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As filed with the Securities and Exchange Commission on December 10, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
STATE AUTO FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Ohio 31-1324304
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
518 East Broad Street
Columbus, Ohio 43215-3976
(614) 464-5000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Robert L. Bailey, Chairman and
Chief Executive Officer
518 East Broad Street
Columbus, Ohio 43215-3976
(614) 464-5000
(614) 464-4911 (facsimile)
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Joseph P. Boeckman, Esq.
Baker & Hostetler LLP
65 East State Street, Suite 2100
Columbus, Ohio 43215
(614) 228-1541
(614) 462-2616 (facsimile)
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
Calculation of Registration Fee
==============================================================================================
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to price per offering registration
to be registered be registered share(1) price(1) fee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, without par 300,000 $27.6875 $8,306,250 $2,450.34
value
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as
amended, on the basis of the average of the high and low sale prices of
the Registrant's Common Shares on the Nasdaq National Market system on
December 5, 1997.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
[STATE AUTO LOGO] STATE AUTO FINANCIAL CORPORATION
MONTHLY STOCK PURCHASE PLAN
FOR INDEPENDENT AGENTS
300,000 COMMON SHARES
State Auto Financial Corporation (the "Company") is offering eligible
independent agents (the "Agents") of the Company's property and casualty
insurance company subsidiaries and of State Automobile Mutual Insurance Company
and its property and casualty insurance company subsidiaries with an opportunity
to acquire a proprietary interest in the Company through the purchase of Common
Shares of the Company (the "Shares") pursuant to the Company's Monthly Stock
Purchase Plan for Independent Agents (the "Plan"). The Plan offers a convenient
and inexpensive method for Agents to have a portion of their commissions
automatically deducted and used to purchase Shares in open-market transactions
at current prices. In addition, if an Agent is an "Inner Circle Agent," as
designated by State Auto (as defined herein), State Auto will add an amount
equal to 5% of the commissions deducted by such Agent. The additional 5% amount
will also be used to purchase Shares pursuant to the Plan. Participation in the
Plan is voluntary, and participants may enroll in the Plan or withdraw from the
Plan at any time, subject to the terms of the Plan. The Company will bear all
brokerage commissions, service charges, and other costs incurred in connection
with the purchase of any Shares under the Plan. National City Bank has been
designated by the Company as its agent to administer the Plan for participants.
The Shares are traded on the Nasdaq National Market system under the symbol
"STFC." On December 5, 1997, the last reported sale price of the Shares on the
Nasdaq National Market system was $28.13 per Share.
The Company will not receive any of the proceeds from the sale of the
Shares. The Company will bear all costs relating to the registration of the
Shares, which are estimated to be approximately $10,000.
---------------------------------
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------
The date of this Prospectus is ________________, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission; Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding registrants that file electronically
with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. For further information pertaining
to the Company and the securities offered hereby, reference is hereby made to
the Registration Statement, including the exhibits and the financial statement
schedules filed therewith or incorporated by reference therein. Statements
contained herein or incorporated by reference therein concerning the provisions
of any documents filed as an exhibit to the Registration Statement are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed or incorporated by reference therein as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1997, June 30, 1997, and March 31, 1997;
(3) The description of the Shares which is contained in the
Company's Registration Statement on Form 8-A filed pursuant to Section
12 of the Exchange Act, including any amendments or reports filed for
the purpose of updating such description.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such reports and other documents.
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Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Prospectus or in any subsequently filed documents
that is also incorporated by reference herein modifies or supersedes such
statement. Any such statements so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including a
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of any and all documents incorporated by
reference into this Prospectus (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference therein). Requests for
copies should be directed to Manager, Investor Relations, State Auto Financial
Corporation, 518 East Broad Street, Columbus, Ohio 43215-3976, telephone number
(800) 444-9950 (extension 5373).
THE COMPANY
The Company, an Ohio corporation, is an insurance holding company which
engages, through its subsidiaries, primarily in the property and casualty
insurance business. The Company is approximately 66% owned by State Automobile
Mutual Insurance Company, an Ohio property and casualty insurance company
("Mutual").
The Company's principal subsidiary, State Auto Property and Casualty
Insurance Company, a South Carolina corporation ("State Auto P&C"), is a
regional insurer engaged primarily in writing personal and commercial
automobile, homeowners, commercial multi-peril, workers' compensation, and fire
insurance. State Auto (as defined below) markets its insurance products through
approximately 11,700 independent insurance agents associated with approximately
2,000 agencies in 24 states. State Auto P&C's products are marketed primarily in
the central and eastern part of the United States, excluding New York, New
Jersey and the New England States. State Auto P&C's products are marketed along
with the insurance products of Mutual and Mutual's property and casualty
insurance company subsidiaries, Milbank Insurance Company, a South Dakota
corporation ("Milbank"), and Midwest Security Insurance Company, a Wisconsin
corporation ("Midwest Security"). State Auto P&C, National (defined below),
Mutual, Milbank, and Midwest Security are hereinafter collectively referred to
as "State Auto."
The Company's other subsidiaries are Stateco Financial Services Inc.,
an Ohio corporation ("Stateco"), State Auto National Insurance Company, an Ohio
corporation ("National"), and Strategic Insurance Software, Inc., an Ohio
corporation ("SIS"). State Auto Financial Corporation and its subsidiaries,
State Auto P&C, Stateco, National, and SIS, are hereinafter collectively
referred to as the "Company."
Stateco provides investment management services to affiliated companies
and insurance premium finance services to customers of State Auto P&C, Mutual,
and Milbank. National is engaged in writing personal automobile insurance for
non-standard risks. SIS develops and sells software for the processing of
insurance transactions, management of insurance policy data and electronic
interfacing of insurance policy information between insurance companies and
agencies.
The Company's offices are located at 518 East Broad Street, Columbus,
Ohio 43215-3976, and its telephone number is (614) 464-5000.
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MONTHLY STOCK PURCHASE PLAN
Introduction to the Plan
- ------------------------
The Plan offers Agents of State Auto the opportunity to purchase Shares
of the Company through deductions from commissions paid by State Auto. All costs
and service charges incurred in connection with the purchase of Shares through
the Plan are paid by the Company. Participation is voluntary, and Participants
may enroll in the Plan or withdraw from the Plan at any time, subject to the
terms of the Plan. National City Bank (the "Bank") has been designated by the
Company as its agent to administer the Plan for participants.
The Plan provides Agents with a convenient and inexpensive method to
acquire a proprietary interest in the Company. A unique feature of the Plan
relates to "Inner Circle Agents" of State Auto. For these Agents, State Auto
will add an amount equal to 5% of the commissions deducted by such Agents (the
"Bonus Commission"), which Bonus Commission will then be used to purchase Shares
pursuant to the Plan for such Agents.
Each participating Agent (a "Participant") should understand that the
relationship between such Participant and the Bank is that of client and
broker/agent, and neither State Auto, the Company, nor any of their affiliates
assume any responsibility for or serves in any capacity in this relationship. In
seeking the benefits of ownership of Shares in the Company, each Participant
must accept his or her own investment risks. Market values are subject to
fluctuations caused by any number of factors, both internal and external.
Therefore, under the Plan, there is no guarantee against financial loss.
Eligibility
- -----------
All principals of active agencies entitled to commissions from State
Auto are eligible to participate in the Plan.
How the Plan Works
- ------------------
The Bank will open and maintain an account in the name of each
Participant who so requests. Purchases and sales of Shares within the Plan will
be made for the accounts of Participants at market prices current at the time of
purchases and sales of such Participant.
Funds received by the Bank from (i) commission deductions, including
Bonus Commissions for Inner Circle Agents, and (ii) additional voluntary
payments up to a maximum of $10,000 per month will be commingled with those of
other Participants in the Plan and used to purchase Shares on a monthly basis.
Such Shares, including fractional Shares carried to three decimal places, will
be credited to each Participant's account.
The Company will pay all brokerage commissions, service charges, and
other costs and expenses related to purchases of Shares. All brokerage
commissions, service charges, and other costs and expenses due to the Bank in
connection with the subsequent sale of any Shares will be payable by the
Participant.
Each time Shares are purchased for a Participant's account, the
Participant will receive from the Bank a detailed statement of the account
showing funds invested from commission deductions (including Bonus Commissions
for Inner Circle Agents) and cash payments received,
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Shares purchased, price per Share, and the total Shares held for the Participant
in the account. The statement will include a detachable form to be used to give
the Bank notice of a change of address, instructions for the sale or withdrawal
of Shares, or to deposit cash payments. With respect to voluntary payments to be
used to purchase Shares, such payment must be made by a check or money order
made payable to "National City Bank."
Commission deductions (including Bonus Commissions for Inner Circle
Agents) and cash payments held by the Bank will be used to purchase Shares on
the 10th day of that month or the next business day immediately following if the
10th day is not a business day. Participants should keep this in mind in the
timing of cash payments, as no interest will be paid on cash in a Participant's
account. Shares may be sold by a Participant in either of two ways. First, the
Participant may request a certificate for his or her Shares from the Bank, in
which case such Shares may be sold by such Participant through any broker or
dealer. Second, the Bank will arrange to sell any Shares held by it for a
Participant. The Bank will provide Participants with a form to provide
instructions to the Bank regarding the sale of any Shares. All brokerage
commissions, service charges, and other costs and expenses due to the Bank in
connection with any sale of any Shares will be payable by the Participant.
The Shares purchased will be held in safekeeping by the Bank until a
Participant terminates his or her participation in the Plan. This convenience
provides protection against any loss, theft, or destruction of share
certificates. However, upon a Participant's written request, the Participant may
obtain a certificate for any full Shares in his or her Account.
Each Participant in the Plan will direct the voting of all full and
fractional Shares in the account and will receive all literature sent to the
Company's shareholders.
How to Participate
- ------------------
To participate in the Plan, an Agent must complete and sign both a
Commission Deduction Authorization and a Purchase Order form. These documents
may be obtained from the Company by calling the Company's Manager, Investor
Relations, at (800) 444-9950 (extension 5373). Once completed, these documents
should be returned to Manager, Investor Relations, State Auto Financial
Corporation, 518 East Broad Street, Columbus, Ohio 43215-3976. The Company will
submit the Commission Deduction Authorization and Purchase Order to the Bank, at
which time the Bank will open the Participant's account.
In order to complete the Commission Deduction Authorization,
Participants must specify the amount to be withheld from commission
disbursements. The minimum amount a Participant can withhold is $50 per month.
The commission deduction amount will remain in effect until revised or
terminated. Changing the amount deducted or terminating the deduction is done by
submitting a written request to the Company on a form that will be provided by
the Company upon request. Enrollment, or termination of deductions, will become
effective as soon as practicable after a request is received by the Company. The
request must be made using the Company's form.
For Inner Circle Agent Participants, State Auto will automatically
cause the Bonus Commission, or 5% of the commission such Participant authorizes
to be deducted, to be added to the amount forwarded to the Bank on behalf of
such Participant. The Bonus Commission will continue for the period of time the
Participant remains an Inner Circle Agent and State Auto continues this program.
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The amounts deducted from commission disbursements pursuant to the
Commission Deduction Authorization will be commingled and forwarded monthly by
the Company to the Bank with a list of the amounts deducted for each
Participant's Account. The Company has reserved the right to terminate the Plan
and to discontinue the use of its commission deduction facilities for this
purpose at any time.
Dividend Disbursements
- ----------------------
Dividends earned on Shares in the Participant's account, as they become
payable by the Company, will be remitted by the Bank to each Participant by
check. Checks will be sent as soon as practicable following each dividend
payment date.
Tax Information
- ---------------
The Bonus Commissions are taxable to the Inner Circle Agents as having
been received in cash even though such Commissions are used to purchase Shares
under the Plan. In addition, the Internal Revenue Service has ruled that the
amount of brokerage commissions paid by the Company for Shares purchased on a
Participant's behalf is to be treated as a distribution to the Participant which
is subject to income tax in the same manner as dividends.
Termination of Participation
- ----------------------------
A Participant may terminate his or her participation in the Plan at any
time by notifying the Bank, in writing, at the following address: National City
Bank, P.O. Box 92301, Cleveland, Ohio 44193-0900. A copy of the termination
notice should also be provided to the Company.
Plan Information
- ----------------
Any questions or correspondence about the Plan should be addressed to:
National City Bank at P.O. Box 92301, Cleveland, Ohio 44193-0900. The telephone
number of the Bank is (216) 575-2658 or 1-800-622-8100 (extension 2658).
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby.
DESCRIPTION OF CAPITAL STOCK
The aggregate number of shares of capital stock of all classes which
the Company has authority to issue is 35,000,000 shares, of which 30,000,000
shares are Common Shares, without par value, and 5,000,000 shares are Preferred
Shares consisting of 2,500,000 Class A Preferred Shares, without par value (the
"Class A Preferred Shares"), and 2,500,000 Class B Preferred Shares, without par
value (the "Class B Preferred Shares") (collectively, the "Preferred Shares").
As of September 30, 1997, there were 18,218,044 Common Shares and no Preferred
Shares issued and outstanding.
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COMMON SHARES
Subject to the senior rights of the Preferred Shares which may from
time to time be outstanding, holders of the Common Shares are entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor. Upon dissolution and liquidation, holders of Common
Shares are entitled to a ratable share of the net assets of the Company
remaining after payment to the holders of the Preferred Shares of the full
preferential amounts to which they may be entitled. All outstanding Common
Shares, including the Common Shares offered hereby, are fully paid and
nonassessable.
The holders of Common Shares are entitled to one vote per share for the
election of directors and on all other matters submitted to a vote of
shareholders. Holders of Common Shares are not entitled to cumulative voting for
the election of directors, which means that the holder of more than 50% of the
voting power of the Company, such as Mutual, is able to elect all directors
entitled to be elected by the shareholders. The absence of cumulative voting and
the Company's staggered Board of Directors, together with the ownership of more
than a majority of the Common Shares of the Company by Mutual and insurance laws
and regulations applicable to the acquisition of insurance holding companies,
can be expected to have the effect of delaying, averting, or preventing a change
in control of the Company unless Mutual was in favor of such change in control.
The holders of the Common Shares are not entitled to preemptive rights.
The transfer agent and registrar for the Common Shares is National City
Bank, Cleveland, Ohio.
PREFERRED SHARES
The Class A Preferred Shares do not have voting rights, and the Class B
Preferred Shares have voting rights. The Preferred Shares, if issued, have
priority over the Common Shares with respect to dividends and to other
distributions, including the distribution of assets upon liquidation. The
Preferred Shares may be issued in one or more series as determined by the Board
of Directors, and the Board of Directors is authorized to fix and determine the
terms, limitations, and relative rights and preferences (except voting rights)
of the Preferred Shares, and to fix and determine the variations among series of
the Preferred Shares. Pursuant to this authority, the Board of Directors has
fixed the terms and conditions of the Class A Preferred Shares, as further
described below.
Class A Preferred Shares
In connection with State Auto's catastrophe reinsurance program, the
Company has entered into a structured contingent financing transaction with
Chase Manhattan Bank ("Chase") pursuant to which Chase will provide up to $100
million to be used to cover catastrophe losses in excess of $120 million. Under
this arrangement, in the event of such a loss, the Company will issue and sell
Class A Preferred Shares to SAF Funding Corporation, a special purpose company
("SPC"), under the terms and conditions described below. SPC will borrow the
money necessary for the purchase of such Class A Preferred Shares from Chase and
a syndicate of other lenders (the "Lenders"). The Company will contribute to
State Auto P&C the proceeds from the sale of such Class A Preferred Shares.
State Auto P&C has assumed catastrophe reinsurance from Mutual, Milbank, and
National pursuant to a Catastrophe Assumption Agreement in the amount of $100
million in excess of $120 million. State Auto P&C will use the contributed
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capital to pay its direct catastrophe losses and losses assumed under the
Catastrophe Assumption Agreement. The Company is obligated to repay SPC (which
will repay the Lenders) by redeeming the Class A Preferred Shares sold to SPC
over a six-year period. The Company's obligation to repay SPC has been secured
by a Put Agreement among the Company, Mutual and the Lenders pursuant to which,
in the event of a default by the Company under such financial arrangements,
Mutual will be obligated to put either the Class A Preferred Shares or the loan
or loans outstanding.
If and when issued, the terms and conditions of the Class A Preferred
Shares will be as follows:
Redemption. The Class A Preferred Shares will have mandatory
and optional redemption rights. Each Class A Preferred Share will have
a redemption value equal to $1.0 million. The Company will be obligated
to redeem all Class A Preferred Shares over a six-year period. In
six-month intervals during such six-year period, the Company will
redeem an equal number of Class A Preferred Shares by paying to the
holders thereof the aggregate redemption value for the Class A
Preferred Shares so redeemed plus any accrued but unpaid dividends
thereon. The Company has the option to redeem at any time all or any
portion of the Class A Preferred Shares for a redemption price equal to
the aggregate redemption value for the Class A Preferred Shares so
redeemed plus any accrued but unpaid dividends thereon. In the event
the Company defaults under its financial arrangements with the Lenders,
the Company may be required to redeem all or any portion of the Class A
Preferred Shares for a redemption price equal to the aggregate
redemption value for the Class A Preferred Shares so redeemed plus any
accrued but unpaid dividends thereon. Upon written notice delivered by
the holders of the Class A Preferred Shares to the Company, such
redemption value plus such dividends will be immediately due and
payable.
Dividends. The holders of the Class A Preferred Shares, in
preference to the holders of the Class B Preferred Shares and the
holders of the Common Shares, will be entitled to receive dividends on
the Class A Preferred Shares when, as and if declared by the Board of
Directors of the Company. Each Class A Preferred Share will accrue
dividends on the redemption value thereof at a rate equal to .75% in
excess of the London interbank market rate (the "Eurodollar Rate") then
in effect for short-term (generally three month) borrowings (the
"Eurodollar Rate Period"), which dividend rate will increase or
decrease based upon increases or decreases in the Eurodollar Rate for
the applicable Eurodollar Rate Period. Accrued dividends on the Class A
Preferred Shares will be payable on the last day of each Eurodollar
Rate Period for the applicable Class A Preferred Shares and upon the
redemption of any Class A Preferred Shares. In the event that a holder
of the Class A Preferred Shares is a person or entity other than SPC,
Mutual, or any Lender, the dividend rate will be 8% per annum and
dividends will be payable quarterly on the last business day of March,
June, September and December of each year. Dividends payable with
respect to any Class A Preferred Shares will begin to accrue and be
cumulative from the date of issuance of such Class A Preferred Shares.
Dividends paid on Class A Preferred Shares in an amount less than the
total amount of dividends at that time accrued and payable will be
allocated on a prorata basis among all such shares at that time
outstanding. The holders of the Class A Preferred Shares will not be
entitled to receive any other dividends. Whenever any dividend payable
has not been paid when due, thereafter and until all accrued and unpaid
dividends payable have been paid in full, or the Company has not
redeemed the Class A Preferred Shares on the
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date such redemption is required, thereafter and until such redemption
payment has been made, the Company will not (A) declare or pay
dividends on any Class B Preferred Shares or Common Shares or make any
other distributions on any Class B Preferred Shares or Common Shares,
or (B) redeem or purchase or otherwise acquire for consideration any
Class B Preferred Shares or Common Shares.
Liquidation. In the event of any liquidation, dissolution or
winding up of the Company, the holders of the Class A Preferred Shares
will be entitled to receive out of the assets of the Company available
for distribution to its shareholders an amount equal to the redemption
value per share plus all accrued and unpaid dividends thereon to the
date of such payment. No distribution will be made to the holders of
any Common Shares, Class B Preferred Shares or any other capital stock
of the Company unless and until the holders of the Class A Preferred
Shares have received the foregoing preferential amounts.
Seniority. The Class A Preferred Shares will be senior in rank
to the Class B Preferred Shares, the Common Shares, and all other
shares of stock of the Company as to dividends and distribution of
assets.
Voting. Except as provided in the Certificate of
Incorporation, and except for any voting rights provided by law, the
holders of the Class A Preferred Shares will not have any voting rights
and their consent will not be required for the taking of any corporate
action.
ANTI-TAKEOVER PROVISIONS
The Company's Code of Regulations contains certain provisions that
could have an anti-takeover effect. Pursuant to the Code of Regulations, the
Board of Directors is divided into three classes each with a term of three
years, with the term of one class expiring each year. As part of such
provisions, the Code of Regulations (a) provide that directors may not be
removed from office by the shareholders without cause except by the affirmative
vote of holders of Common Shares entitling them to exercise at least two-thirds
of the voting power on such proposal, (b) provide that any vacancy on the Board
may be filled by the remaining directors then in office even though less than a
quorum, and (c) provide that a vote of holders of Common Shares entitling them
to exercise at least two-thirds of the voting power on such proposal is required
to alter, amend, or repeal the foregoing provisions or the corresponding and
implementing provisions of the Code of Regulations or to adopt any inconsistent
provision.
The Company's Board of Directors, without shareholder approval, could
issue Preferred Shares with voting and conversion rights that could adversely
affect the voting power of the holders of Common Shares and the issuance of
which could be used by the Board of Directors in defense of a hostile takeover.
In addition, certain provisions of the Company's management agreement
with Mutual, which permit Mutual to terminate such agreement upon a change in
control or potential change in control of the Company, could have an
anti-takeover effect.
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LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by
Baker & Hostetler LLP, Columbus, Ohio. John W. Christensen, a director of Mutual
and State Auto P&C, is of counsel to Baker & Hostetler LLP.
EXPERTS
The consolidated financial statements and schedules of the Company and
its subsidiaries as of December 31, 1996 and 1995, and for each of the years in
the three-year period ended December 31, 1996, incorporated by reference herein
and elsewhere in the Registration Statements have been incorporated herein and
in the Registration Statement in reliance upon the reports of Ernst & Young LLP,
independent auditors, given on the authority of that firm as experts in
accounting and auditing.
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================================================================================
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information ..................................................... 2
Incorporation of Certain Information by
Reference ........................................................ 2
The Company ............................................................... 3
Monthly Stock Purchase Plan ............................................... 4
Use of Proceeds ........................................................... 6
Description of Capital Stock .............................................. 6
Legal Matters ............................................................. 10
Experts ................................................................... 10
</TABLE>
[STATE AUTO LOGO]
STATE AUTO
FINANCIAL CORPORATION
MONTHLY STOCK
PURCHASE PLAN
FOR INDEPENDENT AGENTS
300,000
COMMON SHARES
______________________
PROSPECTUS
______________________
____________, 1997
================================================================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses to be incurred by the Company
in connection with the offering described in this Registration Statement:
Registration Fee -- Securities and
Exchange Commission...........................$ 2,450.34
Legal Fees and Expenses.......................... 6,000.00
Accounting Fees and Expenses .................... 500.00
Printing Expenses................................ 500.00
Miscellaneous Expenses........................... 549.66
----------
Total Expenses..........................$10,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E) of the Ohio Revised Code sets forth conditions and
limitations governing the indemnification of officers, directors, and other
persons.
Article 6 of the Code of Regulations of the Company contains certain
indemnification provisions adopted pursuant to authority contained in Section
1701.13(E) of the Ohio Revised Code. The Company's Code of Regulations provides
for the indemnification of its officers, directors, employees, and agents, or
persons who are serving or have served at the request of the Company as a
director, trustee, officer, employee, or agent of another corporation, domestic
or foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, against all expenses with respect to any judgments, fines, and
amounts paid in settlement, or with respect to any threatened, pending, or
completed action, suit, or proceeding to which they were or are parties or are
threatened to be made parties by reason of acting in such capacities, provided
that it is determined, either by a majority vote of a quorum of disinterested
directors of the Company or by the shareholders of the Company or otherwise as
provided in Section 1701.13(E) of the Ohio Revised Code, that: (a) they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the Company; (b) in any action, suit, or proceeding by or
in the right of the Company, they were not, and have not been adjudicated to
have been, negligent or guilty of misconduct in the performance of their duties
to the Company; and (c) with respect to any criminal action or proceeding, that
they had no reasonable cause to believe that their conduct was unlawful. Section
1701.13(E) provides that to the extent a director, officer, employee, or agent
has been successful on the merits or otherwise in defense of any such action,
suit, or proceeding, he shall be indemnified against expenses reasonably
incurred in connection therewith.
The Company has entered into Indemnification Agreements with each of
its directors. These contracts generally: (i) confirm the existing indemnity
provided to them under the Company's Code of Regulations and assure that this
indemnity will continue to be provided; and (ii) provide that, in addition, the
directors shall be indemnified to the fullest extent permitted by law against
all expenses (including legal fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by them in any threatened, pending
or completed action or proceeding, including any action by or in the right of
the Company, on account of their service as a director or officer of the Company
or at the request or with the consent of the Company
II-1
<PAGE> 15
as a trustee, director, officer, employee, or agent of another corporation or
enterprise. Coverage under the contracts is excluded: (A) to the extent the
director is indemnified under directors' and officers' liability insurance
maintained by the Company; (B) on account of conduct which is finally adjudged
to be knowingly fraudulent, deliberately dishonest, or willful misconduct; (C)
if a final court of adjudication shall determine that such indemnification is
not lawful; or (D) on account of any suit in which judgment is rendered against
the director for an accounting of profits made from the purchase or sale by the
director of securities of the Company pursuant to Section 16(b) of the
Securities Exchange Act of 1934 or any similar provision. The indemnification
agreements are applicable to claims asserted after their effective date, whether
arising from acts or omissions occurring before or after their effective date.
The Company has purchased a liability policy to indemnify its officers
and directors against loss arising from claims by reason of their legal
liability for acts as officers and directors, subject to limitations and
conditions set forth in the policy.
At present, there are no claims, actions, suits, or proceedings pending
where indemnification would be required under the foregoing provisions, and the
Company does not know of any threatened claims, actions, suits, or proceedings
which may result in a request for such indemnification.
ITEM 16. EXHIBITS
Exhibit
No. Description of Exhibit
- ------- ----------------------
5 Opinion of Baker & Hostetler LLP.
23(a) Consent of Baker & Hostetler LLP.
23(b) Consent of Ernst & Young LLP
24 Powers of Attorney.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act; (ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement. Provided, however, that
paragraphs (a)(i) and (a)(ii) shall not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new Registration Statement
II-2
<PAGE> 16
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15, above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, State of Ohio, on December 10, 1997.
STATE AUTO FINANCIAL
CORPORATION
By /s/ Robert L. Bailey
---------------------------------
Robert L. Bailey, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert L. Bailey Chairman of the Board, December 10, 1997
- -------------------------- Chief Executive
Robert L. Bailey Officer and Director
(principal executive officer)
/s/ Steven J. Johnston Chief Financial Officer, December 10, 1997
- -------------------------- Vice President, and
Steve Johnston Treasurer (principal
financial officer and
principal accounting
officer)
John R. Lowther* Vice President, Secretary, December 10, 1997
- ------------------------- General Counsel, and
John R. Lowther Director
David L. Bickelhaupt* Director December 10, 1997
- -------------------------
David L. Bickelhaupt
David J. D'Antoni* Director December 10, 1997
- -------------------------
David J. D'Antoni
Urlin G. Harris* Director December 10, 1997
- -------------------------
Urlin G. Harris
Paul W. Huesman* Director December 10, 1997
- -------------------------
Paul W. Huesman
William J. Lhota* Director December 10, 1997
- -------------------------
William J. Lhota
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C>
George R. Manser* Director December 10, 1997
- -------------------------
George R. Manser
Robert J. Murchake* Director December 10, 1997
- -------------------------
Robert J. Murchake
*The undersigned hereby executes this Registration Statement on behalf of each
of the indicated directors of the Registrant pursuant to powers of attorney
executed by such directors and filed as an exhibit to this Registration
Statement.
/s/ Robert L. Bailey December 10, 1997
- -------------------------
Robert L. Bailey
</TABLE>
<PAGE> 19
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
5 Opinion of Baker & Hostetler LLP.
23(a) Consent of Baker & Hostetler LLP.
23(b) Consent of Ernst & Young LLP.
24 Powers of Attorney.
<PAGE> 1
EXHIBIT 5
BAKER & HOSTETLER LLP
65 East State Street
Suite 2100
Columbus, Ohio 43215
December 10, 1997
State Auto Financial Corporation
518 East Broad Street
Columbus, Ohio 43215-3976
Ladies and Gentlemen:
We are acting as counsel to State Auto Financial Corporation, an Ohio
corporation (the "Company"), in connection with its Registration Statement on
Form S-3 (the "Registration Statement") being filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
to register 300,000 common shares, without par value, of the Company (the
"Shares") for offer and sale under, and pursuant to, the Company's Monthly Stock
Purchase Plan for Independent Agents (the "Plan").
In connection therewith, we have examined the Company's Amended and
Restated Articles of Incorporation, as amended, the Company's Amended and
Restated Code of Regulations, and the records, as exhibited to us, of the
corporate proceedings of the Company; certificates of officers of the Company; a
copy of the Plan; and such other documents and records as we considered
necessary for purposes of this opinion. In rendering this opinion, we have
assumed the genuineness, without independent investigation, of all signatures on
all documents examined by us, the conformity to original documents of all
documents submitted to us as certified or facsimile copies, and the authenticity
of all such documents.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the caption "Legal Matters"
in the Prospectus which is part of the Registration Statement.
Very truly yours,
/s/ Baker & Hostetler LLP
BAKER & HOSTETLER LLP
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF BAKER & HOSTETLER LLP
Contained in Exhibit 5.
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 and related Prospectus of State Auto
Financial Corporation for the registration of 300,000 shares of its common stock
and to the incorporation by reference therein of our report dated February 21,
1997, with respect to the consolidated financial statements and schedules of
State Auto Financial Corporation included in its Annual Report (Form 10-K) for
the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Columbus, Ohio
December 10, 1997
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY
For Form S-3 Registration Statement to Register Common Shares
under the Monthly Stock Purchase Plan for Independent Agents
The undersigned, a director of State Auto Financial Corporation, an
Ohio corporation (the "Company"), hereby constitutes and appoints Robert L.
Bailey, Steven J. Johnston, and John R. Lowther, and each of them (with full
power to each of them to act alone), as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in his capacity as a director of the Company, to sign any
and all Registration Statements on Form S-3 and any and all amendments thereto
(including post-effective amendments) to register under the Securities Act of
1933, as amended, any common shares, without par value, of the Company, for sale
pursuant to the Company's Monthly Stock Purchase Plan for Independent Agents,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Dated: August 21, 1997 /s/ John R. Lowther
-----------------------------
John R. Lowther
Dated: August 21, 1997 /s/ David L. Bickelhaupt
-----------------------------
David L. Bickelhaupt
Dated: August 21, 1997 /s/ David J. D'Antoni
-----------------------------
David J. D'Antoni
Dated: August 21, 1997 /s/ Urlin G. Harris
-----------------------------
Urlin G. Harris
Dated: August 21, 1997 /s/ Paul W. Huesman
-----------------------------
Paul W. Huesman
Dated: August 21, 1997 /s/ William J. Lhota
-----------------------------
William J. Lhota
Dated: August 21, 1997 /s/ George R. Manser
-----------------------------
George R. Manser
Dated: August 21, 1997 /s/ Robert J. Murchake
-----------------------------
Robert J. Murchake
