Put Agreement - STATE AUTO FINANCIAL CORP - 11-13-1996 by STFC-Agreements

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									10(BB) PUT AGREEMENT BETWEEN STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, STATE AUTO FINANCIAL CORPORATION AND THE CHASE MANHATTAN BANK DATED AUGUST 16, 1996

EXHIBIT D to Credit Agreement ************************************************************ STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO FINANCIAL CORPORATION

PUT AGREEMENT Dated as of August 16, 1996

THE CHASE MANHATTAN BANK, as Administrative Agent ************************************************************

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.

Section 1. Definitions and Accounting Terms............................................................. 1.02 Accounting Terms and Determinations....................................................... Section 2. Put.......................................................................................... 2.01 Put....................................................................................... 2.02 Purchase of Loans......................................................................... 2.03 Purchase of Pledged Stock................................................................. 2.04 Obligations Unconditional................................................................. 2.05 Reinstatement............................................................................. 2.06 Payments.................................................................................. 2.07 U.S. Taxes................................................................................ Section 3. Representations and Warranties............................................................... 3.01 Corporate Existence....................................................................... 3.02 Financial Condition....................................................................... 3.03 Litigation................................................................................ 3.04 No Breach................................................................................. 3.05 Action.................................................................................... 3.06 Approvals................................................................................. 3.07 ERISA.....................................................................................

EXHIBIT D to Credit Agreement ************************************************************ STATE AUTOMOBILE MUTUAL INSURANCE COMPANY STATE AUTO FINANCIAL CORPORATION

PUT AGREEMENT Dated as of August 16, 1996

THE CHASE MANHATTAN BANK, as Administrative Agent ************************************************************

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.

Section 1. Definitions and Accounting Terms............................................................. 1.02 Accounting Terms and Determinations....................................................... Section 2. Put.......................................................................................... 2.01 Put....................................................................................... 2.02 Purchase of Loans......................................................................... 2.03 Purchase of Pledged Stock................................................................. 2.04 Obligations Unconditional................................................................. 2.05 Reinstatement............................................................................. 2.06 Payments.................................................................................. 2.07 U.S. Taxes................................................................................ Section 3. Representations and Warranties............................................................... 3.01 Corporate Existence....................................................................... 3.02 Financial Condition....................................................................... 3.03 Litigation................................................................................ 3.04 No Breach................................................................................. 3.05 Action.................................................................................... 3.06 Approvals................................................................................. 3.07 ERISA..................................................................................... 3.08 Taxes..................................................................................... 3.09 Investment Company Act.................................................................... 3.10 Public Utility Holding Company Act........................................................ 3.11 Material Agreements and Liens............................................................. 3.12 Environmental Matters..................................................................... 3.13 Capitalization............................................................................ 3.14 Subsidiaries, Etc......................................................................... 3.15 True and Complete Disclosure.............................................................. Section 4. Covenants of State Auto Mutual............................................................... 4.01 Financial Statements Etc.................................................................. 4.02 Litigation................................................................................ 4.03 Existence, Etc............................................................................ 4.04 Insurance................................................................................. 4.05 Prohibition of Fundamental Changes........................................................ 4.06 Limitation on Liens....................................................................... 4.07 Indebtedness.............................................................................. 4.08 Sale/Leaseback Transactions............................................................... 4.09 Investments...............................................................................

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.

Section 1. Definitions and Accounting Terms............................................................. 1.02 Accounting Terms and Determinations....................................................... Section 2. Put.......................................................................................... 2.01 Put....................................................................................... 2.02 Purchase of Loans......................................................................... 2.03 Purchase of Pledged Stock................................................................. 2.04 Obligations Unconditional................................................................. 2.05 Reinstatement............................................................................. 2.06 Payments.................................................................................. 2.07 U.S. Taxes................................................................................ Section 3. Representations and Warranties............................................................... 3.01 Corporate Existence....................................................................... 3.02 Financial Condition....................................................................... 3.03 Litigation................................................................................ 3.04 No Breach................................................................................. 3.05 Action.................................................................................... 3.06 Approvals................................................................................. 3.07 ERISA..................................................................................... 3.08 Taxes..................................................................................... 3.09 Investment Company Act.................................................................... 3.10 Public Utility Holding Company Act........................................................ 3.11 Material Agreements and Liens............................................................. 3.12 Environmental Matters..................................................................... 3.13 Capitalization............................................................................ 3.14 Subsidiaries, Etc......................................................................... 3.15 True and Complete Disclosure.............................................................. Section 4. Covenants of State Auto Mutual............................................................... 4.01 Financial Statements Etc.................................................................. 4.02 Litigation................................................................................ 4.03 Existence, Etc............................................................................ 4.04 Insurance................................................................................. 4.05 Prohibition of Fundamental Changes........................................................ 4.06 Limitation on Liens....................................................................... 4.07 Indebtedness.............................................................................. 4.08 Sale/Leaseback Transactions............................................................... 4.09 Investments............................................................................... 4.10 Certain Financial Covenants............................................................... 4.11 NAIC Ratio................................................................................

4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21

Interest Rate Protection Agreements....................................................... Lines of Business......................................................................... Ceded Reinsurance......................................................................... Transactions with Affiliates.............................................................. Modifications of Certain Documents........................................................ Indemnity for Certain Costs............................................................... Delivery of Documents on the Closing Date................................................. Delivery of Documents on Each Borrowing Date.............................................. Delivery of Documents in Connection with the Extension of the Commitment Termination Date....................................................................... Consent to Assignment, etc................................................................

Section 5. Miscellaneous................................................................................ 5.01 Waiver.................................................................................... 5.02 Notices................................................................................... 5.03 Expenses, Etc............................................................................. 5.04 Amendments, Etc........................................................................... 5.05 Successors and Assigns.................................................................... 5.06 Captions.................................................................................. 5.07 Counterparts.............................................................................. 5.08 Governing Law; Submission to Jurisdiction................................................. 5.09 Waiver of Jury Trial......................................................................

4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21

Interest Rate Protection Agreements....................................................... Lines of Business......................................................................... Ceded Reinsurance......................................................................... Transactions with Affiliates.............................................................. Modifications of Certain Documents........................................................ Indemnity for Certain Costs............................................................... Delivery of Documents on the Closing Date................................................. Delivery of Documents on Each Borrowing Date.............................................. Delivery of Documents in Connection with the Extension of the Commitment Termination Date....................................................................... Consent to Assignment, etc................................................................

Section 5. Miscellaneous................................................................................ 5.01 Waiver.................................................................................... 5.02 Notices................................................................................... 5.03 Expenses, Etc............................................................................. 5.04 Amendments, Etc........................................................................... 5.05 Successors and Assigns.................................................................... 5.06 Captions.................................................................................. 5.07 Counterparts.............................................................................. 5.08 Governing Law; Submission to Jurisdiction................................................. 5.09 Waiver of Jury Trial...................................................................... 5.10 Treatment of Certain Information; Confidentiality......................................... 5.11 No Liability.............................................................................. 5.12 Further Assurances........................................................................ 5.13 Severability.............................................................................. 5.14 Third-Party Beneficiaries.................................................................

SCHEDULE SCHEDULE SCHEDULE SCHEDULE

I II III IV

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Material Agreements and Liens Subsidiaries and Investments [Intentionally Omitted] Equity Rights and Redemption Obligations

EXHIBIT A EXHIBIT B

- Form of Put Notice - Form of Opinion of Counsel to the State Auto Obligors

-4PUT AGREEMENT dated as of August 16, 1996, between: 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 THE CHASE MANHATTAN BANK, a New York banking corporation, as agent (in such capacity, together with its successors in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders party to the Credit Agreement referred to below. SAF Funding Corporation (the "COMPANY"), certain lenders party thereto from time to time (the "LENDERS") and the Administrative Agent are parties to a Credit Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for loans to be made by the Lenders to the Company in an aggregate principal amount not exceeding $100,000,000. The proceeds of such loans are to be used by the Company to purchase certain preferred stock of State Auto Financial pursuant to a Standby Purchase Agreement, dated as of the date hereof, among the Company and State Auto Financial (as modified and supplemented and in effect from time to time as permitted hereby, the "STANDBY PURCHASE AGREEMENT"). 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

-4PUT AGREEMENT dated as of August 16, 1996, between: 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 THE CHASE MANHATTAN BANK, a New York banking corporation, as agent (in such capacity, together with its successors in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders party to the Credit Agreement referred to below. SAF Funding Corporation (the "COMPANY"), certain lenders party thereto from time to time (the "LENDERS") and the Administrative Agent are parties to a Credit Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for loans to be made by the Lenders to the Company in an aggregate principal amount not exceeding $100,000,000. The proceeds of such loans are to be used by the Company to purchase certain preferred stock of State Auto Financial pursuant to a Standby Purchase Agreement, dated as of the date hereof, among the Company and State Auto Financial (as modified and supplemented and in effect from time to time as permitted hereby, the "STANDBY PURCHASE AGREEMENT"). 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: Section 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 1.01 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

-5employee 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. "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

-5employee 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. "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 GAAP. "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, 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

-6is 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.

-6is 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. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those that, in accordance with the last sentence of Section 1.02(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "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 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 and Milbank 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 and (c) 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 and Milbank 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

-7Rate 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 Administrative 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.

-7Rate 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 Administrative 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. "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 Administrative 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, State Auto Life 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. "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. "OBLIGATIONS" shall have the meaning assigned to such term in Section 2.04 hereof.

-8"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.

-8"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 Administrative 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) an Event of 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; (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 Administrative 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;

-9(e) State Auto Mutual shall default in the performance of any of its obligations under any of Sections 4.05 through 4.09 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

-9(e) State Auto Mutual shall default in the performance of any of its obligations under any of Sections 4.05 through 4.09 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); (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;

-10(k) an event or condition specified in Section 4.01(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 Majority 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 Majority 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

-10(k) an event or condition specified in Section 4.01(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 Majority 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 Majority 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 Majority 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 (1) 12 consecutive months if no Loans are outstanding or (2) 25 consecutive months if any Loans are outstanding, a majority of the Board of Directors of State Auto Financial or State Auto P&C, as the case may be, shall no longer be composed of individuals (i) who were members of said Board on the first day of such period, (ii) whose election or nomination to said Board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of said Board or (iii) whose election or nomination to said Board was approved by individuals referred to in clauses (i) and (ii) 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 10.09 of the Credit Agreement, or the validity or enforceability thereof shall be contested by either State Auto Obligor; (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.

-11"PUT NOTICE" shall mean an instrument executed by the Administrative 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

-11"PUT NOTICE" shall mean an instrument executed by the Administrative 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 Section 1.02(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.

-12"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.

-12"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. 1.02 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 Administrative Agent hereunder shall (unless otherwise disclosed to the Administrative Agent in writing at the time of delivery thereof in the manner described in subsection (b) below) be prepared, in accordance with generally accepted accounting principles or statutory accounting practices, as the case may be, applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Administrative Agent hereunder (which, prior to the delivery of the first financial statements under Section 4.01 hereof, shall mean the audited, or annual statutory, financial statements as at December 31, 1995 referred to in Section 3.02 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 generally accepted accounting principles or statutory accounting practices, as the case may be, applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Administrative Agent pursuant to Section 4.01 hereof (or, prior to the delivery of the first financial statements under Section 4.01 hereof, used in the preparation of the audited, or annual statutory, financial statements as at December 31, 1995 referred to in Section 3.02 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 Majority Lenders (through the Administrative 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 4.01 hereof, shall mean the audited, or annual statutory, financial statements referred to in Section 3.02 hereof). (b) State Auto Mutual shall deliver to the Administrative Agent at the same time as the delivery of any annual or quarterly financial statement under Section 4.01 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 Section 4 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.

-13Section 2. PUT. 2.01 PUT. At any time after the occurrence and during the continuance of a Put Event, the Administrative Agent may (with the approval of the Majority 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 Administrative Agent, all (but not less than all) of the Pledged Stock. In the event that a Put Event has occurred and the Administrative Agent (with the consent of the Majority

-13Section 2. PUT. 2.01 PUT. At any time after the occurrence and during the continuance of a Put Event, the Administrative Agent may (with the approval of the Majority 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 Administrative Agent, all (but not less than all) of the Pledged Stock. In the event that a Put Event has occurred and the Administrative Agent (with the consent of the Majority 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 Administrative 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. 2.02 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 Administrative 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 5.05 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 Administrative Agent and notified in writing by the Administrative 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 1.01 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. 2.03 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 Administrative Agent, and the Administrative Agent shall sell, assign and transfer to State Auto Mutual, the Pledged Stock, (b) State Auto Mutual shall pay to the Administrative 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

-14determined by the Administrative Agent and notified in writing by the Administrative Agent to State Auto Mutual prior to such Put Purchase Date) and (c) the Administrative Agent shall apply such amount to the payment of the Obligations owing to the Lenders under the Credit Documents. 2.04 OBLIGATIONS UNCONDITIONAL. The obligations of State Auto Mutual under Sections 2.01, 2.02,

-14determined by the Administrative Agent and notified in writing by the Administrative Agent to State Auto Mutual prior to such Put Purchase Date) and (c) the Administrative Agent shall apply such amount to the payment of the Obligations owing to the Lenders under the Credit Documents. 2.04 OBLIGATIONS UNCONDITIONAL. The obligations of State Auto Mutual under Sections 2.01, 2.02, 2.03 and 5.03 hereof are absolute, unconditional and irrevocable, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Company 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 2.04 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 Company. 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 Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Company under the Credit Agreement, the Notes, the Pledge Agreements or any other agreement or instrument referred therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. 2.05 REINSTATEMENT. If for any reason any payment received by the Administrative Agent in respect of any of the Obligations prior to the consummation by State Auto Mutual of a purchase contemplated by Section 2.02 or 2.03 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 Administrative Agent and

-15such Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration. 2.06 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 Administrative Agent at an account designated by the Administrative Agent to State Auto Mutual in writing,

-15such Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration. 2.06 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 Administrative Agent at an account designated by the Administrative Agent to State Auto Mutual in writing, not later than 1:00 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). (b) The Administrative 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 Administrative Agent (with notice to State Auto Mutual), PROVIDED that the Administrative Agent's failure to give such notice shall not affect the validity thereof. 2.07 U.S. TAXES. (a) State Auto Mutual agrees to pay to each Lender that is not a U.S. Person such additional amounts as are necessary in order that the net payment of any amount due to such non-U.S. Person hereunder after deduction for or withholding in respect of any U.S. Taxes imposed with respect to such payment (or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less than the amount stated herein to be then due and payable, PROVIDED that the foregoing obligation to pay such additional amounts shall not apply: (i) to any payment to any Lender hereunder unless such Lender is, on the date hereof (or on the date it becomes a Lender as provided in Section 11.05(b) of the Credit Agreement) and on the date of any change in the Applicable Lending Office of such Lender, either entitled to submit a Form 1001 (relating to such Lender and entitling it to a complete exemption from withholding on all interest to be received by it under the Credit Agreement in respect of the Loans) or Form 4224 (relating to all interest to be received by such Lender under the Credit Agreement in respect of the Loans), or (ii) to any U.S. Taxes imposed solely by reason of the failure by such non-U.S. Person to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such non-U.S. Person if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes. For the purposes of this Section 2.07(a), (w) "U.S. PERSON" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America or any State thereof, or any estate or trust that is subject to Federal income taxation regardless of the source of its income, (x) "U.S. TAXES" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein (but excluding any taxes imposed as a result of a present or former connection between such non-U.S. Person or the Administrative Agent and the United States of America or any taxing authority thereof or therein (except a connection arising solely from such non-U.S. Person or the Administrative Agent having executed, delivered or performed its obligations or received a payment under or enforced this Agreement or the Notes), (y) "FORM 1001" shall mean

-16Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America and (z) "FORM 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to

-16Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America and (z) "FORM 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates). Each of the Forms referred to in the foregoing clauses (C) and (D) shall include such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates. (b) Within 30 days after paying any amount to the Administrative Agent or any Lender from which it is required by law to make any deduction or withholding, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, State Auto Mutual shall deliver to the Administrative Agent for delivery to such non-U.S. Person evidence satisfactory to such Person of such deduction, withholding or payment (as the case may be). Section 3. REPRESENTATIONS AND WARRANTIES. Each State Auto Obligor represents and warrants (with respect to itself and its Subsidiaries only) to the Administrative Agent and the Lenders that: 3.01 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. 3.02 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, 1995 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 Financial and its Subsidiaries as at March 31, 1996 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 March 31, 1996, 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 March 31, 1996, 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 March 31, 1996.

-17(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, 1995, and the quarterly Statutory Statement of each Insurance Entity for the fiscal quarter ended March 31, 1996, 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, 1995, and fiscal quarter ended March 31, 1996, in accordance with statutory accounting practices prescribed or permitted by the Applicable Insurance Regulatory Authority. Since March 31, 1996, there has been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of State Auto Mutual

-17(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, 1995, and the quarterly Statutory Statement of each Insurance Entity for the fiscal quarter ended March 31, 1996, 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, 1995, and fiscal quarter ended March 31, 1996, in accordance with statutory accounting practices prescribed or permitted by the Applicable Insurance Regulatory Authority. Since March 31, 1996, 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 March 31, 1996. 3.03 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. 3.04 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. 3.05 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). 3.06 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.

-183.07 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 Administrative Agent under Section 4.01(j) hereof. 3.08 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

-183.07 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 Administrative Agent under Section 4.01(j) hereof. 3.08 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. 3.09 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. 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

-19force 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

-19force 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 35,000,000 shares consisting of (a) 30,000,000 shares of common stock, no par value, of which 18,086,863 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. As of the date hereof, 67% 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 Standby Purchase Agreement and as set forth in Part A of Schedule IV hereto, there are no outstanding Equity Rights with respect to State Auto Financial and (ii) except as set forth in Part B of Schedule IV 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 (i) Investments disclosed in Part A of said Schedule II hereto and any other Investments existing as of the date hereof permitted under Section 4.09 hereof and (ii) 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 Administrative 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 Administrative 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

-20writing furnished to the Administrative 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 Administrative Agent or any Lender, and based on such documents and information as it has deemed appropriate, its own

-20writing furnished to the Administrative 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 Administrative 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 Administrative Agent or any Lender, and based 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 3.02(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. Section 4. COVENANTS OF STATE AUTO MUTUAL. State Auto Mutual covenants and agrees with the Administrative Agent that, so long as any Obligations are outstanding or any Commitments are in effect: 4.01 FINANCIAL STATEMENTS ETC. State Auto Mutual shall deliver to the Administrative 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); (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

-21recognized 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 five Business Days after the date on which each Insurance Entity is required (after giving effect to any extensions) to file with the Applicable Insurance Regulatory Authority its quarterly Statutory Statement for each of the first three

-21recognized 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 five Business Days after the date on which each Insurance Entity is required (after giving effect to any extensions) to file with the Applicable Insurance Regulatory Authority its quarterly Statutory Statement for each of the first three quarterly fiscal periods of each fiscal year of such Insurance Entity, such quarterly Statutory Statement of such Insurance Entity 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 five Business Days after the date on which each Insurance Entity is required (after giving effect to any extensions) to file with the Applicable Insurance Regulatory Authority its annual Statutory Statement, 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 4.01(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 shareholders of State Auto Mutual generally, copies of all financial statements, reports and proxy statements so mailed; (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

-22financial 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

-22financial 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; (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;

-23(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

-23(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 Administrative Agent may reasonably request. 4.02 LITIGATION. State Auto Mutual will promptly give to the Administrative 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. 4.03 EXISTENCE, ETC. State Auto Mutual will: (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 4.03 shall prohibit any transaction expressly permitted under Section 4.05 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

-24(e) and will cause each of its Material Subsidiaries to, permit representatives of any Lender or the Administrative 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 Administrative Agent (as the case may be). 4.04 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

-24(e) and will cause each of its Material Subsidiaries to, permit representatives of any Lender or the Administrative 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 Administrative Agent (as the case may be). 4.04 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 4.04 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 self-insure against such hazards and risks, and in such amounts as is customary for corporations of a similar size and in similar lines of business. 4.05 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 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 4.09 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 4.05: (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

-25constitute 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,

-25constitute 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 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. 4.06 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 GAAP (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 1.01 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

-26any 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;

-26any 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; (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 $10,000,000 in the aggregate at any one time outstanding. 4.07 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 4.06(j) or 4.06(k) hereof) up to but not exceeding $10,000,000 at any one time outstanding. 4.08 SALE/LEASEBACK TRANSACTIONS. State Auto Mutual will not, nor will it permit any of its Material Subsidiaries to, enter into any 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

-27transferred 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 would exceed 10% of the Statutory Surplus of State Auto Mutual at such time. For purposes of this Section 4.08, "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

-27transferred 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 would exceed 10% of the Statutory Surplus of State Auto Mutual at such time. For purposes of this Section 4.08, "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. 4.09 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 4.09. (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 4.09(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) $400,000,000, 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) $250,000,000, 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 $80,000,000 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 that no Loans are outstanding at such time) and (b) 2.50 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

-28all 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).

-28all 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). 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 Administrative 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 State Auto Life Insurance Company, Strategic Insurance Software, Inc. and Stateco Financial Services, Inc., to the extent conducted as of the date hereof, are related to the business of owning and operating property and casualty insurance companies). 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 Administrative 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;

-29(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

-29(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. 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 Administrative Agent (with the approval of the Majority 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 Administrative Agent that it will indemnify the Company, promptly upon demand therefor, for all or any portion of (a) the fees, costs and expenses payable by the Company under Section 5.01, 5.05 or 5.06 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 Company under Section 3.02 of the Credit Agreement at the Post-Default Rate 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 Administrative Agent agrees that the Company shall be a third-party beneficiary of this Agreement.

-304.18 DELIVERY OF DOCUMENTS ON THE CLOSING DATE. On the Closing Date, State Auto Mutual will deliver to the Administrative Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Administrative 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

-304.18 DELIVERY OF DOCUMENTS ON THE CLOSING DATE. On the Closing Date, State Auto Mutual will deliver to the Administrative Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Administrative 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 Administrative 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 Section 3 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); (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 Administrative 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 Administrative 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 Administrative Agent or any Lender or special New York counsel to Chase may reasonably request. 4.19 DELIVERY OF DOCUMENTS ON EACH BORROWING DATE. On the date of each borrowing by the Company under the Credit Agreement (and as a condition thereto), State Auto Mutual will deliver to the Administrative Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Administrative 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

-31with 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 Section 3 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 3.02 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 Company 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;

-31with 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 Section 3 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 3.02 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 Company 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 Administrative Agent or any Lender or special New York counsel to Chase 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 2.10 of the Credit Agreement) State Auto Mutual will deliver to the Administrative Agent (with sufficient copies for each Lender) each of the following documents each of which shall be satisfactory to the Administrative 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 Section 3 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) $400,000,000 for earthquake peril and (y) $250,000,000 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 Administrative 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 an Event of Default, the Administrative Agent and any designee or assignee thereof shall be entitled to exercise any and all rights of the Company 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

-32Pledge Agreement, or otherwise after and during the continuance of an Event of Default, the Administrative 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 Company under the Standby Purchase Agreement or the Pledged Stock. Nothing herein shall require the Administrative Agent or such designee or assignee to cure any default of the Company under the Standby Purchase Agreement or to perform any act, duty or obligation of the Company under the Standby Purchase Agreement, but shall only give them the option so to do.

-32Pledge Agreement, or otherwise after and during the continuance of an Event of Default, the Administrative 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 Company under the Standby Purchase Agreement or the Pledged Stock. Nothing herein shall require the Administrative Agent or such designee or assignee to cure any default of the Company under the Standby Purchase Agreement or to perform any act, duty or obligation of the Company 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 Administrative 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 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 Administrative Agent or its assignee or designee, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Company to the Administrative 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 Administrative Agent of any of the remedies set forth in Section 5.05 of the Company Pledge Agreement, the Administrative Agent may assign its rights and interests and the rights and interests of the Company 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 Administrative Agent shall have previously consented in writing to such release or delegation, as the case may be. Section 5. MISCELLANEOUS. 5.01 WAIVER. No failure on the part of the Administrative 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. 5.02 NOTICES. All notices, requests and other communications provided for herein shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof (or, as to the Administrative Agent, on the signature pages of the Credit Agreement) or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise

-33provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 5.03 EXPENSES, ETC. State Auto Mutual and State Auto Financial jointly and severally agree to pay or reimburse each of the Lenders and the Administrative Agent for: (a) all reasonable and documented out-ofpocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase) in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the other Basic Documents and the making of the Loans under the Credit Agreement and (ii) the negotiation or preparation of

-33provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 5.03 EXPENSES, ETC. State Auto Mutual and State Auto Financial jointly and severally agree to pay or reimburse each of the Lenders and the Administrative Agent for: (a) all reasonable and documented out-ofpocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase) in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the other Basic Documents and the making of the Loans under the Credit Agreement and (ii) the negotiation or preparation of any modification, supplement or waiver of any of the terms of this Agreement or any of the other Basic Documents (whether or not consummated); (b) all reasonable out-of-pocket costs and expenses of the Lenders and the Administrative Agent (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any Put Event (and any event that with notice or lapse of time or both would become a Put Event) and any enforcement or collection proceedings with respect to any Basic Document resulting therefrom, including, without limitation, all manner of participation in or other involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 5.03; and (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Basic Documents or any other document referred to herein or therein. Each of State Auto Mutual and State Auto Financial hereby jointly and severally agrees to indemnify the Administrative Agent and each Lender and their respective directors, officers, employees, attorneys and agents (each, an "INDEMNIFIED PERSON") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them (including, without limitation, any and all losses, liabilities, claims, damages or expenses incurred by the Administrative Agent to any Lender, whether or not the Administrative Agent or any Lender is a party thereto) arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to or arising out of the Loans under the Credit Agreement or any actual or proposed use by the Company of the proceeds thereof or otherwise relating to or arising out of any Basic Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses claimed by an Indemnified Person to the extent finally determined by a court of competent jurisdiction to have been incurred directly and primarily by reason of the gross negligence or willful misconduct of such Indemnified Person. Promptly after receipt by any Indemnified Person of notice of any complaint or the commencement of any action or proceeding with respect to which indemnification is being sought hereunder, such Indemnified Person will notify State Auto Mutual in writing of such complaint or of the commencement of such action or proceeding, but failure so to notify State Auto Mutual will not relieve the State Auto Obligors from any liability which the State Auto Obligors may have hereunder or otherwise, except to the extent that such failure materially prejudices the rights of the State Auto Obligors. If so elected by either State Auto Obligor, such State Auto Obligor will assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to such Indemnified Person and the payment of the fees and disbursements of such counsel. In the event, however, that such Indemnified Person determines in its reasonable judgment that having common counsel would present such counsel with a conflict of interest or if neither State Auto Obligor assumes the defense of the action or proceeding in a timely manner, then such Indemnified Person may employ separate counsel to represent or defend such Indemnified Person in any such action or proceeding and the

-34State Auto Obligors jointly and severally agree to pay or reimburse such Indemnified Person for the reasonable fees and disbursements of such counsel, PROVIDED, however, that the State Auto Obligors will not be required to pay or reimburse the fees and disbursements of more than one separate counsel for all Indemnified Persons in any jurisdiction in any single action or proceeding. In any action or proceeding the defense of which a State Auto Obligor assumes, the Indemnified Person (a) will cooperate with the such State Auto Obligor in defending such

-34State Auto Obligors jointly and severally agree to pay or reimburse such Indemnified Person for the reasonable fees and disbursements of such counsel, PROVIDED, however, that the State Auto Obligors will not be required to pay or reimburse the fees and disbursements of more than one separate counsel for all Indemnified Persons in any jurisdiction in any single action or proceeding. In any action or proceeding the defense of which a State Auto Obligor assumes, the Indemnified Person (a) will cooperate with the such State Auto Obligor in defending such action or proceeding, but the State Auto Obligors jointly and severally agree to pay or reimburse all expenses of such Indemnified Person of so cooperating and (b) will have the right to participate in such litigation and to retain its own counsel at such Indemnified Person's own expense. No Indemnified Person shall be responsible or liable to State Auto Mutual or any of its Subsidiaries, the Company or any other Person for any consequential damages that may be alleged in connection with any of the Basic Documents and the transactions contemplated thereby. 5.04 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 Administrative Agent (with the consent of the Lenders as specified in Section 10.09 of the Credit Agreement), and any provision of this Agreement may be waived by the Administrative Agent (with the consent of the Lenders as specified in Section 10.09 of the Credit Agreement). 5.05 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 Administrative Agent (with the consent of all of the Lenders). 5.06 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. 5.07 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. 5.08 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. Each State Auto Obligor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), and of any other appellate court in the State of New York, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each State Auto Obligor 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. 5.09 WAIVER OF JURY TRIAL. EACH OF STATE AUTO MUTUAL, STATE AUTO FINANCIAL AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 5.10 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.

-35(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

-35(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) Each Lender and the Administrative Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by either State Auto Obligor pursuant to this Agreement that is identified by such State Auto Obligor as being confidential at the time the same is delivered to the Administrative Agent, PROVIDED that nothing herein shall limit the disclosure of any such information (i) after such information shall have become public (other than through a violation of this Section 5.10), (ii) to the extent required by statute, rule, regulation or judicial process, (iii) to counsel for any of the Lenders or the Administrative Agent, (iv) to bank examiners (or any other regulatory authority having jurisdiction over any Lender or the Administrative Agent), or to auditors or accountants, (v) to the Administrative Agent or any other Lender (or to Chase Securities Inc.), (vi) in connection with any litigation to which any one or more of the Lenders or the Administrative Agent is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Basic Document, (vii) to a subsidiary or affiliate of such Lender as provided in paragraph (a) above or (viii) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective Lender an acknowledgement to the effect that it is bound by the provisions of this Section 5.10(b), which acknowledgement may be included as part of the respective assignment or participation agreement pursuant to which such assignee or participant acquires an interest in the Loans under the Credit Agreement); PROVIDED, FURTHER, that in no event shall any Lender or the Administrative Agent be obligated or required to return any materials furnished by either State Auto Obligor. 5.11 NO LIABILITY. Except as expressly provided herein, neither the Administrative 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 Company or any other Person or any other obligation of or the performance or observance by the Company, 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. 5.12 FURTHER ASSURANCES. Each State Auto Obligor agrees that, from time to time upon the written request of the Administrative 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.

-365.13 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 and shall be liberally construed in favor of the Administrative Agent and the Lenders 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. 5.14 THIRD-PARTY BENEFICIARIES. Each State Auto Obligor agrees that each Lender shall be a thirdparty beneficiary of this Agreement and shall be entitled to enforce its rights hereunder as fully as if it were a party

-365.13 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 and shall be liberally construed in favor of the Administrative Agent and the Lenders 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. 5.14 THIRD-PARTY BENEFICIARIES. Each State Auto Obligor agrees that each Lender shall be a thirdparty beneficiary of this Agreement and shall be entitled to enforce its rights hereunder as fully as if it were a party hereto. 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/ Robert H. Moone --------------------------------------Title: 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/ Robert H. Moone --------------------------------------Title: President

Address for Notices: State Auto Financial Corporation 518 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: 614-464-4911

-37Telephone No.: 614-464-5052

-38-

-37Telephone No.: 614-464-5052

-38THE CHASE MANHATTAN BANK, as Administrative Agent By_________________________ Title:

-39SCHEDULE I [Material Agreements and Liens]

-40SCHEDULE II [Subsidiaries and Investments]

-41SCHEDULE III [Intentionally Omitted]

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent.

-38THE CHASE MANHATTAN BANK, as Administrative Agent By_________________________ Title:

-39SCHEDULE I [Material Agreements and Liens]

-40SCHEDULE II [Subsidiaries and Investments]

-41SCHEDULE III [Intentionally Omitted]

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned

-39SCHEDULE I [Material Agreements and Liens]

-40SCHEDULE II [Subsidiaries and Investments]

-41SCHEDULE III [Intentionally Omitted]

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.02 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 2.03 of the Put Agreement, the undersigned hereby requires that State Auto Mutual

-40SCHEDULE II [Subsidiaries and Investments]

-41SCHEDULE III [Intentionally Omitted]

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.02 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 2.03 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 _______________. THE CHASE MANHATTAN BANK, as

-41SCHEDULE III [Intentionally Omitted]

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.02 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 2.03 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 _______________. THE CHASE MANHATTAN BANK, as Administrative Agent By_________________________ Title:

-44-

-42SCHEDULE IV [Equity Rights and Redemption Obligations]

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.02 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 2.03 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 _______________. THE CHASE MANHATTAN BANK, as Administrative Agent By_________________________ Title:

-44EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors] August 16, 1996

-43EXHIBIT 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 August 16, 1996, between State Automobile Mutual Insurance Company, State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Dear Ladies and Gentlemen: Reference is made to the Put Agreement dated as of August 16, 1996 (as modified and supplemented and in effect from time to time, the "PUT AGREEMENT"), between State Automobile Mutual Insurance Company ("STATE AUTO MUTUAL"), State Auto Financial Corporation and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Put Agreement. [Pursuant to Section 2.02 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 2.03 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 _______________. THE CHASE MANHATTAN BANK, as Administrative Agent By_________________________ Title:

-44EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors] August 16, 1996 To each of the Lenders party to the Credit Agreement referred to below and The Chase Manhattan Bank, as Administrative Agent Ladies and Gentlemen:

-44EXHIBIT B to the Put Agreement [Form of Opinion of General Counsel of the State Auto Obligors] August 16, 1996 To each of the Lenders party to the Credit Agreement referred to below and The Chase Manhattan Bank, as Administrative 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 August 16, 1996 (the "PUT AGREEMENT") among the State Auto Obligors and The Chase Manhattan Bank, in its capacity as administrative agent (the "ADMINISTRATIVE AGENT") on behalf of the lenders party to a Credit Agreement dated as of August 16, 1996 among SAF Funding Corporation, the Administrative 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 4.04(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.

-45In 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

-45In 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 New York 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 New York. 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.

-466. 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

-466. 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 the 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 5.03 of the Put Agreement and Section 6.04 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 wilful 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 second sentence of Section 5.08 of the Put Agreement or the second sentence of Section 7.07 of the Standby Purchase Agreement, insofar as either such sentence relates to the subject matter jurisdiction of the United States District Court for the Southern District of New York to adjudicate any controversy related to the applicable State Auto Agreement.

-47The 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.

-47The 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,

10(CC) STANDBY PURCHASE AGREEMENT BETWEEN STATE AUTO FINANCIAL CORPORATION AND SAF FUNDING CORPORATION DATED AUGUST 16, 1996

EXHIBIT E to the Credit Agreement ************************************************************ STATE AUTO FINANCIAL CORPORATION and SAF FUNDING CORPORATION

STANDBY PURCHASE AGREEMENT Dated as of August 16, 1996

************************************************************

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page Section 1. Definitions and Accounting Terms............................... 1

10(CC) STANDBY PURCHASE AGREEMENT BETWEEN STATE AUTO FINANCIAL CORPORATION AND SAF FUNDING CORPORATION DATED AUGUST 16, 1996

EXHIBIT E to the Credit Agreement ************************************************************ STATE AUTO FINANCIAL CORPORATION and SAF FUNDING CORPORATION

STANDBY PURCHASE AGREEMENT Dated as of August 16, 1996

************************************************************

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page Section 1. Definitions and Accounting Terms............................... 1 6 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 9 9

Section 2. Purchase of Preferred Stock. .................................. 2.01 Purchases. ................................................. 2.02 Notices of Purchases. ...................................... 2.03 Commitment Fee.............................................. Section 3. Conditions to Purchase.........................................

Section 4. Representations and Warranties of State Auto Financial......... 4.01 Corporate Existence......................................... 4.02 Litigation.................................................. 4.03 No Breach................................................... 4.04 Action...................................................... 4.05 Approvals................................................... 4.06 Capitalization.............................................. 4.07 True and Complete Disclosure................................ Section 5. Representations and Warranties of the Company.................. 5.01 Investment.................................................. 5.02 No Agreement to Transfer.................................... 5.03 Knowledge and Experience.................................... 5.04 Access to Information....................................... 5.05 Risk........................................................

EXHIBIT E to the Credit Agreement ************************************************************ STATE AUTO FINANCIAL CORPORATION and SAF FUNDING CORPORATION

STANDBY PURCHASE AGREEMENT Dated as of August 16, 1996

************************************************************

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page Section 1. Definitions and Accounting Terms............................... 1 6 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 9 9 9

Section 2. Purchase of Preferred Stock. .................................. 2.01 Purchases. ................................................. 2.02 Notices of Purchases. ...................................... 2.03 Commitment Fee.............................................. Section 3. Conditions to Purchase.........................................

Section 4. Representations and Warranties of State Auto Financial......... 4.01 Corporate Existence......................................... 4.02 Litigation.................................................. 4.03 No Breach................................................... 4.04 Action...................................................... 4.05 Approvals................................................... 4.06 Capitalization.............................................. 4.07 True and Complete Disclosure................................ Section 5. Representations and Warranties of the Company.................. 5.01 Investment.................................................. 5.02 No Agreement to Transfer.................................... 5.03 Knowledge and Experience.................................... 5.04 Access to Information....................................... 5.05 Risk........................................................ 5.06 Restrictions on Transfer....................................

Page Section 6. Covenants...................................................... 6.01 Transfer.................................................... 6.02 Redemption.................................................. 6.03 Use of Proceeds............................................. 10 10 10 10

Section 7. Registration Rights............................................ 10 7.01 Demand Registration......................................... 10 7.02 Piggyback Registrations..................................... 12

TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page Section 1. Definitions and Accounting Terms............................... 1 6 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 9 9 9

Section 2. Purchase of Preferred Stock. .................................. 2.01 Purchases. ................................................. 2.02 Notices of Purchases. ...................................... 2.03 Commitment Fee.............................................. Section 3. Conditions to Purchase.........................................

Section 4. Representations and Warranties of State Auto Financial......... 4.01 Corporate Existence......................................... 4.02 Litigation.................................................. 4.03 No Breach................................................... 4.04 Action...................................................... 4.05 Approvals................................................... 4.06 Capitalization.............................................. 4.07 True and Complete Disclosure................................ Section 5. Representations and Warranties of the Company.................. 5.01 Investment.................................................. 5.02 No Agreement to Transfer.................................... 5.03 Knowledge and Experience.................................... 5.04 Access to Information....................................... 5.05 Risk........................................................ 5.06 Restrictions on Transfer....................................

Page Section 6. Covenants...................................................... 6.01 Transfer.................................................... 6.02 Redemption.................................................. 6.03 Use of Proceeds............................................. Section 7. Registration Rights............................................ 7.01 Demand Registration......................................... 7.02 Piggyback Registrations..................................... 7.03 Registration Procedures..................................... 7.04 Underwritten Offerings...................................... 7.05 Holdback Agreements By State Auto Financial and Other Securityholders............................................. 7.06 Indemnification............................................. 7.07 Covenants Relating to Rule 144.............................. 7.08 References to holders of Registrable Securities............. Section 8. Miscellaneous.................................................. 8.01 Waiver...................................................... 8.02 Notices..................................................... 8.03 Amendments, Etc............................................. 8.04 Successors and Assigns...................................... 8.05 Captions.................................................... 8.06 Counterparts................................................ 8.07 Governing Law; Submission to Jurisdiction................... 8.08 Waiver of Jury Trial........................................ 8.09 Further Assurances.......................................... 8.10 Payments by State Auto Financial............................ 10 10 10 10 10 10 12 13 17 18 18 21 21 22 22 22 22 22 22 22 22 23 23 23

Page

8.11 8.12

Payments Received by the Company under Basic Documents.......23 Third-Party Beneficiaries....................................23

Page Section 6. Covenants...................................................... 6.01 Transfer.................................................... 6.02 Redemption.................................................. 6.03 Use of Proceeds............................................. Section 7. Registration Rights............................................ 7.01 Demand Registration......................................... 7.02 Piggyback Registrations..................................... 7.03 Registration Procedures..................................... 7.04 Underwritten Offerings...................................... 7.05 Holdback Agreements By State Auto Financial and Other Securityholders............................................. 7.06 Indemnification............................................. 7.07 Covenants Relating to Rule 144.............................. 7.08 References to holders of Registrable Securities............. Section 8. Miscellaneous.................................................. 8.01 Waiver...................................................... 8.02 Notices..................................................... 8.03 Amendments, Etc............................................. 8.04 Successors and Assigns...................................... 8.05 Captions.................................................... 8.06 Counterparts................................................ 8.07 Governing Law; Submission to Jurisdiction................... 8.08 Waiver of Jury Trial........................................ 8.09 Further Assurances.......................................... 8.10 Payments by State Auto Financial............................ 10 10 10 10 10 10 12 13 17 18 18 21 21 22 22 22 22 22 22 22 22 23 23 23

Page

8.11 8.12 8.13 SCHEDULE I EXHIBIT A EXHIBIT B EXHIBIT C

Payments Received by the Company under Basic Documents.......23 Third-Party Beneficiaries....................................23 Severability.................................................23 - Equity Rights and Redemption Obligations - Form of Class A Preferred Stock Certificate - Form of Purchase Notice - Form of Opinion of Counsel to State Auto Financial

-5STANDBY PURCHASE AGREEMENT dated as of August 16, 1996, 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"). WHEREAS, 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"); WHEREAS, 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");

Page

8.11 8.12 8.13 SCHEDULE I EXHIBIT A EXHIBIT B EXHIBIT C

Payments Received by the Company under Basic Documents.......23 Third-Party Beneficiaries....................................23 Severability.................................................23 - Equity Rights and Redemption Obligations - Form of Class A Preferred Stock Certificate - Form of Purchase Notice - Form of Opinion of Counsel to State Auto Financial

-5STANDBY PURCHASE AGREEMENT dated as of August 16, 1996, 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"). WHEREAS, 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"); WHEREAS, 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"); WHEREAS, 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: Section 1. DEFINITIONS AND ACCOUNTING TERMS. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "ADMINISTRATIVE AGENT" shall mean The Chase Manhattan Bank, as administrative 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 Administrative Agent, as modified and supplemented and in effect from time to time.

-5STANDBY PURCHASE AGREEMENT dated as of August 16, 1996, 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"). WHEREAS, 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"); WHEREAS, 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"); WHEREAS, 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: Section 1. DEFINITIONS AND ACCOUNTING TERMS. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "ADMINISTRATIVE AGENT" shall mean The Chase Manhattan Bank, as administrative 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 Administrative Agent, as modified and supplemented and in effect from time to time.

-6"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of the date hereof, among the Company, the Administrative 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

-6"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of the date hereof, among the Company, the Administrative 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 7.01 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 7.03(b) and (c) hereof 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-l 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 7.06 hereof. "INDEMNIFYING PARTY" shall mean a party obligated to provide indemnity in accordance with Section 7.06 hereof. "INSPECTORS" shall have the meaning assigned thereto in Section 7.03(j) hereof.

-7"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

-7"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-l with the Commission. "LOSSES" shall have the meaning assigned thereto in Section 7.06(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 Administrative 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 7.01(a) hereof. "NOTICE OF PIGGYBACK REGISTRATION" shall have the meaning assigned thereto in Section 7.02(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 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.

-8"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 $100,000,000. "PURCHASE COMMITMENT TERMINATION DATE" shall mean June 30, 1997, 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.

-8"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 $100,000,000. "PURCHASE COMMITMENT TERMINATION DATE" shall mean June 30, 1997, 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 2.02 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 Administrative 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 7.03(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 (i) any shares of Class A Preferred Stock purchased pursuant to Section 2.01 hereof and (ii) any additional shares of Class A Preferred Stock issued or distributed by way of a dividend, stock split or other distribution in respect of such Class A Preferred Stock purchased pursuant to Section 2.01 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

-9disbursements 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

-9disbursements 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 7.01 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 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. Section 2. PURCHASE OF PREFERRED STOCK. 2.01 PURCHASES. The Company agrees, on the terms and conditions of this Agreement, to purchase in one or more transactions, Class A Preferred Stock with an aggregate Redemption Value of not more than $100,000,000. The purchase price payable by the Company for each share of Class A Preferred Stock shall be equal to the Redemption Value thereof. 2.02 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

- 10 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. 2.03 COMMITMENT FEE. State Auto Financial shall pay to the Company a commitment fee on the daily

- 10 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. 2.03 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 $100,000,000 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 1/4 of 1%. Accrued commitment fee 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. Section 3. CONDITIONS TO PURCHASE. The obligation 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. (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) MINIMUM CATASTROPHIC LOSS. Any one or more of State Auto Mutual, State Auto P&C, Milbank 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 Section 4 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).

- 11 Section 4. REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL. State Auto Financial represents and warrants to the Company that: 4.01 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. 4.02 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

- 11 Section 4. REPRESENTATIONS AND WARRANTIES OF STATE AUTO FINANCIAL. State Auto Financial represents and warrants to the Company that: 4.01 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. 4.02 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. 4.03 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. 4.04 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). 4.05 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. 4.06 CAPITALIZATION. The authorized capital stock of State Auto Financial consists, on the date hereof, of an aggregate of 35,000,000 shares consisting of (a) 30,000,000 shares of common stock, no par value, of which 18,086,863 shares are duly and validly issued and outstanding, each of

- 12 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, 67% 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, 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

- 12 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, 67% 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, 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 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. 4.07 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 Administrative 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 Administrative 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 Administrative Agent for use in connection with the transactions contemplated hereby or thereby. Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to State Auto Financial that: 5.01 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. 5.02 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. 5.03 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. 5.04 ACCESS TO INFORMATION. The Company has access to sufficient information regarding State Auto Financial, including, without limitation, State Auto Financial's filings under the

- 13 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 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. 5.05 RISK. The Company is able to bear the economic risk of its investment in State Auto Financial and the

- 13 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 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. 5.05 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. 5.06 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. Section 6. COVENANTS. 6.01 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. 6.02 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. 6.03 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. Section 7. REGISTRATION RIGHTS. 7.01 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

- 14 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 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:

- 14 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 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 7.04(a) hereof. Subject to paragraph (e) of this Section 7.01, 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 7.01, 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; (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

- 15 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 forgoing, 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

- 15 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 forgoing, 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. 7.02 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 7.02, 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 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 7.01 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 7.02 shall relieve State Auto Financial of its obligations to effect a Demand Registration under Section 7.01 hereof.

- 16 (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

- 16 (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; and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration. 7.03 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 7.01 or 7.02 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;

- 17 (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:

- 17 (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 (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

- 18 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

- 18 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 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

- 19 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

- 19 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 (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.

- 20 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 7.03, 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 7.03 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 7.03 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

- 20 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 7.03, 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 7.03 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 7.03 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). 7.04 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 7.06 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 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 7.02(c)

- 21 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

- 21 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. 7.05 HOLDBACK AGREEMENTS BY STATE AUTO FINANCIAL AND OTHER SECURITYHOLDERS. Unless the Managing Underwriter otherwise agrees, State Auto Financial and each holder of 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. 7.06 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

- 22 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

- 22 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 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 7.06(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 7.06(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

- 23 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.

- 23 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 7.06, 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 7.06, 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 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 7.06 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

- 24 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.

- 24 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. (e) OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding paragraphs of this Section 7.06 (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 7.06 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 7.06 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. 7.07 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. 7.08 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 August 16, 1996 between the Company and the Administrative 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. Section 8. MISCELLANEOUS. 8.01 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.

- 25 8.02 NOTICES. All notices, requests and other communications provided for herein shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered

- 25 8.02 NOTICES. All notices, requests and other communications provided for herein shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 8.03 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 State Auto Financial and the Company (with the consent of the Administrative 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 Administrative Agent and the Lenders as specified in the Credit Agreement). 8.04 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 Administrative Agent and all of the Lenders). 8.05 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. 8.06 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. 8.07 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. Each of State Auto Financial and the Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), and of any other appellate court in the State of New York, 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. 8.08 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 IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 8.09 FURTHER ASSURANCES. State Auto Financial agrees that, from time to time upon the written request of the Administrative Agent, State Auto Financial will execute and deliver such further documents and do such other acts and things as the Company, the Administrative Agent or any Lender

- 26 (through the Administrative 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 2.03 hereof) directly to the Administrative 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.

- 26 (through the Administrative 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 2.03 hereof) directly to the Administrative 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 Administrative 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. 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/ Robert H. Moone -----------------------------Title: President

Address for Notices: State Auto Financial Corporation 518 East Broad Street Columbus, Ohio 43215 Attention: John Lowther, Esq. Telecopier No.: 614-464-4911 Telephone No.: 614-464-5052 SAF FUNDING CORPORATION

- 27 By_________________________ Title: Address for Notices:

- 27 By_________________________ Title: Address for Notices: SAF Funding Corporation 2 Wall Street New York, New York 10005 Attention: Kevin Burns Telecopier No.: 212-346-9012 Telephone No.: 212-346-9007

- 28 SCHEDULE I Part A [Equity Rights] Part B [Redemption Obligations]

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

- 30 [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

- 28 SCHEDULE I Part A [Equity Rights] Part B [Redemption Obligations]

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

- 30 [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 transferrable 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. DATED

-31Chief Executive Officer

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

- 30 [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 transferrable 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. DATED

-31Chief Executive Officer - ---------------Secretary ----------------------------President

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

- 30 [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 transferrable 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. DATED

-31Chief Executive Officer - ---------------Secretary ----------------------------President

- 32 [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 the 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

-31Chief Executive Officer - ---------------Secretary ----------------------------President

- 32 [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 the 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.

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

Pursuant to Section 1701.14 of the Ohio 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 DATE" means, with respect to any shares of Class A Preferred Stock, each of the 3rd, 5th, 7th, 9th, 11th, 13th, 15th, 17th, 19th, 21st, 23rd and 25th Quarterly Dates immediately following

- 32 [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 the 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.

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

Pursuant to Section 1701.14 of the Ohio 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 DATE" means, with respect to any shares of Class A Preferred Stock, each of the 3rd, 5th, 7th, 9th, 11th, 13th, 15th, 17th, 19th, 21st, 23rd and 25th Quarterly Dates immediately following the date of issuance of such shares of Class A Preferred Stock. "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 and (b) (prior to the Rate Conversion Date) dealings in Dollar deposits are carried out in the London interbank market.

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

Pursuant to Section 1701.14 of the Ohio 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 DATE" means, with respect to any shares of Class A Preferred Stock, each of the 3rd, 5th, 7th, 9th, 11th, 13th, 15th, 17th, 19th, 21st, 23rd and 25th Quarterly Dates immediately following the date of issuance of such shares of Class A Preferred Stock. "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 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.

- 34 "CERTIFICATE OF INCORPORATION" means the Articles of Incorporation of the Corporation, as amended or restated from time to time. "CHASE" means The Chase Manhattan Bank and any successor entity. "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.

- 34 "CERTIFICATE OF INCORPORATION" means the Articles of Incorporation of the Corporation, as amended or restated from time to time. "CHASE" means The Chase Manhattan Bank and any successor entity. "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 August 16, 1996 between SAF Funding, the Lenders party thereto and Chase, as Administrative 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 3/4 of 1% per annum; PROVIDED, that from and after the Rate Conversion Date, the "Dividend Rate" means a rate per annum equal to 8%. "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 any Eurodollar Rate Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by Chase at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date two Business Days prior to the first day of such Eurodollar Rate Period for the offering by Chase to leading banks in the London interbank market of Dollar deposits having a term comparable to such Eurodollar Rate Period and in an amount comparable to the aggregate Redemption Value of such shares of Class A Preferred Stock. "EURODOLLAR RATE" means, for any shares of Class A Preferred Stock for any Eurodollar Rate Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Chase (and advised to the Holder and the Corporation) to be equal to the Eurodollar Base Rate for a Loan in a principal amount equal to the aggregate Redemption Value for such shares of Class A Preferred Stock for such Eurodollar Rate Period divided by 1 minus the Reserve Requirement (if any) for such Loan for such Eurodollar Rate 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

- 35 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

- 35 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 RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) 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 by the Federal Reserve Bank of New York on the Business Day next succeeding such day, PROVIDED that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average rate charged to Chase on such Business Day on such transactions as determined by Chase. "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 September, 1996. "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 Administrative 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.

- 36 "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 Sections 9(e) or (f) thereof) and the acceleration of the Loans thereunder; or (b) an "Event of Default" described in Sections 9(e) or (f) of the Credit Agreement.

- 36 "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 Sections 9(e) or (f) thereof) and the acceleration of the Loans thereunder; or (b) an "Event of Default" described in Sections 9(e) or (f) 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 and be cumulative from the date 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.

- 37 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

- 37 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

- 38 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 (i) to the holders of shares of Common Stock, the Class B

- 38 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 (i) 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.

- 39 EXHIBIT B to the Standby Purchase Agreement [Form of Purchase Notice] [Date] SAF Funding Corporation Re: Standby Purchase Agreement dated as of August 16, 1996, 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.

- 39 EXHIBIT B to the Standby Purchase Agreement [Form of Purchase Notice] [Date] SAF Funding Corporation Re: Standby Purchase Agreement dated as of August 16, 1996, 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 2.02 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.

- 40 EXHIBIT C to the Standby Purchase Agreement [Form of Opinion of General Counsel of State Auto Financial] __________, 199_ SAF Funding Corporation (the "Company") To The Chase Manhattan Bank, as ADMINISTRATIVE AGENT (the "Administrative Agent") under, and each of the Lenders party to, the Credit Agreement dated as of August 16, 1996 among the Company, the Administrative Agent and such Lenders Ladies and Gentlemen: I am the general counsel of State Auto Financial Corporation ("STATE AUTO FINANCIAL) and have acted as

- 40 EXHIBIT C to the Standby Purchase Agreement [Form of Opinion of General Counsel of State Auto Financial] __________, 199_ SAF Funding Corporation (the "Company") To The Chase Manhattan Bank, as ADMINISTRATIVE AGENT (the "Administrative Agent") under, and each of the Lenders party to, the Credit Agreement dated as of August 16, 1996 among the Company, the Administrative 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 August 16, 1996 (the "STANDBY PURCHASE AGREEMENT") among 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

- 41 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.

- 41 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. 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.

- 42 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 Change 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

- 42 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 Change 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,

ARTICLE 7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO FINANCIAL CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE INTERIM PERIOD ENDED SEPTEMBER 30, 1996 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 POLICY OTHER POLICY HOLDER FUNDS NOTES PAYABLE COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY PREMIUMS INVESTMENT INCOME INVESTMENT GAINS OTHER INCOME BENEFITS UNDERWRITING AMORTIZATION UNDERWRITING OTHER INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES

9 MOS DEC 31 1996 JAN 31 1996 SEP 30 1996 279,942,482 91,782,988 0 0 0 0 371,725,470 13,854,826 6 16,515,138 441,906,647 159,452,429 90,260,664 0 0 0 90,433,560 0 0 85,350,065 441,906,047 179,035,250 17,866,113 1,292,268 6,004,448 133,475,120 0 49,853,526 18,878,098 4,760,836 14,117,262 0 0 0

ARTICLE 7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO FINANCIAL CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE INTERIM PERIOD ENDED SEPTEMBER 30, 1996 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 POLICY OTHER POLICY HOLDER FUNDS NOTES PAYABLE COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY PREMIUMS INVESTMENT INCOME INVESTMENT GAINS OTHER INCOME BENEFITS UNDERWRITING AMORTIZATION UNDERWRITING OTHER INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED RESERVE OPEN PROVISION CURRENT PROVISION PRIOR PAYMENTS CURRENT PAYMENTS PRIOR RESERVE CLOSE CUMULATIVE DEFICIENCY

9 MOS DEC 31 1996 JAN 31 1996 SEP 30 1996 279,942,482 91,782,988 0 0 0 0 371,725,470 13,854,826 6 16,515,138 441,906,647 159,452,429 90,260,664 0 0 0 90,433,560 0 0 85,350,065 441,906,047 179,035,250 17,866,113 1,292,268 6,004,448 133,475,120 0 49,853,526 18,878,098 4,760,836 14,117,262 0 0 0 14,117,262 .78 .78 0 0 0 0 0 0 0


								
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