatened by any licensing authority except in any such case where such proceedings would not have a Material Adverse Effect.

on such documents and information as it has deemed appropriate (or shall deem appropriate at the time), its own legal, credit and tax analysis of the transactions contemplated hereby. 3.17 Insurance Licenses. Schedule T to the most recent Statutory Statement of each Insurance Entity described in Section 3.2(b) hereof lists, as of the date hereof, all of the jurisdictions in which each of the Insurance Entities holds active licenses (including, without limitation, licenses or certificates of authority from Applicable Insurance Regulatory Authorities), permits or authorizations to transact insurance and reinsurance business or to act as an insurance agent or broker (collectively, the "Licenses"). Each Insurance Entity is in compliance in all material respects with each license held by it. No License (to the extent material) is the subject of a proceeding for suspension or revocation or any similar proceedings, there is no sustainable basis for such a suspension or revocation, and to the knowledge of each State Auto Obligor no such suspension or revocation has been threatened by any licensing authority except in any such case where such proceedings would not have a Material Adverse Effect. 3.18 Year 2000. Each State Auto Obligor has made a full and complete assessment of the Year 2000 Issues and has a realistic and achievable program for remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such assessment and on the Year 2000 Program no State Auto Obligor reasonably anticipates that Year 2000 Issues will have a Material Adverse Effect. ARTICLE IV COVENANTS OF STATE AUTO MUTUAL State Auto Mutual covenants and agrees with the Agent that, so long as any Obligations are outstanding or any Commitments are in effect: 4.1 Financial Statements Etc. State Auto Mutual shall deliver to the Agent (with sufficient copies for each of the Lenders): (a) as soon as available and in any event within 60 days after the end of each quarterly fiscal period of each fiscal year of State Auto Financial, consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets of State Auto Financial and its Subsidiaries as at the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding periods in the preceding fiscal year (except that, in the case of balance sheets, such comparison shall be to the last day of the prior fiscal year), accompanied by a certificate of a senior financial officer of State Auto Financial, which certificate shall state that said consolidated financial statements present fairly in all material respects the consolidated financial condition and results of operations of State Auto Financial and its Subsidiaries in accordance with generally accepted accounting principles, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); -20-

(b) as soon as available and in any event within 90 days after the end of each fiscal year of State Auto Financial, consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for such fiscal year and the related consolidated balance sheets of State Auto Financial and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements present fairly in all material respects the consolidated financial condition and results of operations of State Auto Financial and its Subsidiaries as at the end of, and for, such fiscal year in accordance with generally accepted accounting principles; (c) promptly after filing with the Applicable Insurance Regulatory Authority and in any event within 45 days after the end of each for the first three quarterly fiscal periods of each fiscal year of each Insurance Entity, its quarterly Statutory Statement for such quarterly fiscal period, together with the opinion thereon of a senior financial officer of such Insurance Entity stating that such Statutory Statement presents the financial condition of such Insurance

(b) as soon as available and in any event within 90 days after the end of each fiscal year of State Auto Financial, consolidated statements of income, retained earnings and cash flows of State Auto Financial and its Subsidiaries for such fiscal year and the related consolidated balance sheets of State Auto Financial and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements present fairly in all material respects the consolidated financial condition and results of operations of State Auto Financial and its Subsidiaries as at the end of, and for, such fiscal year in accordance with generally accepted accounting principles; (c) promptly after filing with the Applicable Insurance Regulatory Authority and in any event within 45 days after the end of each for the first three quarterly fiscal periods of each fiscal year of each Insurance Entity, its quarterly Statutory Statement for such quarterly fiscal period, together with the opinion thereon of a senior financial officer of such Insurance Entity stating that such Statutory Statement presents the financial condition of such Insurance Entity for such quarterly fiscal period in accordance with statutory accounting practices required or permitted by the Applicable Insurance Regulatory Authority; (d) promptly after filing with the Applicable Insurance Regulatory Authority and in any event within 90 days after the end of each fiscal year of each Insurance Entity, the annual Statutory Statement of such Insurance Entity for such year, together with (i) the opinion thereon of a senior financial officer of such Insurance Entity stating that said annual Statutory Statement presents the financial condition of such Insurance Entity for such fiscal year in accordance with statutory accounting practices required or permitted by the Applicable Insurance Regulatory Authority and (ii) a certificate of a valuation actuary affirming the adequacy of reserves taken by such Insurance Entity in respect of future policyholder benefits as at the end of such fiscal year (as shown on such Statutory Statement); (e) within 180 days after the end of each fiscal year of each Insurance Entity, the report of Ernst & Young LLP (or other independent certified public accountants of recognized national standing) on the annual Statutory Statements delivered pursuant to Section 4.1(d) hereof; (f) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, that State Auto Mutual or any of its Material Subsidiaries shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange; (g) promptly upon the mailing thereof to the policyholders of State Auto Mutual generally and to the shareholders of State Auto Financial, copies of all financial statements, reports and proxy statements so mailed; -21-

(h) promptly after State Auto Mutual receives the results of a triennial examination by the NAIC of the financial condition and operations of State Auto Mutual and/or any of its Material Subsidiaries, a copy thereof; (i) promptly following the delivery or receipt by State Auto Mutual or any of its Material Subsidiaries of any correspondence, notice or report to or from any Applicable Insurance Regulatory Authority that relates, to any material extent, to the financial viability of State Auto Mutual or any of its Material Subsidiaries, a copy thereof; (j) as soon as possible, and in any event within ten days after either State Auto Obligor knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of State Auto Mutual setting forth details respecting such event or condition and the action, if any, that State Auto Mutual or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to the PBGC by State Auto Mutual or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(c) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the

(h) promptly after State Auto Mutual receives the results of a triennial examination by the NAIC of the financial condition and operations of State Auto Mutual and/or any of its Material Subsidiaries, a copy thereof; (i) promptly following the delivery or receipt by State Auto Mutual or any of its Material Subsidiaries of any correspondence, notice or report to or from any Applicable Insurance Regulatory Authority that relates, to any material extent, to the financial viability of State Auto Mutual or any of its Material Subsidiaries, a copy thereof; (j) as soon as possible, and in any event within ten days after either State Auto Obligor knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of State Auto Mutual setting forth details respecting such event or condition and the action, if any, that State Auto Mutual or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to the PBGC by State Auto Mutual or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(c) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302 (e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by State Auto Mutual or an ERISA Affiliate to terminate any Plan; (iii) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by State Auto Mutual or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by State Auto Mutual or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by State Auto Mutual or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; -22-

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against State Auto Mutual or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if State Auto Mutual or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (k) within five Business Days after receipt, notice from any Applicable Insurance Regulatory Authority of any threatened or actual proceeding for suspension or revocation of any License or any similar proceeding with respect to any such License; (l) promptly, notice of any denial of coverage, litigation, or arbitration arising out of any Reinsurance Agreements to which any Insurance Entity is a party which denial, litigation or arbitration involves $5,000,000 or more; (m) promptly after either State Auto Obligor knows or has reason to believe that any Put Event (or any event that with notice or lapse of time or both would become a Put Event) has occurred, a notice of such Put Event (or such event) describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against State Auto Mutual or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if State Auto Mutual or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (k) within five Business Days after receipt, notice from any Applicable Insurance Regulatory Authority of any threatened or actual proceeding for suspension or revocation of any License or any similar proceeding with respect to any such License; (l) promptly, notice of any denial of coverage, litigation, or arbitration arising out of any Reinsurance Agreements to which any Insurance Entity is a party which denial, litigation or arbitration involves $5,000,000 or more; (m) promptly after either State Auto Obligor knows or has reason to believe that any Put Event (or any event that with notice or lapse of time or both would become a Put Event) has occurred, a notice of such Put Event (or such event) describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that State Auto Mutual has taken or proposes to take with respect thereto; (n) at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate of a senior financial officer of State Auto Mutual (i) to the effect that no Put Event (or any event that with notice or lapse of time or both would become a Put Event) has occurred and is continuing (or, if any Put Event (or any such event) has occurred and is continuing, describing the same in reasonable detail and describing the action that State Auto Mutual has taken or proposes to take with respect thereto) and (ii) setting forth in reasonable detail the computations necessary to determine whether the State Auto Obligors are in compliance with Section 4.10 hereof as of the end of the respective quarterly fiscal period or fiscal year; and (o) from time to time such other information regarding the financial condition, operations, business or prospects of State Auto Mutual or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as the Agent may reasonably request. 4.2 Litigation. State Auto Mutual will promptly give to the Agent (with sufficient copies for each Lender) notice of all legal or arbitral proceedings, and of all proceedings by or before any governmental or regulatory authority or agency, and any material development in respect of such legal or other proceedings, affecting State Auto Mutual or any of its Subsidiaries, except proceedings that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect. 4.3 Existence. Etc. State Auto Mutual will: -23-

(a) and will cause each of its Material Subsidiaries to, preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 4.3 shall prohibit any transaction expressly permitted under Section 4.5 hereof); (b) and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities if failure to comply with such requirements could (either individually or in the aggregate) have a Material Adverse Effect; (c) and will cause each of its Material Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (d) and will cause each of its Material Subsidiaries to, keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles (or, in the case of an

(a) and will cause each of its Material Subsidiaries to, preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 4.3 shall prohibit any transaction expressly permitted under Section 4.5 hereof); (b) and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities if failure to comply with such requirements could (either individually or in the aggregate) have a Material Adverse Effect; (c) and will cause each of its Material Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (d) and will cause each of its Material Subsidiaries to, keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles (or, in the case of an Insurance Entity, statutory accounting principles) consistently applied; and (e) and will cause each of its Material Subsidiaries to, permit representatives of any Lender or the Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Agent (as the case may be). 4.4 Insurance. State Auto Mutual will, and will cause each of its Material Subsidiaries to, maintain insurance with financially sound and reputable insurance companies, and with respect to Property and risks of a character usually maintained by corporations engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such corporations (including general liability insurance, director's and officer's liability insurance, property insurance and worker's compensation insurance), provided that, nothing in this Section 4.4 shall be deemed to require State Auto Mutual or any of its Material Subsidiaries to enter into any Reinsurance Agreement and provided, further, that State Auto Mutual and its Material Subsidiaries may selfinsure against such hazards and risks, and in such amounts as is customary for corporations of a similar size and in similar lines of business. 4.5 Prohibition of Fundamental Changes. (a) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution). (b) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, acquire any business or Property from, or capital stock of, or be a party to any -24-

acquisition of, any Person except for purchases of inventory and other Property to be sold or used in the ordinary course of business, Assumed Reinsurance in the ordinary course of business, Investments permitted under Section 4.9 hereof, and Capital Expenditures. (c) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or a substantial part of its business or Property, whether now owned or hereafter acquired. (d) Notwithstanding the foregoing provisions of this Section 4.5: (i) any Subsidiary of State Auto Mutual may be merged or consolidated with or into: (x) State Auto Mutual if State Auto Mutual shall be the continuing or surviving corporation or (y) any other such Subsidiary; provided that (A) if any such transaction (other than a transaction described in clause (B) below) shall be between a Subsidiary

acquisition of, any Person except for purchases of inventory and other Property to be sold or used in the ordinary course of business, Assumed Reinsurance in the ordinary course of business, Investments permitted under Section 4.9 hereof, and Capital Expenditures. (c) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or a substantial part of its business or Property, whether now owned or hereafter acquired. (d) Notwithstanding the foregoing provisions of this Section 4.5: (i) any Subsidiary of State Auto Mutual may be merged or consolidated with or into: (x) State Auto Mutual if State Auto Mutual shall be the continuing or surviving corporation or (y) any other such Subsidiary; provided that (A) if any such transaction (other than a transaction described in clause (B) below) shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving corporation and (B) if any such transaction shall be between State Auto Financial and any other such Subsidiary, State Auto Financial shall be the surviving corporation; (ii) any Material Subsidiary of State Auto Mutual may sell, lease, transfer or otherwise dispose of any or all of its Property (upon voluntary liquidation or otherwise) to State Auto Mutual or a Wholly Owned Subsidiary of State Auto Mutual; (iii) State Auto Mutual may merge or consolidate with or acquire any other Person if (w) in the case of a merger or consolidation, State Auto Mutual is the surviving corporation, (x) after giving effect thereto, no Put Event (and no event that with notice or lapse of time or both would constitute a Put Event) would exist hereunder, (y) the business activity engaged in by such other Person would be permitted under Section 4.13 hereof if such other Person were a Subsidiary of State Auto Mutual prior to such merger or consolidation and (z) the aggregate amount of the Statutory Surplus (determined as at the date of the relevant merger, consolidation or acquisition) of all such other Persons that have been the subject of any merger, consolidation or acquisition pursuant to this clause (iii) after the date hereof (other than any such merger, consolidation or acquisition financed solely with Net Available Proceeds) shall be less than $250,000,000; and (iv) any Material Subsidiary of State Auto Mutual may merge or consolidate with or acquire any other Person if (w) in the case of a merger or consolidation, the surviving corporation is a Wholly Owned Subsidiary of State Auto Mutual; provided, that in the case of any merger or consolidation involving State Auto Financial, the surviving corporation is State Auto Financial, (x) after giving effect thereto, no Put Event (and no event that with notice or lapse of time or both would constitute a Put Event) would exist hereunder, (y) the business activity engaged in by such other Person would be permitted under Section 4.13 hereof if such other Person were a Subsidiary of State Auto Mutual prior to such merger or consolidation and (z) the aggregate amount of the Statutory Surplus (determined as at the date of the relevant merger, consolidation or acquisition) of all such other Persons that have been the subject of any merger, consolidation or -25-

acquisition pursuant to this clause (iv) during any calendar year (other than any such merger, consolidation or acquisition financed solely with Net Available Proceeds) shall be less than $100,000,000. 4.6 Limitation on Liens. State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except: (a) Liens in existence on the date hereof and listed in Part B of Schedule I hereto; (b) Liens imposed by any governmental authority for taxes, assessments or charges not yet due or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of State Auto Mutual or the affected Material Subsidiaries, as the case may be, in accordance with Agreement Accounting Principles (or, in the case of any Insurance Entity, SAP);

acquisition pursuant to this clause (iv) during any calendar year (other than any such merger, consolidation or acquisition financed solely with Net Available Proceeds) shall be less than $100,000,000. 4.6 Limitation on Liens. State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except: (a) Liens in existence on the date hereof and listed in Part B of Schedule I hereto; (b) Liens imposed by any governmental authority for taxes, assessments or charges not yet due or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of State Auto Mutual or the affected Material Subsidiaries, as the case may be, in accordance with Agreement Accounting Principles (or, in the case of any Insurance Entity, SAP); (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith and by appropriate proceedings and Liens securing judgments but only to the extent for an amount and for a period not resulting in a Put Event under clause (j) of the definition of "Put Event" in Section 1.1 hereof; (d) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (e) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto that do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of State Auto Mutual or any of its Material Subsidiaries; (g) Liens arising under escrows, trusts, custodianships, separate accounts, funds withheld procedures, and similar deposits, arrangements, or agreements established with respect to insurance policies, annuities, guaranteed investment contracts and similar products underwritten by, or Reinsurance Agreements entered into by, any Insurance Entity in the ordinary course of business; (h) deposits with insurance regulatory authorities; -26-

(i) Liens on Property of any corporation that becomes a Subsidiary of State Auto Mutual after the date hereof, provided that such Liens are in existence at the time such corporation becomes a Subsidiary of State Auto Mutual and were not created in anticipation thereof; (j) Liens upon real and/or tangible personal Property acquired after the date hereof (by purchase, construction or otherwise) by State Auto Mutual or any of its Material Subsidiaries, each of which Liens either (i) existed on such Property before the time of its acquisition and was not created in anticipation thereof or (ii) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such Property; provided that (x) no such Lien shall extend to or cover any Property of State Auto Mutual or such Material Subsidiary other than the Property so acquired and improvements thereon and (y) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 80% of the fair market value (as determined in good faith by a senior financial officer of State Auto Mutual) of such Property at the time it was acquired (by purchase, construction or otherwise); and (k) additional Liens upon real and/or personal Property created after the date hereof, provided that the aggregate Indebtedness secured thereby and incurred on and after the date hereof shall not exceed $15,000,000 in the

(i) Liens on Property of any corporation that becomes a Subsidiary of State Auto Mutual after the date hereof, provided that such Liens are in existence at the time such corporation becomes a Subsidiary of State Auto Mutual and were not created in anticipation thereof; (j) Liens upon real and/or tangible personal Property acquired after the date hereof (by purchase, construction or otherwise) by State Auto Mutual or any of its Material Subsidiaries, each of which Liens either (i) existed on such Property before the time of its acquisition and was not created in anticipation thereof or (ii) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such Property; provided that (x) no such Lien shall extend to or cover any Property of State Auto Mutual or such Material Subsidiary other than the Property so acquired and improvements thereon and (y) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 80% of the fair market value (as determined in good faith by a senior financial officer of State Auto Mutual) of such Property at the time it was acquired (by purchase, construction or otherwise); and (k) additional Liens upon real and/or personal Property created after the date hereof, provided that the aggregate Indebtedness secured thereby and incurred on and after the date hereof shall not exceed $15,000,000 in the aggregate at any one time outstanding. 4.7 Indebtedness. State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, create, incur or suffer to exist any Indebtedness except: (a) Indebtedness created pursuant hereto; (b) Indebtedness outstanding on the date hereof and listed in Part A of Schedule I hereto; (c) Indebtedness of Material Subsidiaries of State Auto Mutual to State Auto Mutual or to other Material Subsidiaries of State Auto Mutual; and (d) additional Indebtedness of State Auto Mutual and its Material Subsidiaries (including, without limitation, Capital Lease Obligations and other Indebtedness secured by Liens permitted under Sections 4.6(j) or 4.6(k) hereof) up to but not exceeding $15,000,000 at any one time outstanding. 4.8 Sale/Leaseback Transactions. State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, enter into any an arrangement with any Person (other than State Auto Mutual or any of its Material Subsidiaries) providing for the leasing to State Auto Mutual or any of its Material Subsidiaries for a period of more than five years of any Property which has been or is to be sold or transferred by State Auto Mutual or such Material Subsidiary to such Person or to any other Person (other than State Auto Mutual or any of its Material Subsidiaries), to which funds have been or are to be advanced by such Person on the security of the Property subject to such lease (a "Sale/Leaseback Transaction") if, after giving effect thereto, the Value (as defined below) of all Sale/Leaseback Transactions at such time -27-

would exceed 10% of the Statutory Surplus of State Auto Mutual at such time. For purposes of this Section 4.8, "Value" shall mean, with respect to any Sale/Leaseback Transaction as at any time, the amount equal to the greater of (a) the net proceeds of the sale or transfer of the Property subject to such Sale/Leaseback Transaction and (b) the fair value, in the opinion of the board of directors of State Auto Mutual of such Property at the time of entering into such Sale/Leaseback Transaction, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in such lease. 4.9 Investments. (a) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, make or permit to remain outstanding any Investments except (i) Investments outstanding on the date hereof and identified in Part B of Schedule II hereto, (ii) operating deposit accounts with banks, (iii) Permitted Investments, (iv) Investments by

would exceed 10% of the Statutory Surplus of State Auto Mutual at such time. For purposes of this Section 4.8, "Value" shall mean, with respect to any Sale/Leaseback Transaction as at any time, the amount equal to the greater of (a) the net proceeds of the sale or transfer of the Property subject to such Sale/Leaseback Transaction and (b) the fair value, in the opinion of the board of directors of State Auto Mutual of such Property at the time of entering into such Sale/Leaseback Transaction, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in such lease. 4.9 Investments. (a) State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, make or permit to remain outstanding any Investments except (i) Investments outstanding on the date hereof and identified in Part B of Schedule II hereto, (ii) operating deposit accounts with banks, (iii) Permitted Investments, (iv) Investments by State Auto Mutual and its Material Subsidiaries in State Auto Mutual and its Subsidiaries, (v) Interest Rate Protection Agreements, provided that, without limiting the obligation of State Auto Mutual under Section 4.12 hereof, when entering into any Interest Rate Protection Agreement that at the time has, or at any time in the future may give rise to, any credit exposure, the aggregate credit exposure under all Interest Rate Protection Agreements (excluding the Interest Rate Protection Agreement being entered into pursuant to Section 4.12 hereof) shall not exceed $10,000,000, and (vi) Investments of Insurance Entities not prohibited by clause (b) of this Section 4.9. (b) State Auto Mutual will not permit any Insurance Entity to make any Investment if, on the date of which such Investment is made and after giving effect thereto, the aggregate value of Investments (other than equity Investments) held by such Insurance Entity that are rated lower than "2" by the NAIC or are not rated by the NAIC would exceed 5% of the value of total invested assets. As used in this Section 4.9(b), the "value" of an Investment refers to the value of such Investment that would be shown on the most recent Statutory Statement of the relevant Insurance Entity prepared in accordance with SAP. 4.10 Certain Financial Covenants. (a) Statutory Surplus. State Auto Mutual will not permit its Statutory Surplus at any time to be less than (a) $495,671,189, at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time) and (b) $425,000,000, at any time during the period from and including the date of occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement to but excluding the date all Loans shall have been required to be repaid in full pursuant to the terms of the Credit Agreement. State Auto Mutual will not permit the Statutory Surplus of State Auto P&C to be less than $135,467,450 at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time). (b) Risk-Based Capital Ratio. State Auto Mutual will not permit its Risk-Based Capital Ratio at any time to be less than (a) 4.00 to 1, at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided -28-

that no Loans are outstanding at such time) and (b) 3.00 to 1, at any time during the period from and including the date of occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement to but excluding the date all Loans shall have been required to be repaid in full pursuant to the terms of the Credit Agreement. State Auto Mutual will not permit the Risk-Based Capital Ratio of State Auto P&C to be less than 4.00 to 1 at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time). (c) Premium to Surplus. State Auto Mutual will not permit its Premium to Surplus Ratio at any time to exceed (a) 2.00 to 1, at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time) and (b) 3.00 to 1, at any time during the

that no Loans are outstanding at such time) and (b) 3.00 to 1, at any time during the period from and including the date of occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement to but excluding the date all Loans shall have been required to be repaid in full pursuant to the terms of the Credit Agreement. State Auto Mutual will not permit the Risk-Based Capital Ratio of State Auto P&C to be less than 4.00 to 1 at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time). (c) Premium to Surplus. State Auto Mutual will not permit its Premium to Surplus Ratio at any time to exceed (a) 2.00 to 1, at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time) and (b) 3.00 to 1, at any time during the period from and including the date of occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement to but excluding the date all Loans shall have been required to be repaid in full pursuant to the terms of the Credit Agreement. State Auto Mutual will not permit the Premium to Surplus Ratio of State Auto P&C to exceed 3.00 to 1 at any time prior to the occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement (provided that no Loans are outstanding at such time). (d) Fixed Charge Coverage Ratio. State Auto Financial will not permit its Fixed Charge Coverage Ratio, determined as of the end of each of its fiscal quarters, to be less than 1.00 to 1.00 at any time during the period from and including the date of occurrence of a catastrophe giving rise to Loans being outstanding under the Credit Agreement to but excluding the date all Loans shall have been required to be repaid in full pursuant to the terms of the Credit Agreement. 4.11 NAIC Ratio. In the event that the NAIC or any Applicable Insurance Regulatory Authority shall at any time promulgate any risk-based capital ratio requirements or guidelines, State Auto Mutual will cause each Insurance Entity to comply with the minimum requirements or guidelines applicable to it as established by the NAIC or such Applicable Insurance Regulatory Authority. 4.12 Interest Rate Protection Agreements. State Auto Mutual will within five days after the date of each purchase of Preferred Stock under the Standby Purchase Agreement, cause State Auto Financial to enter into, and thereafter maintain in full force and effect, one or more Interest Rate Protection Agreements with one or more of the Lenders (and/or with a bank or other financial institution having capital, surplus and undivided profits of at least $500,000,000), that effectively would enable State Auto Financial (in a manner satisfactory to the Agent) to protect itself against floating interest rates as to a notional principal amount at least equal to 100% of the aggregate Redemption Value of the Preferred Stock for a period of at least six years measured from the date of the purchase of the Preferred Stock. 4.13 Lines of Business. State Auto Mutual will not, nor will it permit any of its Subsidiaries to, engage to any substantial extent in any line or lines of business activity other than the business of owning and operating property and casualty insurance companies as conducted on the date hereof and businesses related or incidental thereto (it being understood that the businesses of Strategic Insurance Software, Inc., Stateco Financial Services, Inc. and 518 -29-

Property Management and Leasing, LLC, to the extent conducted as of the date hereof, are related to the business of owning and operating property and casualty insurance companies). It is also understood and agreed that the foregoing includes State Auto Mutual assuming reinsurance with premiums in an aggregate amount not to exceed $15,000,000 from third parties. 4.14 Ceded Reinsurance. State Auto Mutual will not, nor will it permit any other Insurance Entity to: (a) enter into any Reinsurance Agreement with any Person other than (i) another Insurance Entity, (ii) any Person for which the most recently published rating by A.M. Best & Co. is "B+" or higher or, if such Person is not rated by A.M. Best & Co., which has a Statutory Surplus (or the equivalent thereof) of not less than $100,000,000, (iii) any Person that posts security under such Reinsurance Agreement in an amount equal to the total liabilities assumed by such Person, through a letter of credit issued by an "authorized bank" (as such term is defined by the Applicable Insurance Regulatory Authority) or cash collateral deposit or (iv) any other reinsurers acceptable to

Property Management and Leasing, LLC, to the extent conducted as of the date hereof, are related to the business of owning and operating property and casualty insurance companies). It is also understood and agreed that the foregoing includes State Auto Mutual assuming reinsurance with premiums in an aggregate amount not to exceed $15,000,000 from third parties. 4.14 Ceded Reinsurance. State Auto Mutual will not, nor will it permit any other Insurance Entity to: (a) enter into any Reinsurance Agreement with any Person other than (i) another Insurance Entity, (ii) any Person for which the most recently published rating by A.M. Best & Co. is "B+" or higher or, if such Person is not rated by A.M. Best & Co., which has a Statutory Surplus (or the equivalent thereof) of not less than $100,000,000, (iii) any Person that posts security under such Reinsurance Agreement in an amount equal to the total liabilities assumed by such Person, through a letter of credit issued by an "authorized bank" (as such term is defined by the Applicable Insurance Regulatory Authority) or cash collateral deposit or (iv) any other reinsurers acceptable to the Agent, provided however, that for purposes of the foregoing clause (ii), any "NA" designation shall not be considered a rating of A.M. Best & Co.; (b) enter into any Reinsurance Agreement or Reinsurance Agreements with Lloyd's of London if the aggregate amount of reinsurance ceded thereby would exceed 15% of the aggregate premium volume of reinsurance ceded by the Insurance Entities. (c) enter into any Surplus Relief Reinsurance except with another Insurance Entity; or (d) enter into any Reinsurance Agreement or Reinsurance Agreements if such Reinsurance Agreements will result in a 20% or more reduction of net premium volume for the Insurance Entities in any 12-month period. 4.15 Transactions with Affiliates. Except as expressly permitted by this Agreement, State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate with or purchase or acquire Property from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, Guarantees and assumptions of obligations of an Affiliate); provided that (i) any Affiliate who is an individual may serve as a director, officer or employee of State Auto Mutual or any of its Material Subsidiaries and receive reasonable compensation for his or her services in such capacity and (ii) State Auto Mutual and its Material Subsidiaries may enter into transactions (other than extensions of credit by State Auto Mutual or any of its Material Subsidiaries to an Affiliate) providing for the leasing of Property, the rendering or receipt of services or the purchase or sale of inventory and other Property in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to State Auto Mutual and its Material Subsidiaries as the monetary or business consideration that would obtain in a comparable transaction with a Person not an Affiliate. -30-

4.16 Modifications of Certain Documents. State Auto Mutual will not, and will not permit any of its Subsidiaries to, (a) consent to any modification, supplement or waiver of (i) the charter or by-laws of State Auto Mutual, (ii) the charter or by-laws of State Auto Financial, (iii) any material term of any Retrocession Agreement or Reinsurance Agreement relating to property and catastrophic risk insurance other than the Intercompany Pooling Arrangement or (iv) without the prior consent of the Agent (with the approval of the Required Lenders, such approval not to be unreasonably withheld), the Intercompany Pooling Agreement if such modification, supplement or waiver would result in the ceding to State Auto Mutual of [70]% or more of the catastrophic loss risk subject to such arrangement or (b) in any manner alter or change the preferences, rights or powers of the Preferred Stock or permit State Auto Financial to issue any additional securities so as to affect adversely the Preferred Stock. 4.17 Indemnity for Certain Costs. State Auto Financial agrees with the Agent that it will indemnify the Borrower, promptly upon demand therefor, for all or any portion of (a) the fees, costs and expenses payable by the Borrower under Article III of the Credit Agreement including, without limitation, in the event that interest for any Lender in respect of any period is computed at the Base Rate, for the excess (if any) of the amount of such

4.16 Modifications of Certain Documents. State Auto Mutual will not, and will not permit any of its Subsidiaries to, (a) consent to any modification, supplement or waiver of (i) the charter or by-laws of State Auto Mutual, (ii) the charter or by-laws of State Auto Financial, (iii) any material term of any Retrocession Agreement or Reinsurance Agreement relating to property and catastrophic risk insurance other than the Intercompany Pooling Arrangement or (iv) without the prior consent of the Agent (with the approval of the Required Lenders, such approval not to be unreasonably withheld), the Intercompany Pooling Agreement if such modification, supplement or waiver would result in the ceding to State Auto Mutual of [70]% or more of the catastrophic loss risk subject to such arrangement or (b) in any manner alter or change the preferences, rights or powers of the Preferred Stock or permit State Auto Financial to issue any additional securities so as to affect adversely the Preferred Stock. 4.17 Indemnity for Certain Costs. State Auto Financial agrees with the Agent that it will indemnify the Borrower, promptly upon demand therefor, for all or any portion of (a) the fees, costs and expenses payable by the Borrower under Article III of the Credit Agreement including, without limitation, in the event that interest for any Lender in respect of any period is computed at the Base Rate, for the excess (if any) of the amount of such interest computed at the Base Rate for such period over the amount of interest that would have been payable in respect of such period had such interest been computed at the relevant Eurodollar Rate for such period and (b) the excess of interest in respect of any period payable by the Borrower under Section 2.11 of the Credit Agreement at 2% over the interest in respect of such period that would have been payable had the relevant Default not occurred. Each of State Auto Financial, State Auto Mutual and the Agent agrees that the Borrower shall be a third-party beneficiary of this Agreement. 4.18 Delivery of Documents on the Closing Date. On the Closing Date, State Auto Mutual will deliver to the Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Agent in form and substance: (a) certified copies of the charter and by-laws (or equivalent documents) of each State Auto Obligor and of all corporate authority for such State Auto Obligor (including, without limitation, board of director resolutions and evidence of the incumbency, including specimen signatures, of officers) with respect to the execution, delivery and performance of such of the Basic Documents to which such State Auto Obligor is intended to be a party and each other document to be delivered by such State Auto Obligor from time to time in connection herewith (and the Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from State Auto Mutual to the contrary); (b) a certificate of a senior officer of State Auto Mutual, dated the Closing Date, to the effect that (i) no Put Event (and no event that with notice or lapse of time or both would become a Put Event) shall have occurred and be continuing and (ii) the representations and warranties made by the State Auto Obligors in Article III hereof shall be true and complete on and as of the Closing Date with the same force and effect as if made on and as of the Closing Date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); -31-

(c) an opinion, dated the Closing Date, of John Lowther, general counsel of each State Auto Obligor, substantially in form of Exhibit B hereto and covering such other matters as the Agent or any Lender may reasonably request (and each State Auto Obligor hereby instructs such counsel to deliver such opinion to the Lenders and the Agent); (d) certified true, correct and complete copies of all Retrocession Agreements and Reinsurance Agreements in effect on the Closing Date; (e) certified true, correct and complete copies of all Tax Sharing Agreements in effect on the Closing Date; (f) evidence that the transactions contemplated by the Basic Documents shall have been approved by each Applicable Insurance Regulatory Authority with respect to State Auto Mutual, State Auto P&C and Milbank; and

(c) an opinion, dated the Closing Date, of John Lowther, general counsel of each State Auto Obligor, substantially in form of Exhibit B hereto and covering such other matters as the Agent or any Lender may reasonably request (and each State Auto Obligor hereby instructs such counsel to deliver such opinion to the Lenders and the Agent); (d) certified true, correct and complete copies of all Retrocession Agreements and Reinsurance Agreements in effect on the Closing Date; (e) certified true, correct and complete copies of all Tax Sharing Agreements in effect on the Closing Date; (f) evidence that the transactions contemplated by the Basic Documents shall have been approved by each Applicable Insurance Regulatory Authority with respect to State Auto Mutual, State Auto P&C and Milbank; and (g) such other documents as the Agent or any Lender or counsel to Bank One may reasonably request. 4.19 Delivery of Documents on Each Borrowing Date. On the date of each borrowing by the Borrower under the Credit Agreement (and as a condition thereto), State Auto Mutual will deliver to the Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Agent in form and substance: (a) a certificate of a senior officer of State Auto Mutual, dated the date of such borrowing, (1) to the effect that, both immediately prior to the making of such Loan and also after giving effect thereto and to the intended use thereof, (i) no Put Event (and no event that with notice or lapse of time or both would become a Put Event) shall have occurred and be continuing and (ii) the representations and warranties made by the State Auto Obligors in Article III hereof (excluding, in the case of the representation and warranty made by the State Auto Obligors in the last sentence of clauses (a) and (b) of Section 3.2 hereof, any such change to the extent such change results from the catastrophic loss claims and/or loss adjustment expenses to which the borrowing by the Borrower under the Credit Agreement and related issuance of Preferred Stock relates) shall be true and complete on and as of such date of borrowing with the same force and effect as if made on and as of such date of borrowing (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and (2) describing in reasonable detail the catastrophic loss claims and/or loss adjustment expenses to which such borrowing relates; (b) such other documents as the Agent or any Lender or counsel to Bank One may reasonably request (including, without limitation, opinions of counsel to the State Auto Obligors relating to the issuance of the Preferred Stock in connection with such borrowing). 4.20 Delivery of Documents in Connection with the Extension of the Commitment Termination Date. On each of the "Request Date" and the "Existing Commitment Termination Date" (in each case as defined in Section 2.19 of the Credit Agreement) State Auto -32-

Mutual will deliver to the Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Agent in form and substance: (a) a certificate of a senior officer of State Auto Mutual, dated such date, to the effect that (i) no Put Event (and no event that with notice or lapse of time or both would become a Put Event) shall have occurred and be continuing and (ii) the representations and warranties made by the State Auto Obligors in Article III hereof shall be true and complete on and as of such date of borrowing with the same force and effect as if made on and as of such date of borrowing (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). (b) a certificate of a senior officer of State Auto Mutual, dated such date, to the effect that (i) the "Probable Maximum Loss" (as defined below) of the State Auto Obligors for the 250-year return period shall not exceed (x) $220,000,000 for earthquake peril and (y) $150,000,000 for hurricane peril and (ii) attached thereto is a

Mutual will deliver to the Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Agent in form and substance: (a) a certificate of a senior officer of State Auto Mutual, dated such date, to the effect that (i) no Put Event (and no event that with notice or lapse of time or both would become a Put Event) shall have occurred and be continuing and (ii) the representations and warranties made by the State Auto Obligors in Article III hereof shall be true and complete on and as of such date of borrowing with the same force and effect as if made on and as of such date of borrowing (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). (b) a certificate of a senior officer of State Auto Mutual, dated such date, to the effect that (i) the "Probable Maximum Loss" (as defined below) of the State Auto Obligors for the 250-year return period shall not exceed (x) $220,000,000 for earthquake peril and (y) $150,000,000 for hurricane peril and (ii) attached thereto is a true, correct and complete copy of the report prepared by the applicable Modelling Firm (as defined below) in connection with the calculation referred to in the definition of "Probable Maximum Loss" below. For purposes of this clause (b), "Probable Maximum Loss" shall mean, for any date, the "probable maximum loss" as most recently calculated prior to such date by Risk Management Solutions, Inc., Applied Insurance Research, EQECAT Inc., Tillinghast (a Towers Perrin Company) or another independent modelling firm satisfactory to the Agent (each, a "Modelling Firm"). 4.21 Consent to Assignment, etc. (a) To the extent contemplated by the Company Pledge Agreement, or otherwise after and during the continuance of a Default, the Agent and any designee or assignee thereof shall be entitled to exercise any and all rights of the Borrower under the Standby Purchase Agreement and the Pledged Stock in accordance with the terms of the Standby Purchase Agreement and such Pledged Stock, and State Auto Financial shall comply in all respects with such exercise. Without limiting the generality of the foregoing, to the extent contemplated by the Company Pledge Agreement, or otherwise after and during the continuance of a Default, the Agent and any designee or assignee thereof shall have the full right and power to enforce directly against State Auto Financial all obligations of State Auto Financial under the Standby Purchase Agreement and the Pledged Stock and otherwise to exercise all remedies thereunder and to make all demands and give all notices and make all requests required or permitted to be made by the Borrower under the Standby Purchase Agreement or the Pledged Stock. Nothing herein shall require the Agent or such designee or assignee to cure any default of the Borrower under the Standby Purchase Agreement or to perform any act, duty or obligation of the Borrower under the Standby Purchase Agreement, but shall only give them the option so to do. (b) State Auto Financial will not, without the prior written consent of the Agent, (i) cancel, suspend or terminate the Standby Purchase Agreement or consent to or accept any such cancellation, suspension or termination thereof, (ii) amend, supplement or otherwise modify the Standby Purchase Agreement or (iii) petition, request or take any other legal or -33-

administrative action which seeks, or may reasonably be expected, to so rescind, cancel, terminate or suspend or amend or modify the Standby Purchase Agreement. (c) A foreclosure of, or other exercise of remedies under, the Company Pledge Agreement or any sale thereunder by the Agent or its assignee or designee, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Borrower to the Agent, the Lenders or any such assignee or designee, in lieu thereof, shall not require the consent of State Auto Financial. (d) Upon the exercise by the Agent of any of the remedies set forth in Section 5.05 of the Company Pledge Agreement, the Agent may assign its rights and interests and the rights and interests of the Borrower under the Standby Purchase Agreement and/or the Pledged Stock to any other Person. (e) State Auto Financial will not be released from any of its obligations under the Standby Purchase Agreement

administrative action which seeks, or may reasonably be expected, to so rescind, cancel, terminate or suspend or amend or modify the Standby Purchase Agreement. (c) A foreclosure of, or other exercise of remedies under, the Company Pledge Agreement or any sale thereunder by the Agent or its assignee or designee, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Borrower to the Agent, the Lenders or any such assignee or designee, in lieu thereof, shall not require the consent of State Auto Financial. (d) Upon the exercise by the Agent of any of the remedies set forth in Section 5.05 of the Company Pledge Agreement, the Agent may assign its rights and interests and the rights and interests of the Borrower under the Standby Purchase Agreement and/or the Pledged Stock to any other Person. (e) State Auto Financial will not be released from any of its obligations under the Standby Purchase Agreement or the Pledged Stock pursuant to any assignment or transfer (including by reason of a merger, consolidation, sale of substantially all of its assets or otherwise), and shall not delegate any of its obligations under the Standby Purchase Agreement or the Pledged Stock, unless the Agent shall have previously consented in writing to such release or delegation, as the case may be. ARTICLE V MISCELLANEOUS 5.1 Waiver. No failure on the part of the Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 5.2 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof or at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 5.2. Each such notice, request or other communication shall be effective (a) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (b) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (c) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section. 5.3 Expenses; Indemnification. (a) State Auto Mutual and State Auto Financial jointly and severally agree to reimburse the Agent for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for -34-

the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Basic Documents. State Auto Mutual and State Auto Financial also jointly and severally agree to reimburse the Agent and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. (b) State Auto Mutual and State Auto Financial hereby jointly and severally agree to indemnify the Agent, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Basic Documents, the transactions

the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Basic Documents. State Auto Mutual and State Auto Financial also jointly and severally agree to reimburse the Agent and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. (b) State Auto Mutual and State Auto Financial hereby jointly and severally agree to indemnify the Agent, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Basic Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of State Auto Mutual and State Auto Financial under this Section 5.3 shall survive the termination of this Agreement. 5.4 Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be modified or supplemented only by an instrument in writing signed by each State Auto Obligor and the Agent (with the consent of the Lenders as specified in Section 10.17 of the Credit Agreement), and any provision of this Agreement may be waived by the Agent (with the consent of the Lenders as specified in Section 10.17 of the Credit Agreement). 5.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided, that neither State Auto Obligor may assign any of its rights or obligations hereunder without the prior consent of the Agent (with the consent of all of the Lenders). 5.6 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 5.7 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. 5.8 CHOICE OF LAW. THE BASIC DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF -35-

THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 5.9 CONSENT TO JURISDICTION. EACH STATE AUTO OBLIGOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH STATE AUTO OBLIGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE

THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 5.9 CONSENT TO JURISDICTION. EACH STATE AUTO OBLIGOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH STATE AUTO OBLIGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY STATE AUTO OBLIGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY STATE AUTO OBLIGOR AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 5.10 WAIVER OF JURY TRIAL. EACH STATE AUTO OBLIGOR, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 5.11 Treatment of Certain Information; Confidentiality. (a) Each State Auto Obligor acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to State Auto Mutual or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and such State Auto Obligor hereby authorizes each Lender to share any information delivered to such Lender by or on behalf of State Auto Mutual and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into the Credit Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) below as if it were a Lender hereunder. Such authorization shall survive the termination of this Agreement. (b) The Agent and each Lender agrees to hold any confidential information which it may receive from either State Auto Obligor pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, so long as such Affiliate or other Lender agrees to be bound by the provisions of this Section, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) -36-

to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4 of the Credit Agreement. 5.12 No Liability. Except as expressly provided herein, neither the Agent nor any Lender shall be responsible or have any liability for (a) any statements, warranties or representations made in or in connection with the Credit Agreement, any other Basic Document or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Basic Document or any other instrument or document furnished pursuant thereto and (b) the financial condition of the Borrower or any other Person or any other obligation of or the performance or observance by the Borrower, any other Person or any other obligor of any of their respective obligations under the Credit Agreement or any

to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4 of the Credit Agreement. 5.12 No Liability. Except as expressly provided herein, neither the Agent nor any Lender shall be responsible or have any liability for (a) any statements, warranties or representations made in or in connection with the Credit Agreement, any other Basic Document or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Basic Document or any other instrument or document furnished pursuant thereto and (b) the financial condition of the Borrower or any other Person or any other obligation of or the performance or observance by the Borrower, any other Person or any other obligor of any of their respective obligations under the Credit Agreement or any other Basic Document or any other instrument or document furnished pursuant thereto. 5.13 Further Assurances. Each State Auto Obligor agrees that, from time to time upon the written request of the Agent, such State Auto Obligor will execute and deliver such further documents and do such other acts and things as the Lender may reasonably request in order fully to effect the purposes of this Agreement. 5.14 Severability of Provisions. Any provision in any Basic Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Basic Documents are declared to be severable. 5.15 Third-Party Beneficiaries. Each State Auto Obligor agrees that each Lender shall be a third-party beneficiary of this Agreement and shall be entitled to enforce its rights hereunder as fully as if it were a party hereto. [signature page follows] -37-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President ------------------------------------

Address for Notices: State Automobile Mutual Insurance Company 518 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: (614) 464-4911 Telephone No.: (614) 464-5052 STATE AUTO FINANCIAL CORPORATION
By: /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President ------------------------------------

Address for Notices: State Automobile Mutual Insurance Company 518 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: (614) 464-4911 Telephone No.: (614) 464-5052 STATE AUTO FINANCIAL CORPORATION
By: /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President ------------------------------------

Addresses for Notices: State Automobile Mutual Insurance Company 518 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: (614) 464-4911 Telephone No.: (614) 464-5052 S-1 [TO PUT AGREEMENT]

BANK ONE, NA
By: /s/ Thomas A. Kiepura II --------------------------------------Title: Assistant Vice President ------------------------------------

Addresses for Notices: 1 Bank One Plaza Chicago, Illinois 60670 Attention: Cynthia W. Priest Telecopier No.: (312) 732-4033 Telephone No.: (312) 732-9565 S-2 [TO PUT AGREEMENT]

BANK ONE, NA
By: /s/ Thomas A. Kiepura II --------------------------------------Title: Assistant Vice President ------------------------------------

Addresses for Notices: 1 Bank One Plaza Chicago, Illinois 60670 Attention: Cynthia W. Priest Telecopier No.: (312) 732-4033 Telephone No.: (312) 732-9565 S-2 [TO PUT AGREEMENT]

Put Agreement Schedule I Part A Indebtedness in Excess of $5,000,000 State Auto Financial owes State Auto Mutual $30,000,000 under a Credit Agreement dated May 1999. On November 11, 1999, the boards of directors of State Auto Financial and State Auto Mutual are expected to approve an additional $20,000,000 line of credit from State Auto Mutual to State Auto Financial. These monies have been used to effect a stock repurchase program.

Put Agreement Schedule I Part B Liens None

Put Agreement Schedule I Part A Indebtedness in Excess of $5,000,000 State Auto Financial owes State Auto Mutual $30,000,000 under a Credit Agreement dated May 1999. On November 11, 1999, the boards of directors of State Auto Financial and State Auto Mutual are expected to approve an additional $20,000,000 line of credit from State Auto Mutual to State Auto Financial. These monies have been used to effect a stock repurchase program.

Put Agreement Schedule I Part B Liens None

Put Agreement Schedule I Part B Liens None

Put Agreement Schedule II Part A Subsidiaries of State Auto Mutual See attached Organizational Chart.

ORGANIZATIONAL STRUCTURE OF STATE AUTO HOLDING COMPANY SYSTEM - - - - - - - - l Public l l 31% l - - - - - - - - l l l ====================================== 69% ================================= l State Auto Financial Corporation l----------------------------------l State Automobile Mutual Insura l Ohio Corporation l l Company Ohio Corporation* ====================================== ================================= l l l l l =========================== l ======================= l 100% l State Auto Property & l 15% l 100% l Midwest Security l--------l Casualty South l-------l l--------l Ins. Co. Wisconsin l l Carolina Corporation* l l l l Corporation* l =========================== l l ======================= l l l l l ==================== l l =========================== l l l l ======================= l 100% l State Auto National l l l 518 Property l l 100% l Associated Services l--------l Ins. Co. l l-----l Management and l l--------l Agency Ohio l l Ohio Corporation* l l l Leasing, LLC l l l Corporation l =========================== l l l l ======================= l l ==================== l l l l l =========================== l l ======================= l 100% l Stateco Financial l 85% l l 100% l Facilitators, Inc. l--------l Services, Inc. l-------l l--------l South Carolina l l Ohio Corporation l l l Corporation l =========================== l ======================= l l l l l =========================== l ======================= l 100% l Strategic Ins. l l 100% l Columbus Marketing, l--------l Software, Inc. l l--------l Inc. Ohio l l Ohio Corporation l l Corporation l =========================== ======================= l l l ============================= l 100% l Milbank Insurance l

Put Agreement Schedule II Part A Subsidiaries of State Auto Mutual See attached Organizational Chart.

ORGANIZATIONAL STRUCTURE OF STATE AUTO HOLDING COMPANY SYSTEM - - - - - - - - l Public l l 31% l - - - - - - - - l l l ====================================== 69% ================================= l State Auto Financial Corporation l----------------------------------l State Automobile Mutual Insura l Ohio Corporation l l Company Ohio Corporation* ====================================== ================================= l l l l l =========================== l ======================= l 100% l State Auto Property & l 15% l 100% l Midwest Security l--------l Casualty South l-------l l--------l Ins. Co. Wisconsin l l Carolina Corporation* l l l l Corporation* l =========================== l l ======================= l l l l l ==================== l l =========================== l l l l ======================= l 100% l State Auto National l l l 518 Property l l 100% l Associated Services l--------l Ins. Co. l l-----l Management and l l--------l Agency Ohio l l Ohio Corporation* l l l Leasing, LLC l l l Corporation l =========================== l l l l ======================= l l ==================== l l l l l =========================== l l ======================= l 100% l Stateco Financial l 85% l l 100% l Facilitators, Inc. l--------l Services, Inc. l-------l l--------l South Carolina l l Ohio Corporation l l l Corporation l =========================== l ======================= l l l l l =========================== l ======================= l 100% l Strategic Ins. l l 100% l Columbus Marketing, l--------l Software, Inc. l l--------l Inc. Ohio l l Ohio Corporation l l Corporation l =========================== ======================= l l l ============================= l 100% l Milbank Insurance l l--------l Company South l l l Dakota Corporation* l l ============================= l l l ============================= ========================= l 100% l Farmers Casualty l 100% l Mid-Plains l l--------l Insurance Company l--------l Insurance Company l l l Iowa Corporation* l l Iowa Corporation* l l ============================= ========================= l l l ============================= l 100% l State Auto l l--------l Insurance Company l l Ohio Corporation* l =============================

ORGANIZATIONAL STRUCTURE OF STATE AUTO HOLDING COMPANY SYSTEM - - - - - - - - l Public l l 31% l - - - - - - - - l l l ====================================== 69% ================================= l State Auto Financial Corporation l----------------------------------l State Automobile Mutual Insura l Ohio Corporation l l Company Ohio Corporation* ====================================== ================================= l l l l l =========================== l ======================= l 100% l State Auto Property & l 15% l 100% l Midwest Security l--------l Casualty South l-------l l--------l Ins. Co. Wisconsin l l Carolina Corporation* l l l l Corporation* l =========================== l l ======================= l l l l l ==================== l l =========================== l l l l ======================= l 100% l State Auto National l l l 518 Property l l 100% l Associated Services l--------l Ins. Co. l l-----l Management and l l--------l Agency Ohio l l Ohio Corporation* l l l Leasing, LLC l l l Corporation l =========================== l l l l ======================= l l ==================== l l l l l =========================== l l ======================= l 100% l Stateco Financial l 85% l l 100% l Facilitators, Inc. l--------l Services, Inc. l-------l l--------l South Carolina l l Ohio Corporation l l l Corporation l =========================== l ======================= l l l l l =========================== l ======================= l 100% l Strategic Ins. l l 100% l Columbus Marketing, l--------l Software, Inc. l l--------l Inc. Ohio l l Ohio Corporation l l Corporation l =========================== ======================= l l l ============================= l 100% l Milbank Insurance l l--------l Company South l l l Dakota Corporation* l l ============================= l l l ============================= ========================= l 100% l Farmers Casualty l 100% l Mid-Plains l l--------l Insurance Company l--------l Insurance Company l l l Iowa Corporation* l l Iowa Corporation* l l ============================= ========================= l l l ============================= l 100% l State Auto l l--------l Insurance Company l l Ohio Corporation* l =============================

*Insurance Entities

Put Agreement Schedule II Part B

Put Agreement Schedule II Part B Investments 1. See Forms "Schedule D" attached for: State Auto Mutual State Auto P&C State Auto National Milbank Insurance Company Midwest Security Insurance Company Farmers Casualty Insurance Company MidPlains Insurance Company 518 Property Management and Leasing, LLC Stateco Financial Services, Inc. Strategic Insurance Software, Inc. Reflecting information as of September 30, 1999 2. As of September 30, 1999, State Auto Mutual had in place 34 loans to its independent agencies with a total amount outstanding of $3,639,728.38.

Put Agreement Schedule III Part A Equity Rights As of November 1, 1999, State Auto Financial has granted 2,481,469 stock options to members of management under State Auto Financial's 1991 Stock Option Plan of which 2,355,811 are outstanding. As of November 1, 1999, State Auto Financial has granted 174,000 stock options to "outside" directors on the boards of directors of State Auto Financial and State Auto Mutual pursuant to the terms of the 1991 Directors' Stock Option Plan. State Auto Financial also has registered 2,400,000 shares to be issued pursuant to an Employee Stock Purchase Plan (the "ESPP") of which 1,473,805 shares have been purchased pursuant to the ESPP as of November 1, 1999. State Auto Financial intends to register 400,000 shares as part of an agents' stock option plan. Options for 16,538 option shares have been issued under this plan but are not exercisable at this time.

Put Agreement Schedule III Part B In August 1999, Strategic Insurance Software, Inc. ("S.I.S.") completed the repurchase of all shares of S.I.S. from holders other than State Auto Financial except for 60,000 shares, which the holders thereof (2 individuals) are contractually obligated to sell no later than January 4, 2000.

EXHIBIT A to the Put Agreement

Put Agreement Schedule III Part A Equity Rights As of November 1, 1999, State Auto Financial has granted 2,481,469 stock options to members of management under State Auto Financial's 1991 Stock Option Plan of which 2,355,811 are outstanding. As of November 1, 1999, State Auto Financial has granted 174,000 stock options to "outside" directors on the boards of directors of State Auto Financial and State Auto Mutual pursuant to the terms of the 1991 Directors' Stock Option Plan. State Auto Financial also has registered 2,400,000 shares to be issued pursuant to an Employee Stock Purchase Plan (the "ESPP") of which 1,473,805 shares have been purchased pursuant to the ESPP as of November 1, 1999. State Auto Financial intends to register 400,000 shares as part of an agents' stock option plan. Options for 16,538 option shares have been issued under this plan but are not exercisable at this time.

Put Agreement Schedule III Part B In August 1999, Strategic Insurance Software, Inc. ("S.I.S.") completed the repurchase of all shares of S.I.S. from holders other than State Auto Financial except for 60,000 shares, which the holders thereof (2 individuals) are contractually obligated to sell no later than January 4, 2000.

EXHIBIT A to the Put Agreement [Form of Put Notice] [Date] State Automobile Mutual Insurance Company State Auto Financial Corporation [Address] Re: Put Agreement dated as of November 19, 1999, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and Bank One, NA, as Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of November 19, 1999 (as modified and supplemented and in effect from time to time, the "Put Agreement"), among State Automobile Mutual Insurance Company ("State Auto Mutual"), State Auto Financial Corporation and Bank One, NA, as Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.2 of the Put Agreement, the undersigned hereby requires that State Auto Mutual purchase all of each Lender's Loans, Note and Commitment. The aggregate purchase price payable by State Auto Mutual for all such Loans, Notes and Commitments shall be $_______________ representing the sum of (a) principal of such Loans in the amount of $_______________, plus (b) accrued and unpaid interest thereon in the amount of $______________, plus (c) other amounts payable under the Basic Documents in respect thereof in the amount of $_______________.]

Put Agreement Schedule III Part B In August 1999, Strategic Insurance Software, Inc. ("S.I.S.") completed the repurchase of all shares of S.I.S. from holders other than State Auto Financial except for 60,000 shares, which the holders thereof (2 individuals) are contractually obligated to sell no later than January 4, 2000.

EXHIBIT A to the Put Agreement [Form of Put Notice] [Date] State Automobile Mutual Insurance Company State Auto Financial Corporation [Address] Re: Put Agreement dated as of November 19, 1999, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and Bank One, NA, as Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of November 19, 1999 (as modified and supplemented and in effect from time to time, the "Put Agreement"), among State Automobile Mutual Insurance Company ("State Auto Mutual"), State Auto Financial Corporation and Bank One, NA, as Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.2 of the Put Agreement, the undersigned hereby requires that State Auto Mutual purchase all of each Lender's Loans, Note and Commitment. The aggregate purchase price payable by State Auto Mutual for all such Loans, Notes and Commitments shall be $_______________ representing the sum of (a) principal of such Loans in the amount of $_______________, plus (b) accrued and unpaid interest thereon in the amount of $______________, plus (c) other amounts payable under the Basic Documents in respect thereof in the amount of $_______________.] [Pursuant to Section 2.3 of the Put Agreement, the undersigned hereby requires that State Auto Mutual purchase all of the Pledged Stock for an aggregate purchase price equal to $_______________ representing the sum of (a) the aggregate Redemption Value of such Pledged Stock in the amount of $_____________, plus (b) accrued and unpaid dividends thereon in the amount of $_______________.] The Put Purchase Date for such purchase shall be _______________, _____. BANK ONE, NA, as Agent By Title: A-1

EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors]

EXHIBIT A to the Put Agreement [Form of Put Notice] [Date] State Automobile Mutual Insurance Company State Auto Financial Corporation [Address] Re: Put Agreement dated as of November 19, 1999, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and Bank One, NA, as Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of November 19, 1999 (as modified and supplemented and in effect from time to time, the "Put Agreement"), among State Automobile Mutual Insurance Company ("State Auto Mutual"), State Auto Financial Corporation and Bank One, NA, as Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.2 of the Put Agreement, the undersigned hereby requires that State Auto Mutual purchase all of each Lender's Loans, Note and Commitment. The aggregate purchase price payable by State Auto Mutual for all such Loans, Notes and Commitments shall be $_______________ representing the sum of (a) principal of such Loans in the amount of $_______________, plus (b) accrued and unpaid interest thereon in the amount of $______________, plus (c) other amounts payable under the Basic Documents in respect thereof in the amount of $_______________.] [Pursuant to Section 2.3 of the Put Agreement, the undersigned hereby requires that State Auto Mutual purchase all of the Pledged Stock for an aggregate purchase price equal to $_______________ representing the sum of (a) the aggregate Redemption Value of such Pledged Stock in the amount of $_____________, plus (b) accrued and unpaid dividends thereon in the amount of $_______________.] The Put Purchase Date for such purchase shall be _______________, _____. BANK ONE, NA, as Agent By Title: A-1

EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors] November 19, 1999 To each of the Lenders party to the Credit Agreement referred to below and Bank One, NA, as Agent Ladies and Gentlemen: I am the general counsel of State Automobile Mutual Insurance Company ("State Auto Mutual") and State Auto Financial Corporation ("State Auto Financial" and, together with State Auto Mutual, the "State Auto Obligors") and have acted as counsel to the State Auto Obligors in connection with (i) the Put Agreement dated as of

EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors] November 19, 1999 To each of the Lenders party to the Credit Agreement referred to below and Bank One, NA, as Agent Ladies and Gentlemen: I am the general counsel of State Automobile Mutual Insurance Company ("State Auto Mutual") and State Auto Financial Corporation ("State Auto Financial" and, together with State Auto Mutual, the "State Auto Obligors") and have acted as counsel to the State Auto Obligors in connection with (i) the Put Agreement dated as of November 19, 1999 (the "Put Agreement") among the State Auto Obligors and Bank One, NA, in its capacity as Agent (the "Agent") on behalf of the lenders party to a Credit Agreement dated as of November 19, 1999, among SAF Funding Corporation, the Agent and (ii) the agreements, instruments and other documents referred to in the next paragraph. All capitalized terms used but not defined herein have the respective meanings given to such terms in the Put Agreement. This opinion letter is delivered to you pursuant to Section 4.18(c) of the Put Agreement. In rendering the opinions expressed below, I have examined the following agreements, instruments and other documents: (a) the Credit Agreement; (b) the Pledge Agreements; (c) the Put Agreement; (d) the Standby Purchase Agreement (collectively with the Put Agreement, the "State Auto Agreements"); and (e) such records of the State Auto Obligors and such other documents as I have deemed necessary as a basis for the opinions expressed below. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity with authentic original documents of all documents submitted to me as copies. When relevant facts were not independently established, I have relied upon certificates of governmental officials and appropriate representatives of the State Auto Obligors and upon representations made in or pursuant to the State Auto Agreements. B-1

In rendering the opinions expressed below, I have assumed, with respect to all of the documents referred to in this opinion letter, that (except, to the extent set forth in the opinions expressed below, as to the State Auto Obligors): (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, partnership or other) to execute, deliver and perform such documents.

In rendering the opinions expressed below, I have assumed, with respect to all of the documents referred to in this opinion letter, that (except, to the extent set forth in the opinions expressed below, as to the State Auto Obligors): (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, partnership or other) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as I have deemed necessary as a basis for the opinions expressed below, I am of the opinion that: 1. State Auto Mutual is a mutual insurance company duly organized, validly existing and in good standing under the laws of the State of Ohio. State Auto Financial is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. 2. Each State Auto Obligor has all requisite corporate power and authority to execute and deliver, and to perform its obligations and to incur liabilities under, the State Auto Agreements to which it is a party. 3. The execution, delivery and performance by each State Auto Obligor of, and the incurrence by such State Auto Obligor of liabilities under, each State Auto Agreement to which such State Auto Obligor is a party, have been duly authorized by all necessary corporate action on the part of such State Auto Obligor. 4. Each State Auto Agreement has been duly executed and delivered by each State Auto Obligor party thereto. 5. Under Ohio conflict of laws principles, the stated choice of Illinois law to govern the State Auto Agreements will be honored by the courts of the State of Ohio and the State Auto Agreements will be construed in accordance with, and will be treated as being governed by, the law of the State of Illinois. However, if the State Auto Agreements were stated to be governed by and construed in accordance with the law of the State of Ohio, or if an Ohio court were to apply the law of the State of Ohio to the State Auto Agreements, each State Auto Agreement would constitute the legal, valid and binding obligation of each State Auto Obligor party thereto, enforceable against such State Auto Obligor in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of the State Auto Agreements is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at

law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. 6. No authorization, approval or consent of, and no filing or registration with, any governmental or regulatory authority or agency of the United States of America or the State of Ohio (other than any authorizations, approvals, consents, filings and registrations heretofore duly made or obtained and in full force and effect) is required on the part of either State Auto Obligor for the execution, delivery or performance by such State Auto Obligor of, or for the incurrence by such State Auto Obligor of any liabilities under, the State Auto Agreements to which such State Auto Obligor is a party. 7. The execution, delivery and performance by each State Auto Obligor of, and the consummation by such State Auto Obligor of the transactions contemplated by, the State Auto Agreements to which such State Auto Obligor is a party do not and will not (a) violate any provision of the Articles of Incorporation or Code of Regulations of

law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. 6. No authorization, approval or consent of, and no filing or registration with, any governmental or regulatory authority or agency of the United States of America or the State of Ohio (other than any authorizations, approvals, consents, filings and registrations heretofore duly made or obtained and in full force and effect) is required on the part of either State Auto Obligor for the execution, delivery or performance by such State Auto Obligor of, or for the incurrence by such State Auto Obligor of any liabilities under, the State Auto Agreements to which such State Auto Obligor is a party. 7. The execution, delivery and performance by each State Auto Obligor of, and the consummation by such State Auto Obligor of the transactions contemplated by, the State Auto Agreements to which such State Auto Obligor is a party do not and will not (a) violate any provision of the Articles of Incorporation or Code of Regulations of such State Auto Obligor, (b) violate any applicable law, rule or regulation of the United States of America or the State of Ohio, (c) violate any order, writ, injunction or decree of any court or governmental authority or agency or any arbitral award applicable to such State Auto Obligor of which I have knowledge (after due inquiry) or (d) result in a breach of, constitute a default under, require any consent under, or result in the acceleration or required prepayment of any indebtedness pursuant to the terms of, any agreement or instrument of which I have knowledge (after due inquiry) to which such State Auto Obligor or any of its Subsidiaries is a party or by which any of them is bound or to which any of them is subject, or result in the creation or imposition of any Lien upon any Property of such State Auto Obligor or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 8. I have no knowledge (after due inquiry) of any legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or threatened against or affecting either State Auto Obligor or any of their respective Properties that, if adversely determined, could have a Material Adverse Effect. 9. State Auto Financial has duly authorized and reserved for issuance 2,500,000 shares of Class A Preferred Stock. The foregoing opinions are subject to the following comments and qualifications: (A) The enforceability of Section 5.3 of the Put Agreement and Section 7.6 of the Standby Purchase Agreement may be limited by (i) laws rendering unenforceable indemnification contrary to Federal or state securities laws and the public policy underlying such laws and (ii) laws limiting the enforceability of provisions exculpating or exempting a party from, or requiring indemnification of a party for, its own action or inaction, to the extent such action or inaction involves gross negligence, recklessness or willful or unlawful conduct.

(B) The enforceability of provisions in the State Auto Agreements to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (C) I express no opinion as to the first sentence of Section 5.08 of the Put Agreement or the second sentence of Section 8.7 of the Standby Purchase Agreement, insofar as either such sentence relates to the subject matter jurisdiction of the United States District Court for the Northern District of Illinois sitting in Chicago, Illinois to adjudicate any controversy related to the applicable State Auto Agreement. The foregoing opinions are limited to matters involving the Federal laws of the United States of America and the law of the State of Ohio, and I do not express any opinion as to the laws of any other jurisdiction. The opinions contained in this letter are rendered only as of the date hereof and I undertake no obligation to update this letter or the opinions contained herein after the date hereof. The opinions contained in this letter only constitute my professional judgment as to the consequences of and the applicability of certain laws to the documents and agreements referred to and the parties thereto and should not be considered to be a guarantee of any particular result.

(B) The enforceability of provisions in the State Auto Agreements to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (C) I express no opinion as to the first sentence of Section 5.08 of the Put Agreement or the second sentence of Section 8.7 of the Standby Purchase Agreement, insofar as either such sentence relates to the subject matter jurisdiction of the United States District Court for the Northern District of Illinois sitting in Chicago, Illinois to adjudicate any controversy related to the applicable State Auto Agreement. The foregoing opinions are limited to matters involving the Federal laws of the United States of America and the law of the State of Ohio, and I do not express any opinion as to the laws of any other jurisdiction. The opinions contained in this letter are rendered only as of the date hereof and I undertake no obligation to update this letter or the opinions contained herein after the date hereof. The opinions contained in this letter only constitute my professional judgment as to the consequences of and the applicability of certain laws to the documents and agreements referred to and the parties thereto and should not be considered to be a guarantee of any particular result. At the request of my clients, this opinion letter is provided to you by me in my capacity as counsel to the State Auto Obligors, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Basic Documents without, in each instance, my prior written consent. Very truly yours,

Exhibit 10(V)

STANDBY PURCHASE AGREEMENT between STATE AUTO FINANCIAL CORPORATION and SAF FUNDING CORPORATION Dated as of November 19, 1999

TABLE OF CONTENTS Section Page ---------ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS.....................................1 1.1 Definitions and Accounting Terms.........................................1 ARTICLE 2.1 2.2 2.3 II - PURCHASE OF PREFERRED STOCK.........................................6 Purchases................................................................6 Notices of Purchases.....................................................6 Commitment Fee...........................................................6

ARTICLE III - CONDITIONS TO PURCHASE.............................................6 ARTICLE 4.1 4.2 4.3 4.4 4.5 IV - REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL..............7 Corporate Existence......................................................7 Litigation...............................................................7 No Breach................................................................8 Action...................................................................8 Approvals................................................................8

Exhibit 10(V)

STANDBY PURCHASE AGREEMENT between STATE AUTO FINANCIAL CORPORATION and SAF FUNDING CORPORATION Dated as of November 19, 1999

TABLE OF CONTENTS Section Page ---------ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS.....................................1 1.1 Definitions and Accounting Terms.........................................1 ARTICLE 2.1 2.2 2.3 II - PURCHASE OF PREFERRED STOCK.........................................6 Purchases................................................................6 Notices of Purchases.....................................................6 Commitment Fee...........................................................6

ARTICLE III - CONDITIONS TO PURCHASE.............................................6 ARTICLE 4.1 4.2 4.3 4.4 4.5 4.6 4.7 ARTICLE 5.1 5.2 5.3 5.4 5.5 5.6 ARTICLE 6.1 6.2 6.3 ARTICLE 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 IV - REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL..............7 Corporate Existence......................................................7 Litigation...............................................................7 No Breach................................................................8 Action...................................................................8 Approvals................................................................8 Capitalization...........................................................8 True and Complete Disclosure.............................................9 V - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................9 Investment...............................................................9 No Agreement to Transfer.................................................9 Knowledge and Experience.................................................9 Access to Information....................................................9 Risk....................................................................10 Restrictions on Transfer................................................10 VI - COVENANTS..........................................................10 Transfer................................................................10 Redemption..............................................................10 Use of Proceeds.........................................................10 VII - REGISTRATION RIGHTS...............................................11 Demand Registration.....................................................11 Piggyback Registrations.................................................12 Registration Procedures.................................................14 Underwritten Offerings..................................................17 Holdback Agreements By State Auto Financial and Other Securityholders...18 Indemnification.........................................................19 Covenants Relating to Rule 144..........................................22 References to holders of Registrable Securities.........................22

ARTICLE VIII - MISCELLANEOUS....................................................22 8.1 Waiver..................................................................22

TABLE OF CONTENTS Section Page ---------ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS.....................................1 1.1 Definitions and Accounting Terms.........................................1 ARTICLE 2.1 2.2 2.3 II - PURCHASE OF PREFERRED STOCK.........................................6 Purchases................................................................6 Notices of Purchases.....................................................6 Commitment Fee...........................................................6

ARTICLE III - CONDITIONS TO PURCHASE.............................................6 ARTICLE 4.1 4.2 4.3 4.4 4.5 4.6 4.7 ARTICLE 5.1 5.2 5.3 5.4 5.5 5.6 ARTICLE 6.1 6.2 6.3 ARTICLE 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 IV - REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL..............7 Corporate Existence......................................................7 Litigation...............................................................7 No Breach................................................................8 Action...................................................................8 Approvals................................................................8 Capitalization...........................................................8 True and Complete Disclosure.............................................9 V - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................9 Investment...............................................................9 No Agreement to Transfer.................................................9 Knowledge and Experience.................................................9 Access to Information....................................................9 Risk....................................................................10 Restrictions on Transfer................................................10 VI - COVENANTS..........................................................10 Transfer................................................................10 Redemption..............................................................10 Use of Proceeds.........................................................10 VII - REGISTRATION RIGHTS...............................................11 Demand Registration.....................................................11 Piggyback Registrations.................................................12 Registration Procedures.................................................14 Underwritten Offerings..................................................17 Holdback Agreements By State Auto Financial and Other Securityholders...18 Indemnification.........................................................19 Covenants Relating to Rule 144..........................................22 References to holders of Registrable Securities.........................22

ARTICLE 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13

VIII - MISCELLANEOUS....................................................22 Waiver..................................................................22 Notices.................................................................23 Amendments, Etc.........................................................23 Successors and Assigns..................................................23 Captions................................................................23 Counterparts............................................................23 Governing Law; Submission to Jurisdiction...............................23 Waiver of Jury Trial....................................................23 Further Assurances......................................................24 Payments by State Auto Financial........................................24 Payments Received by the Company under Basic Documents..................24 Third-Party Beneficiaries...............................................24 Severability............................................................24

SCHEDULES Schedule I Equity Rights and Repurchase Obligations EXHIBITS
Exhibit A Exhibit B Class A Preferred Stock Certificate Purchase Notice

ARTICLE 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13

VIII - MISCELLANEOUS....................................................22 Waiver..................................................................22 Notices.................................................................23 Amendments, Etc.........................................................23 Successors and Assigns..................................................23 Captions................................................................23 Counterparts............................................................23 Governing Law; Submission to Jurisdiction...............................23 Waiver of Jury Trial....................................................23 Further Assurances......................................................24 Payments by State Auto Financial........................................24 Payments Received by the Company under Basic Documents..................24 Third-Party Beneficiaries...............................................24 Severability............................................................24

SCHEDULES Schedule I Equity Rights and Repurchase Obligations EXHIBITS
Exhibit A Exhibit B Exhibit C Class A Preferred Stock Certificate Purchase Notice Opinion of General Counsel of State Auto Financial

- ii -

STANDBY PURCHASE AGREEMENT This Standby Purchase Agreement, dated as of November 19, 1999, is by and between State Auto Financial Corporation, a corporation duly organized and validly existing under the laws of the State of Ohio ("State Auto Financial"), and SAF Funding Corporation, a Delaware corporation (the "Company"). RECITALS: A. State Auto Financial seeks to raise funds for catastrophic loss claims and/or loss adjustment expenses that may be made from time to time for residential and commercial property under insurance coverage underwritten by State Automobile Mutual Insurance Company, an Ohio mutual insurance company ("State Auto Mutual"), and certain of its affiliates, which have been reinsured by State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"). B. State Auto Financial intends to raise such funds through the issuance and sale by State Auto Financial and the purchase by the Company, from time to time, of State Auto Financial's Class A Preferred Stock, no par value per share (the "Class A Preferred Stock"). C. State Auto Financial desires to issue and sell its Class A Preferred Stock from time to time to the Company in accordance with the terms and conditions set forth in this Agreement. NOW, THEREFORE, for and in consideration of the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1 Definitions and Accounting Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa):

STANDBY PURCHASE AGREEMENT This Standby Purchase Agreement, dated as of November 19, 1999, is by and between State Auto Financial Corporation, a corporation duly organized and validly existing under the laws of the State of Ohio ("State Auto Financial"), and SAF Funding Corporation, a Delaware corporation (the "Company"). RECITALS: A. State Auto Financial seeks to raise funds for catastrophic loss claims and/or loss adjustment expenses that may be made from time to time for residential and commercial property under insurance coverage underwritten by State Automobile Mutual Insurance Company, an Ohio mutual insurance company ("State Auto Mutual"), and certain of its affiliates, which have been reinsured by State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"). B. State Auto Financial intends to raise such funds through the issuance and sale by State Auto Financial and the purchase by the Company, from time to time, of State Auto Financial's Class A Preferred Stock, no par value per share (the "Class A Preferred Stock"). C. State Auto Financial desires to issue and sell its Class A Preferred Stock from time to time to the Company in accordance with the terms and conditions set forth in this Agreement. NOW, THEREFORE, for and in consideration of the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1 Definitions and Accounting Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Agent" shall mean Bank One, NA, as agent under the Credit Agreement. "Basic Documents" shall have the meaning assigned thereto in the Credit Agreement. "Commission" shall mean the United States Securities and Exchange Commission, or any successor governmental agency or authority. "Commitment" shall have the meaning assigned thereto in the Credit Agreement.

"Company Pledge Agreement" shall mean the Pledge and Security Agreement, dated as of the date hereof, among the Company and the Agent, as modified and supplemented and in effect from time to time. "Credit Agreement" shall mean the Credit Agreement, dated as of the date hereof, among the Company, the Agent and the Lenders, as modified and supplemented and in effect from time to time. "Cutback Registration" shall mean any Demand Registration or Piggyback Registration to be effected as an underwritten Public Offering in which the Managing Underwriter with respect thereto advises State Auto Financial and the Requesting Holders in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of State Auto Financial which are not Registrable Securities) exceed the number which can be sold in such offering without a material reduction in the selling price anticipated to be received for the securities to be sold in such Public Offering. "Demand Registration" shall mean any registration of Registrable Securities under the Securities Act effected in accordance with Section 7.1 hereof.

"Company Pledge Agreement" shall mean the Pledge and Security Agreement, dated as of the date hereof, among the Company and the Agent, as modified and supplemented and in effect from time to time. "Credit Agreement" shall mean the Credit Agreement, dated as of the date hereof, among the Company, the Agent and the Lenders, as modified and supplemented and in effect from time to time. "Cutback Registration" shall mean any Demand Registration or Piggyback Registration to be effected as an underwritten Public Offering in which the Managing Underwriter with respect thereto advises State Auto Financial and the Requesting Holders in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of State Auto Financial which are not Registrable Securities) exceed the number which can be sold in such offering without a material reduction in the selling price anticipated to be received for the securities to be sold in such Public Offering. "Demand Registration" shall mean any registration of Registrable Securities under the Securities Act effected in accordance with Section 7.1 hereof. "Effective Long-Form Registration" shall mean a Long-Form Registration that results in an Effective Registration. "Effective Registration" shall mean a Demand Registration which (a) has been declared or ordered effective in accordance with the rules of the Commission, (b) has been kept effective for the period of time contemplated by Section 7.3(b) hereof and (c) has resulted in the Registrable Securities requested to be included in such registration actually being sold (except by reason of some act or omission on the part of the Requesting Holders); provided that for purposes of this Agreement (i) a Cutback Registration shall not be an Effective Registration and (ii) a Demand Registration in which State Auto Financial includes securities for sale for the account of State Auto Financial shall not be an Effective Registration. "Effective Short-Form Registration" shall mean a Short-Form Registration that results in an Effective Registration. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Form S-1" shall mean Form S-1 promulgated by the Commission under the Securities Act, or any successor or similar long-form registration statement. "Form S-2" shall mean Form S-2 promulgated by the Commission under the Securities Act, or any successor or similar short-form registration statement. "Form S-3" shall mean Form S-3 promulgated by the Commission under the Securities Act, or any successor or similar short-form registration statement. "Indemnified Party" shall mean a party entitled to indemnity in accordance with Section 7.6 hereof. -2-

"Indemnifying Party" shall mean a party obligated to provide indemnity in accordance with Section 7.6 hereof. "Inspectors" shall have the meaning assigned thereto in Section 7.3(j) hereof. "Lenders" shall have the meaning assigned thereto in the Credit Agreement. "Lien" shall mean, with respect to any Property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loans" shall have the meaning assigned thereto in the Credit Agreement.

"Indemnifying Party" shall mean a party obligated to provide indemnity in accordance with Section 7.6 hereof. "Inspectors" shall have the meaning assigned thereto in Section 7.3(j) hereof. "Lenders" shall have the meaning assigned thereto in the Credit Agreement. "Lien" shall mean, with respect to any Property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loans" shall have the meaning assigned thereto in the Credit Agreement. "Long-Form Registration" shall mean a Demand Registration effected by the filing of a registration statement on Form S-1 with the Commission. "Losses" shall have the meaning assigned thereto in Section 7.6(a) hereof. "Majority Lenders" shall have the meaning assigned thereto in the Credit Agreement. "Managing Underwriter" shall mean, with respect to any Public Offering, the underwriter or underwriters managing such Public Offering. "Material Adverse Effect" shall mean a material adverse effect on (a) the Property, business, operations, financial condition, prospects, liabilities or capitalization of State Auto Mutual and its Subsidiaries taken as a whole, (b) the ability of State Auto Financial to issue the Class A Preferred Stock to or perform its obligations under this Agreement, (c) the ability of State Auto Mutual or State Auto Financial to perform its respective obligations under the Put Agreement, (d) the validity or enforceability of any of the Basic Documents or (e) the rights and remedies of the Lenders and the Agent under any of the Basic Documents. "NASD" shall mean the National Association of Securities Dealers. "Notice of Demand Registration" shall have the meaning assigned thereto in Section 7.1(a) hereof. "Notice of Piggyback Registration" shall have the meaning assigned thereto in Section 7.2(a) hereof. "Piggyback Registration" shall mean any registration of equity securities of State Auto Financial under the Securities Act (other than a registration in respect of a dividend reinvestment or similar plan for stockholders of State Auto Financial or on Form S-4 or Form S-8 promulgated by the Commission, or any successor or similar forms thereto), whether -3-

for sale for the account of State Auto Financial or for the account of any holder of securities of State Auto Financial (other than Registrable Securities). "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Public Offering" shall mean any offering of any equity securities of State Auto Financial to the public, either on behalf of State Auto Financial or any of its securityholders, pursuant to an effective registration statement under the Securities Act. "Purchase Commitment" shall mean the obligation of the Company to purchase Class A Preferred Stock with an aggregate original Redemption Value of not more than $135,000,000.

for sale for the account of State Auto Financial or for the account of any holder of securities of State Auto Financial (other than Registrable Securities). "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Public Offering" shall mean any offering of any equity securities of State Auto Financial to the public, either on behalf of State Auto Financial or any of its securityholders, pursuant to an effective registration statement under the Securities Act. "Purchase Commitment" shall mean the obligation of the Company to purchase Class A Preferred Stock with an aggregate original Redemption Value of not more than $135,000,000. "Purchase Commitment Termination Date" shall mean November 17, 2000; provided that if the "Commitment Termination Date" under the Credit Agreement is extended as provided therein, the Purchase Commitment Termination Date shall, automatically and without any action on the part of State Auto Financial or the Company, be extended to the date to which said "Commitment Termination Date" has been so extended. "Purchase Date" shall have the meaning assigned thereto in Section 2.2 hereof. "Purchase Notice" shall mean a Purchase Notice substantially in the form of Exhibit B hereto. "Put Agreement" shall mean the Put Agreement, dated as of the date hereof, among State Auto Mutual, State Auto Financial and the Agent, as modified and supplemented and in effect from time to time. "Put Dishonor" shall mean the failure of State Auto Mutual for any reason after its receipt of a Put Notice (as defined in the Put Agreement) to comply with its obligations under the Put Agreement to purchase each Lender's Loans, Notes and Commitment (each, as defined in the Put Agreement) or the Class A Preferred Stock, as specified in such Put Notice. "Put Event" shall have the meaning assigned thereto in the Put Agreement. "Quarterly Dates" shall mean the last Business Day of March, June, September and December in each year, the first of which shall be the first such day after the day hereof. "Records" shall have the meaning assigned thereto in Section 7.3(j) hereof. "Redemption Value" shall mean, with respect to any Class A Preferred Stock, the "Redemption Value" for such Class A Preferred Stock set forth in the certificate evidencing such Class A Preferred Stock. "Registrable Securities" shall mean (a) any shares of Class A Preferred Stock purchased pursuant to Section 2.1 hereof and (b) any additional shares of Class A Preferred Stock issued or distributed by way of a dividend, stock split or other distribution in respect of -4-

such Class A Preferred Stock purchased pursuant to Section 2.1 hereof, or acquired by way of any rights offering or similar offering made in respect of such Class A Preferred Stock. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144 or (iii) they shall have ceased to be outstanding. "Registration Expenses" shall mean all expenses incident to State Auto Financial's performance of or compliance with its obligations under this Agreement to effect the registration of Registrable Securities in a Demand Registration or a Piggyback Registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses of complying with

such Class A Preferred Stock purchased pursuant to Section 2.1 hereof, or acquired by way of any rights offering or similar offering made in respect of such Class A Preferred Stock. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144 or (iii) they shall have ceased to be outstanding. "Registration Expenses" shall mean all expenses incident to State Auto Financial's performance of or compliance with its obligations under this Agreement to effect the registration of Registrable Securities in a Demand Registration or a Piggyback Registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for State Auto Financial and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, the reasonable fees and disbursements of a single counsel and single firm of accountants retained by the holders of a majority of the Registrable Securities being registered, premiums and other costs of policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities, which shall be payable by each holder thereof. "Registration Request" shall have the meaning assigned thereto in Section 7.1 hereof. "Requesting Holders" shall mean, with respect to any Demand Registration or Piggyback Registration, the holders of Registrable Securities requesting to have Registrable Securities included in such registration in accordance with this Agreement. "Rule 144" shall mean Rule 144 promulgated by the Commission under the Securities Act, and any successor provision thereto. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Short-Form Registration" shall mean a Demand Registration effected by the filing of a registration statement on Form S-2 or Form S-3 with the Commission. "State Auto Mutual" shall mean the meaning assigned thereto in the first Whereas clause of this Agreement. "State Auto P&C" shall mean the meaning assigned thereto in the first Whereas clause of this Agreement. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having -5-

by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. ARTICLE II PURCHASE OF PREFERRED STOCK

by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. ARTICLE II PURCHASE OF PREFERRED STOCK 2.1 Purchases. The Company agrees, on the terms and conditions of this Agreement, to purchase from State Auto Financial in one or more transactions, Class A Preferred Stock with an aggregate Redemption Value of not more than $135,000,000. The purchase price payable by the Company for each share of Class A Preferred Stock shall be equal to the Redemption Value thereof. 2.2 Notices of Purchases. State Auto Financial shall give the Company notice of each purchase hereunder by delivering to the Company a Purchase Notice not less than four Business Days prior to the date of such purchase (the "Purchase Date"). Not later than 2:00 p.m. New York time on the Purchase Date specified for each such purchase, the Company shall make available the amount of the purchase price of the Class A Preferred Stock to be purchased by it by depositing in immediately available funds such purchase price in an account designated by State Auto Financial. 2.3 Commitment Fee. State Auto Financial shall pay to the Company a commitment fee on the daily average unused amount (based on the aggregate Redemption Value of not more than $135,000,000 of Class A Preferred Stock) of the Company's Purchase Commitment, for the period from and including the date hereof to but not including the earlier of the date such Purchase Commitment is terminated and the Purchase Commitment Termination Date, at a rate per annum equal to 0.20%. Accrued commitment fees shall be payable on each Quarterly Date and on the earlier of the date the Purchase Commitments are terminated and the Purchase Commitment Termination Date. ARTICLE III CONDITIONS TO PURCHASE The obligations of the Company to purchase any Class A Preferred Stock hereunder is subject to the following conditions: (a) Purchase Notice. The Company shall have received a Purchase Notice with respect to such purchase, duly completed and executed. -6-

(b) Opinion of Counsel to the Company. The Company shall have received an opinion, dated the Purchase Date, of John Lowther, general counsel of State Auto Financial, substantially in the form of Exhibit C hereto and covering such other matters as the Company may reasonably request. (c) Certificates. The Company shall have received duly executed stock certificates, substantially in the form of Exhibit A hereto, evidencing the aggregate number of shares of Class A Preferred Stock to be purchased by the Company on such Purchase Date. (d) Catastrophic Loss. Any one or more of State Auto Mutual, State Auto P&C, Milbank Insurance Company, Farmers Casualty Insurance Company, Midwest Security Insurance Company and State Auto National Insurance Company shall have incurred liability in excess of $120,000,000 in the aggregate in respect of catastrophic loss claims and/or loss adjustment expenses resulting from the occurrence of a single catastrophic event and the Company shall have received a certificate of a senior financial officer of State Auto Financial to such effect.

(b) Opinion of Counsel to the Company. The Company shall have received an opinion, dated the Purchase Date, of John Lowther, general counsel of State Auto Financial, substantially in the form of Exhibit C hereto and covering such other matters as the Company may reasonably request. (c) Certificates. The Company shall have received duly executed stock certificates, substantially in the form of Exhibit A hereto, evidencing the aggregate number of shares of Class A Preferred Stock to be purchased by the Company on such Purchase Date. (d) Catastrophic Loss. Any one or more of State Auto Mutual, State Auto P&C, Milbank Insurance Company, Farmers Casualty Insurance Company, Midwest Security Insurance Company and State Auto National Insurance Company shall have incurred liability in excess of $120,000,000 in the aggregate in respect of catastrophic loss claims and/or loss adjustment expenses resulting from the occurrence of a single catastrophic event and the Company shall have received a certificate of a senior financial officer of State Auto Financial to such effect. (e) Officer's Certificate. The Company shall have received a certificate of a senior financial officer of State Auto Financial to the effect that, both immediately prior to such purchase and also after giving effect thereto and to the intended use thereof (i) no Put Event (or an event with notice or lapse of time or both would become a Put Event) shall have occurred and be continuing; and (ii) the representations and warranties made by State Auto Financial in Article IV hereof shall be true and complete on and as of the date of such purchase with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL State Auto Financial represents and warrants to the Company that: 4.1 Corporate Existence. Each of State Auto Financial and its Subsidiaries: (a) is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify could (either individually or in the aggregate) have a Material Adverse Effect. 4.2 Litigation. There are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge of State Auto Financial) threatened against State Auto Financial or any of its Subsidiaries that, if adversely determined could (either individually or in the aggregate) have a Material Adverse Effect. -7-

4.3 No Breach. None of the execution and delivery of this Agreement, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof (including issuance of the Class A Preferred Stock) will conflict with or result in a breach of, or require any consent under, the charter or by-laws (or equivalent documents) of State Auto Financial, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which State Auto Financial or any of its Subsidiaries is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any Property of State Auto Financial or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 4.4 Action. State Auto Financial has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to issue the Class A Preferred Stock; the execution, delivery and performance by State Auto Financial of this Agreement (and the issuance of the Class A Preferred

4.3 No Breach. None of the execution and delivery of this Agreement, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof (including issuance of the Class A Preferred Stock) will conflict with or result in a breach of, or require any consent under, the charter or by-laws (or equivalent documents) of State Auto Financial, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which State Auto Financial or any of its Subsidiaries is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any Property of State Auto Financial or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 4.4 Action. State Auto Financial has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to issue the Class A Preferred Stock; the execution, delivery and performance by State Auto Financial of this Agreement (and the issuance of the Class A Preferred Stock) have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by State Auto Financial and constitutes, its legal, valid and binding obligation, enforceable against State Auto Financial in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.5 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange (other than any authorizations, approvals, consents, filings and registrations heretofore duly made or obtained and in full force and effect), are necessary for the execution, delivery or performance by State Auto Financial of this Agreement (or for the issuance of the Class A Preferred Stock) or for the legality, validity or enforceability hereof. 4.6 Capitalization. The authorized capital stock of State Auto Financial consists, on the date hereof, of an aggregate of 105,000,000 shares consisting of (a) 100,000,000 shares of common stock, no par value, of which 40,565,812 shares are duly and validly issued and outstanding, each of which shares is fully paid and nonassessable, (b) 2,500,000 shares of Class A Preferred Stock, no par value, none of which shares issued and outstanding and (c) 2,500,000 shares of Class B Preferred Stock, no par value, none of which shares are issued and outstanding. As of the date hereof, 70% of such issued and outstanding shares of common stock are owned beneficially and of record by State Auto Mutual. Upon issuance, each share of Class A Preferred Stock will benefit from the Terms and Conditions of Class A Preferred Stock attached to form of Class A Preferred Stock Certificate attached hereto as Exhibit A. As of the date hereof, (i) except for this Agreement, the Put Agreement and as set forth in Part A of Schedule I hereto, there are no outstanding Equity Rights with respect to State Auto Financial and (ii) except as set forth in Part B of Schedule I hereto, there are no outstanding obligations of State Auto Financial or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of State Auto Financial nor are there any outstanding obligations of State Auto Financial or any -8-

of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of State Auto Financial or any of its Subsidiaries. All shares of Class A Preferred Stock purchased by the Company hereunder will, when so purchased, be duly and validly issued and outstanding, fully paid and nonassessable. 4.7 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of State Auto Financial and State Auto Mutual to the Company, the Agent or any Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by State Auto Mutual and its Subsidiaries to the Company, the Agent and the Lenders in connection with this Agreement and the other Basic Documents and the transactions contemplated

of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of State Auto Financial or any of its Subsidiaries. All shares of Class A Preferred Stock purchased by the Company hereunder will, when so purchased, be duly and validly issued and outstanding, fully paid and nonassessable. 4.7 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of State Auto Financial and State Auto Mutual to the Company, the Agent or any Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by State Auto Mutual and its Subsidiaries to the Company, the Agent and the Lenders in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to State Auto Financial that could have a Material Adverse Effect that has not been disclosed herein, in the other Basic Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Agent for use in connection with the transactions contemplated hereby or thereby. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to State Auto Financial that: 5.1 Investment. The Company will purchase the Class A Preferred Stock only for its own account, for investment purposes and not with a view to resale or distribution, and not on behalf of any other person or entity. 5.2 No Agreement to Transfer. Except as set forth in this Agreement, the Credit Agreement, the Put Agreement and the Company Pledge Agreement, the Company is not a party to any agreement, arrangement or understanding concerning the transfer of the Class A Preferred Stock or any interest therein to any other person or entity. 5.3 Knowledge and Experience. The Company has (a) adequate knowledge and experience in financial and business matters to be able to evaluate the merits and risks of its investment in State Auto Financial and the Class A Preferred Stock under this Agreement, or (b) the advice or representation of a person or entity having such knowledge and experience. 5.4 Access to Information. The Company has access to sufficient information regarding State Auto Financial, including, without limitation, State Auto Financial's filings under the Securities Exchange Act of 1934, as amended. The Company has requested information concerning State Auto Financial and has been given an opportunity to ask questions and receive -9-

answers concerning State Auto Financial and the terms and conditions of this Agreement in order to evaluate the merits and risks of its investment in State Auto Financial and the Class A Preferred Stock under this Agreement. 5.5 Risk. The Company is able to bear the economic risk of its investment in State Auto Financial and the Class A Preferred Stock under this Agreement and to hold the Class A Preferred Stock for purposes of investment. 5.6 Restrictions on Transfer. (a) The Class A Preferred Stock which the Company will acquire hereunder (i) will not be registered by reason of an exemption from registration under Section 3(b) or 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), or Regulation D promulgated thereunder and (ii) is not publicly traded, no market exists for the Class A Preferred Stock and the Company must hold the Class A Preferred Stock indefinitely unless a

answers concerning State Auto Financial and the terms and conditions of this Agreement in order to evaluate the merits and risks of its investment in State Auto Financial and the Class A Preferred Stock under this Agreement. 5.5 Risk. The Company is able to bear the economic risk of its investment in State Auto Financial and the Class A Preferred Stock under this Agreement and to hold the Class A Preferred Stock for purposes of investment. 5.6 Restrictions on Transfer. (a) The Class A Preferred Stock which the Company will acquire hereunder (i) will not be registered by reason of an exemption from registration under Section 3(b) or 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), or Regulation D promulgated thereunder and (ii) is not publicly traded, no market exists for the Class A Preferred Stock and the Company must hold the Class A Preferred Stock indefinitely unless a subsequent transfer or other disposition is registered under the Securities Act or is exempt from registration at the time of such transfer or other disposition. (b) In the absence of an effective registration with respect to any proposed transfer of the Class A Preferred Stock (other than any transfer thereof as contemplated by the Company Pledge Agreement or the Put Agreement), State Auto Financial may require, as a condition to such transfer, a legal opinion by counsel of its choice, in form and substance as it may determine, or other documentation satisfactory to its Board of Directors, that an exemption from registration is available for the proposed transfer, and a restrictive legend to that effect will be set forth on the stock certificates representing the Class A Preferred Stock. ARTICLE VI COVENANTS 6.1 Transfer. Except as contemplated by the Company Pledge Agreement and the Put Agreement, the Company shall not sell, offer for sale or otherwise transfer or dispose of the Class A Preferred Stock or any interest therein, unless pursuant to a registration or exemption from registration under the Securities Act and all applicable state securities laws then in effect. 6.2 Redemption. State Auto Financial shall redeem the Class A Preferred Stock at the times, in the amounts, at the prices and on such other terms and conditions as are described in the stock certificates evidencing such Class A Preferred Stock. 6.3 Use of Proceeds. State Auto Financial shall use the proceeds of the sale of Class A Preferred Stock hereunder solely for the purpose of contributing such proceeds to State Auto P&C for it to use to pay direct and assumed catastrophic loss claims and/or loss adjustment expenses resulting from the catastrophic event to which such sale relates. - 10 -

ARTICLE VII REGISTRATION RIGHTS 7.1 Demand Registration. (a) Demand Registration. At any time after the occurrence of a Put Dishonor, upon the written request of the holders of a majority of the Registrable Securities requesting that State Auto Financial effect the registration under the Securities Act of all or part of such holders' Registrable Securities and specifying the number of Registrable Securities to be registered and the intended method of disposition thereof (a "Registration Request"), State Auto Financial will promptly, and in no event more than ten (10) Business Days after receipt of such Registration Request, give written notice (a "Notice of Demand Registration") of such request to all other holders of Registrable Securities, and thereupon will use its best efforts to effect the registration under the Securities Act of:

ARTICLE VII REGISTRATION RIGHTS 7.1 Demand Registration. (a) Demand Registration. At any time after the occurrence of a Put Dishonor, upon the written request of the holders of a majority of the Registrable Securities requesting that State Auto Financial effect the registration under the Securities Act of all or part of such holders' Registrable Securities and specifying the number of Registrable Securities to be registered and the intended method of disposition thereof (a "Registration Request"), State Auto Financial will promptly, and in no event more than ten (10) Business Days after receipt of such Registration Request, give written notice (a "Notice of Demand Registration") of such request to all other holders of Registrable Securities, and thereupon will use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which State Auto Financial has been so requested to register by such holders of a majority of the Registrable Securities; and (ii) all other Registrable Securities the holders of which have made written requests to State Auto Financial for registration thereof within 20 days after the giving of the Notice of Demand Registration (which requests shall specify the intended method of disposition thereof), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof) of the Registrable Securities so to be registered. If requested by the holders of a majority of the Registrable Securities requested to be included in any Demand Registration, the method of disposition of all Registrable Securities included in such registration shall be an underwritten offering effected in accordance with Section 7.4(a) hereof. Subject to paragraph (e) of this Section 7.1, State Auto Financial may include in such registration other securities for sale for its own account or for the account of any other Person. If any security holders of State Auto Financial (other than the holders of Registrable Securities in such capacity) register securities of State Auto Financial in a Demand Registration in accordance with this Section 7.1, such holders shall pay the fees and expenses of their counsel and their pro rata share, on the basis of the respective amounts of the securities included in such registration on behalf of each such holder, of the Registration Expenses if the Registration Expenses for such registration are not paid by State Auto Financial for any reason. (b) Limitations on Demand Registrations. Notwithstanding anything herein to the contrary, State Auto Financial shall not be required to honor a request for a Demand Registration if: (i) a Put Dishonor shall not have occurred; (ii) in the case of a Long-Form Registration, State Auto Financial has previously effected one Effective LongForm Registration; - 11 -

(iii) in the case of a Short-Form Registration, State Auto Financial has previously effected one Effective ShortForm Registration; or (iv) such request is received by State Auto Financial less than 90 days following the effective date of any previous registration statement filed in connection with a Demand Registration, regardless of whether any holder of Registrable Securities exercised its rights under this Agreement with respect to such registration. (c) Registration Statement Form. Demand Registrations shall be on such appropriate registration form promulgated by the Commission as shall be selected by State Auto Financial, and shall be reasonably acceptable to the holders of a majority of the Registrable Securities to which such registration relates, and shall permit the disposition of such Registrable Securities in accordance with the intended method or methods specified in their request for such registration; provided that such registration form is available under the terms of this Agreement.

(iii) in the case of a Short-Form Registration, State Auto Financial has previously effected one Effective ShortForm Registration; or (iv) such request is received by State Auto Financial less than 90 days following the effective date of any previous registration statement filed in connection with a Demand Registration, regardless of whether any holder of Registrable Securities exercised its rights under this Agreement with respect to such registration. (c) Registration Statement Form. Demand Registrations shall be on such appropriate registration form promulgated by the Commission as shall be selected by State Auto Financial, and shall be reasonably acceptable to the holders of a majority of the Registrable Securities to which such registration relates, and shall permit the disposition of such Registrable Securities in accordance with the intended method or methods specified in their request for such registration; provided that such registration form is available under the terms of this Agreement. Notwithstanding the foregoing, if State Auto Financial selects a Form S-3 and the use of such form is available under the terms of this Agreement and is permitted by law, the holders of a majority of the Registrable Securities to which such registration relates may notify State Auto Financial in writing that, in the judgment of such holders (or, if applicable, the Managing Underwriter), the inclusion of some or all of the information required in a more detailed form specified in such notice is of material importance to the success of the Public Offering of such Registrable Securities, in which case State Auto Financial shall supplement or amend the Form S-3 to include such information. (d) Registration Expenses. State Auto Financial will pay all Registration Expenses incurred in connection with any Demand Registration. (e) Priority in Cutback Registrations. If a Demand Registration becomes a Cutback Registration, State Auto Financial will include in any such registration to the extent of the number which the Managing Underwriter advises State Auto Financial can be sold in such offering (i) first, Registrable Securities requested to be included in such registration by the Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders and (ii) second, other securities of State Auto Financial proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among State Auto Financial and the holders of such other securities; and any securities so excluded shall be withdrawn from and shall not be included in such Demand Registration. 7.2 Piggyback Registrations. (a) Right to Include Registrable Securities. If, at any time after the occurrence of a Put Dishonor, State Auto Financial at any time proposes after any shares of Class A Preferred Stock have been purchased hereunder to effect a Piggyback Registration, it will each such time give prompt written notice (a "Notice of Piggyback Registration"), at least 30 days prior to the anticipated filing date, to all holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 7.2, which Notice of Piggyback Registration shall include a description of the intended method of disposition of such securities. Upon the written request of any such holder made within 15 days after receipt of a Notice of Piggyback - 12 -

Registration (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), State Auto Financial will use its best efforts to include in the registration statement relating to such Piggyback Registration all Registrable Securities which State Auto Financial has been so requested to register. Notwithstanding the foregoing, if, at any time after giving a Notice of Piggyback Registration and prior to the effective date of the registration statement filed in connection with such registration, State Auto Financial shall determine for any reason not to register or to delay registration of such securities, State Auto Financial may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Requesting Holder entitled to do so to request that such registration be effected as a Demand Registration under Section 7.1 hereof, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No

Registration (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), State Auto Financial will use its best efforts to include in the registration statement relating to such Piggyback Registration all Registrable Securities which State Auto Financial has been so requested to register. Notwithstanding the foregoing, if, at any time after giving a Notice of Piggyback Registration and prior to the effective date of the registration statement filed in connection with such registration, State Auto Financial shall determine for any reason not to register or to delay registration of such securities, State Auto Financial may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Requesting Holder entitled to do so to request that such registration be effected as a Demand Registration under Section 7.1 hereof, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 7.2 shall relieve State Auto Financial of its obligations to effect a Demand Registration under Section 7.1 hereof. (b) Registration Expenses. State Auto Financial will pay all Registration Expenses incurred in connection with each Piggyback Registration. (c) Priority in Cutback Registrations. If a Piggyback Registration becomes a Cutback Registration, State Auto Financial will include in such registration to the extent of the amount of the securities which the Managing Underwriter advises State Auto Financial can be sold in such offering: (i) if such registration as initially proposed by State Auto Financial was solely a primary registration of its securities, (x) first, the securities proposed by State Auto Financial to be sold for its own account, and (y) second any Registrable Securities requested to be included in such registration by Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders, and (z) third, any other securities of State Auto Financial proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among State Auto Financial and such holders; and (ii) if such registration as initially proposed by State Auto Financial was in whole or in part requested by holders of securities of State Auto Financial, other than holders of Registrable Securities in their capacities as such, pursuant to demand registration rights, (x) first, such securities held by the holders initiating such registration and, if applicable, any securities proposed by State Auto Financial to be sold for its own account, allocated in accordance with the priorities then existing among State Auto Financial and such holders, and (y) second any Registrable Securities requested to be included in such registration by Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders, and (z) third, any other securities of State Auto Financial proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among State Auto Financial and the holders of such other securities; - 13 -

and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration. 7.3 Registration Procedures. If and whenever State Auto Financial is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 7.1 or 7.2 hereof, State Auto Financial will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition thereof specified by the Requesting Holders. Without limiting the foregoing, State Auto Financial in each such case will, as expeditiously as possible: (a) prepare and file with the Commission the requisite registration statement to effect such registration and use its best efforts to cause such registration statement to become effective as soon as practicable, provided that as far in advance as practical before filing such registration statement or any amendment or supplement thereto, State Auto Financial will furnish to the Requesting Holders copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and State Auto Financial will make the

and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration. 7.3 Registration Procedures. If and whenever State Auto Financial is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 7.1 or 7.2 hereof, State Auto Financial will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition thereof specified by the Requesting Holders. Without limiting the foregoing, State Auto Financial in each such case will, as expeditiously as possible: (a) prepare and file with the Commission the requisite registration statement to effect such registration and use its best efforts to cause such registration statement to become effective as soon as practicable, provided that as far in advance as practical before filing such registration statement or any amendment or supplement thereto, State Auto Financial will furnish to the Requesting Holders copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and State Auto Financial will make the corrections reasonably requested by such holder with respect to such information prior to filing any such registration statement or amendment; (b) prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement and (ii) 180 days after such registration statement becomes effective; (c) promptly notify each Requesting Holder and the underwriter or underwriters, if any (i) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (ii) of any written request by the Commission for amendments or supplements to such registration statement or prospectus; (iii) of the notification to State Auto Financial by the Commission of its initiation of any proceeding with respect to the issuance by the Commission of, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement (and State Auto Financial shall promptly attempt to have such order withdrawn); and - 14 -

(iv) of the receipt by State Auto Financial of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (d) furnish to each seller of Registrable Securities covered by such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of its Registrable Securities; (e) use its best efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each holder thereof shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that State Auto

(iv) of the receipt by State Auto Financial of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (d) furnish to each seller of Registrable Securities covered by such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of its Registrable Securities; (e) use its best efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each holder thereof shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that State Auto Financial shall not for any such purpose be required (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified, (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any jurisdiction; (f) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities; (g) furnish to each Requesting Holder a signed counterpart, addressed to such holder (and the underwriters, if any), of (i) an opinion of counsel for State Auto Financial, dated the effective date of such registration statement (or, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), reasonably satisfactory in form and substance to such holder, and (ii) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), signed by the independent public accountants who have certified State Auto Financial's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten Public - 15 -

Offerings of securities and, in the case of the accountants' letter, such other financial matters, as such holder (or the underwriters, if any) may reasonably request; (h) notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

Offerings of securities and, in the case of the accountants' letter, such other financial matters, as such holder (or the underwriters, if any) may reasonably request; (h) notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11 (a) of the Securities Act and Rule 158 promulgated thereunder; (j) make available for inspection by any Requesting Holder, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of State Auto Financial (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause State Auto Financial's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration statement, and permit the Inspectors to participate in the preparation of such registration statement and any prospectus contained therein and any amendment or supplement thereto. Records which State Auto Financial determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the registration statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public. The seller of Registrable Securities agrees by acquisition of such Registrable Securities that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to State Auto Financial and allow State Auto Financial, at State Auto Financial's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; (k) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and - 16 -

(l) use its best efforts to cause all Registrable Securities covered by such registration statement to be listed, upon official notice of issuance, on any securities exchange on which any of the securities of the same class as the Registrable Securities are then listed. State Auto Financial may require each holder of Registrable Securities as to which any registration is being effected to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish State Auto Financial with such information and affidavits regarding such holder and the distribution of such securities as State Auto Financial may from time to time reasonably request in writing in connection with such registration. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice from State Auto Financial of the happening of any event of the kind described in paragraph (h) of this Section 7.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by such paragraph (h) and, if so directed by State Auto

(l) use its best efforts to cause all Registrable Securities covered by such registration statement to be listed, upon official notice of issuance, on any securities exchange on which any of the securities of the same class as the Registrable Securities are then listed. State Auto Financial may require each holder of Registrable Securities as to which any registration is being effected to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish State Auto Financial with such information and affidavits regarding such holder and the distribution of such securities as State Auto Financial may from time to time reasonably request in writing in connection with such registration. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice from State Auto Financial of the happening of any event of the kind described in paragraph (h) of this Section 7.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by such paragraph (h) and, if so directed by State Auto Financial, will deliver to State Auto Financial (at State Auto Financial's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event State Auto Financial shall give any such notice, the period referred to in paragraph (b) of this Section 7.3 shall be extended by a number of days equal to the number of days during the period from and including the giving of notice pursuant to paragraph (h) of this Section 7.3 and to and including the date when each holder of any Registrable Securities covered by such registration statement shall receive the copies of the supplemented or amended prospectus contemplated by such paragraph (h). 7.4 Underwritten Offerings. (a) Underwritten Demand Offerings. In the case of any underwritten Public Offering being effected pursuant to a Demand Registration, the Managing Underwriter and any other underwriter or underwriters with respect to such offering shall be selected, after consultation with State Auto Financial, by the holders of a majority of the Registrable Securities to be included in such underwritten offering with the consent of State Auto Financial, which consent shall not be unreasonably withheld. State Auto Financial shall enter into an underwriting agreement in customary form with such underwriter or underwriters, which shall include, among other provisions, indemnities to the effect and to the extent provided in Section 7.6 hereof and shall take all such other actions as are reasonably requested by the Managing Underwriter in order to expedite or facilitate the registration and disposition of the Registrable Securities. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, State Auto Financial to and for the benefit of such underwriters also be made to and for their benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to their obligations. No holder of Registrable Securities shall be required to make any representations or warranties to or agreements with State Auto Financial or the underwriters other than representations, warranties - 17 -

or agreements regarding such holder and its ownership of the securities being registered on its behalf and such holder's intended method of distribution and any other representation required by law. No Requesting Holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to State Auto Financial and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders. (b) Underwritten Piggyback Offerings. If State Auto Financial at any time proposes to register any of its securities

or agreements regarding such holder and its ownership of the securities being registered on its behalf and such holder's intended method of distribution and any other representation required by law. No Requesting Holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to State Auto Financial and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders. (b) Underwritten Piggyback Offerings. If State Auto Financial at any time proposes to register any of its securities in a Piggyback Registration and such securities are to be distributed by or through one or more underwriters, State Auto Financial will, subject to the provisions of Section 7.2(c) hereof, use its best efforts, if requested by any holder of Registrable Securities, to arrange for such underwriters to include the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, and such holders shall be obligated to sell their Registrable Securities in such Piggyback Registration through such underwriters on the same terms and conditions as apply to the other Company securities to be sold by such underwriters in connection with such Piggyback Registration. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between State Auto Financial and such underwriter or underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, State Auto Financial to and for the benefit of such underwriters also be made to and for their benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to their obligations. No holder of Registrable Securities shall be required to make any representations or warranties to or agreements with State Auto Financial or the underwriters other than representations, warranties or agreements regarding such holder and its ownership of the securities being registered on its behalf and such holder's intended method of distribution and any other representation required by law. No Requesting Holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to State Auto Financial and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders. 7.5 Holdback Agreements By State Auto Financial and Other Securityholders. Unless the Managing Underwriter otherwise agrees, State Auto Financial and each holder of - 18 -

Registrable Securities agrees not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the 180 days after the effective date of the registration statement filed in connection with an underwritten offering made pursuant to a Demand Registration (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such underwritten registration and except pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission or any successor or similar forms thereto. State Auto Financial also agrees, unless the Managing Underwriter otherwise agrees, to cause each holder of its equity securities which is a party to a registration rights agreement with State Auto Financial entered into on or after the date hereof, and each holder of its equity securities, or of any securities convertible into or exchangeable or exercisable for such securities, in each case purchased from State Auto Financial, at any time after the date of this Agreement (other than in a Public Offering), to agree, to the extent permitted by law, not to effect any such public sale or distribution of such securities (including a sale under Rule 144), during such period, except as part of such underwritten registration.

Registrable Securities agrees not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the 180 days after the effective date of the registration statement filed in connection with an underwritten offering made pursuant to a Demand Registration (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such underwritten registration and except pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission or any successor or similar forms thereto. State Auto Financial also agrees, unless the Managing Underwriter otherwise agrees, to cause each holder of its equity securities which is a party to a registration rights agreement with State Auto Financial entered into on or after the date hereof, and each holder of its equity securities, or of any securities convertible into or exchangeable or exercisable for such securities, in each case purchased from State Auto Financial, at any time after the date of this Agreement (other than in a Public Offering), to agree, to the extent permitted by law, not to effect any such public sale or distribution of such securities (including a sale under Rule 144), during such period, except as part of such underwritten registration. 7.6 Indemnification. (a) Indemnification by State Auto Financial. State Auto Financial shall, to the full extent permitted by law, indemnify and hold harmless each seller of Registrable Securities included in any registration statement filed in connection with a Demand Registration or a Piggyback Registration, its directors and officers, and each other Person, if any, who controls any such seller within the meaning of the Securities Act, against any losses, claims, damages, expenses or liabilities, joint or several (together, "Losses"), to which such seller or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and State Auto Financial will reimburse such seller and each such director, officer and controlling Person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such Loss (or action or proceeding in respect thereof); provided that State Auto Financial shall not be liable in any such case to the extent that any such Loss (or action or proceeding in respect thereof) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to State Auto Financial through an instrument duly executed by such seller specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer or controlling Person, and shall survive the transfer of such securities by such seller. State Auto Financial shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who controls - 19 -

any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to sellers of Registrable Securities. (b) Indemnification by the Sellers. Each holder of Registrable Securities which are included or are to be included in any registration statement filed in connection with a Demand Registration or a Piggyback Registration, as a condition to including Registrable Securities in such registration statement, shall, to the full extent permitted by law, indemnify and hold harmless State Auto Financial, its directors and officers, and each other Person, if any, who controls State Auto Financial within the meaning of the Securities Act, against any Losses to which State Auto Financial or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a

any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to sellers of Registrable Securities. (b) Indemnification by the Sellers. Each holder of Registrable Securities which are included or are to be included in any registration statement filed in connection with a Demand Registration or a Piggyback Registration, as a condition to including Registrable Securities in such registration statement, shall, to the full extent permitted by law, indemnify and hold harmless State Auto Financial, its directors and officers, and each other Person, if any, who controls State Auto Financial within the meaning of the Securities Act, against any Losses to which State Auto Financial or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to State Auto Financial through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided however, that the obligation to provide indemnification pursuant to this Section 7.6(b) shall be several, and not joint and several, among such Indemnifying Parties on the basis of the number of Registrable Securities included in such registration statement and the aggregate amount which may be recovered from any holder of Registrable Securities pursuant to the indemnification provided for in this Section 7.6(b) in connection with any registration and sale of Registrable Securities shall be limited to the total proceeds received by such holder from the sale of such Registrable Securities. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of State Auto Financial or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. Such holders shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to State Auto Financial. (c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraph (a) or (b) of this Section 7.6, such Indemnified Party will, if a claim in respect thereof is to be made against an Indemnifying Party pursuant to such paragraphs, give written notice to the latter of the commencement of such action, provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under the preceding paragraphs of this Section 7.6, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Indemnifying Party shall be entitled to participate in and, unless, in the reasonable judgment of any Indemnified Party, a conflict of interest between such Indemnified Party and any Indemnifying Party exists with respect to such claim, to assume - 20 -

the defense thereof, jointly with any other Indemnifying Party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party may participate in such defense at the Indemnified Party's expense; and provided further that the Indemnified Party or Indemnified Parties shall have the right to employ one counsel to represent it or them if, in the reasonable judgment of the Indemnified Party or Indemnified Parties, it is advisable for it or them to be represented by separate counsel by reason of having legal defenses which are different from or in addition to those available to the Indemnifying Party, and in that event the reasonable fees and expenses of such one counsel shall be paid by the Indemnifying Party. If the Indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the Indemnified Parties with respect to such

the defense thereof, jointly with any other Indemnifying Party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party may participate in such defense at the Indemnified Party's expense; and provided further that the Indemnified Party or Indemnified Parties shall have the right to employ one counsel to represent it or them if, in the reasonable judgment of the Indemnified Party or Indemnified Parties, it is advisable for it or them to be represented by separate counsel by reason of having legal defenses which are different from or in addition to those available to the Indemnifying Party, and in that event the reasonable fees and expenses of such one counsel shall be paid by the Indemnifying Party. If the Indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the Indemnified Parties with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim, in which event the Indemnifying Party shall be obligated to pay the fees and expenses of such additional counsel for the Indemnified Parties or counsels. No Indemnifying Party shall consent to entry of any judgment or enter into any settlement without the consent of the Indemnified Party. No Indemnifying Party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. (d) Contribution. If the indemnity and reimbursement obligation provided for in any paragraph of this Section 7.6 is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Losses (or actions or proceedings in respect thereof) referred to therein, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand in connection with statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an Indemnified Party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any Loss which is the subject of this paragraph. No Indemnified Party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Indemnifying Party if the Indemnifying Party was not guilty of such fraudulent misrepresentation. - 21 -

(e) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 7.6 (with appropriate modifications) shall be given by State Auto Financial and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Section 7.6 shall be in addition to any other rights to indemnification or contribution which an Indemnified Party may have pursuant to law, equity, contract or otherwise. (f) Indemnification Payments. The indemnification required by this Section 7.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Losses are incurred. 7.7 Covenants Relating to Rule 144. The Company will file reports in compliance with the Exchange Act, will comply with all rules and regulations of the Commission applicable in connection with the use of Rule 144 and take such other actions and furnish such holder with such other information as such holder may request in order to avail itself of such rule or any other rule or regulation of the Commission allowing such holder to sell any

(e) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 7.6 (with appropriate modifications) shall be given by State Auto Financial and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Section 7.6 shall be in addition to any other rights to indemnification or contribution which an Indemnified Party may have pursuant to law, equity, contract or otherwise. (f) Indemnification Payments. The indemnification required by this Section 7.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Losses are incurred. 7.7 Covenants Relating to Rule 144. The Company will file reports in compliance with the Exchange Act, will comply with all rules and regulations of the Commission applicable in connection with the use of Rule 144 and take such other actions and furnish such holder with such other information as such holder may request in order to avail itself of such rule or any other rule or regulation of the Commission allowing such holder to sell any Registrable Securities without registration and will, at its expense, forthwith upon the request of any holder of Registrable Securities, deliver to such holder a certificate, signed by State Auto Financial's principal financial officer, stating (a) State Auto Financial's name, address and telephone number (including area code), (b) State Auto Financial's Internal Revenue Service identification number, (c) State Auto Financial's Commission file number, (d) the number of shares of each class of Stock outstanding as shown by the most recent report or statement published by State Auto Financial, and (e) whether State Auto Financial has filed the reports required to be filed under the Exchange Act for a period of at least 90 days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. 7.8 References to holders of Registrable Securities. For purposes of this Agreement, references to holders of the Registrable Securities or holders of a majority of the Registrable Securities shall be deemed to refer to the pledgee of the Registered Securities under the Pledge and Security Agreement dated as of even date herewith between the Company and the Agent (as modified and supplemented and in effect from time to time, the "Pledge Agreement") for so long as the Pledge Agreement shall remain in effect. ARTICLE VIII MISCELLANEOUS 8.1 Waiver. No failure on the part of the either party hereto to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. - 22 -

8.2 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 8.2. Each such notice, request or other communication shall be effective (a) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (b) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (c) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section. 8.3 Amendments, Etc. Except as otherwise expressly provided in this Agreement and subject to the Credit Agreement and the Put Agreement, any provision of this Agreement may be modified or supplemented only by an instrument in writing signed by each of State Auto Financial and the Company (with the consent of the Agent and the Lenders as specified in the Credit Agreement), and any provision of this Agreement may be waived by the Company (with the consent of the Agent and the Lenders as specified in the Credit Agreement).

8.2 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 8.2. Each such notice, request or other communication shall be effective (a) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (b) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (c) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section. 8.3 Amendments, Etc. Except as otherwise expressly provided in this Agreement and subject to the Credit Agreement and the Put Agreement, any provision of this Agreement may be modified or supplemented only by an instrument in writing signed by each of State Auto Financial and the Company (with the consent of the Agent and the Lenders as specified in the Credit Agreement), and any provision of this Agreement may be waived by the Company (with the consent of the Agent and the Lenders as specified in the Credit Agreement). 8.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided, that State Auto Financial may not assign any of its rights or obligations hereunder without the prior consent of the Company (with the consent of the Agent and all of the Lenders). 8.5 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 8.6 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. 8.7 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the law of the State of Illinois. Each of State Auto Financial and the Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of the Supreme Court of the State of Illinois sitting in Cook County (including its Appellate Division), and of any other appellate court in the State of Illinois, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each of State Auto Financial and the Company hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 8.8 Waiver of Jury Trial. EACH OF STATE AUTO FINANCIAL AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY - 23 -

IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 8.9 Further Assurances. State Auto Financial agrees that, from time to time upon the written request of the Agent, State Auto Financial will execute and deliver such further documents and do such other acts and things as the Company, the Agent or any Lender (through the Agent) may reasonably request in order fully to effect the purposes of this Agreement. 8.10 Payments by State Auto Financial. The Company hereby instructs State Auto Financial to make any payments required to be made by State Auto Financial hereunder or otherwise in respect of the Class A Preferred Stock (including, without limitation, any amounts payable upon any redemption of the Class A Preferred Stock, any dividends payable on the Class A Preferred Stock and the commitment fee payable under Section 2.3 hereof) directly to the Agent, for the benefit of the Lenders. Each such payment shall be made by

IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 8.9 Further Assurances. State Auto Financial agrees that, from time to time upon the written request of the Agent, State Auto Financial will execute and deliver such further documents and do such other acts and things as the Company, the Agent or any Lender (through the Agent) may reasonably request in order fully to effect the purposes of this Agreement. 8.10 Payments by State Auto Financial. The Company hereby instructs State Auto Financial to make any payments required to be made by State Auto Financial hereunder or otherwise in respect of the Class A Preferred Stock (including, without limitation, any amounts payable upon any redemption of the Class A Preferred Stock, any dividends payable on the Class A Preferred Stock and the commitment fee payable under Section 2.3 hereof) directly to the Agent, for the benefit of the Lenders. Each such payment shall be made by State Auto Financial in accordance with the provisions of the Credit Agreement. 8.11 Payments Received by the Company under Basic Documents. Any amounts paid to the Company under any of the Basic Documents (other than the proceeds of the Loans made under the Credit Agreement) shall be applied as directed by State Auto Financial. 8.12 Third-Party Beneficiaries. Each of State Auto Financial and the Company agrees that the Agent and each Lender shall be third-party beneficiaries of this Agreement and shall be entitled to enforce its respective rights hereunder as fully as if it were a party hereto. 8.13 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. [signature page follows] - 24 -

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. STATE AUTO FINANCIAL CORPORATION
By /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President -----------------------------------

Address for Notices: State Auto Financial Corporation 5 18 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: 614-464-4911 Telephone No.: 614-464-5052 SAF FUNDING CORPORATION

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. STATE AUTO FINANCIAL CORPORATION
By /s/ Steven J. Johnston --------------------------------------Title: Senior Vice President -----------------------------------

Address for Notices: State Auto Financial Corporation 5 18 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: 614-464-4911 Telephone No.: 614-464-5052 SAF FUNDING CORPORATION
By /s/ Richard L. Taiano --------------------------------------Title: Vice President -----------------------------------

Address for Notices: SAF Funding Corporation 2 Wall Street New York, New York 10005 Attention: Richard Taiano Telecopier No.: 212-346-9012 Telephone No.: 212-346-9006 S-1 [TO STANDBY PURCHASE AGREEMENT]

Standby Purchase Agreement Schedule I Part A Equity Rights As of November 1, 1999, State Auto Financial has granted 2,481,469 stock options to members of management under State Auto Financial's 1991 Stock Option Plan of which 2,355,811 are outstanding. As of November 1, 1999, State Auto Financial has granted 174,000 stock options to "outside" directors on the boards of directors of State Auto Financial and State Auto Mutual pursuant to the terms of the 1991 Directors' Stock Option Plan.

Standby Purchase Agreement Schedule I Part A Equity Rights As of November 1, 1999, State Auto Financial has granted 2,481,469 stock options to members of management under State Auto Financial's 1991 Stock Option Plan of which 2,355,811 are outstanding. As of November 1, 1999, State Auto Financial has granted 174,000 stock options to "outside" directors on the boards of directors of State Auto Financial and State Auto Mutual pursuant to the terms of the 1991 Directors' Stock Option Plan. State Auto Financial also has registered 2,400,000 shares to be issued pursuant to an Employee Stock Purchase Plan (the "ESPP") of which 1,473,805 shares have been purchased pursuant to the ESPP as of November 1, 1999. State Auto Financial intends to register 400,000 shares as part of an agents' stock option plan. Options for 16,538 option shares have been issued under this plan but are not exercisable at this time.

Standby Purchase Agreement Schedule I Part B In August 1999, Strategic Insurance Software, Inc. ("S.I.S.") completed the repurchase of all shares of S.I.S. from holders other than State Auto Financial except for 60,000 shares, which the holders thereof (two individuals) are contractually obligated to sell no later than January 4, 2000.

EXHIBIT A to the Standby Purchase Agreement [Form Class A Preferred Stock Certificate]

[Front of Class A Preferred Stock Certificate]
CERTIFICATE NUMBER ---------------------

SHARES ---------------------

STATE AUTO FINANCIAL CORPORATION Incorporated under the laws of the State of Ohio CUSIP __________ SEE REVERSE SIDE FOR CERTAIN TRANSFER RESTRICTIONS AND OTHER IMPORTANT INFORMATION This is to Certify that ______________________________ is the owner of

Standby Purchase Agreement Schedule I Part B In August 1999, Strategic Insurance Software, Inc. ("S.I.S.") completed the repurchase of all shares of S.I.S. from holders other than State Auto Financial except for 60,000 shares, which the holders thereof (two individuals) are contractually obligated to sell no later than January 4, 2000.

EXHIBIT A to the Standby Purchase Agreement [Form Class A Preferred Stock Certificate]

[Front of Class A Preferred Stock Certificate]
CERTIFICATE NUMBER ---------------------

SHARES ---------------------

STATE AUTO FINANCIAL CORPORATION Incorporated under the laws of the State of Ohio CUSIP __________ SEE REVERSE SIDE FOR CERTAIN TRANSFER RESTRICTIONS AND OTHER IMPORTANT INFORMATION This is to Certify that ______________________________ is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A PREFERRED STOCK NO PAR VALUE OF State Auto Financial Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. WITNESS the seal of the Corporation and the signatures of its duly authorized officers.
-------------------------Secretary -----------------------------Chief Executive Officer -----------------------------President

[Reverse of Class A Preferred Stock Certificate] STATE AUTO FINANCIAL CORPORATION

EXHIBIT A to the Standby Purchase Agreement [Form Class A Preferred Stock Certificate]

[Front of Class A Preferred Stock Certificate]
CERTIFICATE NUMBER ---------------------

SHARES ---------------------

STATE AUTO FINANCIAL CORPORATION Incorporated under the laws of the State of Ohio CUSIP __________ SEE REVERSE SIDE FOR CERTAIN TRANSFER RESTRICTIONS AND OTHER IMPORTANT INFORMATION This is to Certify that ______________________________ is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A PREFERRED STOCK NO PAR VALUE OF State Auto Financial Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. WITNESS the seal of the Corporation and the signatures of its duly authorized officers.
-------------------------Secretary -----------------------------Chief Executive Officer -----------------------------President

[Reverse of Class A Preferred Stock Certificate] STATE AUTO FINANCIAL CORPORATION The Corporation will furnish upon request and without charge to each shareholder the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock series within a class of stock of the Corporation, as well as the qualifications, limitations and restrictions relating to those preferences and/or rights. THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

[Front of Class A Preferred Stock Certificate]
CERTIFICATE NUMBER ---------------------

SHARES ---------------------

STATE AUTO FINANCIAL CORPORATION Incorporated under the laws of the State of Ohio CUSIP __________ SEE REVERSE SIDE FOR CERTAIN TRANSFER RESTRICTIONS AND OTHER IMPORTANT INFORMATION This is to Certify that ______________________________ is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A PREFERRED STOCK NO PAR VALUE OF State Auto Financial Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. WITNESS the seal of the Corporation and the signatures of its duly authorized officers.
-------------------------Secretary -----------------------------Chief Executive Officer -----------------------------President

[Reverse of Class A Preferred Stock Certificate] STATE AUTO FINANCIAL CORPORATION The Corporation will furnish upon request and without charge to each shareholder the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock series within a class of stock of the Corporation, as well as the qualifications, limitations and restrictions relating to those preferences and/or rights. THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. In addition, the shares evidenced by this certificate are subject to the restrictions on transfer set forth in the Terms and Conditions attached hereto.

[Reverse of Class A Preferred Stock Certificate] STATE AUTO FINANCIAL CORPORATION The Corporation will furnish upon request and without charge to each shareholder the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock series within a class of stock of the Corporation, as well as the qualifications, limitations and restrictions relating to those preferences and/or rights. THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. In addition, the shares evidenced by this certificate are subject to the restrictions on transfer set forth in the Terms and Conditions attached hereto.

TERMS AND CONDITIONS of CLASS A PREFERRED STOCK of STATE AUTO FINANCIAL CORPORATION

Pursuant to Section 1701.14 of the Ohio General Corporation Law

Section 1. General. The certificate to which these Terms and Conditions are attached represents one or more shares of Class A Preferred Stock, no par value (the "Class A Preferred Stock"), of State Auto Financial Corporation, an Ohio corporation (the "Corporation"). The stated value and liquidation preference per share of the Class A Preferred Stock shall be equal to $1,000,000 (the "Redemption Value"). Section 2. Definitions. Capitalized terms used herein shall have the meanings set forth in this Section 2: "Applicable Redemption Dates" means, with respect to any shares of Class A Preferred Stock, each of the 2nd, 4th, 6th, 8th, 10th, 12th, 14th, l6th, 18th, 20th, 22nd and 24th Quarterly Dates immediately following the date of issuance of such shares of Class A Preferred Stock. "Bank One" means Bank One, NA and any successor entity. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" shall mean any day on which (a) commercial banks are not authorized or required to close in New York City or Chicago and (b) (prior to the Rate Conversion Date) dealings in Dollar deposits are carried out in the London interbank market.

TERMS AND CONDITIONS of CLASS A PREFERRED STOCK of STATE AUTO FINANCIAL CORPORATION

Pursuant to Section 1701.14 of the Ohio General Corporation Law

Section 1. General. The certificate to which these Terms and Conditions are attached represents one or more shares of Class A Preferred Stock, no par value (the "Class A Preferred Stock"), of State Auto Financial Corporation, an Ohio corporation (the "Corporation"). The stated value and liquidation preference per share of the Class A Preferred Stock shall be equal to $1,000,000 (the "Redemption Value"). Section 2. Definitions. Capitalized terms used herein shall have the meanings set forth in this Section 2: "Applicable Redemption Dates" means, with respect to any shares of Class A Preferred Stock, each of the 2nd, 4th, 6th, 8th, 10th, 12th, 14th, l6th, 18th, 20th, 22nd and 24th Quarterly Dates immediately following the date of issuance of such shares of Class A Preferred Stock. "Bank One" means Bank One, NA and any successor entity. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" shall mean any day on which (a) commercial banks are not authorized or required to close in New York City or Chicago and (b) (prior to the Rate Conversion Date) dealings in Dollar deposits are carried out in the London interbank market. "By-Laws" means the Code of Regulations of the Corporation, as amended or restated from time to time. "Certificate of Incorporation" means the Articles of Incorporation of the Corporation as amended or restated from time to time. "Class A Preferred Stock" has the meaning assigned to such term in Section 1 hereof.

"Class B Preferred Stock" means all Class B Preferred Stock, no par value, issued by the Corporation. "Common Stock" means all common stock, of any series and of any par value or no par value issued by the Corporation. "Corporation" means State Auto Financial Corporation, an Ohio corporation. "Credit Agreement" means the Credit Agreement dated as of November 19, 1999, between SAF Funding, the

"Class B Preferred Stock" means all Class B Preferred Stock, no par value, issued by the Corporation. "Common Stock" means all common stock, of any series and of any par value or no par value issued by the Corporation. "Corporation" means State Auto Financial Corporation, an Ohio corporation. "Credit Agreement" means the Credit Agreement dated as of November 19, 1999, between SAF Funding, the Lenders party thereto and Bank One, as Agent, as modified and supplemented and in effect from time to time, a copy of which is maintained on file in the Principal Corporate Office. "Dividend Rate" means, for each Eurodollar Rate Period relating to any Class A Preferred Stock, the Eurodollar Rate for such Eurodollar Rate Period plus 1% per annum; provided, however, that if, as of the last day of any fiscal quarter of State Auto Mutual, the Statutory Surplus of State Auto Mutual, as reflected in the most recent annual or quarterly financial statements of State Auto Mutual delivered pursuant to Section 4.1(a) or (b) of the Put Agreement (the "Financials"), is less than $575,000,000, then the "Dividend Rate" shall be the Eurodollar Rate for such Eurodollar Rate Period plus 1.25% per annum until such time as the Lenders receive Financials from State Auto Mutual indicating that the Statutory Surplus of State Auto Mutual as reflected therein is $575,000,000 or more; provided, further, that from and after the Rate Conversion Date, the "Dividend Rate" means a rate per annum equal to 8%. Adjustments, if any, to the Dividend Rate shall be effective five Business Days after the Lenders have received the applicable Financials. "Dollars" and "$" mean lawful money of the United States of America. "Eurodollar Base Rate" means, with respect to any shares of Class A Preferred Stock for the relevant Eurodollar Rate Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Eurodollar Rate Period, provided that, (a) if Reuters Screen FRBD is not available to Bank One for any reason, the applicable Eurodollar Base Rate for the relevant Eurodollar Rate Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Rate Period, and having a maturity equal to such Eurodollar Rate Period, and (b) if no such British Bankers' Association Interest Settlement Rate is available to Bank One, the applicable Eurodollar Base Rate for the relevant Eurodollar Rate Period shall instead be the rate determined by Bank One to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Rate Period, in the approximate amount of the aggregate Redemption Value of such shares of Class A Preferred Stock and having a maturity equal to such Interest Period.

"Eurodollar Rate" means, for any shares of Class A Preferred Stock for any Eurodollar Rate Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Eurodollar Rate Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Period. "Eurodollar Rate Period" means, with respect to any shares of Class A Preferred Stock, each period commencing on the date such Class A Preferred Stock is issued or (in the case of a continuation of one Eurodollar Rate Period to the next) the last day of the next preceding Eurodollar Rate Period for such Class A Preferred Stock and ending on the numerically corresponding day in the third calendar month thereafter, except that each Eurodollar Rate Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) no Eurodollar Rate Period may commence before and end after any Applicable Redemption Date unless, after giving effect thereto, the aggregate Redemption Value of shares of Class A Preferred Stock having Eurodollar Rate Periods that end after such Applicable Redemption Date shall be equal to or less than the aggregate Redemption Value of shares of Class A Preferred Stock scheduled to be outstanding after giving effect to the redemption payments required to be made on such Applicable Redemption Date; and

"Eurodollar Rate" means, for any shares of Class A Preferred Stock for any Eurodollar Rate Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Eurodollar Rate Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Period. "Eurodollar Rate Period" means, with respect to any shares of Class A Preferred Stock, each period commencing on the date such Class A Preferred Stock is issued or (in the case of a continuation of one Eurodollar Rate Period to the next) the last day of the next preceding Eurodollar Rate Period for such Class A Preferred Stock and ending on the numerically corresponding day in the third calendar month thereafter, except that each Eurodollar Rate Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) no Eurodollar Rate Period may commence before and end after any Applicable Redemption Date unless, after giving effect thereto, the aggregate Redemption Value of shares of Class A Preferred Stock having Eurodollar Rate Periods that end after such Applicable Redemption Date shall be equal to or less than the aggregate Redemption Value of shares of Class A Preferred Stock scheduled to be outstanding after giving effect to the redemption payments required to be made on such Applicable Redemption Date; and (b) each Eurodollar Rate Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (c) notwithstanding clause (a) above, no Eurodollar Rate Period shall have a duration of less than three months. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by Bank One from three Federal funds brokers of recognized standing selected by Bank One in its sole discretion. "Holder" means SAF Funding or any subsequent holder of shares of Class A Preferred Stock. "Loans" means the Loans made to SAF Funding under the Credit Agreement. "Person" means any person or entity of any nature whatsoever, specifically including an individual, a firm, a company, a corporation, a partnership, a trust, a limited liability company or other entity. "Principal Corporate Office" means the principal corporate office of the Corporation located at 518 East Broad Street, Columbus, Ohio 43215. "Quarterly Dates" means the last Business Day of March, June, September and December in each year, the first of which shall be the last Business Day of December, 1999.

"Rate Conversion Date" shall mean the first date upon which the Holder is a person or entity other than any of SAF Funding, State Automobile Mutual Insurance Company, an Ohio mutual insurance company, any Lender party to the Credit Agreement or the Agent under the Credit Agreement. "Redemption Value" has the meaning assigned to such term in Section 1 hereof. "Reserve Requirement" has the meaning assigned to such term in the Credit Agreement. "SAF Funding" means SAF Funding Corporation, a Delaware corporation. "Secretary" means the Secretary of the Corporation. "Trigger Event" means the occurrence of (a) any "Event of Default" described in the Credit Agreement (other than those events described in Section 7.5 or 7.6 thereof) and the acceleration of the Loans thereunder; or (b) an

"Rate Conversion Date" shall mean the first date upon which the Holder is a person or entity other than any of SAF Funding, State Automobile Mutual Insurance Company, an Ohio mutual insurance company, any Lender party to the Credit Agreement or the Agent under the Credit Agreement. "Redemption Value" has the meaning assigned to such term in Section 1 hereof. "Reserve Requirement" has the meaning assigned to such term in the Credit Agreement. "SAF Funding" means SAF Funding Corporation, a Delaware corporation. "Secretary" means the Secretary of the Corporation. "Trigger Event" means the occurrence of (a) any "Event of Default" described in the Credit Agreement (other than those events described in Section 7.5 or 7.6 thereof) and the acceleration of the Loans thereunder; or (b) an "Event of Default" described in Section 7.5 or 7.6 of the Credit Agreement. Section 3. Dividends and Distributions. (a) The Holder, in preference to the holders of shares of Class B Preferred Stock and the holders of shares of Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available for the payment of dividends, dividends at the Dividend Rate on the Redemption Value of each share, payable in arrears in cash. Accrued dividends on the Class A Preferred Stock shall be payable on the last day of each Eurodollar Rate Period for the applicable Class A Preferred Stock and upon the redemption of any Class A Preferred Stock (but only on the aggregate Redemption Value of the Class A Preferred Stock so redeemed), provided that after the Rate Conversion Date, said dividends shall be payable quarterly on the last Business Day of March, June, September and December of each year. (b) Dividends payable with respect to any share of Class A Preferred Stock shall begin to accrue at the Dividend Rate and be cumulative from the date of issuance of such Class A Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Corporation legally available for the payment of such dividends). Dividends paid on the shares of Class A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of Holder entitled to receive payment of a dividend declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof. (c) The Holder shall not be entitled to receive any dividends or other distributions except as provided in these Terms and Conditions. (d) Whenever (i) any dividend payable pursuant to paragraph (a) of this Section 3 has not been paid when due, thereafter and until all accrued and unpaid dividends

payable pursuant to paragraph (a) of this Section 3 have been paid in full or (ii) the Corporation shall not have redeemed shares of Class A Preferred Stock on the date such redemption is required pursuant to Section 5 hereof, thereafter and until such redemption payment shall have been made the Corporation shall not (A) declare or pay dividends on any shares of Class B Preferred Stock or Common Stock or make any other distributions on any shares of Class B Preferred Stock or Common Stock, whether upon liquidation, redemption or otherwise; or (B) redeem or purchase or otherwise acquire for consideration any shares of Class B Preferred Stock or Common Stock, whether upon liquidation, redemption, or otherwise. Section 4. Voting Rights. Except as provided in the Certificate of Incorporation, and except for any voting rights provided by law, the Holder shall have no voting rights and its consent shall not be required for the taking of any corporate action.

payable pursuant to paragraph (a) of this Section 3 have been paid in full or (ii) the Corporation shall not have redeemed shares of Class A Preferred Stock on the date such redemption is required pursuant to Section 5 hereof, thereafter and until such redemption payment shall have been made the Corporation shall not (A) declare or pay dividends on any shares of Class B Preferred Stock or Common Stock or make any other distributions on any shares of Class B Preferred Stock or Common Stock, whether upon liquidation, redemption or otherwise; or (B) redeem or purchase or otherwise acquire for consideration any shares of Class B Preferred Stock or Common Stock, whether upon liquidation, redemption, or otherwise. Section 4. Voting Rights. Except as provided in the Certificate of Incorporation, and except for any voting rights provided by law, the Holder shall have no voting rights and its consent shall not be required for the taking of any corporate action. Section 5. Redemption. (a) On each of the first eleven Applicable Redemption Dates for any shares of Class A Preferred Stock the Corporation shall redeem, without prior notice to the Holder, out of funds legally available therefor, one-twelfth of the number of shares of Class A Preferred Stock issued on the date of issuance of such shares of Class A Preferred Stock, by paying to the Holder the aggregate Redemption Value for such Class A Preferred Stock so redeemed plus any accrued but unpaid dividends thereon. On the twelfth Applicable Redemption Date for such shares of Class A Preferred Stock the Corporation shall redeem, without prior notice to the Holder, out of funds legally available therefor, the balance of the number of shares of Class A Preferred Stock issued on such date of issuance, by paying to the Holder the aggregate Redemption Value for such Class A Preferred Stock so redeemed plus any accrued but unpaid dividends thereon. (b) Upon the occurrence and during the continuance of any Trigger Event, the Holder may require the Corporation to redeem out of funds of the Corporation legally available therefor, all or any portion of the Class A Preferred Stock for a redemption price equal to the aggregate Redemption Value for the Class A Preferred Stock so redeemed plus any accrued but unpaid dividends thereon. Upon written notice delivered by the Holder to the President of the Corporation, such Redemption Value plus such dividends shall be immediately due and payable. (c) The Corporation may, by delivering written notice that is received by the Holder not later than 10:00 a.m. New York time on the third Business Day prior to the date of the relevant redemption, redeem out of funds of the Corporation legally available therefor, all or any portion of the Class A Preferred Stock for a redemption price equal to the aggregate Redemption Value for the Class A Preferred Stock so redeemed plus any accrued but unpaid dividends thereon. (d) From and after the date of a redemption, unless default shall be made by the Corporation in providing for the payment of the aggregate Redemption Value for the Class A Preferred Stock so redeemed plus accrued but unpaid dividends thereon, all dividends on the Class A Preferred Stock so redeemed shall cease to accrue, and from and after the date of redemption so specified, unless default shall be made by the Corporation as aforesaid, all rights

of the Holder with respect to such shares, except the right to receive such Redemption Value and dividends, shall cease and terminate. Section 6. Reacquired Shares. Any shares of Class A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof and shall be restored to the status of authorized but unissued shares of Class A Preferred Stock of the Corporation and may thereafter be issued. Upon any redemption pursuant to Section 5 hereof of a fractional number of shares of Class A Preferred Stock, the Corporation shall reissue to the Holder Class A Preferred Stock having an aggregate Redemption Value equal to the $1,000,000 multiplied by the sum of 1 minus such fractional number.

of the Holder with respect to such shares, except the right to receive such Redemption Value and dividends, shall cease and terminate. Section 6. Reacquired Shares. Any shares of Class A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof and shall be restored to the status of authorized but unissued shares of Class A Preferred Stock of the Corporation and may thereafter be issued. Upon any redemption pursuant to Section 5 hereof of a fractional number of shares of Class A Preferred Stock, the Corporation shall reissue to the Holder Class A Preferred Stock having an aggregate Redemption Value equal to the $1,000,000 multiplied by the sum of 1 minus such fractional number. Section 7. Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holder shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders an amount equal to the Redemption Value per share plus all accrued and unpaid dividends thereon to the date of such payment, and no distribution shall be made to the holders of shares of Common Stock, the Class B Preferred Stock or any other capital stock of the Corporation unless prior thereto the Holder shall have received an amount equal to the Redemption Value per share plus all accrued and unpaid dividends thereon, to the date of such payment. Section 8. Rank. The Class A Preferred Stock shall rank as to dividends and distribution of assets prior to the Class B Preferred Stock, the Common Stock and all other shares of stock of the Corporation. Section 9. Payments. Except to the extent otherwise provided herein, all payments to be made by the Corporation in respect of the Class A Preferred Stock shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Holder at an account designated by the Holder, not later than 12:00 p.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). If the due date of any payment hereunder would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and dividends shall be payable on the aggregate Redemption Value of any shares of Class A Preferred Stock for the period of such extension. Section 10. Fiscal Year. The Corporation will not change the last day of its fiscal year from December 31 of each year.

EXHIBIT B to the Standby Purchase Agreement [Form of Purchase Notice] [Date] SAF Funding Corporation

Re: Standby Purchase Agreement dated as of November 19, 1999, among State Auto Financial Corporation

EXHIBIT B to the Standby Purchase Agreement [Form of Purchase Notice] [Date] SAF Funding Corporation

Re: Standby Purchase Agreement dated as of November 19, 1999, among State Auto Financial Corporation and SAF Funding Corporation (as modified and supplemented and in effect from time to time, the "Standby Purchase Agreement"). Ladies and Gentlemen: Reference is made to the Standby Purchase Agreement referred to above. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Standby Purchase Agreement. Pursuant to Section 2.2 of the Standby Purchase Agreement, State Auto Financial hereby notifies you that it intends to sell to you ________ shares of Class A Preferred Stock with an aggregate Redemption Value of $____________________(1) on _____________, 199__(2). STATE AUTO FINANCIAL CORPORATION By Title: (1) Insert an amount at least equal to $10,000,000 or a larger multiple of $1,000,000. (2) Insert a date falling on or after the fourth Business Day following the date of this Purchase Notice.

EXHIBIT C to the Standby Purchase Agreement [Form of Opinion of General Counsel of State Auto Financial) ------------------, ---SAF Funding Corporation (the "Company") To Bank One, NA, as Agent (the "Agent") under, and each of the Lenders party to, the Credit Agreement dated as of November 19, 1999, among the Company, the Agent and such Lenders Ladies and Gentlemen: I am the general counsel of State Auto Financial Corporation ("State Auto Financial") and have acted as counsel to State Auto Financial in connection with the Standby Purchase Agreement dated as of November 19, 1999 (the "Standby Purchase Agreement") between State Auto Financial and the Company, pursuant to which the Company has agreed to purchase, from time to time, a certain number of shares of State Auto Financial's Class

EXHIBIT C to the Standby Purchase Agreement [Form of Opinion of General Counsel of State Auto Financial) ------------------, ---SAF Funding Corporation (the "Company") To Bank One, NA, as Agent (the "Agent") under, and each of the Lenders party to, the Credit Agreement dated as of November 19, 1999, among the Company, the Agent and such Lenders Ladies and Gentlemen: I am the general counsel of State Auto Financial Corporation ("State Auto Financial") and have acted as counsel to State Auto Financial in connection with the Standby Purchase Agreement dated as of November 19, 1999 (the "Standby Purchase Agreement") between State Auto Financial and the Company, pursuant to which the Company has agreed to purchase, from time to time, a certain number of shares of State Auto Financial's Class A Redeemable Preferred Stock, no par value per share (the "Class A Preferred Stock"). This opinion letter is delivered to you pursuant to Section 3(b) of the Standby Purchase Agreement in connection with the proposed issuance and sale by State Auto Financial, and the purchase by the Company, on the date hereof, of ____ shares of the Class A Preferred Stock (the "Purchased Stock"). In rendering the opinions expressed below, I have examined the following agreements, instruments and other documents: (a) the Standby Purchase Agreement; (b) certificates evidencing the Purchased Stock (the "Purchased Stock Certificates"); and (c) such records of State Auto Financial and such other documents as I have deemed necessary as a basis for the opinions expressed below. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity with authentic original documents of all documents submitted to me as copies. When relevant facts were not independently established, I have relied upon certificates of governmental officials and appropriate representatives of State Auto Financial and upon representations made in or pursuant to the Standby Purchase Agreement.

Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as I have deemed necessary as a basis for the opinions expressed below, I am of the opinion that: 1. State Auto Financial is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. 2. State Auto Financial has all requisite corporate power and authority to issue and sell the Purchased Stock and execute and deliver the Purchased Stock Certificates. 3. The issuance and sale of the Purchased Stock to the Company and execution and delivery by State Auto Financial of the Purchased Stock Certificates have been duly authorized by all necessary corporate action on the part of State Auto Financial.

Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as I have deemed necessary as a basis for the opinions expressed below, I am of the opinion that: 1. State Auto Financial is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. 2. State Auto Financial has all requisite corporate power and authority to issue and sell the Purchased Stock and execute and deliver the Purchased Stock Certificates. 3. The issuance and sale of the Purchased Stock to the Company and execution and delivery by State Auto Financial of the Purchased Stock Certificates have been duly authorized by all necessary corporate action on the part of State Auto Financial. 4. The Purchased Stock Certificates have been duly executed and delivered by State Auto Financial. 5. No authorization, approval or consent of, and no filing or registration with, any governmental or regulatory authority or agency of the United States of America or the State of Ohio (other than any authorizations, approvals, consents, filings and registrations heretofore duly made or obtained and in full force and effect) is required on the part of State Auto Financial for issuance and sale of the Purchased Stock to the Company and the execution and delivery of the Purchased Stock Certificates. 6. The issuance and sale of the Purchased Stock to the Company and the execution and delivery of the Purchased Stock do not and will not (a) violate any provision of the Articles of Incorporation or Code of Regulations of State Auto Financial, (b) violate any applicable law, rule or regulation of the United States of America or the State of Ohio, (c) violate any order, writ, injunction or decree of any court or governmental authority or agency or any arbitral award applicable to State Auto Financial of which I have knowledge (after due inquiry) or (d) result in a breach of, constitute a default under, require any consent under, or result in the acceleration or required prepayment of any indebtedness pursuant to the terms of, any agreement or instrument of which I have knowledge (after due inquiry) to which such State Auto Financial or any of its Subsidiaries is a party or by which any of them is bound or to which any of them is subject, or result in the creation or imposition of any Lien upon any Property of State Auto Financial or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 7. The Purchased Shares are validly issued and outstanding, are fully paid and non-assessable and have, and entitle the holders thereof to, the relative rights and preferences set forth with respect to the Class A Preferred Stock in the Purchased Stock Certificates. 8. I have no knowledge (after due inquiry) of any legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or

agency, now pending or threatened against or affecting State Auto Financial or any of its Property that, if adversely determined, could have a Material Adverse Effect (excluding any Material Adverse Effect resulting from the catastrophic loss claims and/or loss adjustment expenses to which the issuance of the Purchased Stock relates). The foregoing opinions are limited to matters involving the Federal laws of the United States of America and the law of the State of Ohio, and I do not express any opinion as to the laws of any other jurisdiction. The opinions contained in this letter are rendered only as of the date hereof and I undertake no obligation to update this letter or the opinions contained herein after the date hereof. The opinions contained in this letter only constitute my professional judgment as to the consequences of and the applicability of certain laws to the documents and agreements referred to and the parties thereto and should not be considered to be a guarantee of any particular result. At the request of my clients, this opinion letter is provided to you by me in my capacity as counsel to State Auto

agency, now pending or threatened against or affecting State Auto Financial or any of its Property that, if adversely determined, could have a Material Adverse Effect (excluding any Material Adverse Effect resulting from the catastrophic loss claims and/or loss adjustment expenses to which the issuance of the Purchased Stock relates). The foregoing opinions are limited to matters involving the Federal laws of the United States of America and the law of the State of Ohio, and I do not express any opinion as to the laws of any other jurisdiction. The opinions contained in this letter are rendered only as of the date hereof and I undertake no obligation to update this letter or the opinions contained herein after the date hereof. The opinions contained in this letter only constitute my professional judgment as to the consequences of and the applicability of certain laws to the documents and agreements referred to and the parties thereto and should not be considered to be a guarantee of any particular result. At the request of my clients, this opinion letter is provided to you by me in my capacity as counsel to State Auto Financial, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Basic Documents without, in each instance, my prior written consent. Very truly yours,

Exhibit 10(W) Reinsurance Pooling Agreement Amended and Restated As of January 1, 2000 By and among State Automobile Mutual Insurance Company State Auto Property and Casualty Insurance Company Milbank Insurance Company Midwest Security Insurance Company Farmers Casualty Insurance Company State Auto Insurance Company

Page 1 REINSURANCE POOLING AGREEMENT AMENDED AND RESTATED AS OF JANUARY 1, 2000 This Reinsurance Pooling Agreement Amended and Restated effective as of 12:01 a.m., Eastern Standard Time, January 1, 2000 (the "2000 Pooling Agreement") is by and among State Automobile Mutual Insurance Company, 518 East Broad Street, Columbus, Ohio (hereinafter referred to as "State Auto Mutual"), State Auto Property and Casualty Insurance Company, 112 South Main Street, Greer, South Carolina (hereinafter referred to as "State Auto P&C"), Milbank Insurance Company, East Highway 12, Milbank, South Dakota (hereinafter referred to as "Milbank"), Midwest Security Insurance Company, 2700 Midwest Drive, Onalaska, Wisconsin (hereinafter referred to as "Midwest Security"), Farmers Casualty Insurance Company, 1300 Woodland Drive, West Des Moines, Iowa (hereinafter referred to as "Farmers Casualty") and State Auto Insurance Company, 518 East Broad Street, Columbus, Ohio ("State Auto IC"). (State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC are herein collectively referred to as the "Pooled Companies" and individually as a "Pooled Company"). BACKGROUND INFORMATION The Pooled Companies have determined that their business operations should be conducted by employees of State Auto P&C on behalf of each of the Pooled Companies and that State Auto Mutual should remain as the agent for each of the Pooled Companies with respect to collecting and disbursing funds as required by the Pooled

Exhibit 10(W) Reinsurance Pooling Agreement Amended and Restated As of January 1, 2000 By and among State Automobile Mutual Insurance Company State Auto Property and Casualty Insurance Company Milbank Insurance Company Midwest Security Insurance Company Farmers Casualty Insurance Company State Auto Insurance Company

Page 1 REINSURANCE POOLING AGREEMENT AMENDED AND RESTATED AS OF JANUARY 1, 2000 This Reinsurance Pooling Agreement Amended and Restated effective as of 12:01 a.m., Eastern Standard Time, January 1, 2000 (the "2000 Pooling Agreement") is by and among State Automobile Mutual Insurance Company, 518 East Broad Street, Columbus, Ohio (hereinafter referred to as "State Auto Mutual"), State Auto Property and Casualty Insurance Company, 112 South Main Street, Greer, South Carolina (hereinafter referred to as "State Auto P&C"), Milbank Insurance Company, East Highway 12, Milbank, South Dakota (hereinafter referred to as "Milbank"), Midwest Security Insurance Company, 2700 Midwest Drive, Onalaska, Wisconsin (hereinafter referred to as "Midwest Security"), Farmers Casualty Insurance Company, 1300 Woodland Drive, West Des Moines, Iowa (hereinafter referred to as "Farmers Casualty") and State Auto Insurance Company, 518 East Broad Street, Columbus, Ohio ("State Auto IC"). (State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC are herein collectively referred to as the "Pooled Companies" and individually as a "Pooled Company"). BACKGROUND INFORMATION The Pooled Companies have determined that their business operations should be conducted by employees of State Auto P&C on behalf of each of the Pooled Companies and that State Auto Mutual should remain as the agent for each of the Pooled Companies with respect to collecting and disbursing funds as required by the Pooled Companies' business operations. These arrangements have been effected through the Management Agreement dated January 1, 2000 (the "2000 Management Agreement"), as to Midwest Security through the Amended and Restated Management Agreement dated effective January 1, 2000 (the "2000 Midwest Management Agreement"), as to Farmers Casualty through the Amended and Restated Management Agreement dated effective January 1, 2000 (the "2000 Farmers Casualty Management Agreement") and by means of mutual reinsurance on a percentage basis as herein provided. State Auto Mutual and State Auto P&C originally entered into an intercompany Reinsurance Agreement effective as of 12:01 a.m., January 1, 1987 (the "Reinsurance Agreement"). The Reinsurance Agreement has since been amended by an Addendum effective January 1, 1987, adding insolvency and arbitration provisions; by Amendment Number 1 effective as of January 1, 1992 amending the pooling percentages from 20% State Auto P&C - 80% State Auto Mutual to 30% and 70% respectively; by Amendment Number 2 effective as of January 1, 1991 excluding post retirement health care benefits liability as a pooled expense and as of January 1, 1994 excluding post employment benefits liability as a pooled expense; and by Amendment Number 3 effective as of January 1, 1995 adding Milbank as a party and adjusting the pooling percentages as follows: State Auto P&C 35%, State Auto Mutual 55% and Milbank 10% and by an Amended and Restated Reinsurance Pooling Agreement dated July 1, 1996 (the "7/1/96 Reinsurance Agreement"), which excluded from the Reinsurance Agreement catastrophic loss claims and loss adjustment expenses incurred by State Auto Mutual,

Page 1 REINSURANCE POOLING AGREEMENT AMENDED AND RESTATED AS OF JANUARY 1, 2000 This Reinsurance Pooling Agreement Amended and Restated effective as of 12:01 a.m., Eastern Standard Time, January 1, 2000 (the "2000 Pooling Agreement") is by and among State Automobile Mutual Insurance Company, 518 East Broad Street, Columbus, Ohio (hereinafter referred to as "State Auto Mutual"), State Auto Property and Casualty Insurance Company, 112 South Main Street, Greer, South Carolina (hereinafter referred to as "State Auto P&C"), Milbank Insurance Company, East Highway 12, Milbank, South Dakota (hereinafter referred to as "Milbank"), Midwest Security Insurance Company, 2700 Midwest Drive, Onalaska, Wisconsin (hereinafter referred to as "Midwest Security"), Farmers Casualty Insurance Company, 1300 Woodland Drive, West Des Moines, Iowa (hereinafter referred to as "Farmers Casualty") and State Auto Insurance Company, 518 East Broad Street, Columbus, Ohio ("State Auto IC"). (State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC are herein collectively referred to as the "Pooled Companies" and individually as a "Pooled Company"). BACKGROUND INFORMATION The Pooled Companies have determined that their business operations should be conducted by employees of State Auto P&C on behalf of each of the Pooled Companies and that State Auto Mutual should remain as the agent for each of the Pooled Companies with respect to collecting and disbursing funds as required by the Pooled Companies' business operations. These arrangements have been effected through the Management Agreement dated January 1, 2000 (the "2000 Management Agreement"), as to Midwest Security through the Amended and Restated Management Agreement dated effective January 1, 2000 (the "2000 Midwest Management Agreement"), as to Farmers Casualty through the Amended and Restated Management Agreement dated effective January 1, 2000 (the "2000 Farmers Casualty Management Agreement") and by means of mutual reinsurance on a percentage basis as herein provided. State Auto Mutual and State Auto P&C originally entered into an intercompany Reinsurance Agreement effective as of 12:01 a.m., January 1, 1987 (the "Reinsurance Agreement"). The Reinsurance Agreement has since been amended by an Addendum effective January 1, 1987, adding insolvency and arbitration provisions; by Amendment Number 1 effective as of January 1, 1992 amending the pooling percentages from 20% State Auto P&C - 80% State Auto Mutual to 30% and 70% respectively; by Amendment Number 2 effective as of January 1, 1991 excluding post retirement health care benefits liability as a pooled expense and as of January 1, 1994 excluding post employment benefits liability as a pooled expense; and by Amendment Number 3 effective as of January 1, 1995 adding Milbank as a party and adjusting the pooling percentages as follows: State Auto P&C 35%, State Auto Mutual 55% and Milbank 10% and by an Amended and Restated Reinsurance Pooling Agreement dated July 1, 1996 (the "7/1/96 Reinsurance Agreement"), which excluded from the Reinsurance Agreement catastrophic loss claims and loss adjustment expenses incurred by State Auto Mutual,

Page 2 State Auto P&C and Milbank in the amount of $100,000,000 in excess of $120,000,000 of such losses and loss adjustment expense and the premiums for such exposure; and by an Amended and Restated Reinsurance Pooling Agreement effective January 1, 1998 (the "'98 Pooling Agreement") which added Midwest Security as a party and adjusted the Respective Percentages (as defined below) to State Auto P&C 37%, State Auto Mutual 52%, Milbank 10%, and Midwest Security 1%; and by a Reinsurance Pooling Agreement Amended and Restated as of January 1, 1999 (hereafter referred to as the "'99 Pooling Agreement") which added Farmers Casualty as a party and adjusted the Respective Percentages to State Auto P&C-37%, State Auto Mutual-49%, Milbank10%, Farmers Casualty-3%, Midwest Security-1%. In addition to the foregoing amendments to the pooling arrangement as set forth in the various agreements, each of these agreements and this 2000 Pooling Agreement is subject to the Guaranty Agreement dated as of May 16, 1991 between State Auto Mutual and State Auto P&C (the "Reserve Guaranty Agreement").

Page 2 State Auto P&C and Milbank in the amount of $100,000,000 in excess of $120,000,000 of such losses and loss adjustment expense and the premiums for such exposure; and by an Amended and Restated Reinsurance Pooling Agreement effective January 1, 1998 (the "'98 Pooling Agreement") which added Midwest Security as a party and adjusted the Respective Percentages (as defined below) to State Auto P&C 37%, State Auto Mutual 52%, Milbank 10%, and Midwest Security 1%; and by a Reinsurance Pooling Agreement Amended and Restated as of January 1, 1999 (hereafter referred to as the "'99 Pooling Agreement") which added Farmers Casualty as a party and adjusted the Respective Percentages to State Auto P&C-37%, State Auto Mutual-49%, Milbank10%, Farmers Casualty-3%, Midwest Security-1%. In addition to the foregoing amendments to the pooling arrangement as set forth in the various agreements, each of these agreements and this 2000 Pooling Agreement is subject to the Guaranty Agreement dated as of May 16, 1991 between State Auto Mutual and State Auto P&C (the "Reserve Guaranty Agreement"). The parties desire to amend and restate the '99 Pooling Agreement as the 2000 Pooling Agreement, to provide for the continuation of the pooling arrangement it effects, including the above-described previous amendments and the additional amendments incorporated herein, which include the following: to remove from the scope of the 2000 Pooling Agreement the premiums, losses, underwriting and administrative expenses attributable to State Auto Mutual's voluntary assumption of reinsurance from third parties which are unaffiliated with State Auto Mutual, which voluntary assumed reinsurance contracts/treaties initially commenced on or after January 1, 1999 (this January 1, 1999 and after voluntary third party assumption reinsurance is hereafter referred to as the "State Auto Mutual Reinsurance Book"); to add State Auto IC as a new party; to remove an exclusion for post retirement health care benefits liabilities; and post employment benefits liabilities and to adjust the Respective Percentages as set forth below. STATEMENT OF AGREEMENT In consideration of the mutual covenants set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, the parties hereto hereby agree as follows: 1. DEFINITIONS: As used in this Agreement: (a) "Net Liabilities" shall mean all direct liabilities plus reinsurance assumed minus reinsurance ceded, except as otherwise expressly excluded below, provided that the parties hereto expressly understand and agree that Net Liabilities excludes any and all liabilities arising out of the State Auto Mutual Reinsurance Book for such reinsurance assumed on and after January 1, 2000. (b) "Net Premiums" shall mean all direct premiums plus reinsurance assumed minus reinsurance ceded, except as otherwise expressly excluded below, provided that the parties hereto expressly understand and agree that Net Premiums excludes any and all premiums arising out of the State Auto

Page 3 Mutual Reinsurance Book for such reinsurance assumed on and after January 1, 2000.
c. "Respective As As As As As As Percentage" shall be: to State Auto IC to Farmers Casualty to Midwest Security to Milbank to State Auto P&C to State Auto Mutual

1% 3% 1% 10% 39% 46%

2. CESSION: (a) STATE AUTO P&C CESSION: State Auto Mutual hereby reinsures and assumes and State Auto P&C hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by State Auto P&C outstanding and in force as of and subsequent to

Page 3 Mutual Reinsurance Book for such reinsurance assumed on and after January 1, 2000.
c. "Respective As As As As As As Percentage" shall be: to State Auto IC to Farmers Casualty to Midwest Security to Milbank to State Auto P&C to State Auto Mutual

1% 3% 1% 10% 39% 46%

2. CESSION: (a) STATE AUTO P&C CESSION: State Auto Mutual hereby reinsures and assumes and State Auto P&C hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by State Auto P&C outstanding and in force as of and subsequent to 12:01 a.m. Eastern Standard Time, January 1, 2000. Such liabilities shall include State Auto P&C's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by State Auto P&C's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of State Auto P&C, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed State Auto Mutual shall receive the Net Premiums for said contracts and policies. (b) MILBANK CESSION: State Auto Mutual hereby reinsures and assumes and Milbank hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by Milbank outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include Milbank's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by Milbank's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of Milbank, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State

Page 4 Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. (c) MIDWEST SECURITY CESSION: State Auto Mutual hereby reinsures and assumes and Midwest Security hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by Midwest Security outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include Midwest Security's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by Midwest Security's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of Midwest Security, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. (d) FARMERS CASUALTY CESSION: State Auto Mutual hereby reinsures and assumes and Farmers Casualty hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by Farmers Casualty outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include Farmers Casualty's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding

Page 4 Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. (c) MIDWEST SECURITY CESSION: State Auto Mutual hereby reinsures and assumes and Midwest Security hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by Midwest Security outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include Midwest Security's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by Midwest Security's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of Midwest Security, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. (d) FARMERS CASUALTY CESSION: State Auto Mutual hereby reinsures and assumes and Farmers Casualty hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of insurance issued by Farmers Casualty outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include Farmers Casualty's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by Farmers Casualty's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of Farmers Casualty, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. (e) STATE AUTO IC CESSION: State Auto Mutual hereby reinsures and assumes and State Auto IC hereby cedes and transfers to State Auto Mutual all Net Liabilities incurred under or in connection with all contracts and policies of

Page 5 insurance issued by State Auto IC outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include State Auto IC's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by State Auto IC's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of State Auto IC, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. 3. ASSETS TRANSFER TO STATE AUTO MUTUAL: (a) STATE AUTO P&C: In consideration of the agreements herein contained, State Auto P&C hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto P&C assumed by State Auto Mutual under paragraph 2(a) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There have been included among the assets assigned and transferred to State Auto Mutual by State Auto P&C all of the right, title and interest of State Auto P&C in and to all assets relative to the underwriting operations of State Auto P&C, due or that became due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (b) MILBANK: In consideration of the agreements herein contained, Milbank hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the

Page 5 insurance issued by State Auto IC outstanding and in force as of and subsequent to 12:01 a.m. EST, January 1, 2000. Such liabilities shall include State Auto IC's reserves for unearned premiums, outstanding losses and loss expenses (including unreported losses) and all other outstanding underwriting and administrative expenses as evidenced by State Auto IC's books and records at the close of business on December 31, 1999, but shall not include intercompany balances, liabilities incurred in connection with the investment transactions of State Auto IC, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies. 3. ASSETS TRANSFER TO STATE AUTO MUTUAL: (a) STATE AUTO P&C: In consideration of the agreements herein contained, State Auto P&C hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto P&C assumed by State Auto Mutual under paragraph 2(a) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There have been included among the assets assigned and transferred to State Auto Mutual by State Auto P&C all of the right, title and interest of State Auto P&C in and to all assets relative to the underwriting operations of State Auto P&C, due or that became due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (b) MILBANK: In consideration of the agreements herein contained, Milbank hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of Milbank assumed by State Auto Mutual under paragraph 2(b) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto Mutual by Milbank all of the right, title and interest of Milbank in and to all assets relative to the underwriting operations of Milbank due or that

Page 6 may become due as evidenced by its books and records at the close of business on December 31, 1999 not including investments, accrued investment income, intercompany balances and bank deposits. (c) MIDWEST SECURITY: In consideration of the agreements herein contained, Midwest Security hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of Midwest Security assumed by State Auto Mutual under paragraph 2(c) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto Mutual by Midwest Security all of the right, title and interest of Midwest Security in and to all assets relative to the underwriting operations of Midwest Security due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (d) FARMERS CASUALTY: In consideration of the agreements herein contained, Farmers Casualty hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of Farmers Casualty assumed by State Auto Mutual under paragraph 2(d) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto Mutual by Farmers Casualty all of the right, title and interest of Farmers Casualty in and to all assets relative to the underwriting operations of Farmers Casualty due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (e) State Auto IC: In consideration of the agreements herein contained, State Auto IC hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the

Page 6 may become due as evidenced by its books and records at the close of business on December 31, 1999 not including investments, accrued investment income, intercompany balances and bank deposits. (c) MIDWEST SECURITY: In consideration of the agreements herein contained, Midwest Security hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of Midwest Security assumed by State Auto Mutual under paragraph 2(c) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto Mutual by Midwest Security all of the right, title and interest of Midwest Security in and to all assets relative to the underwriting operations of Midwest Security due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (d) FARMERS CASUALTY: In consideration of the agreements herein contained, Farmers Casualty hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of Farmers Casualty assumed by State Auto Mutual under paragraph 2(d) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto Mutual by Farmers Casualty all of the right, title and interest of Farmers Casualty in and to all assets relative to the underwriting operations of Farmers Casualty due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (e) State Auto IC: In consideration of the agreements herein contained, State Auto IC hereby agrees that there has been or will be assigned and transferred to State Auto Mutual an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto IC assumed by State Auto Mutual under paragraph 2(e) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included

Page 7 among the assets assigned and transferred to State Auto Mutual by State Auto IC all of the right, title and interest of State Auto IC in and to all assets relative to the underwriting operations of State Auto IC due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. 4. ASSUMPTION OF REINSURANCE: (a) STATE AUTO P&C: State Auto P&C hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to State Auto P&C its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by State Auto P&C and reinsured by State Auto Mutual as provided in paragraph 2(a)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (b) MILBANK: Milbank hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to Milbank its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by Milbank and reinsured by State Auto Mutual as provided in paragraph 2(b)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and

Page 7 among the assets assigned and transferred to State Auto Mutual by State Auto IC all of the right, title and interest of State Auto IC in and to all assets relative to the underwriting operations of State Auto IC due or that may become due as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. 4. ASSUMPTION OF REINSURANCE: (a) STATE AUTO P&C: State Auto P&C hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to State Auto P&C its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by State Auto P&C and reinsured by State Auto Mutual as provided in paragraph 2(a)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (b) MILBANK: Milbank hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to Milbank its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by Milbank and reinsured by State Auto Mutual as provided in paragraph 2(b)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (c) MIDWEST SECURITY: Midwest Security hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to Midwest Security its Respective Percentage of all

Page 8 Net Liabilities under all contracts and policies of insurance, (including those ceded by Midwest Security and reinsured by State Auto Mutual as provided in paragraph 2(c)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (d) FARMERS CASUALTY: Farmers Casualty hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to Farmers Casualty its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by Farmers Casualty and reinsured by State Auto Mutual as provided in paragraph 2(d)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book.

Page 8 Net Liabilities under all contracts and policies of insurance, (including those ceded by Midwest Security and reinsured by State Auto Mutual as provided in paragraph 2(c)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (d) FARMERS CASUALTY: Farmers Casualty hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to Farmers Casualty its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by Farmers Casualty and reinsured by State Auto Mutual as provided in paragraph 2(d)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. (e) STATE AUTO IC: State Auto IC hereby reinsures and assumes and State Auto Mutual hereby cedes and transfers to State Auto IC its Respective Percentage of all Net Liabilities under all contracts and policies of insurance, (including those ceded by State Auto IC and reinsured by State Auto Mutual as provided in paragraph 2(e)), on which State Auto Mutual is subject to liability and which are outstanding and in force on or after the effective date hereof. Such liabilities shall include reserves for unearned premiums, outstanding losses (including unreported losses) and loss expenses and all other underwriting and administrative expenses, but shall not include intercompany balances, liabilities for federal income taxes, liabilities incurred in connection with investment transactions, liabilities for dividends to stockholders declared and unpaid, other liabilities not

Page 9 incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. 5. ASSET TRANSFER BY STATE AUTO MUTUAL: (a) STATE AUTO P&C: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to State Auto P&C an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by State Auto P&C under paragraph 4(a) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto P&C by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (b) MILBANK: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to Milbank an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by Milbank under paragraph 4(b) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to Milbank by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting

Page 9 incurred in connection with underwriting operations and liabilities arising out of the State Auto Mutual Reinsurance Book. 5. ASSET TRANSFER BY STATE AUTO MUTUAL: (a) STATE AUTO P&C: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to State Auto P&C an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by State Auto P&C under paragraph 4(a) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto P&C by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (b) MILBANK: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to Milbank an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by Milbank under paragraph 4(b) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to Milbank by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (c) MIDWEST SECURITY: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to Midwest Security an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by Midwest Security under paragraph 4(c) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to Midwest

Page 10 Security by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (d) FARMERS CASUALTY: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to Farmers Casualty an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by Farmers Casualty under paragraph 4(d) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to Farmers Casualty by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (e) State Auto IC: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to State Auto IC an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by State Auto IC under paragraph 4(e) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto IC by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its

Page 10 Security by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (d) FARMERS CASUALTY: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to Farmers Casualty an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by Farmers Casualty under paragraph 4(d) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to Farmers Casualty by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. (e) State Auto IC: In consideration of the agreements herein contained, State Auto Mutual hereby agrees that there has been or will be assigned and transferred to State Auto IC an amount, in cash or other assets, equal to the aggregate of all liabilities of State Auto Mutual assumed by State Auto IC under paragraph 4(e) hereof, less a ceding commission equal to the sum of the acquisition expenses associated with the unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to State Auto IC by State Auto Mutual all of the right, title and interest of State Auto Mutual in and to all assets relative to the underwriting operations of State Auto Mutual, due or that may become due, as evidenced by its books and records at the close of business on December 31, 1999, not including investments, accrued investment income, intercompany balances and bank deposits. 6. PREMIUM COLLECTION AND PAYMENT OF LOSSES: As of the effective date of this Agreement and pursuant to the terms of the 2000 Management Agreement as amended from time to time, the 2000 Midwest Management Agreement, as amended from time to time, and the 2000 Farmers Casualty Management Agreement, as amended

Page 11 from time to time, State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC hereby authorize and empower State Auto Mutual to collect and receive all premiums and to take charge of, adjust and administer the payment of all losses with respect to any and all contracts and policies of insurance previously or thereafter issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC and to reinsure or terminate all such contracts and policies, and in all respects to act as though said contracts and policies were issued by State Auto Mutual. State Auto Mutual agrees to administer the payment of all losses and loss adjustment expenses in connection with such contracts and policies. None of the foregoing is intended to affect or impair the direct obligation of State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC to their insureds under policies issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC, respectively. 7. PREMIUM PAYABLE BY STATE AUTO MUTUAL: (a) STATE AUTO P&C: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay to State Auto P&C its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including the policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for catastrophe reinsurance ceded by State Auto Mutual, Farmers Casualty, Midwest Security, Milbank, and State Auto IC to State Auto P&C pursuant to a Property Catastrophe Overlying Excess of Loss Reinsurance Contract dated as of July 1, 1999 as amended January 1, 2000 in which State Auto P&C provides catastrophe coverage for the aforesaid companies for

Page 11 from time to time, State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC hereby authorize and empower State Auto Mutual to collect and receive all premiums and to take charge of, adjust and administer the payment of all losses with respect to any and all contracts and policies of insurance previously or thereafter issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC and to reinsure or terminate all such contracts and policies, and in all respects to act as though said contracts and policies were issued by State Auto Mutual. State Auto Mutual agrees to administer the payment of all losses and loss adjustment expenses in connection with such contracts and policies. None of the foregoing is intended to affect or impair the direct obligation of State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC to their insureds under policies issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC, respectively. 7. PREMIUM PAYABLE BY STATE AUTO MUTUAL: (a) STATE AUTO P&C: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay to State Auto P&C its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including the policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for catastrophe reinsurance ceded by State Auto Mutual, Farmers Casualty, Midwest Security, Milbank, and State Auto IC to State Auto P&C pursuant to a Property Catastrophe Overlying Excess of Loss Reinsurance Contract dated as of July 1, 1999 as amended January 1, 2000 in which State Auto P&C provides catastrophe coverage for the aforesaid companies for $135,000,000 of catastrophe losses and loss expenses in excess of $120,000,000 of such losses and loss expenses incurred by the Pooled Companies) (the "State Auto P&C Catastrophe Assumption Agreement") shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. (b) MILBANK: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay Milbank its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date

Page 12 of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. (c) MIDWEST SECURITY: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay Midwest Security its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. (d) FARMERS CASUALTY: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay Farmers Casualty its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses,

Page 12 of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. (c) MIDWEST SECURITY: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay Midwest Security its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. (d) FARMERS CASUALTY: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay Farmers Casualty its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter.

Page 13 (e) STATE AUTO IC: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay State Auto IC its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. 8. OFFSET: It is understood and agreed that, insofar as is practicable and consistent with the purposes and intentions of this Agreement, the obligations of each company under this Agreement to transfer assets to the other company may, in whole or in part, be offset against the reciprocal reinsurance obligations of each company to the other company so that each company shall deliver hereunder only a net amount of assets required under such offset. 9. GENERAL STATEMENT OF INTENT: It is the purpose and intent of this Agreement that: (a) State Auto Mutual shall be liable as a reinsurer to State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC on the policies and contracts of insurance of State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC respectively, issued and in force at 12:01 a.m., EST, January 1, 2000, or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC to the extent of State Auto Mutual's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement.

Page 13 (e) STATE AUTO IC: Commencing with the effective date of this Agreement, State Auto Mutual hereby agrees to pay State Auto IC its Respective Percentage of the Net Premiums written by the parties hereto. Similarly, commencing with the effective date of this Agreement, all losses, loss expenses, underwriting expenses, and administrative expenses chargeable to underwriting of the parties hereto (except for losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book), including policyholder dividends, less all losses and expenses recovered and recoverable under reinsurance ceded to reinsurers other than the parties hereto, (except for the State Auto P&C Catastrophe Assumption Agreement) shall be prorated among the parties on the basis of the Respective Percentage of each. Accounts shall be rendered at quarterly intervals and shall be settled within sixty (60) days thereafter. 8. OFFSET: It is understood and agreed that, insofar as is practicable and consistent with the purposes and intentions of this Agreement, the obligations of each company under this Agreement to transfer assets to the other company may, in whole or in part, be offset against the reciprocal reinsurance obligations of each company to the other company so that each company shall deliver hereunder only a net amount of assets required under such offset. 9. GENERAL STATEMENT OF INTENT: It is the purpose and intent of this Agreement that: (a) State Auto Mutual shall be liable as a reinsurer to State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC on the policies and contracts of insurance of State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC respectively, issued and in force at 12:01 a.m., EST, January 1, 2000, or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC to the extent of State Auto Mutual's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (b) State Auto P&C shall be liable as a reinsurer to State Auto Mutual, Milbank, Midwest Security, Farmers Casualty and State Auto IC on the policies and contracts of insurance of State Auto Mutual, Milbank, Midwest Security, Farmers Casualty and State Auto IC, respectively, issued and in force

Page 14 at 12:01 a.m., EST, January 1, 2000, or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto Mutual, Milbank, Midwest Security, Farmers Casualty and State Auto IC to the extent of State Auto P&C's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (c) Milbank shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC on the policies and contracts of State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC, respectively, issued and in force at 12:01 a.m., EST, on January 1, 2000 or on which there were, at that time, unsettled claims or losses and on policies thereafter issued by State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC to the extent of Milbank's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (d) Midwest Security shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC on the policies and contracts of State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC, respectively, issued and in force at 12:01 a.m., EST, on January 1, 2000 or on which there were, at that time, unsettled claims or losses and on policies thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC to the extent of Midwest Security's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement.

Page 14 at 12:01 a.m., EST, January 1, 2000, or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto Mutual, Milbank, Midwest Security, Farmers Casualty and State Auto IC to the extent of State Auto P&C's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (c) Milbank shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC on the policies and contracts of State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC, respectively, issued and in force at 12:01 a.m., EST, on January 1, 2000 or on which there were, at that time, unsettled claims or losses and on policies thereafter issued by State Auto Mutual, State Auto P&C, Midwest Security, Farmers Casualty and State Auto IC to the extent of Milbank's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (d) Midwest Security shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC on the policies and contracts of State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC, respectively, issued and in force at 12:01 a.m., EST, on January 1, 2000 or on which there were, at that time, unsettled claims or losses and on policies thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Farmers Casualty and State Auto IC to the extent of Midwest Security's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (e) Farmers Casualty shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Milbank, Midwest Security and State Auto IC on the policies and contracts of State Auto Mutual, State Auto P&C, Milbank, Midwest Security and State Auto IC, respectively, issued and in force at 12:01 a.m., EST, January 1, 2000 or on which there were, at that time, unsettled claims or losses, and on policies and

Page 15 contracts thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Midwest Security and State Auto IC to the extent of Farmers Casualty's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (f) State Auto IC shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty on the policies and contracts of State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty, respectively, issued and in force at 12:01 a.m., EST, January 1, 2000 or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty to the extent of State Auto IC's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (g) The parties hereto shall, on and after 12:01 a.m., EST, January 1, 2000, participate on the basis of 46% for State Auto Mutual, 39% for State Auto P&C, 10% for Milbank, 1% for Midwest Security, 3% for Farmers Casualty, and 1% for State Auto IC in all of the underwriting operations of each of the six parties hereto. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. 10. LOSSES EXCLUDED: Notwithstanding any of the foregoing, the parties hereto understand and agree that this 2000 Pooling Agreement shall not apply to catastrophe losses and loss expenses for residential and commercial property to the extent such losses and loss expenses are covered by the State Auto P&C Catastrophe Assumption Agreement. Once the aforesaid $135,000,000 of coverage is exhausted by loss

Page 15 contracts thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Midwest Security and State Auto IC to the extent of Farmers Casualty's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (f) State Auto IC shall be liable as a reinsurer to State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty on the policies and contracts of State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty, respectively, issued and in force at 12:01 a.m., EST, January 1, 2000 or on which there were, at that time, unsettled claims or losses, and on policies and contracts thereafter issued by State Auto Mutual, State Auto P&C, Milbank, Midwest Security and Farmers Casualty to the extent of State Auto IC's Respective Percentage. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. (g) The parties hereto shall, on and after 12:01 a.m., EST, January 1, 2000, participate on the basis of 46% for State Auto Mutual, 39% for State Auto P&C, 10% for Milbank, 1% for Midwest Security, 3% for Farmers Casualty, and 1% for State Auto IC in all of the underwriting operations of each of the six parties hereto. Premiums, losses, loss expenses, underwriting expenses and administrative expenses chargeable to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are excluded from the scope of the 2000 Pooling Agreement. 10. LOSSES EXCLUDED: Notwithstanding any of the foregoing, the parties hereto understand and agree that this 2000 Pooling Agreement shall not apply to catastrophe losses and loss expenses for residential and commercial property to the extent such losses and loss expenses are covered by the State Auto P&C Catastrophe Assumption Agreement. Once the aforesaid $135,000,000 of coverage is exhausted by loss expenses and loss payments on behalf of any party hereto, under either the State Auto P&C Catastrophe Assumption Agreement or directly, all parties understand and agree that catastrophe losses and loss expenses in excess of $255,000,000 shall once again be ceded and assumed under the terms of the 2000 Pooling Agreement. All premiums attributable to the State Auto P&C Catastrophe Assumption Agreement are to be paid to State Auto P&C outside of the 2000 Pooling Agreement. All premiums, losses, loss expenses, underwriting expenses and administrative expenses attributable

Page 16 to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are outside the 2000 Pooling Agreement. In addition, this 2000 Pooling Agreement is subject to the Reserve Guaranty Agreement. 11. LIABILITIES EXCLUDED: In addition to the liabilities set forth in paragraphs 2(a), 2(b), 2(c), 2(d), 2(e) and 10 above, this Agreement shall not apply to the investment operation or liabilities for federal income tax or other liabilities excluded by this Agreement. 12. "FOLLOW THE FORTUNES": The reinsurance provided by the terms of this Agreement shall be subject to the same terms and conditions under which the original insurance was concluded, or which may be or may have been agreed to during the term of the original insurance contract. 13. METHODS AND PROCEDURES: The president of State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC, or any officer of any of these companies designated by said president, shall determine the methods and procedures, including accounting transactions, by which the terms of this Agreement shall be performed by and on behalf of the parties hereto. 14. AMENDMENTS: This Agreement may be modified from time to time, so as to adapt its provisions to the varying conditions of the business of the Pooled Companies, by a mutual agreement in writing of the parties hereto, subject to ratification by the Board of Directors of each party and with the approval of the insurance regulatory officials from the State of Ohio, the State of South Carolina, the State of South Dakota, the State of Wisconsin, and the State of Iowa as required by law.

Page 16 to the State Auto Mutual Reinsurance Book from and after 12:01 a.m. EST January 1, 2000 are outside the 2000 Pooling Agreement. In addition, this 2000 Pooling Agreement is subject to the Reserve Guaranty Agreement. 11. LIABILITIES EXCLUDED: In addition to the liabilities set forth in paragraphs 2(a), 2(b), 2(c), 2(d), 2(e) and 10 above, this Agreement shall not apply to the investment operation or liabilities for federal income tax or other liabilities excluded by this Agreement. 12. "FOLLOW THE FORTUNES": The reinsurance provided by the terms of this Agreement shall be subject to the same terms and conditions under which the original insurance was concluded, or which may be or may have been agreed to during the term of the original insurance contract. 13. METHODS AND PROCEDURES: The president of State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC, or any officer of any of these companies designated by said president, shall determine the methods and procedures, including accounting transactions, by which the terms of this Agreement shall be performed by and on behalf of the parties hereto. 14. AMENDMENTS: This Agreement may be modified from time to time, so as to adapt its provisions to the varying conditions of the business of the Pooled Companies, by a mutual agreement in writing of the parties hereto, subject to ratification by the Board of Directors of each party and with the approval of the insurance regulatory officials from the State of Ohio, the State of South Carolina, the State of South Dakota, the State of Wisconsin, and the State of Iowa as required by law. 15. TERM: This Agreement shall remain in full force and effect until canceled by agreement of the parties or by the giving of ninety (90) days notice by one of the parties to the other parties and to the respective domiciliary insurance department of each of the parties. 16. INTERPRETATION: Wherever required to give the correct meaning throughout this Agreement, the singular shall be interpreted in the plural. Clerical errors or errors of involuntary or inadvertent omission or commission shall not be interpreted as a discharge of liability on behalf of any of the parties to this contract. Such errors shall be rectified at the time of discovery or as soon as practicable thereafter. Caption headings are for convenience only and are not intended to affect the construction of the terms hereof. 17. INSOLVENCY: The reinsurance made under this Agreement (which the parties understand and agree excludes the State Auto Mutual Reinsurance Book for such business assumed on and after January 1, 2000) shall be payable by the assuming reinsurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution because of the insolvency of the ceding insurer. In the event of insolvency

Page 17 of the ceding insurer, the liquidator or receiver or statutory successor of such insurer shall give written notice to the assuming reinsurer of the pendency of a claim against the insolvent ceding insurer on the policy or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding; that during the pendency of such claim the assuming reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it may deem available to the ceding insurer or its liquidator or receiver or statutory successors; that the expense thus incurred by the assuming reinsurer shall be chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming reinsurer. The reinsurance made effective under this Agreement shall be payable by the assuming reinsurer to the ceding insurer or to the liquidator, receiver or statutory successor of the ceding insurer. 18. ARBITRATION: In the event of any dispute hereafter arising with respect to this Agreement, State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC hereby agree that such dispute shall, upon the request of the one of the parties, be submitted to arbitration. One arbitrator shall be chosen by each party and those arbitrators shall then select an umpire who shall hear and decide the issues to be

Page 17 of the ceding insurer, the liquidator or receiver or statutory successor of such insurer shall give written notice to the assuming reinsurer of the pendency of a claim against the insolvent ceding insurer on the policy or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding; that during the pendency of such claim the assuming reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it may deem available to the ceding insurer or its liquidator or receiver or statutory successors; that the expense thus incurred by the assuming reinsurer shall be chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming reinsurer. The reinsurance made effective under this Agreement shall be payable by the assuming reinsurer to the ceding insurer or to the liquidator, receiver or statutory successor of the ceding insurer. 18. ARBITRATION: In the event of any dispute hereafter arising with respect to this Agreement, State Auto Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC hereby agree that such dispute shall, upon the request of the one of the parties, be submitted to arbitration. One arbitrator shall be chosen by each party and those arbitrators shall then select an umpire who shall hear and decide the issues to be arbitrated. If one party fails to name an arbitrator within thirty (30) days after receipt of a written request to do so, the party initiating the arbitration may choose the arbitrators. The decision of the umpire shall be final and binding on the parties. Each party shall bear the expense of its arbitrator and the cost of the umpire shall be shared equally. The arbitration shall take place at Columbus, Ohio or such other location upon which the parties may mutually agree. 19. COUNTERPARTS: The 2000 Pooling Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

Page 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and the year first above written. Attest State Automobile Mutual Insurance Company
/s/ John R. Lowther -------------------------Secretary By /s/ Robert H. Moone --------------------------------President

State Auto Property and Casualty Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Milbank Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Midwest Security Insurance Company

/s/ John R. Lowther --------------------------

By /s/ Robert H. Moone ---------------------------------

Page 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and the year first above written. Attest State Automobile Mutual Insurance Company
/s/ John R. Lowther -------------------------Secretary By /s/ Robert H. Moone --------------------------------President

State Auto Property and Casualty Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Milbank Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Midwest Security Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Farmers Casualty Insurance Company

/s/ John R. Lowther -------------------------Assistant Secretary

By /s/ Marion D. Houk --------------------------------President State Auto Insurance Company

/s/ John R. Lowther -------------------------Secretary

By /s/ Robert H. Moone --------------------------------President

Exhibit 10(X) Management and Operations Agreement As of January 1, 2000 Among State Automobile Mutual Insurance Company State Auto Financial Corporation State Auto Property and Casualty Insurance Company State Auto National Insurance Company Milbank

Exhibit 10(X) Management and Operations Agreement As of January 1, 2000 Among State Automobile Mutual Insurance Company State Auto Financial Corporation State Auto Property and Casualty Insurance Company State Auto National Insurance Company Milbank Insurance Company State Auto Insurance Company Stateco Financial Services, Inc. Strategic Insurance Software, Inc. 518 Property Management and Leasing, LLC

MANAGEMENT AND OPERATIONS AGREEMENT This Management Agreement (the "Agreement") is made as of January 1, 2000 among State Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"), State Auto Financial Corporation, an Ohio corporation ("State Auto Financial"), State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"), State Auto National Insurance Company, an Ohio corporation ("National"), Milbank Insurance Company, a South Dakota corporation ("Milbank"), State Auto Insurance Company, an Ohio corporation ("State Auto IC"), Stateco Financial Services, Inc., an Ohio corporation ("Stateco"), Strategic Insurance Software, Inc., an Ohio corporation ("S.I.S."), and 518 Property Management and Leasing, LLC, an Ohio limited liability company ("518 PML"). BACKGROUND INFORMATION A. Mutual is a property and casualty insurance company. Its wholly owned subsidiary is Midwest Security Insurance Company ("Midwest Security"), a Wisconsin domiciled property and casualty insurance company which is a party to a separate Amended and Restated Management Agreement dated January 1, 2000 with State Auto P&C and Mutual (the "2000 Midwest Management Agreement"). Mutual also owns approximately 70% of the outstanding common shares, without par value, of State Auto Financial. B. State Auto P&C, Milbank, Stateco, National, and Farmers Casualty Insurance Company ("Farmers Casualty") are wholly owned subsidiaries of State Auto Financial. State Auto Financial also indirectly owns 100% of Mid-Plains Insurance Company ("Mid-Plains"), which is a wholly owned subsidiary of Farmers Casualty. Both Farmers Casualty and Mid-Plains are party to a separate Amended and Restated Management Agreement dated January 1, 2000 with State Auto P&C and Mutual (the "2000 Farmers Casualty Management Agreement"). State Auto Financial also owns all the issued and outstanding shares of State Auto IC, an Ohio corporation. State Auto Financial also indirectly owns 518 PML whose sole members are Stateco and State Auto P&C. State Auto Financial also controls S.I.S. through its ownership of S.I.S.' common shares. State Auto P&C, National, State Auto IC, Milbank, Farmers Casualty, and Mid-Plains are property and casualty insurance companies. Stateco provides investment management services to Mutual, State Auto P&C, National, Milbank, Midwest Security, Farmers Casualty and Mid-Plains and State Auto IC. 518 PML is engaged in the business of managing and leasing real and personal property whose present customers are affiliated companies. S.I.S. is engaged in the business of writing and servicing agency management software products, among other software products. It derives revenue from sales to insurer affiliates, as well as third-party insurers and agents. For purposes of this Agreement, State Auto Financial, State Auto P&C, Milbank, National, State Auto IC, Stateco, S.I.S. and 518 PML are hereinafter collectively referred to as the "State Auto Financial Group." The State Auto Financial Group and Mutual are hereinafter collectively referred to as the "State Auto Companies" and individually as a "State Auto Company." C. The insurance products offered by Mutual, State Auto P&C, National, Milbank, Midwest Security, Farmers Casualty, Mid-Plains and commencing on and after January 1, 2000, State Auto IC, are marketed together through independent agents and it is the intention of the parties to this Agreement to continue such arrangement. Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC participate in a

MANAGEMENT AND OPERATIONS AGREEMENT This Management Agreement (the "Agreement") is made as of January 1, 2000 among State Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"), State Auto Financial Corporation, an Ohio corporation ("State Auto Financial"), State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"), State Auto National Insurance Company, an Ohio corporation ("National"), Milbank Insurance Company, a South Dakota corporation ("Milbank"), State Auto Insurance Company, an Ohio corporation ("State Auto IC"), Stateco Financial Services, Inc., an Ohio corporation ("Stateco"), Strategic Insurance Software, Inc., an Ohio corporation ("S.I.S."), and 518 Property Management and Leasing, LLC, an Ohio limited liability company ("518 PML"). BACKGROUND INFORMATION A. Mutual is a property and casualty insurance company. Its wholly owned subsidiary is Midwest Security Insurance Company ("Midwest Security"), a Wisconsin domiciled property and casualty insurance company which is a party to a separate Amended and Restated Management Agreement dated January 1, 2000 with State Auto P&C and Mutual (the "2000 Midwest Management Agreement"). Mutual also owns approximately 70% of the outstanding common shares, without par value, of State Auto Financial. B. State Auto P&C, Milbank, Stateco, National, and Farmers Casualty Insurance Company ("Farmers Casualty") are wholly owned subsidiaries of State Auto Financial. State Auto Financial also indirectly owns 100% of Mid-Plains Insurance Company ("Mid-Plains"), which is a wholly owned subsidiary of Farmers Casualty. Both Farmers Casualty and Mid-Plains are party to a separate Amended and Restated Management Agreement dated January 1, 2000 with State Auto P&C and Mutual (the "2000 Farmers Casualty Management Agreement"). State Auto Financial also owns all the issued and outstanding shares of State Auto IC, an Ohio corporation. State Auto Financial also indirectly owns 518 PML whose sole members are Stateco and State Auto P&C. State Auto Financial also controls S.I.S. through its ownership of S.I.S.' common shares. State Auto P&C, National, State Auto IC, Milbank, Farmers Casualty, and Mid-Plains are property and casualty insurance companies. Stateco provides investment management services to Mutual, State Auto P&C, National, Milbank, Midwest Security, Farmers Casualty and Mid-Plains and State Auto IC. 518 PML is engaged in the business of managing and leasing real and personal property whose present customers are affiliated companies. S.I.S. is engaged in the business of writing and servicing agency management software products, among other software products. It derives revenue from sales to insurer affiliates, as well as third-party insurers and agents. For purposes of this Agreement, State Auto Financial, State Auto P&C, Milbank, National, State Auto IC, Stateco, S.I.S. and 518 PML are hereinafter collectively referred to as the "State Auto Financial Group." The State Auto Financial Group and Mutual are hereinafter collectively referred to as the "State Auto Companies" and individually as a "State Auto Company." C. The insurance products offered by Mutual, State Auto P&C, National, Milbank, Midwest Security, Farmers Casualty, Mid-Plains and commencing on and after January 1, 2000, State Auto IC, are marketed together through independent agents and it is the intention of the parties to this Agreement to continue such arrangement. Mutual, State Auto P&C, Milbank, Midwest Security, Farmers Casualty and State Auto IC participate in a pooling arrangement pursuant to which each of State Auto P&C, Milbank, Midwest Security, Farmers Casualty, and State Auto IC cedes all of its insurance business to Mutual and in turn assumes a percentage of the combined

2 business of all those companies. Under the current pooling arrangement, effected through the Reinsurance Pooling Agreement Amended and Restated as of January 1, 2000 (the "2000 Pooling Agreement") the pool participants and their respective percentages are: Mutual - 46%, State Auto P&C - 39%, Milbank - 10%, Midwest Security - 1%, Farmers Casualty - 3%, and State Auto IC- 1%. D. Since April 1, 1994, there has been in place an Amended and Restated Management Agreement dated April 1, 1994 (the "94 Management Agreement") to which State Auto P&C, State Auto Financial, Mutual, Milbank and National are parties. State Auto P&C has provided executive management services to Mutual, Milbank and National under the '94 Management Agreement. It has provided the same services to Midwest Security since January 1, 1997 through a Management Agreement with Midwest Security and to Farmers Casualty and Mid-

2 business of all those companies. Under the current pooling arrangement, effected through the Reinsurance Pooling Agreement Amended and Restated as of January 1, 2000 (the "2000 Pooling Agreement") the pool participants and their respective percentages are: Mutual - 46%, State Auto P&C - 39%, Milbank - 10%, Midwest Security - 1%, Farmers Casualty - 3%, and State Auto IC- 1%. D. Since April 1, 1994, there has been in place an Amended and Restated Management Agreement dated April 1, 1994 (the "94 Management Agreement") to which State Auto P&C, State Auto Financial, Mutual, Milbank and National are parties. State Auto P&C has provided executive management services to Mutual, Milbank and National under the '94 Management Agreement. It has provided the same services to Midwest Security since January 1, 1997 through a Management Agreement with Midwest Security and to Farmers Casualty and MidPlains since January 1, 1999 through a Management Agreement with Farmers Casualty and Mid-Plains. These services have been provided by individuals who are employees of State Auto P&C. Under these same Agreements, Mutual acted as common paymaster and provided all other employees and certain facilities these companies required to operate their businesses. E. Each of S.I.S., Stateco, and 518 PML (along with State Auto Financial, collectively the "Service Companies" and individually a "Service Company") was not a party to the `94 Management Agreement and each paid for the expenses attributable to its operations through payment of direct expenses and reasonable allocations for expenses that were other than direct expenses. F. As of January 1, 2000, all the individuals providing services to any of the State Auto Companies who heretofore were not employees of State Auto P&C have become employees of State Auto P&C. G. State Auto P&C and Mutual have entered into the 2000 Midwest Management Agreement and the 2000 Farmers Casualty Management Agreement as of January 1, 2000 which effect for Midwest Security, Farmers Casualty and Mid-Plains the operational changes described below. H. Mutual, State Auto Financial, National, Milbank, State Auto IC, and the Service Companies will require substantially all of the services of the employees of State Auto P&C including without limitation, executive, managerial, supervisory, administrative, technical, professional, and clerical services necessary or appropriate in the operation of their respective businesses (collectively referred to hereafter as "Management and Operations Services") and each of Mutual, State Auto Financial, National, Milbank, State Auto IC and the Service Companies will rely on Mutual to provide certain facilities needed to conduct their respective businesses. I. With this Agreement, the parties hereto desire to terminate the '94 Management Agreement, replace it with this Agreement, and formalize the operating relationship with those State Auto Companies that were not previously a party to any of the foregoing management agreements. STATEMENT OF AGREEMENT The parties hereby acknowledge the accuracy of the above Background Information and in consideration of the mutual covenants set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, hereby agree as follows:

3 1. TERMINATION: Upon this Agreement becoming effective, the '94 Management Agreement, is terminated and the relationship among the parties hereto shall be governed by this Agreement. 2. ENGAGEMENT AND TERM: On the terms and subject to the conditions described in this Agreement, Mutual, State Auto Financial, Milbank, National, State Auto IC, S.I.S., Stateco, and 518 PML (collectively, the "Managed Companies", individually, a "Managed Company") hereby engage State Auto P&C, and State Auto P&C hereby accepts such engagement, to provide Management and Operations Services to the Managed Companies as any of such Managed Companies require to operate its business. Any of State Auto P&C's employees may also serve as directors or officers of any of the State Auto Companies,

3 1. TERMINATION: Upon this Agreement becoming effective, the '94 Management Agreement, is terminated and the relationship among the parties hereto shall be governed by this Agreement. 2. ENGAGEMENT AND TERM: On the terms and subject to the conditions described in this Agreement, Mutual, State Auto Financial, Milbank, National, State Auto IC, S.I.S., Stateco, and 518 PML (collectively, the "Managed Companies", individually, a "Managed Company") hereby engage State Auto P&C, and State Auto P&C hereby accepts such engagement, to provide Management and Operations Services to the Managed Companies as any of such Managed Companies require to operate its business. Any of State Auto P&C's employees may also serve as directors or officers of any of the State Auto Companies, notwithstanding that such persons may also be officers or directors of State Auto P&C. State Auto P&C shall also be entitled to continue using its employees to conduct all of its business operations, notwithstanding that such persons will be performing services for other State Auto Companies as well. To the extent reasonably possible, the parties shall jointly utilize State Auto P&C's employees in a cooperative manner and consistent with the business interests and needs of the State Auto Companies. State Auto P&C shall direct its employees performing such services for each of the Managed Companies to use their best efforts to promote the general interests and economic welfare of each of the Managed Companies to the same extent as such employees provide to State Auto P&C. The term of State Auto P&C's engagement under this Agreement shall begin on the date of this Agreement and shall end, unless sooner terminated in accordance with the provisions of Section 10 below, on the tenth anniversary of this Agreement. This Agreement shall be automatically renewed for successive ten-year periods upon the same terms and conditions contained in this Agreement, unless and until terminated as described in Section 10 below. 3. AUTHORITY AND DUTIES OF STATE AUTO P&C: In providing Management and Operations Services, State Auto P&C, acting through its employees, shall be responsible for performing all organizational, operational, and management functions of each of the Managed Companies. State Auto P&C shall use its reasonable efforts to operate each Managed Company's business efficiently and in accordance with the reasonable guidelines and policies which may be established from time to time by the board of directors of each of the Managed Companies. State Auto P&C shall have all authority necessary to carry out its duties under this Agreement and shall act as an agent of each of the Managed Companies. Without limiting the generality of the foregoing, State Auto P&C's duties under this Agreement shall include the following: (a) MANAGEMENT AND ADMINISTRATION OF INSURANCE OPERATIONS - State Auto P&C shall operate, administer, and manage the day-to-day insurance business operations of each of the Managed Companies engaged in the insurance business, in accordance with the underwriting, claims and any other reasonable guidelines of such companies which may be in effect or established from time to time by the board of directors of such companies. The management and administration of each such insurers' business operations by State Auto P&C shall include, without limitation, appointment and termination of agencies, underwriting of insurance risks, investigation and settlement of claims and arrangement of reinsurance. State Auto P&C shall use the same degree of care in acting on behalf of such insurers as the degree of care it uses in connection the conduct of its insurance business operations.

4 (b) MANAGEMENT AND ADMINISTRATION OF NON-INSURANCE OPERATIONS OF THE SERVICE COMPANIES - State Auto P&C through its employees, will perform Management and Operations Services for each of the other Managed Companies which are Service Companies in accordance with the policies and guidelines which each of such companies' board of directors may establish from time to time. State Auto P&C will use the same degree of care in acting on behalf of these companies as it uses in connection with the conduct of its own business operations. (c) EMPLOYEES - State Auto P&C shall provide each Managed Company with all executive, managerial, supervisory, administrative, technical, clerical, professional, and other personnel as may be necessary or desirable

4 (b) MANAGEMENT AND ADMINISTRATION OF NON-INSURANCE OPERATIONS OF THE SERVICE COMPANIES - State Auto P&C through its employees, will perform Management and Operations Services for each of the other Managed Companies which are Service Companies in accordance with the policies and guidelines which each of such companies' board of directors may establish from time to time. State Auto P&C will use the same degree of care in acting on behalf of these companies as it uses in connection with the conduct of its own business operations. (c) EMPLOYEES - State Auto P&C shall provide each Managed Company with all executive, managerial, supervisory, administrative, technical, clerical, professional, and other personnel as may be necessary or desirable for the operation and administration of each Managed Company's business. State Auto P&C shall direct its employees, in performing such services for each Managed Company, to use their best efforts to promote the general interests and economic welfare of each Managed Company, in the same manner as such employees utilize when providing service to State Auto P&C. (d) EMPLOYEES AND PAYROLL - The employees provided by State Auto P&C to each Managed Company under this Agreement shall be employed as employees of State Auto P&C and not of any of the Managed Companies. Notwithstanding the foregoing, Mutual shall continue to act as the common agent or common paymaster of all such employees providing services to any State Auto Company. As common paymaster, Mutual shall be responsible for filing information and tax returns and issuing tax and other payroll forms and reports with respect to wages paid to the employees employed by State Auto P&C and provided to each Managed Company. 4. PROVISION OF FACILITIES AND EXPENSE PAYMENTS - During the term of this Agreement, Mutual shall provide State Auto P&C and each of the other Managed Companies with such data processing equipment, office supplies and equipment, furniture and fixtures, automobiles and such other items of tangible personal property as each of such Managed Companies may require or desire for the operation of its business. Utilizing the employees of State Auto P&C, Mutual shall act as agent for each of the Managed Companies and to the extent necessary for the purposes of its business, in collecting and disbursing funds due to any Managed Company, and in paying expenses and other operating costs of the facilities used by such parties except for those expenses paid directly by any such Managed Company from its own accounts. 5. BOARD OF DIRECTORS' CONTROL - Except as otherwise provided in this Agreement, the officers of State Auto P&C and of each of the Managed Companies shall be subject to the authority of their respective boards of directors. Each Managed Company and State Auto P&C may appoint or elect as its officers those persons who hold offices in any other State Auto Company, subject at all times to the power of each company's respective board of directors to appoint, elect, or remove its officers in accordance with its respective articles or certificate of incorporation, code of regulations or by-laws, and other governing documents, statutes, or rules of law applicable to each respective company. 6. ALLOCATION OF COSTS AND EXPENSES - Except to the extent otherwise allocated under any other provisions of this Agreement, all out-of-pocket expenses incurred for goods or services from third-party vendors or other unrelated parties which are identifiable to a particular State Auto Company, including without limitation, director's fees, legal fees, audit fees, stock transfer expenses, travel expenses, stationery, supplies and items of a similar nature, shall be charged to the State Auto Company for whose benefit such costs or expenses were incurred. All costs

5 and expenses incurred by State Auto P&C for the employees, equipment, facilities and other items shared by the parties pursuant to this Agreement shall be allocated among the parties to this Agreement as follows: (a) INSURANCE LOSSES, LOSS ADJUSTMENT EXPENSES AND UNDERWRITING EXPENSES OF MUTUAL, STATE AUTO P&C, MILBANK, AND STATE AUTO IC - All insurance losses, loss adjustment expenses and underwriting expenses of Mutual, State Auto P&C, Milbank, State Auto IC (hereafter the "Pooled Companies"), as computed under the statutory accounting principles used by State Auto P&C from time to time, including, but not limited to, all related claim adjustment services, commissions and brokerage expenses, salaries

5 and expenses incurred by State Auto P&C for the employees, equipment, facilities and other items shared by the parties pursuant to this Agreement shall be allocated among the parties to this Agreement as follows: (a) INSURANCE LOSSES, LOSS ADJUSTMENT EXPENSES AND UNDERWRITING EXPENSES OF MUTUAL, STATE AUTO P&C, MILBANK, AND STATE AUTO IC - All insurance losses, loss adjustment expenses and underwriting expenses of Mutual, State Auto P&C, Milbank, State Auto IC (hereafter the "Pooled Companies"), as computed under the statutory accounting principles used by State Auto P&C from time to time, including, but not limited to, all related claim adjustment services, commissions and brokerage expenses, salaries and employee relations and welfare expenses and all other loss adjustment and other underwriting expenses to be reflected in the annual statement to be filed with state insurance authorities, shall be shared by each of the Pooled Companies in accordance with the provisions of the pooling arrangement as in effect through the 2000 Pooling Agreement. It is understood and acknowledged that the percentages by which such losses and expenses are shared under the 2000 Pooling Agreement and other provisions of the 2000 Pooling Agreement may be changed from time to time under procedures outlined in the 2000 Pooling Agreement. (b) EXPENSES OF STATE AUTO FINANCIAL, STATECO, S.I.S., AND 518 PML, - The salary expenses attributable to State Auto P&C employees performing services for the Service Companies shall be reimbursed to State Auto P&C by each of these companies based on an allocation of the time these individuals spend on behalf of each of the Service Companies. In addition, each of the Service Companies shall reimburse State Auto P&C for the expense of services provided to it by State Auto P&C including, without limitation, payroll taxes, benefits, overhead, and rent based on a percentage of the aforesaid salary expenses to be determined annually by State Auto P&C in an amount that reasonably reflects the actual costs of the aforesaid items. (c) INSURANCE LOSSES, LOSS ADJUSTMENT EXPENSES AND UNDERWRITING EXPENSES OF NATIONAL - All insurance losses, loss adjustment expenses and underwriting expenses of National, as computed under the statutory accounting principles used by National from time to time shall be paid by National. Underwriting expenses include, without limitation, expenses for State Auto P&C employees providing services on behalf of National for only part of their time, which expenses shall be allocated to National in proportion to the amount of time those employees spend on National's behalf in accordance with statutory accounting principles used by National from time to time. (d) PENSION AND BENEFIT EXPENSES - Each of the members of State Auto Financial Group and Mutual, is designated as a participating company under the State Auto Insurance Companies Employees' Retirement Plan, and any other applicable benefit plans provided by any State Auto Company for the employees of State Auto P&C (the "Plans"). Each of the Pooled Companies share of pension and benefit expenses under the Plans for employees of State Auto P&C providing services to each of such insurers shall be allocated and paid pursuant to the 2000 Pooling Agreement and their percentage shares of all obligations of the Plans' sponsors under the Plans shall equal their percentage shares under the 2000 Pooling Agreement, as changed from time to time. State Auto Financial's, National's, S.I.S.'s, 518 PML's and Stateco's share of pension and benefit expenses under the Plans for employees of State Auto P&C shall be allocated to the respective company based on the percentage of payroll expenses attributable to each such company.

6 (f) REAL ESTATE EXPENSES - State Auto P&C, State Auto Financial, National, Stateco, and 518 PML, currently are provided office space by Mutual in the office located at 518 East Broad Street, Columbus, OH. The amount of rent Mutual charges State Auto Financial, National, Stateco, and 518 PML shall be based upon the percentage that the total salaries (including a benefits factor) paid to individuals performing services for any of such entities bears to the aggregate of all salaries for State Auto P&C times the total rent expenses for the State Auto Companies for the location at 518 East Broad Street, Columbus, OH in accordance with statutory accounting principles. The rent expense incurred by each of the Pooled Companies for other office locations owned by Mutual (Cincinnati, OH and Cleveland, OH) is an underwriting expense subject to the 2000 Pooling Agreement. Notwithstanding the foregoing allocations to the contrary, if a State Auto Company which is not currently participating the 2000 Pooling Agreement, hereafter begins participating in such 2000 Pooling Agreement as

6 (f) REAL ESTATE EXPENSES - State Auto P&C, State Auto Financial, National, Stateco, and 518 PML, currently are provided office space by Mutual in the office located at 518 East Broad Street, Columbus, OH. The amount of rent Mutual charges State Auto Financial, National, Stateco, and 518 PML shall be based upon the percentage that the total salaries (including a benefits factor) paid to individuals performing services for any of such entities bears to the aggregate of all salaries for State Auto P&C times the total rent expenses for the State Auto Companies for the location at 518 East Broad Street, Columbus, OH in accordance with statutory accounting principles. The rent expense incurred by each of the Pooled Companies for other office locations owned by Mutual (Cincinnati, OH and Cleveland, OH) is an underwriting expense subject to the 2000 Pooling Agreement. Notwithstanding the foregoing allocations to the contrary, if a State Auto Company which is not currently participating the 2000 Pooling Agreement, hereafter begins participating in such 2000 Pooling Agreement as amended from time to time, then expenses subject to the 2000 Pooling Agreement shall be allocated among that company and the other pooling arrangement participants in the same manner as expenses are allocated between the Pooled Companies as set forth above. 7. SERVICES FEE - The Services Fee shall be determined as follows: (a) For the services provided by State Auto P&C hereunder, each Managed Company that is an insurance company shall pay to State Auto P&C an annual service fee equal to four percent (4%) times the most recent three-year average of statutory surplus (or the average of such lesser period that such Managed Company has filed an annual statutory statement as a subsidiary of Mutual or State Auto Financial) (statutorily admitted assets less liabilities), less the carrying value of its subsidiaries as reflected on its annual statutory financial statement for consolidated subsidiaries which are also Managed Companies. Such fee shall be payable in not less often than quarterly installments during the term of this Agreement. (b) For the services provided by State Auto P&C, each Managed Company that is a Service Company shall pay to State Auto P&C an annual service fee equal to four per cent (4 %) of the three year average (or such shorter period of such company's existence) of shareholders equity of such company or its equivalent less the carrying value of any subsidiary reflected on the books of such Service Company, which subsidiary is also a Managed Company. (c) Upon request of either Mutual or State Auto Financial, on behalf of the State Auto Financial Group, not more often than annually, the amount of the management fee shall be reviewed to determine whether an adjustment in the management fee is necessary. Any change to the management fee, other than changes automatically occurring pursuant to the terms of this Agreement, must be presented to the Coordinating Committee (defined in 9(b) below), which must review and evaluate the proposed change and make a recommendation to the boards of directors of Mutual and State Auto Financial. Any such change presented to the Coordinating Committee must be approved by the boards of directors of Mutual, which shall make a determination for Mutual, and State Auto Financial, which shall make a determination for all members of the State Auto Financial Group. (d) If any Managed Company that is an insurance company (a "Managed Insurer") does not meet the performance standard (as described below) for any calendar quarter, then the quarterly service fee payment shall be withheld, unless such performance standard had been met for the trailing four quarters as a whole, in which case the quarterly service fee shall

7 not be withheld. If any portion of the service fee is withheld pursuant to this section, it shall be released to State Auto P&C if, based on such Managed Company's performance for the entire calendar year, the Managed Company's performance meets the performance standard. The performance standard may be changed from time to time, provided that any such change shall be approved by the board of directors of such Managed Company and State Auto P&C after review and approval by the Coordinating Committee. At the commencement of this Agreement the performance standard shall be as follows: Payment would be withheld if, for the calendar quarter immediately preceding the then current calendar quarter, a

7 not be withheld. If any portion of the service fee is withheld pursuant to this section, it shall be released to State Auto P&C if, based on such Managed Company's performance for the entire calendar year, the Managed Company's performance meets the performance standard. The performance standard may be changed from time to time, provided that any such change shall be approved by the board of directors of such Managed Company and State Auto P&C after review and approval by the Coordinating Committee. At the commencement of this Agreement the performance standard shall be as follows: Payment would be withheld if, for the calendar quarter immediately preceding the then current calendar quarter, a Managed Insurer's statutory combined ratio is equal to or greater than the statutory combined ratio for the property casualty insurance industry for the same period, as published by A. M. Best and Co., excluding the effect of losses arising out of catastrophes numbered by the Insurance Services Office and other extraordinary loss events arising out of circumstances that bear no relation to the performance by employees provided by State Auto P&C and for the calendar quarter for which the management fee is due such Managed Insurer's surplus as regards policyholders shall have decreased by more than 10% from the amount of surplus as regards policyholders as of the end of the previous calendar year. 8. PAYMENTS FOR SERVICES - All amounts due under this Agreement shall be due and payable by the respective company within fifteen days after request for payment from the party to be paid. 9. CONFLICTS OF INTEREST - The parties hereby acknowledge that, due to the common management of Mutual and the State Auto Financial Group, conflicts of interest may arise with respect to business opportunities available to such companies. In order to deal with such conflicts of interest on an equitable basis, the following guidelines shall be used to determine which company may avail itself of a business opportunity: (a) A business opportunity shall not be required to be presented to the Coordinating Committee, as described in 9(b) below, if: (i) such business opportunity involves the purchase or sale on the open market of marketable securities at the market price for that issue or comparable issues; (ii) such business opportunity involves the new issue of stocks or bonds in a public offering registered or exempt from registration under the Securities Act of 1933, as amended; (iii) such business opportunity does not fit within the investment criteria and guidelines, including without limitation debt to equity mix, of either Mutual or State Auto P&C, or any other party to this Agreement, established by their respective investment committees; (iv) such business opportunity involves the underwriting of policies of insurance; (v) State Auto Financial proposes to purchase securities issued by it; or (vi) in the good faith judgment of the common officers of Mutual and State Auto Financial on behalf of the State Auto Financial Group, such business opportunity does not meet the investment policies or objectives, the underwriting or claims guidelines, or is inconsistent with the cash flow or tax situation of Mutual or any member of the State Auto Financial Group. (b) All other business opportunities shall be presented to a Coordinating Committee consisting of two eligible directors of Mutual and two eligible directors of State Auto Financial (the "Coordinating Committee"), with the State Auto Financial committee members also representing the interests of all subsidiaries of State Auto Financial and the Mutual members also representing the interests of wholly owned subsidiaries of Mutual. In order to be eligible to serve on the Coordinating Committee, Mutual directors shall not, during the time of service on

8 such committee, also be directors or officers of the companies in the State Auto Financial Group, and State Auto Financial directors shall not, during the time of service on such committee, also be directors or officers of Mutual or any wholly owned subsidiary of Mutual. The Coordinating Committee shall review and evaluate such business opportunities using such factors as it considers relevant. Based upon such review and evaluation, such committee shall make a recommendation to each respective board of directors as to whether or not such business opportunities should be pursued and if so, by which company. If the Coordinating Committee is unable to agree upon a recommendation by at least a majority vote of all of its members, the two directors serving on such committee from either of Mutual or State Auto Financial shall report that result to the board of such company on which they serve, along with their recommendation, if any. The boards of directors of Mutual and of State Auto Financial must then act on the recommendation of the committee or the committee members after considering all other factors deemed relevant to them.

8 such committee, also be directors or officers of the companies in the State Auto Financial Group, and State Auto Financial directors shall not, during the time of service on such committee, also be directors or officers of Mutual or any wholly owned subsidiary of Mutual. The Coordinating Committee shall review and evaluate such business opportunities using such factors as it considers relevant. Based upon such review and evaluation, such committee shall make a recommendation to each respective board of directors as to whether or not such business opportunities should be pursued and if so, by which company. If the Coordinating Committee is unable to agree upon a recommendation by at least a majority vote of all of its members, the two directors serving on such committee from either of Mutual or State Auto Financial shall report that result to the board of such company on which they serve, along with their recommendation, if any. The boards of directors of Mutual and of State Auto Financial must then act on the recommendation of the committee or the committee members after considering all other factors deemed relevant to them. (c) A State Auto Company shall not sell any property or security to, or purchase any property or security from, any other State Auto Company, if, in the good faith judgment of the common officers of Mutual and State Auto Financial such sale or purchase is a material transaction to any State Auto Company which is a party to the sale or purchase, unless such sale or purchase is presented to the Coordinating Committee for review and evaluation and approved by the boards of directors of Mutual and State Auto Financial in the manner provided in the preceding paragraph (b). Notwithstanding the foregoing, State Auto P&C and Mutual may sell marketable securities to one another at the market price of such securities or an approximation thereof. 10. TERMINATION - This Agreement may be terminated prior to the end of the initial term, or any renewal thereof, as follows: (a) By any of the Managed Companies, at its option, at any time after a "Change in Control" or "Potential Change in Control" (as defined below) of State Auto Financial. (b) At the end of the term then in effect by any of the parties upon advance written notice to the other parties at least two years prior to the end of the term then in effect (provided that such termination shall only relate to the Company giving notice and shall not terminate the Agreement with respect to any of the other parties unless they also give notice of termination of at least two years prior to the end of the term then in effect). (c) Automatically, with respect to a party, if that party files a voluntary petition in bankruptcy, applies for or consents to the appointment of a receiver, makes a general assignment for the benefit of creditors, admits in writing its inability to pay debts as they mature, files a petition or answer seeking a reorganization or arrangement with creditors under any insolvency law, files an answer admitting the material allegations of a petition filed in any bankruptcy or reorganization proceeding, or if a decree of any court is entered adjudging the party to be bankrupt or approving a reorganization or arrangement under any insolvency law (which decree is not set aside within ninety days after it is entered), (provided that such termination shall only relate to the Company subject to the foregoing event or action and shall not terminate the Agreement with respect to any of the other parties unless they also give notice of termination either within thirty days of the event that causes the automatic termination for another party). For purposes of this section, a "Change in Control" means the happening of any of the following:

9 (i) When any "person" as defined in Section 3 (a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act, but excluding State Auto Financial and any subsidiary and any employee benefit plan sponsored or maintained by State Auto Financial or any subsidiary (including any trustee or such plan acting as trustee) and excluding Mutual, directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act, as amended from time to time), of securities of State Auto Financial representing 20% or more of the combined voting power of the then outstanding securities; (ii) When, during any period of twenty-four consecutive months during the effectiveness of this Agreement, the individuals who, at the beginning of such period, constitute the board of directors of State Auto Financial (the

9 (i) When any "person" as defined in Section 3 (a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act, but excluding State Auto Financial and any subsidiary and any employee benefit plan sponsored or maintained by State Auto Financial or any subsidiary (including any trustee or such plan acting as trustee) and excluding Mutual, directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act, as amended from time to time), of securities of State Auto Financial representing 20% or more of the combined voting power of the then outstanding securities; (ii) When, during any period of twenty-four consecutive months during the effectiveness of this Agreement, the individuals who, at the beginning of such period, constitute the board of directors of State Auto Financial (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such twenty-four month period shall be deemed to have satisfied such twenty-four month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such twenty-four month period) or by prior operation of this paragraph; or (iii) The occurrence of a transaction requiring shareholder approval for the acquisition of State Auto Financial by an entity other than Mutual or a subsidiary of State Auto Financial through purchase of assets, by merger or otherwise. For purposes of this section, a "Potential Change in Control" means the happening of any one of the following: (i) The approval by shareholders of an Agreement by State Auto Financial, the consummation of which would result in a Change in Control of State Auto Financial as defined above; or (ii) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group other than State Auto Financial or a subsidiary or any employee benefit plan sponsored or maintained by State Auto Financial or any subsidiary (including any trustee of such plan acting as such trustee) of securities of State Auto Financial representing 5% or more of the combined voting power of State Auto Financial's outstanding securities and the adoption by the board of directors of State Auto Financial of a resolution to the effect that a Potential Change in Control of State Auto Financial has occurred for purposes of this Agreement. 11. ARBITRATION - Any and all disagreements or controversies arising with respect to this Agreement, whether during or after the term of State Auto P&C's engagement under this Agreement, shall be settled by binding arbitration by a panel of three arbitrators, one selected by Mutual on behalf of any member of the Mutual Group, one selected by State Auto Financial on behalf of any member of the State Auto Financial Group, and the third to be selected by the mutual agreement of the first two arbitrators. The arbitration shall be held, and the award made, in Franklin County, Ohio, pursuant to the Ohio Arbitration Law (Ohio Revised Code Chapter 2711 or any law of similar tenor or effect that hereafter is enacted). All fees of the arbitrators shall be borne equally by the parties to the arbitration.

10 12. COMPLETE AGREEMENT - This document contains the entire agreement between the parties and supersedes all prior or contemporaneous discussions, negotiations, representations, or agreements relating to the subject matter, including without limitation, the 94 Management Agreement and all previous amendments thereto. No changes to this Agreement shall be made or be binding on any party unless made in writing and signed by each party to this Agreement. 13. NO THIRD PARTY BENEFIT - This Agreement is intended for the exclusive benefit of the parties to this Agreement and their respective successors and assigns, and nothing contained in this Agreement shall be construed as creating any rights or benefits in or to any third party. 14. CAPTIONS - The captions of the various sections of this Agreement are not part of the content or context of this Agreement, but are only labels to assist in locating those sections, and shall be ignored in construing this

10 12. COMPLETE AGREEMENT - This document contains the entire agreement between the parties and supersedes all prior or contemporaneous discussions, negotiations, representations, or agreements relating to the subject matter, including without limitation, the 94 Management Agreement and all previous amendments thereto. No changes to this Agreement shall be made or be binding on any party unless made in writing and signed by each party to this Agreement. 13. NO THIRD PARTY BENEFIT - This Agreement is intended for the exclusive benefit of the parties to this Agreement and their respective successors and assigns, and nothing contained in this Agreement shall be construed as creating any rights or benefits in or to any third party. 14. CAPTIONS - The captions of the various sections of this Agreement are not part of the content or context of this Agreement, but are only labels to assist in locating those sections, and shall be ignored in construing this Agreement. 15. FORCE MAJEURE - Notwithstanding any provision of this Agreement to the contrary, any party's obligations under this Agreement shall be excused if and to the extent that any delay or failure to perform such obligations is due to fire or other casualty, material shortages, strikes or labor disputes, acts of God, or other causes beyond the reasonable control of such party. 16. AMENDMENTS - This Agreement may be amended by the parties, upon authority of their officers without specific director approval, if such amendment is solely for the purpose of clarification and does not change the substance of this Agreement and the parties have obtained an opinion of legal counsel to that effect. Additionally, any present or future subsidiary or affiliate of Mutual or State Auto Financial may be added as a party to this Agreement by an amendment entered into by Mutual, State Auto Financial and the new party, after approval of the Coordinating Committee and the directors of each such Company. Except as otherwise specifically provided in this Agreement, all other amendments to this Agreement must be presented to the Coordinating Committee and be approved by the directors of each company pursuant to the procedures set forth in Section 9. 17. SUCCESSORS - No party may assign any of its rights or obligations under this Agreement without the written consent of all other parties to this Agreement, which consent may be arbitrarily withheld by any such party. Except as otherwise provided in this Agreement, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the respective successors and assigns of each party to this Agreement. In Witness whereof, each of the parties hereto has subscribed its name below. Date: December 30, 1999 STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Robert H. Moone -------------------------------------Robert H. Moone, President

11 STATE AUTO FINANCIAL CORPORATION
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

11 STATE AUTO FINANCIAL CORPORATION
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STATE AUTO NATIONAL INSURANCE COMPANY
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STATE AUTO INSURANCE COMPANY
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STATECO FINANCIAL SERVICES, INC.
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

MILBANK INSURANCE COMPANY
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

STRATEGIC INSURANCE SOFTWARE, INC.
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, Vice Chairman

518 PROPERTY AND MANAGEMENT LEASING, LLC
By: /s/ Robert H. Moone ---------------------------------------Robert H. Moone, President

Exhibit 10(Y) Property Catastrophe Overlying Excess of Loss Reinsurance Contract Issued to State Automobile Mutual Insurance Company State Auto National Insurance Company Milbank Insurance Company Midwest Security Insurance Company Farmers Casualty Insurance Company Mid-Plains Insurance Company By State Auto Property and Casualty Insurance Company

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT ISSUED TO STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY BY STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT
TABLE OF CONTENTS -----------------

ARTICLE NO. ----------ARTICLE I ARTICLE II ARTICLE III ARTICLE IV

TITLE ----BUSINESS COVERED EXCLUSIONS TERM TERRITORY

PAGE ---1 1 3 3 2

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT ISSUED TO STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY BY STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT
TABLE OF CONTENTS -----------------

ARTICLE NO. ----------ARTICLE I ARTICLE II ARTICLE III ARTICLE IV ARTICLE V ARTICLE VI ARTICLE VII ARTICLE VIII ARTICLE IX ARTICLE X ARTICLE XI ARTICLE XII ARTICLE XIII ARTICLE XIV ARTICLE XV ARTICLE XVI

TITLE ----BUSINESS COVERED EXCLUSIONS TERM TERRITORY AMOUNT OF LIMIT AND RETENTION ULTIMATE NET LOSS NET RETAINED LINES UNDERLYING EXCESS DEFINITION OF LOSS OCCURRENCE NOTICE OF LOSS AND LOSS SETTLEMENT PREMIUM CURRENCY OFFSET ACCESS TO RECORDS ERRORS AND OMISSIONS TAXES

PAGE ---1 1 3 3 3 3 - 4 4 4 4 - 5 6 6 6 6 - 7 7 7 7 2

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT
TABLE OF CONTENTS -----------------

ARTICLE NO. ----------ARTICLE I ARTICLE II ARTICLE III ARTICLE IV ARTICLE V ARTICLE VI ARTICLE VII ARTICLE VIII ARTICLE IX ARTICLE X ARTICLE XI ARTICLE XII ARTICLE XIII ARTICLE XIV ARTICLE XV ARTICLE XVI ARTICLE XVII ARTICLE XVIII

TITLE ----BUSINESS COVERED EXCLUSIONS TERM TERRITORY AMOUNT OF LIMIT AND RETENTION ULTIMATE NET LOSS NET RETAINED LINES UNDERLYING EXCESS DEFINITION OF LOSS OCCURRENCE NOTICE OF LOSS AND LOSS SETTLEMENT PREMIUM CURRENCY OFFSET ACCESS TO RECORDS ERRORS AND OMISSIONS TAXES INSOLVENCY ARBITRATION

PAGE ---1 1 3 3 3 3 - 4 4 4 4 - 5 6 6 6 6 - 7 7 7 7 7 - 8 8 - 9 2

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY (HEREINAFTER COLLECTIVELY REFERRED TO AS THE "COMPANY") AND STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY (HEREINAFTER REFERRED TO AS THE SUBSCRIBING "REINSURER") ARTICLE I BUSINESS COVERED: The Reinsurer shall indemnify the Company for the net excess liability as hereinafter provided and specified, which may accrue to the Company as a result of any loss or losses which may occur during the currency of the Contract under any and all policies, contracts, binders and other evidence of insurance and reinsurance, oral or written (hereinafter referred to as "Policies") heretofore or hereafter issued or entered into by or on behalf of the Company and classified by the Company as Fire, Allied Lines, Homeowners (property coverages), Farmowners (property coverages), Commercial Multiple Peril policies (property coverages), Ocean Marine, Inland Marine and Automobile Physical Damage. ARTICLE II EXCLUSIONS: The following shall be excluded from the scope of this Contract: 1. Business written and classified by the Company as: a) Aviation Insurance; b) Casualty Insurance (i.e. Accident, Health, Third Party Liability, Workers Compensation and Employers Liability, Fidelity, Plate Glass and Burglary and Theft when written as such); c) Credit Insurance; d) Financial Guarantee Insurance; e) Insolvency Insurance;

f) Life Insurance; g) Mortgage Impairment Insurance; h) Title Insurance; i) Surety; j) Flood Insurance when written as such; k) Earthquake Insurance when written as such; l) Difference in Conditions Insurance; m) Ocean Marine Insurance, except yachts; n) Boiler and Machinery; o) Multiple Peril policies other than the Property coverages as included in the Business Covered Section, hereof; p) Reinsurance, but not to exclude so-called agency reinsurance, reinsurance of an individual risk or policy, or

f) Life Insurance; g) Mortgage Impairment Insurance; h) Title Insurance; i) Surety; j) Flood Insurance when written as such; k) Earthquake Insurance when written as such; l) Difference in Conditions Insurance; m) Ocean Marine Insurance, except yachts; n) Boiler and Machinery; o) Multiple Peril policies other than the Property coverages as included in the Business Covered Section, hereof; p) Reinsurance, but not to exclude so-called agency reinsurance, reinsurance of an individual risk or policy, or any intercompany pooling arrangements. 2. Wind and Hail on growing and standing crops. 3. Manufacture, processing, storage, filling or breaking down of explosives. 4. Oil and petrochemical refineries and pipelines and oil or gas drilling rigs. 5. Excess of Loss insurance or reinsurance where the deductible exceeds $99,999. 6. Bridges and Tunnels where the Total Insured Value over all interests exceeds $250,000,000. 7. Extra Contractual Obligations and Losses in Excess of Policy Limits as per attached Exclusion Clause. 8. Loss/or Damage/or Costs/or Expenses arising from seepage and/or Pollution and/or Contamination, other than Contamination from Smoke Damage. Nevertheless, this exclusion does not preclude payment of the cost of removal of debris of property damaged by a loss otherwise covered hereunder, but subject always to a limit of 25% of the Company's property loss under the original policy. 9. Loss in respect of overhead transmission and distribution lines and their supporting structure other than those on or within 150 meters (or 500 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters' or distributors' policy. 10. Insolvency Fund Exclusion Clause. 11. War Risk Exclusion Clause. 12. Pools and Associations Exclusion Clause. 13. Nuclear Incident Exclusion Clauses - Physical Damage - Reinsurance - U.S.A. and Canada.

ARTICLE III TERM: The term of this Contract shall be from 12:01 A.M. Standard Time, July 1, 1999 to 12:01 A.M. Standard Time, July 1, 2000. If the liability of the Reinsurer under this Contract terminates while a loss occurrence giving rise to a claim hereunder is in progress, then the Reinsurer shall be liable as if the whole loss occurrence had occurred during the term of this Contract, provided that no part of that loss occurrence is claimed against any renewal or replacement of this Contract. ARTICLE IV

ARTICLE III TERM: The term of this Contract shall be from 12:01 A.M. Standard Time, July 1, 1999 to 12:01 A.M. Standard Time, July 1, 2000. If the liability of the Reinsurer under this Contract terminates while a loss occurrence giving rise to a claim hereunder is in progress, then the Reinsurer shall be liable as if the whole loss occurrence had occurred during the term of this Contract, provided that no part of that loss occurrence is claimed against any renewal or replacement of this Contract. ARTICLE IV TERRITORY: This Contract shall cover wherever the Company's Policies cover. ARTICLE V AMOUNT OF LIMIT AND RETENTION: No claim shall be made hereunder unless and until the Company and other members of the State Auto Insurance Companies Group, being State Automobile Mutual Insurance Company, State Auto Property and Casualty Insurance Company, Milbank Insurance Company, Midwest Security Insurance Company, State Auto National Insurance Company, Farmers Casualty Insurance Company, and Mid-Plains Insurance Company, hereinafter referred to as the "Group", on a pooled basis where applicable, shall first have sustained an Ultimate Net Loss in excess of $120,000,000, regardless of the number of Policies under which such loss is payable or the number of interests insured. The Reinsurer shall then be liable for the amount of Ultimate Net Loss for the Company in excess of $120,000,000 Ultimate Net Loss each occurrence, but the sum recoverable from the Reinsurer in respect of each loss occurrence shall not exceed $100,000,000, nor more than $100,000,000 in respect of all loss occurrences during the term of this contract. The amount of coverage is subject to at least two risks being involved in the same loss occurrence. ARTICLE VI ULTIMATE NET LOSS: The term "ultimate net loss" shall mean the amount that the Company pays, such loss to include all expenses incurred by the Company in connection with the settlement of losses or resistance to or negotiations concerning a loss, including salaries and expenses of employees of the Company while diverted from their normal duties to the service of field adjustment but shall not include any office expenses of the Company. However, nothing in this Article shall be construed to prevent

the Company from including all such amounts defined as ultimate net loss attributable to the Group on a pooled basis for the first $120,000,000 of ultimate net loss. All salvages and recoveries and payments (net of the cost of obtaining any salvage, recovery or payment), whether recovered or received prior or subsequent to loss settlement under this Contract, including amounts recoverable under all Reinsurances whether collected or not, shall be applied as if recovered or received prior to the aforesaid settlement and shall be deducted from the actual loss incurred to arrive at the amount of ultimate net loss. Nothing in this Article shall be construed to mean losses are not recoverable until the ultimate net loss to the Company has been ascertained. ARTICLE VII

the Company from including all such amounts defined as ultimate net loss attributable to the Group on a pooled basis for the first $120,000,000 of ultimate net loss. All salvages and recoveries and payments (net of the cost of obtaining any salvage, recovery or payment), whether recovered or received prior or subsequent to loss settlement under this Contract, including amounts recoverable under all Reinsurances whether collected or not, shall be applied as if recovered or received prior to the aforesaid settlement and shall be deducted from the actual loss incurred to arrive at the amount of ultimate net loss. Nothing in this Article shall be construed to mean losses are not recoverable until the ultimate net loss to the Company has been ascertained. ARTICLE VII NET RETAINED LINES: This Contract applies to only that portion of any policy which the Company and the other member of the Group, on a pooled basis where applicable, retains net for its own account. The amount of the Reinsurer's liability hereunder in respect of any loss shall not be increased by reason of the inability of the Company to collect from any other Reinsurer, whether specific or general, any amounts which may have become due whether such inability arises from the insolvency of such other Reinsurer or otherwise. ARTICLE VIII UNDERLYING EXCESS: The Company has in force underlying catastrophe excess of loss reinsurance and recoveries thereunder shall be disregarded for all purposes of this Contract and shall inure to the sole benefit of the Company. ARTICLE IX DEFINITION OF LOSS OCCURRENCE: The term "loss occurrence" shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one "loss occurrence" shall be limited to all individual losses sustained by the Company occurring during any period of one hundred sixty-eight (168) consecutive hours arising out of and directly occasioned by the same event except that the term "loss occurrence" shall be further defined as follows: A. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company

occurring during any period of seventy-two (72) consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto. B. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of seventy-two (72) consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of seventy-two (72) consecutive hours may be extended in respect of individual losses which occur beyond such seventy-two (72) consecutive hours during the continued occupation of an insured's premises by strikers, provided such occupation commenced during the aforesaid period. C. As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred

occurring during any period of seventy-two (72) consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto. B. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of seventy-two (72) consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of seventy-two (72) consecutive hours may be extended in respect of individual losses which occur beyond such seventy-two (72) consecutive hours during the continued occupation of an insured's premises by strikers, provided such occupation commenced during the aforesaid period. C. As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the opening paragraph of this Article) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of one hundred and sixty-eight (168) consecutive hours may be included in the Company's "loss occurrence". D. As regards "freeze", only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be included in the Company's "loss occurrence". For all "loss occurrences" except as referred to under sub-paragraph B, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident, or loss and provided that only one such period of one hundred and sixty-eight (168) consecutive hours shall apply with respect to one event, except for those "loss occurrences" referred to in sub-paragraph A above, where only one such period of seventy-two (72) consecutive hours shall apply with respect to one event, regardless of the duration of the event. As respect those "loss occurrences" referred to in sub-paragraph B above, if the disaster, accident or loss occasioned by the event is of greater duration than seventy-two (72) consecutive hours, then the Company may divide that disaster, accident or loss into two or more "loss occurrences" provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss. No individual losses occasioned by an event that would be covered by seventy-two (72) hours clauses may be included in any "loss occurrence" claimed under the one hundred and sixty-eight (168) hours provision.

ARTICLE X NOTICE OF LOSS AND LOSS SETTLEMENT: The Company shall adjust, settle, or compromise all claims and losses hereunder. All loss settlements by the Company which comply with the terms hereof shall be unconditionally binding upon the Reinsurer. The Company shall advise the Reinsurer promptly of all claims and any subsequent developments pertaining thereto, which may, in the Company's opinion, develop into losses involving Reinsurance hereunder. Inadvertent omission or oversight in dispatching such advices shall in no way affect the liability of the Reinsurer under this Contract provided the Company informs the Reinsurer of such omission or oversight promptly upon its discovery. The Reinsurer shall tender all loss payments as soon as practicable after receipt of any proof of loss. ARTICLE XI PREMIUM:

ARTICLE X NOTICE OF LOSS AND LOSS SETTLEMENT: The Company shall adjust, settle, or compromise all claims and losses hereunder. All loss settlements by the Company which comply with the terms hereof shall be unconditionally binding upon the Reinsurer. The Company shall advise the Reinsurer promptly of all claims and any subsequent developments pertaining thereto, which may, in the Company's opinion, develop into losses involving Reinsurance hereunder. Inadvertent omission or oversight in dispatching such advices shall in no way affect the liability of the Reinsurer under this Contract provided the Company informs the Reinsurer of such omission or oversight promptly upon its discovery. The Reinsurer shall tender all loss payments as soon as practicable after receipt of any proof of loss. ARTICLE XI PREMIUM: The premium to be paid to the Reinsurer shall be $3,000,000, payable in four equal quarterly installments. Each company shall pay a percentage of the premium based on its share of written premiums of the subject lines of businesss as estimated in Exhibit A. ARTICLE XII CURRENCY: All retentions, limits and premiums referenced in this Contract are expressed in United States Dollars and all payments made by either party shall be made in United States Dollars. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company. ARTICLE XIII OFFSET: The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

ARTICLE XIV ACCESS TO RECORDS: The Company shall place at the disposal of the Reinsurer at all reasonable times, and the Reinsurer shall have the right to inspect through its designated representatives, during the term of this Contract and thereafter, all books, records and papers of the Company in connection with any reinsurance hereunder, or the subject matter hereof. ARTICLE XV ERRORS AND OMISSIONS: Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to either party if such delay, omission or error had not been made, provided such delay, omission or error is rectified as soon as practicable after discovery.

ARTICLE XIV ACCESS TO RECORDS: The Company shall place at the disposal of the Reinsurer at all reasonable times, and the Reinsurer shall have the right to inspect through its designated representatives, during the term of this Contract and thereafter, all books, records and papers of the Company in connection with any reinsurance hereunder, or the subject matter hereof. ARTICLE XV ERRORS AND OMISSIONS: Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to either party if such delay, omission or error had not been made, provided such delay, omission or error is rectified as soon as practicable after discovery. ARTICLE XVI TAXES: In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns, or when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or to the District of Columbia. ARTICLE XVII INSOLVENCY: The reinsurance under this Contract shall be payable by the Reinsurer on the basis of the liability of one or more of the Companies under the Policy or Policies reinsured without diminution because of the insolvency of one or more of the Companies reinsured or because the liquidator, receiver, conservator or statutory successor of the Company(ies) has failed to pay all or a portion of any claim. In the event of the insolvency of one or more of the Companies reinsured, the liquidator, receiver, conservator or statutory successor of the Company(ies) shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Company(ies) on the Policy or Policies reinsured within a reasonable time after such claim is filed in the insolvency proceeding and during the pendency of such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it may deem available to the Company(ies) or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Company(ies) as part of the expense of liquidation to the extent of

a proportionate share of the benefit which may accrue to the Company(ies) solely as a result of the defense undertaken by the Reinsurer. Where two or more Reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the Company(ies). In the event of the insolvency of one or more of the Companies reinsured, the reinsurance under this Contract shall be payable by the Reinsurer directly to the Company(ies) or to the liquidator, receiver, conservator or statutory successor, except as provided by subsection (A) of section 4118 of the Insurance Law of New York or except where (I) the Contract specifies another payee of such Reinsurance in the event of the insolvency of the Company(ies) and (II) the Reinsurer with the consent of the direct insureds and, with the prior approval of the Superintendent of Insurance of New York to the certificate of assumption issued to New York direct insureds, has assumed such

a proportionate share of the benefit which may accrue to the Company(ies) solely as a result of the defense undertaken by the Reinsurer. Where two or more Reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the Company(ies). In the event of the insolvency of one or more of the Companies reinsured, the reinsurance under this Contract shall be payable by the Reinsurer directly to the Company(ies) or to the liquidator, receiver, conservator or statutory successor, except as provided by subsection (A) of section 4118 of the Insurance Law of New York or except where (I) the Contract specifies another payee of such Reinsurance in the event of the insolvency of the Company(ies) and (II) the Reinsurer with the consent of the direct insureds and, with the prior approval of the Superintendent of Insurance of New York to the certificate of assumption issued to New York direct insureds, has assumed such policy obligations of the Company(ies) as its direct obligations to the payees under such policies, in substitution for the obligations of the Company(ies) to such payees. ARTICLE XVIII ARBITRATION: If any dispute shall arise between the parties to this Contract, either before or after its termination, with reference to the interpretation of this Contract or the rights of either party with respect to any transactions under this Contract, including the formation or validity thereof, the dispute shall be referred to three (3) arbitrators as a condition precedent to any right of action arising under this Contract. The arbitrators shall be active or retired disinterested officers of insurance or reinsurance companies or Lloyd's Underwriters other than the parties or their affiliates. One arbitrator shall be chosen by each party and the third by the two so chosen. If either party refuses or neglects to appoint an arbitrator within thirty (30) days after the receipt of written notice from the other party requesting it to do so, the requesting party may nominate two (2) arbitrators who shall choose the third. In the event the arbitrators do not agree on the selection of the third arbitrator within thirty (30) days after both arbitrators have been named, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within thirty (30) days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held, to appoint an officer or retired officer of an insurance or reinsurance company or Lloyd's Underwriter as the third arbitrator. In the event both parties request the appointment of the third arbitrator, the third arbitrator shall be the soonest named in writing by the justice of the court. Each party shall submit its case to the arbitrators within thirty (30) days of the appointment of the arbitrators. The arbitrators shall consider this Contract an honorable engagement rather than merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of a majority of the arbitrators shall be final and binding on both the Company and the Reinsurer. Judgment may be entered upon the award of the arbitrators in any court having jurisdiction.

Each party shall bear the fee and expenses of its own arbitrator, one half of the fee and the expenses of the third arbitrator and one half of the other expenses of the arbitration. In the event both arbitrators are chosen by one party, the fees of the arbitrators shall be equally divided between the parties. Any such arbitration shall take place in Columbus, Ohio unless some other location is mutually agreed upon by the parties.

EXHIBIT A STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

Each party shall bear the fee and expenses of its own arbitrator, one half of the fee and the expenses of the third arbitrator and one half of the other expenses of the arbitration. In the event both arbitrators are chosen by one party, the fees of the arbitrators shall be equally divided between the parties. Any such arbitration shall take place in Columbus, Ohio unless some other location is mutually agreed upon by the parties.

EXHIBIT A STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT FOR THE PERIOD 12:01 A.M. STANDARD TIME JULY 1, 1999 THROUGH 12:01 A.M. STANDARD TIME JULY 1, 2000 Calculation of Premium Percentage for Each Company
Written Premium July 1, 1998 through June 30, 1999 Annual State Automobile State Auto Farmers Statement Line Mutual Milbank Midwest National Casualty --------------------------------------------------------------------------------------------------------1.0 21,858,073 742,377 53,077 2.0 12,958,492 616,452 30,033 65% of 3.0 0 3,131,479 0 65% of 4.0 28,698,456 7,017,580 1,724,386 452,373 50% of 5.0 9,946,161 1,099,410 0 90% of 8.0 1,928,889 5,933 0 9.0 8,331,051 1,178,978 178,003 12.0 1,689,108 10,906 355 50% of 21.1 25,044,475 7,707,316 3,374,757 4,675,777 5,604,110 50% of 21.2 5,317,616 337,952 0 Total Premiums Ceded Net Total % of Total Item 1: Selected Estimates Item 2: Premium (rounded to 000) Item 3: Quarterly Installment 115,772,321 (364,090) 115,408,231 74.67% 75.0% 2,250,000 562,500 21,848,383 (37,875) 21,810,508 14.11% 14.0% 420,000 105,000 5,360,611 (4,192) 5,356,419 3.47% 3.0% 90,000 22,500 4,675,777 0 4,675,777 3.03% 3.0% 90,000 22,500 6,056,483 (991) 6,055,492 3.92% 4.0% 120,000 30,000

INTERESTS AND LIABILITIES AGREEMENT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY

EXHIBIT A STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT FOR THE PERIOD 12:01 A.M. STANDARD TIME JULY 1, 1999 THROUGH 12:01 A.M. STANDARD TIME JULY 1, 2000 Calculation of Premium Percentage for Each Company
Written Premium July 1, 1998 through June 30, 1999 Annual State Automobile State Auto Farmers Statement Line Mutual Milbank Midwest National Casualty --------------------------------------------------------------------------------------------------------1.0 21,858,073 742,377 53,077 2.0 12,958,492 616,452 30,033 65% of 3.0 0 3,131,479 0 65% of 4.0 28,698,456 7,017,580 1,724,386 452,373 50% of 5.0 9,946,161 1,099,410 0 90% of 8.0 1,928,889 5,933 0 9.0 8,331,051 1,178,978 178,003 12.0 1,689,108 10,906 355 50% of 21.1 25,044,475 7,707,316 3,374,757 4,675,777 5,604,110 50% of 21.2 5,317,616 337,952 0 Total Premiums Ceded Net Total % of Total Item 1: Selected Estimates Item 2: Premium (rounded to 000) Item 3: Quarterly Installment 115,772,321 (364,090) 115,408,231 74.67% 75.0% 2,250,000 562,500 21,848,383 (37,875) 21,810,508 14.11% 14.0% 420,000 105,000 5,360,611 (4,192) 5,356,419 3.47% 3.0% 90,000 22,500 4,675,777 0 4,675,777 3.03% 3.0% 90,000 22,500 6,056,483 (991) 6,055,492 3.92% 4.0% 120,000 30,000

INTERESTS AND LIABILITIES AGREEMENT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY (THE "COMPANY") AND STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

INTERESTS AND LIABILITIES AGREEMENT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY (THE "COMPANY") AND STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY (THE SUBSCRIBING "REINSURER") It is hereby mutually agreed by and between the Company on the one part, and the Subscribing Reinsurer on the other part that effective July 1, 1999, the Subscribing Reinsurer's share of the Interests and Liabilities of the PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT attached hereto and forming part of this Agreement, shall be for ONE HUNDRED PERCENT (100%). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed in duplicate by their authorized representatives. Signed in Columbus, Ohio this 8th day of December, 1999. STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
By /s/ Steven J. Johnston ------------------------------------Title Senior Vice President ----------------------------------

Signed in Columbus, Ohio this 8th day of December, 1999. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY
By /s/ Steven J. Johnston ------------------------------------Title Senior Vice President ----------------------------------

ENDORSEMENT NO. 1 TO THE

ENDORSEMENT NO. 1 TO THE PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY (THE "COMPANY") AND STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY (THE SUBSCRIBING "REINSURER") It is hereby understood and agreed that effective January 1, 2000, this Contract is amended as follows: I. Company shall read: State Automobile Mutual Insurance Company State Auto National Insurance Company Milbank Insurance Company Midwest Security Insurance Company Farmers Casualty Insurance Company Mid-Plains Insurance Company State Auto Insurance Company II. ARTICLE V, AMOUNT OF LIMIT AND RETENTION shall read: No claim shall be made hereunder unless and until the Company and other members of the State Auto Insurance Companies Group, being State Automobile Mutual Insurance Company, State Auto Property and Casualty Insurance Company, Milbank Insurance Company, Midwest Security Insurance Company, State Auto National Insurance Company, Farmers Casualty Insurance Company, and Mid-Plains Insurance Company, hereinafter referred to as the "Group", on a pooled basis where applicable, shall first have sustained an Ultimate Net Loss in excess of $120,000,000, regardless of the number of Policies under which such loss is payable or the number of interests insured. The Reinsurer shall then be liable for the amount of Ultimate Net Loss for the Company in excess of $120,000,000 Ultimate Net Loss each occurrence, but the sum recoverable from the Reinsurer in respect of each loss occurrence shall not exceed $135,000,000, nor more than $135,000,000 in respect of all loss occurrences during the term of this contract.

ENDORSEMENT NO. 1 The amount of coverage is subject to at least two risks being involved in the same loss occurrence. III. ARTICLE XI, PREMIUM, shall read: The premium to be paid to the Reinsurer shall be $4,050,000, payable in four equal quarterly installments. Each company shall pay a percentage of the premium based on its share of written premiums of the subject lines of business as estimated in Exhibit A. IV. EXHIBIT A is modified as attached and replaces the original Exhibit A. All other terms and conditions remain unchanged.

ENDORSEMENT NO. 1 The amount of coverage is subject to at least two risks being involved in the same loss occurrence. III. ARTICLE XI, PREMIUM, shall read: The premium to be paid to the Reinsurer shall be $4,050,000, payable in four equal quarterly installments. Each company shall pay a percentage of the premium based on its share of written premiums of the subject lines of business as estimated in Exhibit A. IV. EXHIBIT A is modified as attached and replaces the original Exhibit A. All other terms and conditions remain unchanged. IN WITNESS WHEREOF, the parties hereto have caused this endorsement to be signed in duplicate by their authorized representatives. Signed in Columbus, Ohio this 21st day of February, 2000. STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
By /s/ Steven J. Johnston ------------------------------------Title Senior Vice President ----------------------------------

Signed in Columbus, Ohio this 21st day of February, 2000. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY MILBANK INSURANCE COMPANY STATE AUTO NATIONAL INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY STATE AUTO INSURANCE COMPANY
By /s/ Steven J. Johnston ------------------------------------Title Senior Vice President ----------------------------------

ENDORSEMENT NO. 1 EXHIBIT A STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT FOR THE PERIOD

ENDORSEMENT NO. 1 EXHIBIT A STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO NATIONAL MILBANK INSURANCE COMPANY MIDWEST SECURITY INSURANCE COMPANY FARMERS CASUALTY INSURANCE COMPANY MID-PLAINS INSURANCE COMPANY PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT FOR THE PERIOD 12:01 A.M. STANDARD TIME JULY 1, 1999 THROUGH 12:01 A.M. STANDARD TIME JULY 1, 2000 Calculation of Premium Percentage for Each Company
Written Premium July 1, 1998 through June 30, 1999 Annual State Automobile State Auto Farmers Statement Line Mutual Milbank Midwest National Casualt --------------------------------------------------------------------------------------------------------1.0 21,858,073 742,377 53,077 2.0 12,958,492 616,452 30,033 65% of 3.0 0 3,131,479 0 65% of 4.0 28,698,456 7,017,580 1,724,386 452,37 50% of 5.0 9,946,161 1,099,410 0 90% of 8.0 1,928,889 5,933 0 9.0 8,331,051 1,178,978 178,003 12.0 1,689,108 10,906 355 50% of 21.1 25,044,475 7,707,316 3,374,757 4,675,777 5,604,11 50% of 21.2 5,317,616 337,952 0 Total Premiums Ceded Net Total % of Total Item 1: Selected Estimates Item 2: Annual Premium (rounded to 000) Item 3: Quarterly Installment 115,772,321 (364,090) 115,408,231 74.67% 75.0% 3,037,500 759,375 21,848,383 (37,875) 21,810,508 14.11% 14.0% 567,000 141,750 5,360,611 (4,192) 5,356,419 3.47% 3.0% 121,500 30,375 4,675,777 0 4,675,777 3.03% 3.0% 121,500 30,375 6,056,48 (99 6,055,49 3.9 4. 162,00 40,50

INSOLVENCY FUNDS EXCLUSIONS CLAUSE This Agreement excludes: All liability of the Company arising, by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency Fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE REINSURANCE - U.S.A. 1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and

INSOLVENCY FUNDS EXCLUSIONS CLAUSE This Agreement excludes: All liability of the Company arising, by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency Fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE REINSURANCE - U.S.A. 1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks. 2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: I. Nuclear reactor power plants including all auxiliary property on the site, or II. Any other nuclear reactor installation including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material," and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission. 3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate: (A) Where the Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or (B) Where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (B) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof. 4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE REINSURANCE - U.S.A. 1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks. 2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: I. Nuclear reactor power plants including all auxiliary property on the site, or II. Any other nuclear reactor installation including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material," and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission. 3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate: (A) Where the Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or (B) Where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (B) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof. 4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard. 6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954, or by any law amendatory thereof. 7. The Reassured to be sole judge of what constitutes: (A) substantial quantities, and (B) the extent of installation, plant or site. NOTE: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that:

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard. 6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954, or by any law amendatory thereof. 7. The Reassured to be sole judge of what constitutes: (A) substantial quantities, and (B) the extent of installation, plant or site. NOTE: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that: (A) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provision of this Clause until expiry date or 31st December 1960, whichever first occurs whereupon all the provisions of this Clause shall apply, (B) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960, whichever first occurs whereupon all the provisions of this Clause shall apply.

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE REINSURANCE - CANADA APPLICABLE TO POLICIES BECOMING EFFECTIVE ON AND AFTER JANUARY 1, 1985 (SEE NOTE) 1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks. 2. Without in any way restricting the operation of paragraph 1 of this Clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: (A) Nuclear reactor power plants including all auxiliary property on the site, or (B) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or (C) Installations for fabricating complete fuel elements or for processing substantial quantities of prescribed substances, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or (D) Installations other than those listed in (C) above using substantial quantities of radioactive isotopes or other products of nuclear fission. 3. Without in any way restricting the operations of paragraphs 1 and 2 of this Clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installations and which normally would be insured therewith, except that this paragraph 3 shall not operate (A) Where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE REINSURANCE - CANADA APPLICABLE TO POLICIES BECOMING EFFECTIVE ON AND AFTER JANUARY 1, 1985 (SEE NOTE) 1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks. 2. Without in any way restricting the operation of paragraph 1 of this Clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: (A) Nuclear reactor power plants including all auxiliary property on the site, or (B) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or (C) Installations for fabricating complete fuel elements or for processing substantial quantities of prescribed substances, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or (D) Installations other than those listed in (C) above using substantial quantities of radioactive isotopes or other products of nuclear fission. 3. Without in any way restricting the operations of paragraphs 1 and 2 of this Clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installations and which normally would be insured therewith, except that this paragraph 3 shall not operate (A) Where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or (B) Where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2, and 3 of this Clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against. 5. This Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard. 6. The term "prescribed substances" shall have the meaning given it by the Atomic Energy Control Act R.S.C. 1974, or by any law amendatory thereof. 7. The Reinsured to be sole judge of what constitutes: (A) substantial quantities, and (B) the extent of installation, plant or site. 8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this Clause, this Agreement does

4. Without in any way restricting the operation of paragraphs 1, 2, and 3 of this Clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against. 5. This Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard. 6. The term "prescribed substances" shall have the meaning given it by the Atomic Energy Control Act R.S.C. 1974, or by any law amendatory thereof. 7. The Reinsured to be sole judge of what constitutes: (A) substantial quantities, and (B) the extent of installation, plant or site. 8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this Clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer caused by any nuclear incident as defined in the Nuclear Liability Act, nuclear explosion or contamination by radioactive material. NOTE: In addition, this Clause is applicable to all original contracts of the Reinsured in effect prior to January 1, 1985 whether new, renewal or replacement which incorporate a Nuclear Incident/Radioactive Contamination Exclusion as contained in form IBC 1105 1-82.

POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE SECTION A: EXCLUDING: (1) All Business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities. (2) Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, l968 for the purpose of insuring Property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage. SECTION B: It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations, or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder: Industrial Risk Insurers; Associated Factory Mutuals; Improved Risk Mutuals. Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs. United States Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated Aviation Underwriters, American Aviation Underwriters. SECTION B does not apply:

POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE SECTION A: EXCLUDING: (1) All Business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities. (2) Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, l968 for the purpose of insuring Property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage. SECTION B: It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations, or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder: Industrial Risk Insurers; Associated Factory Mutuals; Improved Risk Mutuals. Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs. United States Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated Aviation Underwriters, American Aviation Underwriters. SECTION B does not apply: (1) Where the Total Insured Value over all interests of the risk in question is less than $250,000,000. (2) To interests traditionally underwritten as Inland Marine or Stock and/or Contents written on a Blanket basis. (3) To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B (1). (4) To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than Railroad Schedules) and Builder's Risks on the classes of risks specified in this subsection (4) only.

SECTION C: Where this Clause attaches to catastrophe excesses, the following Section C is added: NEVERTHELESS the Reinsurer specifically agree that liability accruing to the Company from its participation in: (l) The following so-called "Coastal Pools": ALABAMA INSURANCE UNDERWRITING ASSOCIATION FLORIDA WINDSTORM UNDERWRITING ASSOCIATION LOUISIANA INSURANCE UNDERWRITING ASSOCIATION MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING ASSOCIATION TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION and

SECTION C: Where this Clause attaches to catastrophe excesses, the following Section C is added: NEVERTHELESS the Reinsurer specifically agree that liability accruing to the Company from its participation in: (l) The following so-called "Coastal Pools": ALABAMA INSURANCE UNDERWRITING ASSOCIATION FLORIDA WINDSTORM UNDERWRITING ASSOCIATION LOUISIANA INSURANCE UNDERWRITING ASSOCIATION MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING ASSOCIATION TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION and (2) All "FAIR Plan" and "Rural Risk Plan" business, including the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Property and Casualty Joint Underwriting Association ("JUA"). For all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from: (1) the inability of any other participant in such "Coastal Pool" and/or "FAIR Plan" and/or "Rural Risk Plan" and/or Residual Market Mechanisms to meet its liability. (2) any claim against such "Coastal Pool" and/or "FAIR Plan" and/or "Rural Risk Plan" and/or Residual Market Mechanisms or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any Insolvency Fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

SECTION D: Notwithstanding Section C above, in respect of the FWUA, FPCJUA and RPCJUA, where an assessment is made against the Company by the FWUA, the FPCJUA, the RPCJUA, or any combination thereof, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of: (1) The Company's assessment from the relevant entity (FWUA, FPCJUA and/or RPCJUA) for the accounting year in which the loss occurrence commenced, or (2) The product of the following: a) The Company's percentage participation in the relevant entity for the accounting year in which the loss occurrence commenced; and b) The relevant entity's total losses in such loss occurrence. Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of the FWUA, the FPCJUA and/or the RPCJUA, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of the FWUA, the FPCJUA and/or the RPCJUA. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by the FWUA, the FPCJUA and/or the RPCJUA to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by the FWUA, FPCJUA and/or RPCJUA of the collection of monies.

SECTION D: Notwithstanding Section C above, in respect of the FWUA, FPCJUA and RPCJUA, where an assessment is made against the Company by the FWUA, the FPCJUA, the RPCJUA, or any combination thereof, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of: (1) The Company's assessment from the relevant entity (FWUA, FPCJUA and/or RPCJUA) for the accounting year in which the loss occurrence commenced, or (2) The product of the following: a) The Company's percentage participation in the relevant entity for the accounting year in which the loss occurrence commenced; and b) The relevant entity's total losses in such loss occurrence. Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of the FWUA, the FPCJUA and/or the RPCJUA, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of the FWUA, the FPCJUA and/or the RPCJUA. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by the FWUA, the FPCJUA and/or the RPCJUA to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by the FWUA, FPCJUA and/or RPCJUA of the collection of monies.

NORTH AMERICAN WAR EXCLUSION CLAUSE (REINSURANCE) Approved by Lloyd's Underwriters' Fire and Non-Marine Association "As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the fifty States of the Union and the District of Columbia, its territories and possessions including Panama Canal Zone and the Commonwealth of Puerto Rico and including Bridges between the U.S.A. and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies, endorsements or binders containing a standard war or hostilities or warlike operations exclusion clause." Nevertheless, this Clause shall not be construed to apply to riots, strikes, civil commotion, vandalism, malicious damage including acts committed by the agent of any government, party or faction engaged in war, hostilities, or other warlike operation, providing such agent is acting secretly and not in connection with any operations of military or naval armed forces in the country where the interest insured is situated.

Exhibit 10(Z) First Amendment To the Management and Operations Agreement Effective January 1, 2000 Among

NORTH AMERICAN WAR EXCLUSION CLAUSE (REINSURANCE) Approved by Lloyd's Underwriters' Fire and Non-Marine Association "As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the fifty States of the Union and the District of Columbia, its territories and possessions including Panama Canal Zone and the Commonwealth of Puerto Rico and including Bridges between the U.S.A. and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies, endorsements or binders containing a standard war or hostilities or warlike operations exclusion clause." Nevertheless, this Clause shall not be construed to apply to riots, strikes, civil commotion, vandalism, malicious damage including acts committed by the agent of any government, party or faction engaged in war, hostilities, or other warlike operation, providing such agent is acting secretly and not in connection with any operations of military or naval armed forces in the country where the interest insured is situated.

Exhibit 10(Z) First Amendment To the Management and Operations Agreement Effective January 1, 2000 Among State Automobile Mutual Insurance Company State Auto Financial Corporation State Auto Property and Casualty Insurance Company State Auto National Insurance Company Milbank Insurance Company State Auto Insurance Company Stateco Financial Services, Inc. Strategic Insurance Software, Inc. 518 Property Management and Leasing, LLC

FIRST AMENDMENT TO MANAGEMENT AND OPERATIONS AGREEMENT This First Amendment (the "Amendment") to the Management and Operations Agreement dated January 1, 2000 is attached to and hereby expressly made a part of said Management and Operations Agreement (the "2000 Management Agreement") by and among State Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"), State Auto Financial Corporation, an Ohio corporation ("State Auto Financial"), State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"), State Auto National Insurance Company, an Ohio corporation ("National"), Milbank Insurance Company, a South Dakota corporation ("Milbank"), State Auto Insurance Company, an Ohio corporation ("State Auto IC"), Stateco Financial Services, Inc., an Ohio corporation ("Stateco"), Strategic Insurance Software, Inc., an Ohio corporation ("S.I.S."), and 518 Property Management and Leasing, LLC, an Ohio limited liability company ("518 PML"). BACKGROUND INFORMATION

Exhibit 10(Z) First Amendment To the Management and Operations Agreement Effective January 1, 2000 Among State Automobile Mutual Insurance Company State Auto Financial Corporation State Auto Property and Casualty Insurance Company State Auto National Insurance Company Milbank Insurance Company State Auto Insurance Company Stateco Financial Services, Inc. Strategic Insurance Software, Inc. 518 Property Management and Leasing, LLC

FIRST AMENDMENT TO MANAGEMENT AND OPERATIONS AGREEMENT This First Amendment (the "Amendment") to the Management and Operations Agreement dated January 1, 2000 is attached to and hereby expressly made a part of said Management and Operations Agreement (the "2000 Management Agreement") by and among State Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"), State Auto Financial Corporation, an Ohio corporation ("State Auto Financial"), State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"), State Auto National Insurance Company, an Ohio corporation ("National"), Milbank Insurance Company, a South Dakota corporation ("Milbank"), State Auto Insurance Company, an Ohio corporation ("State Auto IC"), Stateco Financial Services, Inc., an Ohio corporation ("Stateco"), Strategic Insurance Software, Inc., an Ohio corporation ("S.I.S."), and 518 Property Management and Leasing, LLC, an Ohio limited liability company ("518 PML"). BACKGROUND INFORMATION The parties hereto desire to make clarifying changes to the 2000 Management Agreement in order to address certain concerns of the Ohio Insurance Department relating to the accounting processes to be used by the insurers party to the 2000 Management Agreement. While this Amendment is executed on March 21, 2000, it is understood to be effective from and after January 1, 2000. STATEMENT OF AGREEMENT In consideration of the mutual covenants set forth herein and intending to be legally bound hereby, the parties hereto hereby agree as follows. 1. Capitalized terms used herein that are not otherwise defined herein shall have the meaning ascribed to such term in the 2000 Management Agreement, as amended by this Amendment. 2. Section 7 Services Fee is amended by the addition of the following sentences at the end of subsection (a): The service fee shall be allocated in accordance with applicable statutory accounting principles by each Managed Company that is an insurance company. State Auto P&C shall record this service fee as other income in accordance with applicable statutory accounting principles. 3. In Section 7, subsection (c), any reference to the phrase "management fee" shall be amended to read "service fee."

FIRST AMENDMENT TO MANAGEMENT AND OPERATIONS AGREEMENT This First Amendment (the "Amendment") to the Management and Operations Agreement dated January 1, 2000 is attached to and hereby expressly made a part of said Management and Operations Agreement (the "2000 Management Agreement") by and among State Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"), State Auto Financial Corporation, an Ohio corporation ("State Auto Financial"), State Auto Property and Casualty Insurance Company, a South Carolina corporation ("State Auto P&C"), State Auto National Insurance Company, an Ohio corporation ("National"), Milbank Insurance Company, a South Dakota corporation ("Milbank"), State Auto Insurance Company, an Ohio corporation ("State Auto IC"), Stateco Financial Services, Inc., an Ohio corporation ("Stateco"), Strategic Insurance Software, Inc., an Ohio corporation ("S.I.S."), and 518 Property Management and Leasing, LLC, an Ohio limited liability company ("518 PML"). BACKGROUND INFORMATION The parties hereto desire to make clarifying changes to the 2000 Management Agreement in order to address certain concerns of the Ohio Insurance Department relating to the accounting processes to be used by the insurers party to the 2000 Management Agreement. While this Amendment is executed on March 21, 2000, it is understood to be effective from and after January 1, 2000. STATEMENT OF AGREEMENT In consideration of the mutual covenants set forth herein and intending to be legally bound hereby, the parties hereto hereby agree as follows. 1. Capitalized terms used herein that are not otherwise defined herein shall have the meaning ascribed to such term in the 2000 Management Agreement, as amended by this Amendment. 2. Section 7 Services Fee is amended by the addition of the following sentences at the end of subsection (a): The service fee shall be allocated in accordance with applicable statutory accounting principles by each Managed Company that is an insurance company. State Auto P&C shall record this service fee as other income in accordance with applicable statutory accounting principles. 3. In Section 7, subsection (c), any reference to the phrase "management fee" shall be amended to read "service fee." 4. In all other respects the 2000 Management Agreement is hereby reaffirmed.

In Witness Whereof, the parties to the 2000 Management Agreement have caused this First Amendment to be executed as of March 21, 2000. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATE AUTO FINANCIAL CORPORATION
By: /s/ Robert H. Moone

In Witness Whereof, the parties to the 2000 Management Agreement have caused this First Amendment to be executed as of March 21, 2000. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATE AUTO FINANCIAL CORPORATION
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATE AUTO NATIONAL INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATE AUTO INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STATECO FINANCIAL SERVICES, INC.
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

MILBANK INSURANCE COMPANY
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

STRATEGIC INSURANCE SOFTWARE, INC.
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, Vice Chairman

518 PROPERTY AND MANAGEMENT LEASING, LLC
By: /s/ Robert H. Moone --------------------------------------------Robert H. Moone, President

Exhibit 10(AA) First Amendment to the June 1, 1999 Credit Agreement Dated November 1, 1999 Between State Auto Financial Corporation and State Automobile Mutual Insurance Company

FIRST AMENDMENT TO THE CREDIT AGREEMENT This First Amendment to the Credit Agreement dated effective as of November 11, 1999 (the "First Amendment") is attached to and hereby expressly made a part of the Credit Agreement dated as of June 1, 1999 (the "Credit Agreement") by and between State Auto Financial Corporation (the "Company") and State Automobile Mutual Insurance Company (the "Lender"). In consideration of the mutual covenants set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, the Company and the Lender hereby agree to amend the Credit Agreement in the following particulars as set forth in this First Amendment. Section 1. Definitions and Accounting Matters: The definition of Commitment is deleted and replaced by the following: Commitment shall mean, as to the Lender, the obligation of the Lender to make Loans in an aggregate principal amount up to but not exceeding $50,000,000. Section 2. Commitment, Loans, Notes and Prepayments: Section 2.01 Loans is deleted and replaced by the following: 2.01. Loans: The Lender agrees, on the terms and conditions of this Agreement, to make one or more term loans to the Company in dollars on or before the Commitment Termination Date in an aggregate principal amount up to but not exceeding $50,000,000. Loans paid or prepaid may not be re-borrowed. In addition, the Company hereby restates and brings forward each representation and warranty set forth in Section 6 of the Credit Agreement as though each were made as of the date of this First Amendment. The Company also specifically agrees that the covenants set forth in Section 7 of the Credit Agreement shall continue to be applicable to the Credit Agreement as amended by this First Amendment. By their signatures hereon, the parties expressly agree to the changes to the Credit Agreement as set forth in this First Amendment and each does further hereby reaffirm each and every other provision of the Credit Agreement. For the Company

Exhibit 10(AA) First Amendment to the June 1, 1999 Credit Agreement Dated November 1, 1999 Between State Auto Financial Corporation and State Automobile Mutual Insurance Company

FIRST AMENDMENT TO THE CREDIT AGREEMENT This First Amendment to the Credit Agreement dated effective as of November 11, 1999 (the "First Amendment") is attached to and hereby expressly made a part of the Credit Agreement dated as of June 1, 1999 (the "Credit Agreement") by and between State Auto Financial Corporation (the "Company") and State Automobile Mutual Insurance Company (the "Lender"). In consideration of the mutual covenants set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, the Company and the Lender hereby agree to amend the Credit Agreement in the following particulars as set forth in this First Amendment. Section 1. Definitions and Accounting Matters: The definition of Commitment is deleted and replaced by the following: Commitment shall mean, as to the Lender, the obligation of the Lender to make Loans in an aggregate principal amount up to but not exceeding $50,000,000. Section 2. Commitment, Loans, Notes and Prepayments: Section 2.01 Loans is deleted and replaced by the following: 2.01. Loans: The Lender agrees, on the terms and conditions of this Agreement, to make one or more term loans to the Company in dollars on or before the Commitment Termination Date in an aggregate principal amount up to but not exceeding $50,000,000. Loans paid or prepaid may not be re-borrowed. In addition, the Company hereby restates and brings forward each representation and warranty set forth in Section 6 of the Credit Agreement as though each were made as of the date of this First Amendment. The Company also specifically agrees that the covenants set forth in Section 7 of the Credit Agreement shall continue to be applicable to the Credit Agreement as amended by this First Amendment. By their signatures hereon, the parties expressly agree to the changes to the Credit Agreement as set forth in this First Amendment and each does further hereby reaffirm each and every other provision of the Credit Agreement. For the Company
By: Title: /s/ John R. Lowther Vice President

For the Lender

FIRST AMENDMENT TO THE CREDIT AGREEMENT This First Amendment to the Credit Agreement dated effective as of November 11, 1999 (the "First Amendment") is attached to and hereby expressly made a part of the Credit Agreement dated as of June 1, 1999 (the "Credit Agreement") by and between State Auto Financial Corporation (the "Company") and State Automobile Mutual Insurance Company (the "Lender"). In consideration of the mutual covenants set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, the Company and the Lender hereby agree to amend the Credit Agreement in the following particulars as set forth in this First Amendment. Section 1. Definitions and Accounting Matters: The definition of Commitment is deleted and replaced by the following: Commitment shall mean, as to the Lender, the obligation of the Lender to make Loans in an aggregate principal amount up to but not exceeding $50,000,000. Section 2. Commitment, Loans, Notes and Prepayments: Section 2.01 Loans is deleted and replaced by the following: 2.01. Loans: The Lender agrees, on the terms and conditions of this Agreement, to make one or more term loans to the Company in dollars on or before the Commitment Termination Date in an aggregate principal amount up to but not exceeding $50,000,000. Loans paid or prepaid may not be re-borrowed. In addition, the Company hereby restates and brings forward each representation and warranty set forth in Section 6 of the Credit Agreement as though each were made as of the date of this First Amendment. The Company also specifically agrees that the covenants set forth in Section 7 of the Credit Agreement shall continue to be applicable to the Credit Agreement as amended by this First Amendment. By their signatures hereon, the parties expressly agree to the changes to the Credit Agreement as set forth in this First Amendment and each does further hereby reaffirm each and every other provision of the Credit Agreement. For the Company
By: Title: /s/ John R. Lowther Vice President

For the Lender Commitment $50,000,000 State Automobile Mutual Insurance Company
By: /s/ Steven J. Johnston

Title:

Senior Vice President

For the Lender Commitment $50,000,000 State Automobile Mutual Insurance Company
By: /s/ Steven J. Johnston

Title:

Senior Vice President

Exhibit 21 List of subsidiaries of State Auto Financial Corporation State Auto Property and Casualty Insurance Company, a South Carolina corporation State Auto National Insurance Company, an Ohio corporation Stateco Financial Services, Inc., an Ohio corporation Strategic Insurance Software, Inc., an Ohio corporation Milbank Insurance Company, a South Dakota corporation Farmers Casualty Insurance Company, an Iowa corporation Mid-Plains Insurance Company, an Iowa corporation State Auto Insurance Company, an Ohio corporation 518 Property Management and Leasing, LLC, an Ohio limited liability company

Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement on Forms S-8 pertaining to the 1991 Stock Option Plan, the 1991 Directors' Stock Option Plan and the 1991 Employee Stock Purchase and Dividend Reinvestment Plan, and on Form S-3 pertaining to the Monthly Stock Purchase Plan for Independent Agents of our report dated February 18, 2000, with respect to the consolidated financial statements and schedules of State Auto Financial Corporation and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/Ernst & Young LLP Columbus, Ohio March 23, 2000

Exhibit 21 List of subsidiaries of State Auto Financial Corporation State Auto Property and Casualty Insurance Company, a South Carolina corporation State Auto National Insurance Company, an Ohio corporation Stateco Financial Services, Inc., an Ohio corporation Strategic Insurance Software, Inc., an Ohio corporation Milbank Insurance Company, a South Dakota corporation Farmers Casualty Insurance Company, an Iowa corporation Mid-Plains Insurance Company, an Iowa corporation State Auto Insurance Company, an Ohio corporation 518 Property Management and Leasing, LLC, an Ohio limited liability company

Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement on Forms S-8 pertaining to the 1991 Stock Option Plan, the 1991 Directors' Stock Option Plan and the 1991 Employee Stock Purchase and Dividend Reinvestment Plan, and on Form S-3 pertaining to the Monthly Stock Purchase Plan for Independent Agents of our report dated February 18, 2000, with respect to the consolidated financial statements and schedules of State Auto Financial Corporation and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/Ernst & Young LLP Columbus, Ohio March 23, 2000

Exhibit 23 (Continued) STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES (a majority-owned subsidiary of State Automobile Mutual Insurance Company) Report of Independent Auditors The Board of Directors and Stockholders State Auto Financial Corporation We have audited the accompanying consolidated balance sheets of State Auto Financial Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedules listed in the Index at Item

Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement on Forms S-8 pertaining to the 1991 Stock Option Plan, the 1991 Directors' Stock Option Plan and the 1991 Employee Stock Purchase and Dividend Reinvestment Plan, and on Form S-3 pertaining to the Monthly Stock Purchase Plan for Independent Agents of our report dated February 18, 2000, with respect to the consolidated financial statements and schedules of State Auto Financial Corporation and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/Ernst & Young LLP Columbus, Ohio March 23, 2000

Exhibit 23 (Continued) STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES (a majority-owned subsidiary of State Automobile Mutual Insurance Company) Report of Independent Auditors The Board of Directors and Stockholders State Auto Financial Corporation We have audited the accompanying consolidated balance sheets of State Auto Financial Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedules listed in the Index at Item 14(a)(2). These consolidated financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of State Auto Financial Corporation and subsidiaries as of December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/Ernst & Young LLP Columbus, Ohio February 18, 2000

Exhibit 23 (Continued) STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES (a majority-owned subsidiary of State Automobile Mutual Insurance Company) Report of Independent Auditors The Board of Directors and Stockholders State Auto Financial Corporation We have audited the accompanying consolidated balance sheets of State Auto Financial Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedules listed in the Index at Item 14(a)(2). These consolidated financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of State Auto Financial Corporation and subsidiaries as of December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/Ernst & Young LLP Columbus, Ohio February 18, 2000

ARTICLE 7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO FINANCIAL COPORATION'S AUDITED FINANCIAL STATEMENTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END DEBT HELD FOR SALE DEBT CARRYING VALUE DEBT MARKET VALUE EQUITIES MORTGAGE REAL ESTATE TOTAL INVEST CASH RECOVER REINSURE DEFERRED ACQUISITION TOTAL ASSETS POLICY LOSSES UNEARNED PREMIUMS

YEAR DEC 31 1999 JAN 01 1999 DEC 31 1999 527,806,000 43,981,000 0 55,518,000 0 0 627,305,000 24,560,000 0 28,936,000 759,945,000 232,489,000 153,570,000

ARTICLE 7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO FINANCIAL COPORATION'S AUDITED FINANCIAL STATEMENTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

PERIOD TYPE YEAR FISCAL YEAR END DEC 31 1999 PERIOD START JAN 01 1999 PERIOD END DEC 31 1999 DEBT HELD FOR SALE 527,806,000 DEBT CARRYING VALUE 43,981,000 DEBT MARKET VALUE 0 EQUITIES 55,518,000 MORTGAGE 0 REAL ESTATE 0 TOTAL INVEST 627,305,000 CASH 24,560,000 RECOVER REINSURE 0 DEFERRED ACQUISITION 28,936,000 TOTAL ASSETS 759,945,000 POLICY LOSSES 232,489,000 UNEARNED PREMIUMS 153,570,000 POLICY OTHER 0 POLICY HOLDER FUNDS 0 NOTES PAYABLE 45,500,000 PREFERRED MANDATORY 0 PREFERRED 0 COMMON 105,888,000 OTHER SE 211,799,000 TOTAL LIABILITY AND EQUITY 759,945,000 PREMIUMS 392,058,000 INVESTMENT INCOME 34,262,000 INVESTMENT GAINS 2,555,000 OTHER INCOME 11,996,000 BENEFITS 264,628,000 UNDERWRITING AMORTIZATION 92,441,000 UNDERWRITING OTHER 19,331,000 INCOME PRETAX 56,985,000 INCOME TAX 14,169,000 INCOME CONTINUING 42,816,000 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET INCOME 42,816,000 EPS BASIC 1.05 EPS DILUTED 1.03 RESERVE OPEN 225,914,000 PROVISION CURRENT 271,507,000 PROVISION PRIOR (6,878,000) PAYMENTS CURRENT 168,512,000 PAYMENTS PRIOR 100,349,000 RESERVE CLOSE 221,682,000 CUMULATIVE DEFICIENCY (6,878,000) Beginning reserves have been increased $13,247,000 due to the January 1,1999 acquisition of Farmers Casualty Insurance Co. and its wholly-owned subsidiary and also $7,633,000 due to the January 1, 1999 increase in pooling participation percentage.