<PAGE> 1
As filed with the Securities and Exchange Commission on November 8, 1999
Registration No. 333-___________________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 30549
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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 (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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 OFFICERS)
---------------------
ROBERT H. MOONE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
STATE AUTO FINANCIAL CORPORATION
518 EAST BROAD STREET
COLUMBUS, OHIO 43215-3976
(614) 464-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------
Copies of correspondence to:
John R. Lowther Curtis A. Loveland, Esq.
Vice President, Secretary and Porter, Wright, Morris & Arthur LLP
General Counsel 41 South High Street
State Auto Financial Corporation Columbus, Ohio 43215
518 East Broad Street (614) 227-2000
Columbus, Ohio 43215-3976
(614) 464-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please 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. [ ]
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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.[ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, without par value 400,000 shares $11.4375 $4,575,000 $1,272
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</TABLE>
(1) This Registration Statement is filed for up to 400,000 shares to be issued
or offered pursuant to the State Auto Financial Corporation 1998 State
Auto Agents' Stock Option Plan.
(2) Estimated solely for purposes of calculating registration fee.
(3) Registration fee has been calculated pursuant to Rule 457(h) based on the
average of the high and low prices of the Common Stock as reported on the
Nasdaq Stock Market on November 4, 1999 of $11.4375 share.
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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<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED NOVEMBER 8, 1999
PROSPECTUS
STATE AUTO FINANCIAL CORPORATION
518 E. BROAD ST.
COLUMBUS, OHIO 43215-3976
(614) 464-5000
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1998 STATE AUTO AGENTS' STOCK OPTION PLAN
---------------------
We are offering 400,000 of our common shares, without par value, upon
the exercise of options granted to our insurance agents under the 1998 State
Auto Agents' Stock Option Plan.
When we grant an award of stock options, we will enter into a
Participation Agreement with you which sets forth additional terms of that
award. You should refer to the Participation Agreement for information
concerning the exercise price and number of shares that may be received when you
exercise your stock options. The common stock is listed on the Nasdaq National
Market under the symbol "STFC."
See "The Plan" below on page 2 for a description of the stock options.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
You should rely only on the information contained or incorporated by
reference in this document. We have not authorized anyone to provide you with
information that is different from what is contained in this document. This
document is not an offer to sell or a solicitation of an offer to buy any
securities other than securities offered by this document. This document is not
an offer to sell or a solicitation of an offer to buy any securities in any
jurisdiction to any person to whom it is unlawful to make an offer or
solicitation in that jurisdiction. This document is dated November 8, 1999, and
you should not assume that the information contained in this document is
accurate as of any other date. Neither the mailing of this document nor the
issuance of any securities shall create any implication to the contrary.
---------------------
The date of this Prospectus is __________________, 1999
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<TABLE>
TABLE OF CONTENTS
<S> <C>
Business..................................................................................1
General................................................................................1
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.......1
The Plan..................................................................................2
Administration of the Plan.............................................................2
Plan Eligibility.......................................................................2
The Grant of Stock Options.............................................................2
Option Prices..........................................................................2
Exercising an Option...................................................................2
Payment of the Option Price............................................................3
Available Shares.......................................................................3
The Exercise of Awards by Non-Participants.............................................3
The Termination of Awards..............................................................3
The Status of an Option Holder.........................................................3
Change of Control of the Company.......................................................3
Participant's Agreements...............................................................4
Conditions to Issue or Deliver Common Stock............................................4
Resale of Common Stock.................................................................4
Term of the Plan.......................................................................4
Federal Tax Considerations................................................................4
Other Considerations......................................................................5
Use of Proceeds...........................................................................5
Legal Matters.............................................................................5
Experts...................................................................................5
Where You Can Find More Information.......................................................5
Incorporation of Documents by Reference...................................................6
</TABLE>
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BUSINESS
Throughout this prospectus the words "we", "us", "our" and "State
Auto" refer to both State Auto and our subsidiaries.
GENERAL
We are an insurance holding company engaged through our subsidiaries
in the property and casualty insurance business. We are approximately 70% owned
by State Automobile Mutual Insurance Company, an Ohio property and casualty
insurance company formed in 1921. Our principal operating subsidiaries and their
businesses are:
o State Auto Property and Casualty Insurance Company, a South Carolina
corporation, and Milbank Insurance Company, a South Dakota corporation,
which are regional standard insurers engaged primarily in writing personal
and commercial automobile, homeowners, commercial multi-peril, workers'
compensation and fire insurance.
o State Auto National Insurance Company, an Ohio corporation, which writes
personal automobile insurance for non-standard risks.
o Farmers Casualty Insurance Company, an Iowa domiciled standard property
casualty insurer, writing in Iowa and Kansas. Mid-Plains Insurance Company,
a subsidiary of Farmers Casualty Insurance Company, is an Iowa based
insurer which principally writes nonstandard auto insurance in Iowa and
Kansas.
o Stateco Financial Services, Inc., an Ohio corporation, provides investment
management services to affiliated companies and insurance premium finance
services to customers of State Auto Property and Casualty Insurance Company
and Milbank Insurance Company.
o State Auto Insurance Company, an Ohio corporation, which is currently
seeking a certificate of authority from the Ohio Department of Insurance,
expects to offer personal lines insurance in Ohio.
o Strategic Insurance Software, Inc., an Ohio corporation and a
majority-owned subsidiary of State Auto Financial, 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.
o 518 Property Management and Leasing, LLC, an Ohio limited liability
company, owns and leases real and personal property to our affiliated
companies. The members of 518 Property Management and Leasing are State
Auto Property and Casualty Insurance Company and Stateco Financial
Services, Inc.
Additionally, Midwest Security Insurance Company, a Wisconsin
domiciled standard personal lines property and casualty insurer, owned by State
Automobile Mutual Insurance Company, is managed by us.
At this time, we market our insurance products through approximately
12,500 independent insurance agents associated with approximately 2,200 agencies
in 26 states. Our insurance products are marketed primarily in the central and
eastern part of the United States, excluding New York, New Jersey and the New
England States.
Our principal executive office is located at 518 East Broad St.,
Columbus, Ohio 43215. Our telephone number is (614) 464-5000. You can find
additional information concerning State Auto and our business activities in the
documents incorporated by reference in this prospectus.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements contained in this prospectus and incorporated herein by
reference expressing the beliefs of our management and the other statements
which are not historical facts are forward looking statements that involve risks
and uncertainties. These risks and uncertainties include but are not limited to:
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o adverse state and federal legislative changes or judicial and
regulatory decisions;
o competitive products and pricing;
o weather and weather-related events or other types of catastrophic
events;
o geographic spread of risk;
o fluctuations of securities markets;
o general economic and business conditions that are less favorable
than expected;
o changes in technology or industry standards;
o shortages of labor and materials in storm hit areas;
o late reported claims and previously undisclosed damage;
o utilities and financial institutions disruptions;
o shortage of skilled personnel;
o regulatory or governmental systems breakdown; and
o other risk factors or uncertainties listed from time to time in
this prospectus or any document incorporated by reference in this
prospectus.
THE PLAN
ADMINISTRATION OF THE PLAN
The Plan will be administered by a Plan Administration Committee
consisting of at least three members appointed by our Board of Directors.
PLAN ELIGIBILITY
Our agents who will be eligible to receive options under the Plan are
those invited to participate pursuant to criteria established by the Plan
Administration Committee. Each person who receives an award under the Plan is
referred to as a Participant. We have no obligation to select any or all agents
for participation in the Plan. For purposes of the Plan, an agent is a person
who has entered into an agency agreement with us.
THE GRANT OF STOCK OPTIONS
Each year, we will grant options to Participants in the Plan based on
the formula set forth in the Plan and in each Participant's Participation
Agreement.
OPTION PRICES
As long as our shares of common stock are listed on the Nasdaq
National Market, the exercise price of options granted under the Plan will be
equal to the last reported sale price on the Nasdaq National Market on the day
of the grant under the terms of the Plan.
EXERCISING AN OPTION
Subject to certain restrictions, Participants may exercise options
that are vested. Each option will be effective for no more than ten (10) years.
If an option is not fully exercised by its expiration date it will terminate to
the extent not previously exercised.
A Participant may exercise an option by delivering written notice to
us and paying the exercise price. Participants may exercise options in full or
in part. A Participant will become a shareholder of those shares for which an
option is exercised at the time the Plan Administration Committee determines
that the exercise is valid, the option price has been received and a certificate
for the shares has been issued. We will issue shares of common stock as soon as
practicable after exercise.
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PAYMENT OF THE OPTION PRICE
A Participant may pay the exercise price of an option in cash or by
check. Additionally, Participant can pay the exercise price by delivering
previously held shares of the common stock or by a combination of cash and
shares. If a Participant uses shares for this payment, the value of each share
delivered shall be equal to the last reported sale price on the Nasdaq National
Market on the day the option is exercised.
AVAILABLE SHARES
Subject to adjustments for stock splits, stock dividends and other
changes in the number and character of shares of common stock available for
awards, we will grant awards for up to 400,000 shares of common stock under the
Plan. The shares that we will deliver upon the exercise of options may be
authorized but unissued shares of common stock or issued shares of common stock
which we have reacquired or a combination of both.
In the event of a stock split, stock dividend or similar change in the
number and character of shares of common stock available for awards, we will
adjust:
o The number of shares of common stock available for awards under
the Plan; and
o The exercise price per share of common stock under each
outstanding option.
The purpose and effect of this type of adjustment is to give you the same
economic rights in our common stock that you had prior to a stock split, stock
dividend or similar change. We will not make this type of adjustment unless the
adjustment would require an increase or decrease in the number of shares or
exercise price of at least 1%.
THE EXERCISE OF AWARDS BY NON-PARTICIPANTS
Under the Agents' Stock Option Plan Addendum, which you are required
to sign to become a Participant in the Plan, we will consent to allow you to
designate natural persons who are your owners the right to participate in the
Plan. Otherwise, you may not transfer awards other than by will or by the laws
of descent and distribution upon death. In the case of your death, your estate
or heirs may exercise the award within one (1) year of death, to the same extent
that you could have exercised the award at the time of your death.
THE TERMINATION OF AWARDS
All awards have a term of ten (10) years. If your agency agreement
terminates, you fail to meet your performance criteria as set forth in your
Participation Agreement and in the Plan, or you fail to pay us any amounts due
under your agency agreement on time, your option, to the extent not vested,
terminates. You will, however, be able to exercise your option to the extent
vested until the term lapses.
If your relationship with us terminates, you will not be eligible to
receive awards after the date of termination of the relationship. Any
outstanding but unexercised awards will terminate as described in the preceding
paragraph.
THE STATUS OF AN OPTION HOLDER
Receiving an option does not give you any right to continue your
relationship with us, and it does not interfere with our right to terminate our
relationship with you at any time. You will not have rights as a shareholder for
any shares of common stock subject to an option until the date we issue those
shares.
CHANGE OF CONTROL OF THE COMPANY
If we are a party to a merger or consolidation, other than a merger in
which we are the surviving corporation, the aggregate number of shares reserved
for issuance under the Plan and the number and exercise price of outstanding
options will be adjusted. The adjustment will entitle you to receive for the
original aggregate exercise price the number and type of shares of stock which
you would have received upon the happening of the
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event giving rise to the adjustment as if you had exercised all of your options
and held shares of common stock prior to the happening of the event.
PARTICIPANT'S AGREEMENTS
The terms and conditions of your award will be contained in an
agreement between you and us. The terms of your agreement will be consistent
with the terms of the Plan, but may include additional provisions and
restrictions that are not inconsistent with the Plan.
CONDITIONS TO ISSUE OR DELIVER COMMON STOCK
Our obligation to issue or deliver shares of common stock upon the
exercise of an award is subject to applicable laws and the approval of
applicable governmental and regulatory authorities, if necessary or appropriate.
RESALE OF COMMON STOCK
You may publicly sell shares of common stock acquired pursuant to the
Plan. However, if you may be considered our "affiliate" as defined in the SEC
rules under the Securities Act of 1933 any shares that you own may not be
re-offered or resold except:
o Under a separate prospectus covering those shares;
o In connection with Rule 144 under the rules of the Securities
Act; or
o Under another Securities Act exemption from registration.
TERM OF THE PLAN
The Plan will terminate on May 27, 2008, unless terminated earlier by
our Board of Directors. The termination of the Plan will not affect the
exercisability of outstanding options.
FEDERAL TAX CONSIDERATIONS
Options granted under the Plan are non-qualified options under the
Internal Revenue Code. Generally, the grant of options will not result in the
recognition of taxable income for federal income tax purposes. When a
Participant exercises an option, the Participant recognizes, as ordinary income,
the excess of the fair market value of the common stock on the date of exercise
over the exercise price. We will be allowed a deduction for federal income tax
purposes to the same extent and at the same time as the Participant recognizes
income.
The tax basis of a share acquired by exercise of an option with a cash
payment will be its fair market value used to determine the amount of taxable
income arising from the exercise of the option. Assuming the shares issued on
the exercise of an option are held as a capital asset, the holding period for
purposes of determining whether a subsequent sale of the share results in the
recognition of short-term or long-term capital gain or loss will begin on the
day of transfer of the share to the Participant.
If a Participant delivers shares of common stock that he or she
already owns as payment of the exercise price of shares acquired on the exercise
of an option, the delivery will not result in the recognition of a capital gain
or loss on the previously owned stock. The number of option shares received in
excess of the previously owned shares given up, in effect, are "purchased" with
the untaxed appreciation on the previously owned stock. A Participant's tax
basis and holding period for the number of shares received equal to the number
of shares delivered will be the same as that for the shares delivered. A
Participant's tax basis for shares received in excess of the number of shares
delivered will equal the fair market value of the shares used to determine the
amount of taxable income arising from the exercise of the option. A
Participant's holding period for those excess shares will begin on the date the
shares are transferred to the Participant.
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We will report the amount of taxable income arising from the exercise
of an option on IRS Form 1099. You should consult your tax advisor to determine
the income tax consequences of holding and exercising any awards granted under
the Plan and of selling any stock acquired pursuant to that exercise, as well as
to determine the effect of any state or local taxes.
The Plan is not qualified under Section 401(a) of the Internal Revenue
Code and is not subject to any provisions of the Employee Retirement Income
Security Act of 1974, as amended.
OTHER CONSIDERATIONS
The Plan will continue in effect until all awards that we have granted
expire. We will not grant any awards under the Plan after May 27, 2008. Our
Board of Directors may amend, suspend or terminate the Plan. However, no action
shall adversely affect or impair in any material respect any award granted under
the Plan without the consent of the Participant holding the award.
USE OF PROCEEDS
We will use any proceeds from the exercise of awards for general
corporate purposes.
LEGAL MATTERS
The legality of the common stock offered under this prospectus will be
passed upon by Porter, Wright, Morris & Arthur LLP.
EXPERTS
The consolidated financial statements of State Auto Financial
Corporation at December 31, 1998 and 1997, and for each of the three years in
the period ended December 31, 1998, incorporated by reference in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon and incorporated by reference
herein, and are included in reliance upon such report given the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, therefore, we file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You can inspect and copy any document we file with the Commission at
the following locations:
o At the Public Reference Room of the Commission, Room
1024-Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549;
o At the Public Reference Room of the Commission's regional
office at Seven World Trade Center, 13th Floor, New York,
New York 10048;
o At the Public Reference Room of the Commission's regional
office at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661;
o By writing the Commission, Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549;
o At the offices of the National Association of Securities
Dealers, Inc., Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006; or
o From the Commission's web site at www.sec.gov.
Some of these locations may charge a prescribed fee or modest fee for
copies.
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We have filed with the Commission a registration statement and related
exhibits under the Securities Act of 1933 with respect to the securities. As
permitted by the Commission, this prospectus, which constitutes a part of the
registration statement, does not contain all the information included in the
registration statement. Such additional information may be obtained from the
locations described above. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete. You
should refer to the contract or other document for all the details.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference the information
we file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and information that we later file
with the Commission will automatically update and supersede this information.
Accordingly, we incorporate by reference the following documents we filed with
the Commission pursuant to Section 13 of the Securities Exchange Act of 1934
(Commission File Number 0-19289):
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998 (filed March 30, 1999);
o Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 (filed May 14, 1999) and June 30, 1999 (filed August 13,
1999);
o Our Proxy Statement for the Annual Meeting of Shareholders held
on May 27, 1999 (filed April 26, 1999);
o The description of our common stock, contained in the
registration statement on Form 8-A filed with the Commission
pursuant to Section 12 of the Securities Exchange Act of 1934 and
all amendments thereto and reports filed for the purpose of
updating such description; and
o All documents filed by us with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 after the date of this prospectus and before the offering
of the common stock thereby is completed (other than portions of
such documents described in paragraphs (i), (k) and (l) of Item
402 of Regulation S-K promulgated by the Commission).
These documents are or will be available for inspection or copying at
the locations identified above under the caption "Where You Can Find More
Information." We will provide without charge to each to whom this prospectus is
delivered, upon written or oral request, a copy of any and all of the documents
that have been incorporated by reference in this prospectus (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference). You should direct requests for documents to:
State Auto Insurance Corporation
518 East Broad St.
Columbus, Ohio 43215-3976
Attention: James E. Duemey, Vice President
Telephone Number: (614) 464-5000
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be paid by the
Company in connection with the sale and distribution of the securities being
registered hereby. All amounts shown are estimates, except the SEC registration
fee:
SEC registration fee $ 1,272.00
Legal fees and expenses 7,500.00
Accounting fees and expenses 1,000.00
Miscellaneous expenses 1,228.00
Total $11,000.00
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 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.
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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 AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed herewith or incorporated by reference
as part of this Registration Statement.
Exhibit No. Description of Exhibit
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4.1* 1998 State Auto Agents' Stock Option Plan.
5.1* Opinion of Porter, Wright, Morris & Arthur LLP regarding
the legality of the securities being issued hereunder.
23.1* Consent of Counsel (included in Exhibit 5.1 hereof)
23.2* Consent of Ernst & Young LLP.
24.1* Power of Attorney.
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*Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) 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 of 1933;
(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 aggregate, represent a
fundamental change in the information set forth in
the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(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;
(iv) Provided, however, that paragraphs (1)(i) and
(1)(ii) do not apply if the information required
to be included in a post-effective amendment by
those paragraphs is contained in periodic reports
filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities
Exchange Act of
II-2
<PAGE> 13
1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement 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.
(3) 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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
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) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 of 1933 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 of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 14
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 November 5, 1999.
STATE AUTO FINANCIAL CORPORATION
By: /s/ Robert H. Moone
-------------------------------
Robert H. Moone, President 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 5th day of November, 1999.
Name Title
/s/ Robert H. Moone President and Chief Executive Officer
- ------------------------ (principal executive officer)
Robert H. Moone
/s/ Steven J. Johnston Chief Financial Officer, Vice President,
- ------------------------ and Treasurer (principal financial officer
Steven J. Johnston and principal accounting officer)
Robert L. Bailey* Chairman of the Board
- ------------------------
Robert L. Bailey
John R. Lowther* Vice President, Secretary,
- ------------------------ General Counsel, and Director
John R. Lowther
David L. Bickelhaupt* Director
- ------------------------
David L. Bickelhaupt
David J. D'Antoni* Director
- ------------------------
David J. D'Antoni
Urlin G. Harris* Director
- ------------------------
Urlin G. Harris
Paul W. Huesman* Director
- ------------------------
Paul W. Huesman
William J. Lhota* Director
- ------------------------
William J. Lhota
George R. Manser* Director
- ------------------------
George R. Manser
II-4
<PAGE> 15
*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 H. Moone
- ------------------------
Robert H. Moone
Power of Attorney
II-5
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
4.1* 1998 State Auto Agents' Stock Option Plan.
5.1* Opinion of Porter, Wright, Morris & Arthur LLP regarding
the legality of the securities being issued hereunder.
23.1* Consent of Counsel (included in Exhibit 5.1 hereof)
23.2* Consent of Ernst & Young LLP.
24.1* Power of Attorney.
- ----------------------
*Filed herewith.
<PAGE> 1
Exhibit 4.1
STATE AUTO FINANCIAL CORPORATION
STATE AUTO INSURANCE COMPANIES
AGENTS' STOCK OPTION PLAN
Amended and Restated as of May 1, 1999
SECTION 1. PURPOSE; DEFINITIONS.
The 1998 State Auto Agents' Stock Option Plan (the "Plan") of State Auto
Financial Corporation, an Ohio corporation (the "Company"), a majority owned
subsidiary of State Automobile Mutual Insurance Company ("State Auto Mutual") is
intended to encourage authorized independent insurance agencies of the State
Auto Insurance Companies ("State Auto Agents" or individually a "State Auto
Agent") to acquire or increase and retain a financial interest in the Company
and to strengthen the mutuality of interests between such State Auto Agents and
the Company's shareholders by offering such State Auto Agents who become
Participants (as defined below) non qualified stock options to purchase Shares
(as defined herein) of the Company, in accordance with the terms of the Plan as
set forth below. The intent of the Plan is to prescribe a basic framework for
offering a Participant the opportunity to earn Awards (as defined below) during
the term of the Agent Option Plan Addendum (as defined below), executed pursuant
to this Plan, by producing prescribed levels of State Auto Growth (as defined
below) with Profit (as defined below).
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Agent Option Plan Addendum" means the contract document attached to
and made a part of the Participant's Agency Agreement with the State Auto
Insurance Companies, confirming the Participant's participation in the Plan.
(b) "Award" means the vesting of Stock Options granted under the Plan.
(c) "Award Level Growth" means State Auto Growth, in increments or units
of $500,000, provided that in the event a Participant's volume of State Auto
Premium should decline during a Qualifying Period from the amount of such
Participant's State Auto Premium in force at the end of the previous Qualifying
Period, Award Level Growth means $500,000 of State Auto Growth plus an
additional amount of State Auto Growth equal to the aggregate amount by which
such Participant's State Auto Premium declined during the previous Qualifying
Period(s) .
1
<PAGE> 2
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(f) "Company" means State Auto Financial Corporation, an Ohio
corporation, or any successor corporation.
(g) "Disability" means permanent and total disability as defined in
Section 22(e)(3) of the Code.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(i) "Fair Market Value" means, as of any given date, the (i) last
reported sale price on the NASDAQ National Market System, or (ii) mean between
the high and low bid and ask price, as reported by the National Association of
Securities Dealers, or (iii) last reported sale price on any stock exchange on
which the Stock is listed.
(j) "Option Price" means the Fair Market Value of one share of the Stock
on the effective date of a Stock Option granted under this Plan.
(k) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(l) "Participant" means a State Auto Agent, having been invited by the
Committee (as defined in Section 7 below) to participate in the Plan, who
executes an Agent Option Plan Addendum or is designated as such pursuant to the
Agent Option Plan Addendum.
(m) "Participation Agreement" means that document setting forth specific
terms applicable to the timing of an Option granted under the Plan or a
Participant's performance required by the Plan to vest any Option granted
hereunder which terms are deemed necessary or appropriate by the Committee (as
defined in Section 7 below) to address a Participant's individual circumstances
and to further the interests of the Company, as determined by the Committee in
its discretion.
(n) "Plan" means State Auto Financial Corporation State Auto Insurance
Companies 1998 State Auto Agents' Stock Option Plan, as amended from time to
time.
(o) "Profit" or "Profitable" means the Participant has a QPA Profit as of
the end of the calendar year in two of the last three calendar years (including
the then current calendar year) or the Participant has a cumulative QPA profit
over the three year period
2
<PAGE> 3
including the then current calendar year and the two calendar years immediately
preceding.
(p) "QPA Profit" means the profitability measure set forth in the Quality
Performance Agreement (QPA) between the State Auto Insurance Companies and the
Participant which is incorporated herein by this reference.
(q) "Qualifying Day" means the last day of a Qualifying Period in which
the Participant has achieved Award Level Growth.
(r) "Qualifying Period" means a calendar year during the term of this
Plan or a portion thereof in the first calendar year in which a Participant
commences participation under the Plan.
(s) "State Auto Growth" means the net increase in State Auto Premium from
the beginning of one Qualifying Period to the end of such Qualifying Period.
(t) "State Auto Premium" means voluntary, written premium placed by the
Participant in any of the following State Auto Insurance Companies, i.e.,: State
Auto Mutual, State Auto Property and Casualty Insurance Company ("State Auto
P&C"), Milbank Insurance Company ("Milbank"), Midwest Security Insurance Company
("Midwest Security"), and Farmers Casualty Insurance Company ("Farmers
Casualty") as well as any other property and casualty insurer designated by the
Committee which is controlled by or under common control with State Auto Mutual.
(u) "Stock" or "Shares" means the Common Shares, without par value, of
the Company.
(v) "Stock Option" or "Option" means any option to purchase Shares
granted pursuant to Section 3, which options shall be non-qualified stock
options.
(w) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
SECTION 2. STOCK SUBJECT TO THE PLAN.
(a) Aggregate Stock Subject to the Plan. Subject to adjustment as
provided below in Section 2(c), the total number of shares of Stock reserved and
3
<PAGE> 4
available for Awards under the Plan is 400,000. Any Stock issued hereunder may
consist, in whole or in part, of authorized and unissued Shares or treasury
shares.
(b) Forfeiture or Termination of Awards of Stock. If any Stock
subject to any Award granted hereunder is forfeited or an Award otherwise
terminates or expires without the issuance of Stock, the Stock subject to such
Award shall again be available for distribution in connection with future Awards
under the Plan as set forth in Section 2(a).
(c) Adjustment.
(1) If the Company (i) pays a dividend or makes a
distribution in shares of Stock, (ii) subdivides or splits its outstanding Stock
into a greater number of shares, or (iii) combines its outstanding Stock into a
smaller number of shares, the aggregate number of shares of Stock reserved for
issuance pursuant to the Plan and the number and option price of shares of Stock
subject to outstanding Options granted pursuant to the Plan immediately prior
thereto shall be adjusted. The adjustment would occur as follows: assuming that
Options had been previously granted for all of the shares of Stock so reserved,
the Participants would be entitled to receive for the same aggregate price that
number of shares of Stock which they would have owned after the happening of any
of the events described above had they exercised all of such Options prior to
the happening of such event. An adjustment made pursuant to this Section 2(c)(1)
shall become effective immediately after the record date in the case of a
dividend and shall become effective immediately after the effective date in the
case of a subdivision or combination.
(2) If the Company reclassifies or changes the Stock
(except for splitting or combining, or changing par value, or changing from par
value to no par value, or changing from no par value to par value) or
participates in a consolidation or merger (other than a merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the Stock except as stated above), the aggregate
number of shares of Stock reserved for issuance pursuant to the Plan and the
number and option price of shares of Stock subject to outstanding Options
granted pursuant to the Plan immediately prior thereto shall be adjusted. This
adjustment shall occur as follows: assuming that Options had been previously
granted for all the shares of Stock so reserved, the Participants would be
entitled to receive for the same aggregate price that number and type of shares
of capital stock which they would have owned after the happening of any of the
events described above had they exercised all of such Options prior to the
happening of such event.
(3) No adjustment pursuant to this Section 2(c) shall be
required unless such adjustment would require an increase or decrease of at
least 1% in such number or price; PROVIDED, HOWEVER, that any adjustments which,
by reason of this Section 2(c)(3), are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2(c) shall be
4
<PAGE> 5
made to the nearest cent or to the nearest full share, as the case may be.
Anything in this Section 2(c) to the contrary notwithstanding, the Committee
shall be entitled to make such reductions in the option price, in addition to
those required by this Section 2(c), as it in its discretion shall determine to
be advisable in order that any stock dividends, subdivisions or splits of
shares, distribution of rights to purchase stock or securities, or a
distribution of securities convertible into or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(4) Whenever an adjustment is made pursuant to this Section
2(c), the Company shall promptly prepare a notice of such adjustment setting
forth the terms of such adjustment and the date on which such adjustment becomes
effective and shall mail such notice of such adjustment to the Participants at
their respective addresses appearing on the records of the Company or at such
other address any Participant may from time to time designate in writing to the
Company.
SECTION 3. STOCK OPTIONS.
(a) Grant and Eligibility. Except as set forth in a Participation
Agreement, all Participants shall be granted a Stock Option for such number of
Shares as described in Section (3)(b)(1) below (an "Award Level Grant") on the
first day of each Qualifying Period during the Term of the Participant's Agent
Option Plan Addendum, provided that if the Participant achieves two or more full
units of Award Level Growth with Profit as described in Section 4 below within
one Qualifying Period, the Participant will be granted one additional Award
Level Grant for each full unit of Award Level Growth with Profit achieved during
the Qualifying Period, which additional Award Level Grant(s) shall be deemed to
be effective as of the Qualifying Day.
(b) Terms and Conditions. Except as set forth in a Participation
Agreement, options granted under the Plan shall be evidenced by option
agreements, and shall be subject to the following terms and conditions:
(1) Number of Shares. Each grant of a Stock Option under
this Plan shall be for such whole number of Shares equal to $50,000 divided by
the Option Price. If the Participant designates through the Agent Option Plan
Addendum one or more individuals to receive a Stock Option, the number of Shares
for which an Option shall be granted to such individuals from the number
described herein shall be designated by the Participant who executes the Agent
Option Plan Addendum.
(2) Option Term. Subject to Section 3(b)(6), the term of
each Stock Option granted hereunder shall be ten (10) years.
(3) Vesting. Each Stock Option granted under the Plan vests
in the manner and as of the time set forth in Section 4 below. Following
vesting, the Stock Option shall thereafter be exercisable during the term of
such Stock Option as specified in
5
<PAGE> 6
Section 3(b)(2). If the Participant fails to meet the vesting requirements set
forth in Section 4 below the Award Level Grant lapses and no rights under or
benefits in such Option accrue to the Participant and any option agreements
tendered to the Participant for such Option shall be null and void if the Option
does not vest in the manner described herein.
(4) Method of Exercise. When exercisable in accordance with
Section 3(b)(3), a Stock Option may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of Shares to be
purchased.
(i) Such notice shall be accompanied by payment in full of
the Option Price times the number of Shares for which the Option is exercised
(the "Exercise Price"), in cash or by certified check or such other instrument
as the Committee may provide for the Company to accept. In addition, payment, in
full or in part, of the Exercise Price of Stock Options may be made in the form
of unrestricted Stock owned by the Participant for at least six months prior to
the exercise. The value of each such share of Stock surrendered shall be 100% of
the Fair Market Value of the Stock on the date the Option is exercised.
(ii) No Stock shall be issued pursuant to an exercise of an
Option until full payment has been made. A Participant shall not have rights to
dividends or any other rights of a shareholder with respect to any Stock subject
to an Option unless and until the Participant has given written notice of
exercise, has paid in full for such Shares, has given, if requested, the
representations described in Section 8(a) and such Shares have been issued to
the Participant.
(5) Non-Transferability of Options. No Stock Option shall
be transferable by the Participant other than in accordance with the terms
hereof. All Stock Options shall be exercisable only by the Participant, or by
the Participant's estate (as provided in Section 3(b)(6) or by the Participant's
authorized legal representative if the Participant is a natural person and is
unable to exercise an Option as a result of the Participant's Disability.
(6) Death of Participant. If a Participant who is a natural
person dies while holding an unexercised vested Stock Option, any vested Stock
Option held by such Participant at the time of his or her death may thereafter
be exercised, to the extent such Option was exercisable at the time of death, by
the estate of the Participant (acting through its fiduciary), for a period of
one year from the date of such death regardless of the term of the Stock Option
remaining at the Participant's death.
6
<PAGE> 7
SECTION 4. AWARD QUALIFICATION (VESTING) CONDITIONS.
(a) Award Qualification (Vesting) Conditions. Except as set forth in a
Participation Agreement, to vest an Award Level Grant under the Plan, the
Participant must achieve Award Level Growth (the "Growth Condition") with Profit
(the "Profit Condition") as more fully explained in Sections 4(a)(1) and
4(a)(2), provided that the Participant shall have no more than two consecutive
Qualifying Periods to meet the criteria set forth in (a)(1) and (a)(2) below to
vest one Award Level Grant. A Participant who fails to vest at least one Award
Level Grant in a period of two consecutive Qualifying Periods shall be subject
to being removed from the Plan by the Committee.
(1) Growth Condition. To vest an Award Level Grant under
the Plan, a Participant must have achieved Award Level Growth as of the end of a
particular Qualifying Period during the term of the Participant's Agent Option
Plan Addendum. A Participant may vest one award Level Grant for each unit of
Award Level Growth achieved in a particular Qualifying Period. To the extent
that a Participant's State Auto Growth in a particular Qualifying Period exceeds
one or more units of Award Level Growth, such State Auto Growth that exceeds the
total number of units of Award Level Growth in that Qualifying Period will be
carried forward one time into the next Qualifying Period. To the extent that a
Participant's State Auto Growth does not equal Award Level Growth in a
particular Qualifying Period, such State Auto Growth as was achieved will be
carried forward one time into the next Qualifying Period.
(2) Profit Condition. In order to be eligible to vest an
Award Level Grant under the Plan, in addition to meeting the condition set forth
in Section 4(a)(1) above, a Participant must be Profitable as of the end of the
Qualifying Period in which the Award Level Growth was achieved or as of the
Qualifying Period that immediately follows such Qualifying Period.
(b) Award (Vesting) Effective Date. Except as set forth in a
Participation Agreement, an Award Level Grant made under Section 3 hereof shall
vest hereunder as of the first day of the calendar year next following the
Participant's achievement of the vesting conditions for a Stock Option as
described above.
SECTION 5. AMENDMENTS AND TERMINATION.
The Board may at any time, in its sole discretion, amend, alter or
terminate the Plan, but no such amendments, alterations or termination shall be
made without the Participant's consent which would impair the rights of a
Participant who has executed or been designated as such under the Agent Option
Plan Addendum.
SECTION 6. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the Company.
7
<PAGE> 8
SECTION 7. ADMINISTRATION.
The Plan shall be administered by the Plan Administration Committee (the
"Committee") which shall consist of not less than three members appointed by the
Board of Directors the Company. The members of the Committee shall serve at the
pleasure of the Board, which may remove members from the Committee or appoint
new members to the Committee from time to time and members of the Committee may
resign by written notice to the President or Secretary of the Company.
Unless otherwise determined by the Board, the Committee shall have full
and final authority to administer the Plan in a manner consistent with its
intent and the interests of the Company and its affiliates. The Committee shall
have the express authority to (i) invite State Auto Agents who meet such
criteria as the Committee selects to become Participants in the Plan; (ii)
interpret all provisions of the Plan consistent with law; (iii) prescribe the
form and terms of instruments that document and describe a Participant's
participation in the Plan, including, without limitation, the Agent Option Plan
Addendum, the option agreement(s) for any Option granted under this Plan and any
Participation Agreements; (iv) require the inclusion of legends on any Shares
acquired through Option exercise; (v) adopt, amend and rescind general and
special rules and regulations for the Plan's administration; (vi) direct
employees of the Company and subsidiary and affiliated corporations, and
advisors to prepare such materials or perform such analyses as the Committee
deems necessary and appropriate; and (vii) make all other determinations
necessary or advisable for the administration of this Plan.
The Committee may designate selected Committee members or certain
employees of the Company to assist the Committee in the administration of the
Plan and may grant authority to such persons to execute documents, including
Options, on behalf of the Committee.
No member of the Committee shall be liable for any action taken or
determination made in good faith.
Any interpretation or administration of the Plan by the Committee, and
all actions of the Committee, shall be final, binding and conclusive on the
Company and all Participants in the Plan, their respective legal
representatives, successors and assigns, and upon all persons claiming under it
through any of them.
Members of the Committee shall be entitled to indemnification,
reimbursement and other protections as set forth in the Company's Amended and
Restated Articles of Incorporation and Amended and Restated Code of Regulations,
as each may be further amended from time to time, as set forth in any Indemnity
Agreements between the Company and such Committee members and additionally as
provided, and to the full extent not prohibited, by law.
8
<PAGE> 9
SECTION 8. GENERAL PROVISIONS.
(a) The Company may require each Participant acquiring Stock
pursuant to an Option under the Plan (i) to represent and warrant to and agree
with the Company in writing that the Participant is acquiring the Stock without
a view to distribution thereof, and (ii) to make such additional
representations, warranties and agreements with respect to the investment intent
of such person or persons exercising the Option as the Company may reasonably
request. The certificates for such shares may include any legend which the
Company deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stop-transfer orders and other
restrictions as the Company may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, and any applicable federal or state
securities law, and the Company may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) No later than the date as of which an amount first becomes
includable in the gross income of the Participant for federal income tax
purposes with respect to any Award under the Plan, (which under current law
should be the date of exercise of a vested Award) State Auto Mutual or the
Company will prepare and deliver to the Participant and the Internal Revenue
Service a form 1099 which reflects the amount of money that is includable in the
gross income of the Participant for federal income tax purposes.
(c) The Plan, all Awards made and actions taken thereunder and any
agreements relating thereto shall be governed by and construed in accordance
with the laws of the State of Ohio.
(d) All agreements entered into with Participants pursuant to the
Plan, including but not limited to, any option agreement(s), the Agent Option
Plan Addendum and any Participation Agreements, shall be subject to the express
terms and general intent of the Plan.
(e) If the Participant's Agency Agreement with State Auto
terminates or is terminated during the term of the Participant's participation
in the Plan, all Award Level Grants made but not yet vested shall lapse as of
the effective date of such Agency Agreement termination.
9
<PAGE> 10
SECTION 9. EFFECTIVE DATE OF PLAN.
This Plan as amended and restated was adopted by the Board to be
effective as of May 1, 1999, and it shall be effective as of that date.
10
<PAGE> 11
SECTION 10. TERM OF PLAN.
Except as otherwise set forth in a Participant's Agent Option Plan
Addendum, no Award level Grant shall be made to any Participant pursuant to the
Plan on or after the fifth anniversary of the first day of the first full
calendar year of such Participant's participation in the Plan, but an Award
Level Grant made prior to such fifth anniversary may extend beyond that date.
Notwithstanding the foregoing, this Plan shall terminate as of the last day
immediately preceding the tenth anniversary of the original adoption of this
Plan by the Board i.e., May 27, 2008, unless previously terminated by the Board
of Directors.
IN WITNESS WHEREOF, the Board has approved this Plan as amended and restated to
be effective as of May 1, 1999, as evidenced by the signature of the Company's
Chief Executive Officer below.
/s/ Robert H. Moone
- ----------------------------------------
Robert H. Moone, Chief Executive Officer
11
<PAGE> 1
Exhibit 5.1
PORTER, WRIGHT, MORRIS & ARTHUR LLP
41 South High Street
Columbus, Ohio 43215
Telephone: (614) 227-2000
Fax: (614) 227-2100
November 8, 1999
State Auto Financial Corporation
518 East Broad Street
Columbus, Ohio 43215
Re: Registration Statement on Form S-3
State Auto Financial Corporation 1998 State Auto Agents' Stock
Option Plan (the "Plan")
Ladies and Gentlemen:
We have acted as counsel for State Auto Financial Corporation, an Ohio
corporation ("State Auto"), in connection with the Registration Statement on
Form S-3 (the "Registration Statement"), filed by State Auto with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, with
respect to the registration of 400,000 shares of State Auto Common Stock,
without par value (the "Shares"), to be issued under the Plan.
In connection with this opinion, we have examined such corporate
records, documents and other instruments of the registrant as we have deemed
necessary.
Based on the foregoing, we are of the opinion that the Shares will,
when issued and paid for in accordance with the provisions of the Plan, be
legally issued, fully paid and nonassessable, and entitled to the benefits of
the Plan.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Porter, Wright, Morris & Arthur LLP
PORTER, WRIGHT, MORRIS & ARTHUR LLP
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of State Auto Financial
Corporation for the registration of 400,000 shares of its common stock and to
the incorporation by reference therein of our report dated February 12, 1999,
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, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Columbus, Ohio
November 5, 1999
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
For Form S-3 Registration Statement to Register Common Shares
Under the 1998 State Auto Agents' Stock Option Plan
The undersigned, a director of State Auto Financial Corporation, an
Ohio corporation (the "Company"), hereby constitutes and appoints Robert H.
Moone, 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 1998 State Auto Agents' Stock Option Plan, 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: November 1, 1999 /s/ Robert L. Bailey
-------------------------- ---------------------------------
Robert L. Bailey
Dated: November 1, 1999 /s/ David L. Bickelhaupt
-------------------------- ---------------------------------
David L. Bickelhaupt
Dated: November 1, 1999 /s/ David J. D'Antoni
-------------------------- ---------------------------------
David J. D'Antoni
Dated: November 1, 1999 /s/ Urlin G. Harris, Jr.
-------------------------- ---------------------------------
Urlin G. Harris, Jr.
Dated: November 1, 1999 /s/ Paul W. Huesman
-------------------------- ---------------------------------
Paul W. Huesman
Dated: November 1, 1999 /s/ William J. Lhota
-------------------------- ---------------------------------
William J. Lhota
Dated: November 1, 1999 /s/ John R. Lowther
-------------------------- ---------------------------------
John R. Lowther
Dated: November 1, 1999 /s/ George R. Manser
-------------------------- ---------------------------------
George R. Manser
Dated: November 1, 1999 /s/ Robert H. Moone
-------------------------- ---------------------------------
Robert H. Moone
