1
10(CC)
STANDBY PURCHASE AGREEMENT
BETWEEN
STATE AUTO FINANCIAL CORPORATION
AND
SAF FUNDING CORPORATION
DATED AUGUST 16, 1996
2
EXHIBIT E to the
Credit Agreement
************************************************************
STATE AUTO FINANCIAL CORPORATION
and
SAF FUNDING CORPORATION
-----------------------------
STANDBY PURCHASE AGREEMENT
Dated as of August 16, 1996
------------------------------
************************************************************
3
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Terms............................... 1
Section 2. Purchase of Preferred Stock. .................................. 6
2.01 Purchases. ................................................. 6
2.02 Notices of Purchases. ...................................... 6
2.03 Commitment Fee.............................................. 6
Section 3. Conditions to Purchase......................................... 6
Section 4. Representations and Warranties of State Auto Financial......... 7
4.01 Corporate Existence......................................... 7
4.02 Litigation.................................................. 7
4.03 No Breach................................................... 7
4.04 Action...................................................... 8
4.05 Approvals................................................... 8
4.06 Capitalization.............................................. 8
4.07 True and Complete Disclosure................................ 8
Section 5. Representations and Warranties of the Company.................. 9
5.01 Investment.................................................. 9
5.02 No Agreement to Transfer.................................... 9
5.03 Knowledge and Experience.................................... 9
5.04 Access to Information....................................... 9
5.05 Risk........................................................ 9
5.06 Restrictions on Transfer.................................... 9
4
Page
Section 6. Covenants...................................................... 10
6.01 Transfer.................................................... 10
6.02 Redemption.................................................. 10
6.03 Use of Proceeds............................................. 10
Section 7. Registration Rights............................................ 10
7.01 Demand Registration......................................... 10
7.02 Piggyback Registrations..................................... 12
7.03 Registration Procedures..................................... 13
7.04 Underwritten Offerings...................................... 17
7.05 Holdback Agreements By State Auto Financial and Other
Securityholders............................................. 18
7.06 Indemnification............................................. 18
7.07 Covenants Relating to Rule 144.............................. 21
7.08 References to holders of Registrable Securities............. 21
Section 8. Miscellaneous.................................................. 22
8.01 Waiver...................................................... 22
8.02 Notices..................................................... 22
8.03 Amendments, Etc............................................. 22
8.04 Successors and Assigns...................................... 22
8.05 Captions.................................................... 22
8.06 Counterparts................................................ 22
8.07 Governing Law; Submission to Jurisdiction................... 22
8.08 Waiver of Jury Trial........................................ 23
8.09 Further Assurances.......................................... 23
8.10 Payments by State Auto Financial............................ 23
5
Page
8.11 Payments Received by the Company under Basic Documents.......23
8.12 Third-Party Beneficiaries....................................23
8.13 Severability.................................................23
SCHEDULE I - Equity Rights and Redemption Obligations
EXHIBIT A - Form of Class A Preferred Stock Certificate
EXHIBIT B - Form of Purchase Notice
EXHIBIT C - Form of Opinion of Counsel to
State Auto Financial
6
-5-
STANDBY PURCHASE AGREEMENT dated as of August 16, 1996,
between:
STATE AUTO FINANCIAL CORPORATION, a corporation duly organized
and validly existing under the laws of the State of Ohio ("STATE AUTO
FINANCIAL"); and
SAF Funding Corporation, a Delaware corporation (the
"COMPANY").
WHEREAS, State Auto Financial seeks to raise funds for
catastrophic loss claims and/or loss adjustment expenses that may be made from
time to time for residential and commercial property under insurance coverage
underwritten by State Automobile Mutual Insurance Company, an Ohio mutual
insurance company ("STATE AUTO MUTUAL") and certain of its affiliates, which
have been reinsured by State Auto Property and Casualty Insurance Company, a
South Carolina corporation ("STATE AUTO P&C");
WHEREAS, State Auto Financial intends to raise such funds
through the issuance and sale by State Auto Financial and the purchase by the
Company, from time to time, of State Auto Financial's Class A Preferred Stock,
no par value per share (the "CLASS A PREFERRED STOCK");
WHEREAS, State Auto Financial desires to issue and sell its
Class A Preferred Stock from time to time to the Company in accordance with the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING TERMS. As used herein,
the following terms shall have the following meanings (all terms defined in this
Section 1.01 or in other provisions of this Agreement in the singular to have
the same meanings when used in the plural and vice versa):
"ADMINISTRATIVE AGENT" shall mean The Chase Manhattan Bank, as
administrative agent under the Credit Agreement.
"BASIC DOCUMENTS" shall have the meaning assigned thereto in
the Credit Agreement.
"COMMISSION" shall mean the United States Securities and
Exchange Commission, or any successor governmental agency or authority.
"COMMITMENT" shall have the meaning assigned thereto in the
Credit Agreement.
"COMPANY PLEDGE AGREEMENT" shall mean the Pledge and Security
Agreement, dated as of the date hereof, among the Company and the Administrative
Agent, as modified and supplemented and in effect from time to time.
7
- 6 -
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as
of the date hereof, among the Company, the Administrative Agent and the Lenders,
as modified and supplemented and in effect from time to time.
"CUTBACK REGISTRATION" shall mean any Demand Registration or
Piggyback Registration to be effected as an underwritten Public Offering in
which the Managing Underwriter with respect thereto advises State Auto Financial
and the Requesting Holders in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of State Auto Financial which are not Registrable Securities) exceed the number
which can be sold in such offering without a material reduction in the selling
price anticipated to be received for the securities to be sold in such Public
Offering.
"DEMAND REGISTRATION" shall mean any registration of
Registrable Securities under the Securities Act effected in accordance with
Section 7.01 hereof.
"EFFECTIVE LONG-FORM REGISTRATION" shall mean a Long-Form
Registration that results in an Effective Registration.
"EFFECTIVE REGISTRATION" shall mean a Demand Registration
which (a) has been declared or ordered effective in accordance with the rules of
the Commission, (b) has been kept effective for the period of time contemplated
by Section 7.03(b) and (c) hereof has resulted in the Registrable Securities
requested to be included in such registration actually being sold (except by
reason of some act or omission on the part of the Requesting Holders); provided
that for purposes of this Agreement (i) a Cutback Registration shall not be an
Effective Registration and (ii) a Demand Registration in which State Auto
Financial includes securities for sale for the account of State Auto Financial
shall not be an Effective Registration.
"EFFECTIVE SHORT-FORM REGISTRATION" shall mean a Short-Form
Registration that results in an Effective Registration.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"FORM S-1" shall mean Form S-l promulgated by the Commission
under the Securities Act, or any successor or similar long-form registration
statement.
"FORM S-2" shall mean Form S-2 promulgated by the Commission
under the Securities Act, or any successor or similar short-form registration
statement.
"FORM S-3" shall mean Form S-3 promulgated by the Commission
under the Securities Act, or any successor or similar short-form registration
statement.
"INDEMNIFIED PARTY" shall mean a party entitled to indemnity
in accordance with Section 7.06 hereof.
"INDEMNIFYING PARTY" shall mean a party obligated to provide
indemnity in accordance with Section 7.06 hereof.
"INSPECTORS" shall have the meaning assigned thereto in
Section 7.03(j) hereof.
8
- 7 -
"LENDERS" shall have the meaning assigned thereto in the
Credit Agreement.
"LIEN" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"LOANS" shall have the meaning assigned thereto in the
Credit Agreement.
"LONG-FORM REGISTRATION" shall mean a Demand Registration
effected by the filing of a registration statement on Form S-l with the
Commission.
"LOSSES" shall have the meaning assigned thereto in Section
7.06(a) hereof.
"MAJORITY LENDERS" shall have the meaning assigned thereto in
the Credit Agreement.
"MANAGING UNDERWRITER" shall mean, with respect to any Public
Offering, the underwriter or underwriters managing such Public Offering.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of State Auto Mutual and its Subsidiaries taken as
a whole, (b) the ability of State Auto Financial to issue the Class A Preferred
Stock to or perform its obligations under this Agreement, (c) the ability of
State Auto Mutual or State Auto Financial to perform its respective obligations
under the Put Agreement, (d) the validity or enforceability of any of the Basic
Documents or (e) the rights and remedies of the Lenders and the Administrative
Agent under any of the Basic Documents.
"NASD" shall mean the National Association of Securities
Dealers.
"NOTICE OF DEMAND REGISTRATION" shall have the meaning
assigned thereto in Section 7.01(a) hereof.
"NOTICE OF PIGGYBACK REGISTRATION" shall have the meaning
assigned thereto in Section 7.02(a) hereof.
"PIGGYBACK REGISTRATION" shall mean any registration of equity
securities of State Auto Financial under the Securities Act (other than a
registration in respect of a dividend reinvestment or similar plan for
stockholders of State Auto Financial or on Form S-4 or Form S-8 promulgated by
the Commission, or any successor or similar forms thereto), whether for sale for
the account of State Auto Financial or for the account of any holder of
securities of State Auto Financial (other than Registrable Securities).
"PROPERTY" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PUBLIC OFFERING" shall mean any offering of any equity
securities of State Auto Financial to the public, either on behalf of State Auto
Financial or any of its securityholders, pursuant to an effective registration
statement under the Securities Act.
9
- 8 -
"PURCHASE COMMITMENT" shall mean the obligation of the Company
to purchase Class A Preferred Stock with an aggregate original Redemption Value
of not more than $100,000,000.
"PURCHASE COMMITMENT TERMINATION DATE" shall mean June 30,
1997, provided that if the "Commitment Termination Date" under the Credit
Agreement is extended as provided therein, the Purchase Commitment Termination
Date shall, automatically and without any action on the part of State Auto
Financial or the Company, be extended to the date to which said "Commitment
Termination Date" has been so extended.
"PURCHASE DATE" shall have the meaning assigned thereto in
Section 2.02 hereof.
"PURCHASE NOTICE" shall mean a Purchase Notice substantially
in the form of Exhibit B hereto.
"PUT AGREEMENT" shall mean the Put Agreement, dated as of the
date hereof, among State Auto Mutual, State Auto Financial and the
Administrative Agent, as modified and supplemented and in effect from time to
time.
"PUT DISHONOR" shall mean the failure of State Auto Mutual for
any reason after its receipt of a Put Notice (as defined in the Put Agreement)
to comply with its obligations under the Put Agreement to purchase each Lender's
Loans, Notes and Commitment (each, as defined in the Put Agreement) or the Class
A Preferred Stock, as specified in such Put Notice.
"PUT EVENT" shall have the meaning assigned thereto in the
Put Agreement.
"QUARTERLY DATES" shall mean the last Business Day of March,
June, September and December in each year, the first of which shall be the first
such day after the day hereof.
"RECORDS" shall have the meaning assigned thereto in Section
7.03(j) hereof.
"REDEMPTION VALUE" shall mean, with respect to any Class A
Preferred Stock, the "Redemption Value" for such Class A Preferred Stock set
forth in the certificate evidencing such Class A Preferred Stock.
"REGISTRABLE SECURITIES" shall mean (i) any shares of Class A
Preferred Stock purchased pursuant to Section 2.01 hereof and (ii) any
additional shares of Class A Preferred Stock issued or distributed by way of a
dividend, stock split or other distribution in respect of such Class A Preferred
Stock purchased pursuant to Section 2.01 hereof, or acquired by way of any
rights offering or similar offering made in respect of such Class A Preferred
Stock. As to any particular Registrable Securities, once issued such securities
shall cease to be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public pursuant to Rule 144 or (iii) they shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to
State Auto Financial's performance of or compliance with its obligations under
this Agreement to effect the registration of Registrable Securities in a Demand
Registration or a Piggyback Registration, including, without limitation, all
registration, filing, securities exchange listing and NASD fees, all
registration, filing, qualification and other fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and
10
- 9 -
disbursements of counsel for State Auto Financial and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of a single counsel and single firm of
accountants retained by the holders of a majority of the Registrable Securities
being registered, premiums and other costs of policies of insurance against
liabilities arising out of the Public Offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities,
which shall be payable by each holder thereof.
"REGISTRATION REQUEST" shall have the meaning assigned thereto
in Section 7.01 hereof.
"REQUESTING HOLDERS" shall mean, with respect to any Demand
Registration or Piggyback Registration, the holders of Registrable Securities
requesting to have Registrable Securities included in such registration in
accordance with this Agreement.
"RULE 144" shall mean Rule 144 promulgated by the Commission
under the Securities Act, and any successor provision thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SHORT-FORM REGISTRATION" shall mean a Demand Registration
effected by the filing of a registration statement on Form S-2 or Form S-3 with
the Commission.
"STATE AUTO MUTUAL" shall mean the meaning assigned thereto in
the first Whereas clause of this Agreement.
"STATE AUTO P&C" shall mean the meaning assigned thereto in
the first Whereas clause of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
Section 2. PURCHASE OF PREFERRED STOCK.
2.01 PURCHASES. The Company agrees, on the terms and
conditions of this Agreement, to purchase in one or more transactions, Class A
Preferred Stock with an aggregate Redemption Value of not more than
$100,000,000. The purchase price payable by the Company for each share of Class
A Preferred Stock shall be equal to the Redemption Value thereof.
2.02 NOTICES OF PURCHASES. State Auto Financial shall give the
Company notice of each purchase hereunder by delivering to the Company a
Purchase Notice not less than four Business Days prior to the date of such
purchase (the "Purchase Date"). Not later than 2:00 p.m. New York time on the
11
- 10 -
Purchase Date specified for each such purchase, the Company shall make available
the amount of the purchase price of the Class A Preferred Stock to be purchased
by it by depositing in immediately available funds such purchase price in an
account designated by State Auto Financial.
2.03 COMMITMENT FEE. State Auto Financial shall pay to the
Company a commitment fee on the daily average unused amount (based on the
aggregate Redemption Value of not more than $100,000,000 of Class A Preferred
Stock) of the Company's Purchase Commitment, for the period from and including
the date hereof to but not including the earlier of the date such Purchase
Commitment is terminated and the Purchase Commitment Termination Date, at a rate
per annum equal to 1/4 of 1%. Accrued commitment fee shall be payable on each
Quarterly Date and on the earlier of the date the Purchase Commitments are
terminated and the Purchase Commitment Termination Date.
Section 3. CONDITIONS TO PURCHASE. The obligation of the
Company to purchase any Class A Preferred Stock hereunder is subject to the
following conditions:
(a) PURCHASE NOTICE. The Company shall have received a
Purchase Notice with respect to such purchase, duly completed and
executed.
(b) OPINION OF COUNSEL TO THE COMPANY. The Company shall have
received an opinion, dated the Purchase Date, of ▇▇▇▇ ▇▇▇▇▇▇▇, general
counsel of State Auto Financial, substantially in the form of Exhibit C
hereto and covering such other matters as the Company may reasonably
request.
(c) CERTIFICATES. The Company shall have received duly
executed stock certificates, substantially in the form of Exhibit A
hereto, evidencing the aggregate number of shares of Class A Preferred
Stock to be purchased by the Company on such Purchase Date.
(d) MINIMUM CATASTROPHIC LOSS. Any one or more of State Auto
Mutual, State Auto P&C, Milbank Insurance Company and State Auto
National Insurance Company shall have incurred liability in excess of
$120,000,000 in the aggregate in respect of catastrophic loss claims
and/or loss adjustment expenses resulting from the occurrence of a
single catastrophic event and the Company shall have received a
certificate of a senior financial officer of State Auto Financial to
such effect.
(e) OFFICER'S CERTIFICATE. The Company shall have received a
certificate of a senior financial officer of State Auto Financial to
the effect that, both immediately prior to such purchase and also after
giving effect thereto and to the intended use thereof (i) no Put Event
(or an event with notice or lapse of time or both would become a Put
Event) shall have occurred and be continuing; and (ii) the
representations and warranties made by State Auto Financial in Section
4 hereof shall be true and complete on and as of the date of such
purchase with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).
12
- 11 -
Section 4. REPRESENTATIONS AND WARRANTIES OF STATE AUTO
FINANCIAL. State Auto Financial represents and warrants to the Company that:
4.01 CORPORATE EXISTENCE. Each of State Auto Financial and its
Subsidiaries: (a) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
4.02 LITIGATION. There are no legal or arbitral proceedings,
or any proceedings by or before any governmental or regulatory authority or
agency, now pending or (to the knowledge of State Auto Financial) threatened
against State Auto Financial or any of its Subsidiaries that, if adversely
determined could (either individually or in the aggregate) have a Material
Adverse Effect.
4.03 NO BREACH. None of the execution and delivery of this
Agreement, the consummation of the transactions herein and therein contemplated
or compliance with the terms and provisions hereof and thereof (including
issuance of the Class A Preferred Stock) will conflict with or result in a
breach of, or require any consent under, the charter or by-laws (or equivalent
documents) of State Auto Financial, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which State Auto Financial or any of
its Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any Property of State Auto Financial or any of its Subsidiaries pursuant to
the terms of any such agreement or instrument.
4.04 ACTION. State Auto Financial has all necessary corporate
power, authority and legal right to execute, deliver and perform its obligations
under this Agreement and to issue the Class A Preferred Stock; the execution,
delivery and performance by State Auto Financial of this Agreement (and the
issuance of the Class A Preferred Stock) have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by State Auto Financial and constitutes, its legal, valid
and binding obligation, enforceable against State Auto Financial in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.05 APPROVALS. No authorizations, approvals or consents of,
and no filings or registrations with, any governmental or regulatory authority
or agency, or any securities exchange (other than any authorizations, approvals,
consents, filings and registrations heretofore duly made or obtained and in full
force and effect), are necessary for the execution, delivery or performance by
State Auto Financial of this Agreement (or for the issuance of the Class A
Preferred Stock) or for the legality, validity or enforceability hereof.
4.06 CAPITALIZATION. The authorized capital stock of State
Auto Financial consists, on the date hereof, of an aggregate of 35,000,000
shares consisting of (a) 30,000,000 shares of common stock, no par value, of
which 18,086,863 shares are duly and validly issued and outstanding, each of
13
- 12 -
which shares is fully paid and nonassessable, (b) 2,500,000 shares of Class A
Preferred Stock, no par value, none of which shares issued and outstanding and
(c) 2,500,000 shares of Class B Preferred Stock, no par value, none of which
shares are issued and outstanding. As of the date hereof, 67% of such issued and
outstanding shares of common stock are owned beneficially and of record by State
Auto Mutual. As of the date hereof, (i) except for this Agreement, the Put
Agreement and as set forth in Part A of Schedule I hereto, there are no
outstanding Equity Rights with respect to State Auto Financial and (ii) except
as set forth in Part B of Schedule I hereto, there are no outstanding
obligations of State Auto Financial or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of capital stock of State Auto Financial
nor are there any outstanding obligations of State Auto Financial or any of its
Subsidiaries to make payments to any Person, such as "phantom stock" payments,
where the amount thereof is calculated with reference to the fair market value
or equity value of State Auto Financial or any of its Subsidiaries. All shares
of Class A Preferred Stock purchased by the Company hereunder will, when so
purchased, be duly and validly issued and outstanding, fully paid and
nonassessable.
4.07 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of State Auto Financial and State Auto Mutual to the Company, the
Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Basic Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by State Auto Mutual and its
Subsidiaries to the Company, the Administrative Agent and the Lenders in
connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to State Auto Financial that could have a Material
Adverse Effect that has not been disclosed herein, in the other Basic Documents
or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to the Administrative Agent for use in connection with
the transactions contemplated hereby or thereby.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to State Auto Financial that:
5.01 INVESTMENT. The Company will purchase the Class A
Preferred Stock only for its own account, for investment purposes and not with a
view to resale or distribution, and not on behalf of any other person or entity.
5.02 NO AGREEMENT TO TRANSFER. Except as set forth in this
Agreement, the Credit Agreement, the Put Agreement and the Company Pledge
Agreement, the Company is not a party to any agreement, arrangement or
understanding concerning the transfer of the Class A Preferred Stock or any
interest therein to any other person or entity.
5.03 KNOWLEDGE AND EXPERIENCE. The Company has (a) adequate
knowledge and experience in financial and business matters to be able to
evaluate the merits and risks of its investment in State Auto Financial and the
Class A Preferred Stock under this Agreement, or (b) the advice or
representation of a person or entity having such knowledge and experience.
5.04 ACCESS TO INFORMATION. The Company has access to
sufficient information regarding State Auto Financial, including, without
limitation, State Auto Financial's filings under the
14
- 13 -
Securities Exchange Act of 1934, as amended. The Company has requested
information concerning State Auto Financial and has been given an opportunity to
ask questions and receive answers concerning State Auto Financial and the terms
and conditions of this Agreement in order to evaluate the merits and risks of
its investment in State Auto Financial and the Class A Preferred Stock under
this Agreement.
5.05 RISK. The Company is able to bear the economic risk of
its investment in State Auto Financial and the Class A Preferred Stock under
this Agreement and to hold the Class A Preferred Stock for purposes of
investment.
5.06 RESTRICTIONS ON TRANSFER.
(a) The Class A Preferred Stock which the Company will acquire
hereunder (i) will not be registered by reason of an exemption from registration
under Section 3(b) or 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), or Regulation D promulgated thereunder and (ii) is not
publicly traded, no market exists for the Class A Preferred Stock and the
Company must hold the Class A Preferred Stock indefinitely unless a subsequent
transfer or other disposition is registered under the Securities Act or is
exempt from registration at the time of such transfer or other disposition.
(b) In the absence of an effective registration with respect
to any proposed transfer of the Class A Preferred Stock (other than any transfer
thereof as contemplated by the Company Pledge Agreement or the Put Agreement),
State Auto Financial may require, as a condition to such transfer, a legal
opinion by counsel of its choice, in form and substance as it may determine, or
other documentation satisfactory to its Board of Directors, that an exemption
from registration is available for the proposed transfer, and a restrictive
legend to that effect will be set forth on the stock certificates representing
the Class A Preferred Stock.
Section 6. COVENANTS.
6.01 TRANSFER. Except as contemplated by the Company Pledge
Agreement and the Put Agreement, the Company shall not sell, offer for sale or
otherwise transfer or dispose of the Class A Preferred Stock or any interest
therein, unless pursuant to a registration or exemption from registration under
the Securities Act and all applicable state securities laws then in effect.
6.02 REDEMPTION. State Auto Financial shall redeem the Class A
Preferred Stock at the times, in the amounts, at the prices and on such other
terms and conditions as are described in the stock certificates evidencing such
Class A Preferred Stock.
6.03 USE OF PROCEEDS. State Auto Financial shall use the
proceeds of the sale of Class A Preferred Stock hereunder solely for the purpose
of contributing such proceeds to State Auto P&C for it to use to pay direct and
assumed catastrophic loss claims and/or loss adjustment expenses resulting from
the catastrophic event to which such sale relates.
Section 7. REGISTRATION RIGHTS.
7.01 DEMAND REGISTRATION.
(a) DEMAND REGISTRATION. At any time after the occurrence of a
Put Dishonor, upon the written request of the holders of a majority of the
Registrable Securities requesting that State Auto
15
- 14 -
Financial effect the registration under the Securities Act of all or part of
such holders' Registrable Securities and specifying the number of Registrable
Securities to be registered and the intended method of disposition thereof (a
"REGISTRATION REQUEST"), State Auto Financial will promptly, and in no event
more than 10 Business Days after receipt of such Registration Request, give
written notice (a "NOTICE OF DEMAND REGISTRATION") of such request to all other
holders of Registrable Securities, and thereupon will use its best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which State Auto Financial has
been so requested to register by such holders of a majority of the
Registrable Securities; and
(ii) all other Registrable Securities the holders of which have
made written requests to State Auto Financial for registration thereof
within 20 days after the giving of the Notice of Demand Registration
(which requests shall specify the intended method of disposition
thereof),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities so to be registered. If
requested by the holders of a majority of the Registrable Securities requested
to be included in any Demand Registration, the method of disposition of all
Registrable Securities included in such registration shall be an underwritten
offering effected in accordance with Section 7.04(a) hereof. Subject to
paragraph (e) of this Section 7.01, State Auto Financial may include in such
registration other securities for sale for its own account or for the account of
any other Person. If any security holders of State Auto Financial (other than
the holders of Registrable Securities in such capacity) register securities of
State Auto Financial in a Demand Registration in accordance with this Section
7.01, such holders shall pay the fees and expenses of their counsel and their
pro rata share, on the basis of the respective amounts of the securities
included in such registration on behalf of each such holder, of the Registration
Expenses if the Registration Expenses for such registration are not paid by
State Auto Financial for any reason.
(b) LIMITATIONS ON DEMAND REGISTRATIONS. Notwithstanding
anything herein to the contrary, State Auto Financial shall not be required to
honor a request for a Demand Registration if:
(i) a Put Dishonor shall not have occurred;
(ii) in the case of a Long-Form Registration, State Auto
Financial has previously effected one Effective Long-Form Registration;
(iii) in the case of a Short-Form Registration, State Auto
Financial has previously effected one Effective Short-Form
Registration; or
(iv) such request is received by State Auto Financial less than
90 days following the effective date of any previous registration
statement filed in connection with a Demand Registration, regardless of
whether any holder of Registrable Securities exercised its rights under
this Agreement with respect to such registration.
(c) REGISTRATION STATEMENT FORM. Demand Registrations shall be
on such appropriate registration form promulgated by the Commission as shall be
selected by State Auto Financial, and shall
16
- 15 -
be reasonably acceptable to the holders of a majority of the Registrable
Securities to which such registration relates, and shall permit the disposition
of such Registrable Securities in accordance with the intended method or methods
specified in their request for such registration, PROVIDED that such
registration form is available under the terms of this Agreement.
Notwithstanding the forgoing, if State Auto Financial selects a Form S-3 and the
use of such form is available under the terms of this Agreement and is permitted
by law, the holders of a majority of the Registrable Securities to which such
registration relates may notify State Auto Financial in writing that, in the
judgment of such holders (or, if applicable, the Managing Underwriter), the
inclusion of some or all of the information required in a more detailed form
specified in such notice is of material importance to the success of the Public
Offering of such Registrable Securities, in which case State Auto Financial
shall supplement or amend the Form S-3 to include such information.
(d) REGISTRATION EXPENSES. State Auto Financial will pay all
Registration Expenses incurred in connection with any Demand Registration.
(e) PRIORITY IN CUTBACK REGISTRATIONS. If a Demand
Registration becomes a Cutback Registration, State Auto Financial will include
in any such registration to the extent of the number which the Managing
Underwriter advises State Auto Financial can be sold in such offering (i) FIRST,
Registrable Securities requested to be included in such registration by the
Requesting Holders, pro rata on the basis of the number of Registrable
Securities requested to be included by such holders and (ii) SECOND, other
securities of State Auto Financial proposed to be included in such registration,
allocated among the holders thereof in accordance with the priorities then
existing among State Auto Financial and the holders of such other securities;
and any securities so excluded shall be withdrawn from and shall not be included
in such Demand Registration.
7.02 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If, at any time
after the occurrence of a Put Dishonor, State Auto Financial at any time
proposes after any shares of Class A Preferred Stock have been purchased
hereunder to effect a Piggyback Registration, it will each such time give prompt
written notice (a "NOTICE OF PIGGYBACK REGISTRATION"), at least 30 days prior to
the anticipated filing date, to all holders of Registrable Securities of its
intention to do so and of such holders' rights under this Section 7.02, which
Notice of Piggyback Registration shall include a description of the intended
method of disposition of such securities. Upon the written request of any such
holder made within 15 days after receipt of a Notice of Piggyback Registration
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof), State Auto
Financial will use its best efforts to include in the registration statement
relating to such Piggyback Registration all Registrable Securities which State
Auto Financial has been so requested to register. Notwithstanding the foregoing,
if, at any time after giving a Notice of Piggyback Registration and prior to the
effective date of the registration statement filed in connection with such
registration, State Auto Financial shall determine for any reason not to
register or to delay registration of such securities, State Auto Financial may,
at its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any Requesting Holder entitled to do so to request
that such registration be effected as a Demand Registration under Section 7.01
hereof, and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities for the same period as
the delay in registering such other securities. No registration effected under
this Section 7.02 shall relieve State Auto Financial of its obligations to
effect a Demand Registration under Section 7.01 hereof.
17
- 16 -
(b) REGISTRATION EXPENSES. State Auto Financial will pay all
Registration Expenses incurred in connection with each Piggyback Registration.
(c) PRIORITY IN CUTBACK REGISTRATIONS. If a Piggyback
Registration becomes a Cutback Registration, State Auto Financial will include
in such registration to the extent of the amount of the securities which the
Managing Underwriter advises State Auto Financial can be sold in such offering:
(i) if such registration as initially proposed by State Auto
Financial was solely a primary registration of its securities, (x)
FIRST, the securities proposed by State Auto Financial to be sold for
its own account, and (y) SECOND, any Registrable Securities requested
to be included in such registration by Requesting Holders, PRO RATA on
the basis of the number of Registrable Securities requested to be
included by such holders, and (z) THIRD, any other securities of State
Auto Financial proposed to be included in such registration, allocated
among the holders thereof in accordance with the priorities then
existing among State Auto Financial and such holders; and
(ii) if such registration as initially proposed by State Auto
Financial was in whole or in part requested by holders of securities of
State Auto Financial, other than holders of Registrable Securities in
their capacities as such, pursuant to demand registration rights, (x)
FIRST, such securities held by the holders initiating such registration
and, if applicable, any securities proposed by State Auto Financial to
be sold for its own account, allocated in accordance with the
priorities then existing among State Auto Financial and such holders,
and (y) SECOND, any Registrable Securities requested to be included in
such registration by Requesting Holders, pro rata on the basis of the
number of Registrable Securities requested to be included by such
holders, and (z) THIRD, any other securities of State Auto Financial
proposed to be included in such registration, allocated among the
holders thereof in accordance with the priorities then existing among
State Auto Financial and the holders of such other securities;
and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.
7.03 REGISTRATION PROCEDURES. If and whenever State Auto
Financial is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act pursuant to Section 7.01 or 7.02
hereof, State Auto Financial will use its best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended methods of disposition thereof specified by the Requesting Holders.
Without limiting the foregoing, State Auto Financial in each such case will, as
expeditiously as possible:
(a) prepare and file with the Commission the requisite
registration statement to effect such registration and use its best
efforts to cause such registration statement to become effective as
soon as practicable, PROVIDED that as far in advance as practical
before filing such registration statement or any amendment or
supplement thereto, State Auto Financial will furnish to the Requesting
Holders copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and any such holder shall
have the opportunity to object to any information pertaining solely to
such holder that is contained therein and State Auto Financial will
make the corrections reasonably requested by such holder with respect
to such information prior to filing any such registration statement or
amendment;
18
- 17 -
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement, in accordance
with the intended methods of disposition thereof, until the earlier of
(i) such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement and (ii) 180
days after such registration statement becomes effective;
(c) promptly notify each Requesting Holder and the
underwriter or underwriters, if any:
(i) when such registration statement or any prospectus
used in connection therewith, or any amendment or supplement
thereto, has been filed and, with respect to such registration
statement or any post-effective amendment thereto, when the
same has become effective;
(ii) of any written request by the Commission for
amendments or supplements to such registration statement or
prospectus;
(iii) of the notification to State Auto Financial by the
Commission of its initiation of any proceeding with respect to
the issuance by the Commission of, or of the issuance by the
Commission of, any stop order suspending the effectiveness of
such registration statement (and State Auto Financial shall
promptly attempt to have such order withdrawn); and
(iv) of the receipt by State Auto Financial of any
notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction;
(d) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each amendment and supplement thereto (in
each case including all exhibits and documents incorporated by
reference), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
promulgated under the Securities Act relating to such holder's
Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable
Securities;
(e) use its best efforts to register or qualify all
Registrable Securities covered by such
19
- 18 -
registration statement under such other securities or blue sky
laws of such jurisdictions as each holder thereof shall reasonably
request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and take any
other action which may be reasonably necessary or advisable to enable
such holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such holder, except that State Auto
Financial shall not for any such purpose be required (i) to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this paragraph (e) be
obligated to be so qualified, (ii) to subject itself to taxation in any
such jurisdiction or (iii) to consent to general service of process in
any jurisdiction;
(f) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable each holder thereof to consummate the disposition
of such Registrable Securities;
(g) furnish to each Requesting Holder a signed counterpart,
addressed to such holder (and the underwriters, if any), of
(i) an opinion of counsel for State Auto Financial,
dated the effective date of such registration statement (or,
if such registration includes an underwritten Public Offering,
dated the date of any closing under the underwriting
agreement), reasonably satisfactory in form and substance to
such holder, and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten Public Offering, dated the date of
any closing under the underwriting agreement), signed by the
independent public accountants who have certified State Auto
Financial's financial statements included in such registration
statement,
in each case covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters
delivered to the underwriters in underwritten Public Offerings of
securities and, in the case of the accountants' letter, such other
financial matters, as such holder (or the underwriters, if any) may
reasonably request;
(h) notify each holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and at the
20
- 19 -
request of any such holder promptly prepare and furnish to such holder
a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first full calendar
month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Holder,
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate
documents and properties of State Auto Financial (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause State Auto Financial's
officers, directors and employees to supply all information reasonably
requested by any such Inspector in connection with such registration
statement, and permit the Inspectors to participate in the preparation
of such registration statement and any prospectus contained therein and
any amendment or supplement thereto. Records which State Auto Financial
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. The
seller of Registrable Securities agrees by acquisition of such
Registrable Securities that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give
notice to State Auto Financial and allow State Auto Financial, at State
Auto Financial's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed, upon official
notice of issuance, on any securities exchange on which any of the
securities of the same class as the Registrable Securities are then
listed.
State Auto Financial may require each holder of Registrable
Securities as to which any registration is being effected to, and each such
holder, as a condition to including Registrable Securities in such registration,
shall, furnish State Auto Financial with such information and affidavits
regarding such holder and the distribution of such securities as State Auto
Financial may from time to time reasonably request in writing in connection with
such registration.
21
- 20 -
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that upon receipt of any notice from State Auto
Financial of the happening of any event of the kind described in paragraph (h)
of this Section 7.03, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by such paragraph
(h) and, if so directed by State Auto Financial, will deliver to State Auto
Financial (at State Auto Financial's expense) all copies, other than permanent
file copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event State Auto Financial shall give any such notice, the period referred to in
paragraph (b) of this Section 7.03 shall be extended by a number of days equal
to the number of days during the period from and including the giving of notice
pursuant to paragraph (h) of this Section 7.03 and to and including the date
when each holder of any Registrable Securities covered by such registration
statement shall receive the copies of the supplemented or amended prospectus
contemplated by such paragraph (h).
7.04 UNDERWRITTEN OFFERINGS.
(a) UNDERWRITTEN DEMAND OFFERINGS. In the case of any
underwritten Public Offering being effected pursuant to a Demand Registration,
the Managing Underwriter and any other underwriter or underwriters with respect
to such offering shall be selected, after consultation with State Auto
Financial, by the holders of a majority of the Registrable Securities to be
included in such underwritten offering with the consent of State Auto Financial,
which consent shall not be unreasonably withheld. State Auto Financial shall
enter into an underwriting agreement in customary form with such underwriter or
underwriters, which shall include, among other provisions, indemnities to the
effect and to the extent provided in Section 7.06 hereof and shall take all such
other actions as are reasonably requested by the Managing Underwriter in order
to expedite or facilitate the registration and disposition of the Registrable
Securities. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, State Auto Financial to and for the benefit
of such underwriters also be made to and for their benefit and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to their obligations. No
holder of Registrable Securities shall be required to make any representations
or warranties to or agreements with State Auto Financial or the underwriters
other than representations, warranties or agreements regarding such holder and
its ownership of the securities being registered on its behalf and such holder's
intended method of distribution and any other representation required by law. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to State Auto Financial and the Managing Underwriter, and
each of the remaining Requesting Holders shall be entitled to increase the
number of Registrable Securities being registered to the extent of the
Registrable Securities so withdrawn in the proportion which the number of
Registrable Securities being registered by such remaining Requesting Holder
bears to the total number of Registrable Securities being registered by all such
remaining Requesting Holders.
(b) UNDERWRITTEN PIGGYBACK OFFERINGS. If State Auto Financial
at any time proposes to register any of its securities in a Piggyback
Registration and such securities are to be distributed by or through one or more
underwriters, State Auto Financial will, subject to the provisions of Section
7.02(c)
22
- 21 -
hereof, use its best efforts, if requested by any holder of Registrable
Securities, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters, and such holders shall be obligated to sell
their Registrable Securities in such Piggyback Registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such Piggyback
Registration. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between State Auto
Financial and such underwriter or underwriters and may, at their option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, State Auto Financial to and for the benefit of such
underwriters also be made to and for their benefit and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to their obligations. No
holder of Registrable Securities shall be required to make any representations
or warranties to or agreements with State Auto Financial or the underwriters
other than representations, warranties or agreements regarding such holder and
its ownership of the securities being registered on its behalf and such holder's
intended method of distribution and any other representation required by law. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to State Auto Financial and the Managing Underwriter, and
each of the remaining Requesting Holders shall be entitled to increase the
number of Registrable Securities being registered to the extent of the
Registrable Securities so withdrawn in the proportion which the number of
Registrable Securities being registered by such remaining Requesting Holder
bears to the total number of Registrable Securities being registered by all such
remaining Requesting Holders.
7.05 HOLDBACK AGREEMENTS BY STATE AUTO FINANCIAL AND OTHER
SECURITYHOLDERS. Unless the Managing Underwriter otherwise agrees, State Auto
Financial and each holder of Registrable Securities agrees not to effect any
public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14 days prior to and the 180 days after the effective date of the registration
statement filed in connection with an underwritten offering made pursuant to a
Demand Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto. State Auto Financial also agrees, unless the
Managing Underwriter otherwise agrees, to cause each holder of its equity
securities which is a party to a registration rights agreement with State Auto
Financial entered into on or after the date hereof, and each holder of its
equity securities, or of any securities convertible into or exchangeable or
exercisable for such securities, in each case purchased from State Auto
Financial, at any time after the date of this Agreement (other than in a Public
Offering), to agree, to the extent permitted by law, not to effect any such
public sale or distribution of such securities (including a sale under Rule
144), during such period, except as part of such underwritten registration.
7.06 INDEMNIFICATION
(a) INDEMNIFICATION BY STATE AUTO FINANCIAL. State Auto
Financial shall, to the full extent permitted by law, indemnify and hold
harmless each seller of Registrable Securities included in any registration
statement filed in connection with a Demand Registration or a Piggyback
Registration, its directors and officers, and each other Person, if any, who
controls any such seller within the meaning
23
- 22 -
of the Securities Act, against any Losses, claims, damages, expenses or
liabilities, joint or several (together, "LOSSES"), to which such seller or any
such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, and State Auto Financial will reimburse
such seller and each such director, officer and controlling Person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such Loss (or action or proceeding in respect
thereof); PROVIDED that State Auto Financial shall not be liable in any such
case to the extent that any such Loss (or action or proceeding in respect
thereof) arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to State Auto Financial through an instrument duly
executed by such seller specifically stating that it is for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer or controlling Person, and shall survive the transfer of such
securities by such seller. State Auto Financial shall also indemnify each other
Person who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors and each other Person, if
any, who controls any such participating Person within the meaning of the
Securities Act to the same extent as provided above with respect to sellers of
Registrable Securities.
(b) INDEMNIFICATION BY THE SELLERS. Each holder of Registrable
Securities which are included or are to be included in any registration
statement filed in connection with a Demand Registration or a Piggyback
Registration, as a condition to including Registrable Securities in such
registration statement, shall, to the full extent permitted by law, indemnify
and hold harmless State Auto Financial, its directors and officers, and each
other Person, if any, who controls State Auto Financial within the meaning of
the Securities Act, against any Losses to which State Auto Financial or any such
director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to State Auto Financial through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; PROVIDED, HOWEVER, that
the obligation to provide indemnification pursuant to this Section 7.06(b) shall
be several, and not joint and several, among such Indemnifying Parties on the
basis of the number of Registrable Securities included in such registration
statement and the aggregate amount which may be recovered from any holder of
Registrable Securities pursuant to the indemnification provided for in this
Section 7.06(b) in connection with any registration and sale of Registrable
Securities shall be limited to the total proceeds received by such holder from
the sale of such Registrable Securities. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of State
Auto Financial or any such director, officer
24
- 23 -
or controlling Person and shall survive the transfer of such securities by such
seller. Such holders shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to State Auto Financial.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraph (a) or (b) of this
Section 7.06, such Indemnified Party will, if a claim in respect thereof is to
be made against an Indemnifying Party pursuant to such paragraphs, give written
notice to the latter of the commencement of such action, PROVIDED that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under the preceding paragraphs
of this Section 7.06, except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, the Indemnifying Party shall be entitled
to participate in and, unless, in the reasonable judgment of any Indemnified
Party, a conflict of interest between such Indemnified Party and any
Indemnifying Party exists with respect to such claim, to assume the defense
thereof, jointly with any other Indemnifying Party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; PROVIDED that the
Indemnified Party may participate in such defense at the Indemnified Party's
expense; and PROVIDED FURTHER that the Indemnified Party or Indemnified Parties
shall have the right to employ one counsel to represent it or them if, in the
reasonable judgment of the Indemnified Party or Indemnified Parties, it is
advisable for it or them to be represented by separate counsel by reason of
having legal defenses which are different from or in addition to those available
to the Indemnifying Party, and in that event the reasonable fees and expenses of
such one counsel shall be paid by the Indemnifying Party. If the Indemnifying
Party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
the Indemnified Parties with respect to such claim, unless in the reasonable
judgment of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other Indemnified Parties with respect to such claim,
in which event the Indemnifying Party shall be obligated to pay the fees and
expenses of such additional counsel for the Indemnified Parties or counsels. No
Indemnifying Party shall consent to entry of any judgment or enter into any
settlement without the consent of the Indemnified Party. No Indemnifying Party
shall be subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld.
(d) CONTRIBUTION. If the indemnity and reimbursement
obligation provided for in any paragraph of this Section 7.06 is unavailable or
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by PRO RATA allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first
25
- 24 -
sentence of this paragraph. The amount paid by an Indemnified Party as a result
of the Losses referred to in the first sentence of this paragraph shall be
deemed to include any legal and other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any Loss which
is the subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Section 7.06 (with appropriate
modifications) shall be given by State Auto Financial and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act. The provisions of this
Section 7.06 shall be in addition to any other rights to indemnification or
contribution which an Indemnified Party may have pursuant to law, equity,
contract or otherwise.
(f) INDEMNIFICATION PAYMENTS. The indemnification required by
this Section 7.06 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or Losses are incurred.
7.07 COVENANTS RELATING TO RULE 144. The Company will file
reports in compliance with the Exchange Act, will comply with all rules and
regulations of the Commission applicable in connection with the use of Rule 144
and take such other actions and furnish such holder with such other information
as such holder may request in order to avail itself of such rule or any other
rule or regulation of the Commission allowing such holder to sell any
Registrable Securities without registration and will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by State Auto Financial's principal financial officer,
stating (a) State Auto Financial's name, address and telephone number (including
area code), (b) State Auto Financial's Internal Revenue Service identification
number, (c) State Auto Financial's Commission file number, (d) the number of
shares of each class of Stock outstanding as shown by the most recent report or
statement published by State Auto Financial, and (e) whether State Auto
Financial has filed the reports required to be filed under the Exchange Act for
a period of at least 90 days prior to the date of such certificate and in
addition has filed the most recent annual report required to be filed
thereunder.
7.08 REFERENCES TO HOLDERS OF REGISTRABLE SECURITIES. For
purposes of this Agreement, references to holders of the Registrable Securities
or holders of a majority of the Registrable Securities shall be deemed to refer
to the pledgee of the Registered Securities under the Pledge and Security
Agreement dated as of August 16, 1996 between the Company and the Administrative
Agent (as modified and supplemented and in effect from time to time, the "PLEDGE
AGREEMENT") for so long as the Pledge Agreement shall remain in effect.
Section 8. MISCELLANEOUS.
8.01 WAIVER. No failure on the part of the either party hereto
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
26
- 25 -
8.02 NOTICES. All notices, requests and other communications
provided for herein shall be given or made in writing (including, without
limitation, by telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
8.03 AMENDMENTS, ETC. Except as otherwise expressly provided
in this Agreement and subject to the Credit Agreement and the Put Agreement, any
provision of this Agreement may be modified or supplemented only by an
instrument in writing signed by each State Auto Financial and the Company (with
the consent of the Administrative Agent and the Lenders as specified in the
Credit Agreement), and any provision of this Agreement may be waived by the
Company (with the consent of the Administrative Agent and the Lenders as
specified in the Credit Agreement).
8.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, PROVIDED, that State Auto Financial may not
assign any of its rights or obligations hereunder without the prior consent of
the Company (with the consent of the Administrative Agent and all of the
Lenders).
8.05 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
8.06 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
8.07 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
shall be governed by, and construed in accordance with, the law of the State of
New York. Each of State Auto Financial and the Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York, for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each of State Auto Financial and the Company hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
8.08 WAIVER OF JURY TRIAL. EACH OF STATE AUTO FINANCIAL AND
THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
8.09 FURTHER ASSURANCES. State Auto Financial agrees that,
from time to time upon the written request of the Administrative Agent, State
Auto Financial will execute and deliver such further documents and do such other
acts and things as the Company, the Administrative Agent or any Lender
27
- 26 -
(through the Administrative Agent) may reasonably request in order fully to
effect the purposes of this Agreement.
8.10 PAYMENTS BY STATE AUTO FINANCIAL. The Company hereby
instructs State Auto Financial to make any payments required to be made by State
Auto Financial hereunder or otherwise in respect of the Class A Preferred Stock
(including, without limitation, any amounts payable upon any redemption of the
Class A Preferred Stock, any dividends payable on the Class A Preferred Stock
and the commitment fee payable under Section 2.03 hereof) directly to the
Administrative Agent, for the benefit of the Lenders. Each such payment shall be
made by State Auto Financial in accordance with the provisions of the Credit
Agreement.
8.11 PAYMENTS RECEIVED BY THE COMPANY UNDER BASIC DOCUMENTS.
Any amounts paid to the Company under any of the Basic Documents (other than the
proceeds of the Loans made under the Credit Agreement) shall be applied as
directed by State Auto Financial.
8.12 THIRD-PARTY BENEFICIARIES. Each of State Auto Financial
and the Company agrees that the Administrative Agent and each Lender shall be
third-party beneficiaries of this Agreement and shall be entitled to enforce its
respective rights hereunder as fully as if it were a party hereto.
8.13 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
STATE AUTO FINANCIAL CORPORATION
By /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: President
Address for Notices:
State Auto Financial Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
SAF FUNDING CORPORATION
28
- 27 -
By_________________________
Title:
Address for Notices:
SAF Funding Corporation
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
29
- 28 -
SCHEDULE I
Part A
------
[Equity Rights]
Part B
------
[Redemption Obligations]
30
- 29 -
EXHIBIT A to the
Standby Purchase Agreement
[Form Class A Preferred Stock Certificate]
31
- 30 -
[Front of Class A Preferred Stock Certificate]
CERTIFICATE
NUMBER SHARES
----------- ------
___________ ______
STATE AUTO FINANCIAL CORPORATION
Incorporated under the laws
of the State of Ohio
CUSIP ___________
SEE REVERSE SIDE FOR CERTAIN TRANSFER
RESTRICTIONS AND OTHER IMPORTANT INFORMATION
This is to Certify that ________________________ is the owner of
________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF
CLASS A PREFERRED STOCK NO PAR VALUE OF
State Auto Financial Corporation
transferrable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED
--------------------------------------
32
-31-
Chief Executive Officer
---------------- -----------------------------
Secretary President
33
- 32 -
[Reverse of Class A Preferred Stock Certificate]
STATE AUTO FINANCIAL CORPORATION
The Corporation will furnish upon request and without charge to each
shareholder the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock series within a class of
stock of the Corporation, as well as the qualifications, limitations and
restrictions relating to the those preferences and/or rights.
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF SAID SECURITIES ACT OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
In addition, the shares evidenced by this certificate are subject to
the restrictions on transfer set forth in the Terms and Conditions attached
hereto.
34
- 33 -
TERMS AND CONDITIONS
of
CLASS A PREFERRED STOCK
of
STATE AUTO FINANCIAL CORPORATION
------------------------------------------------------------
Pursuant to Section 1701.14 of the
Ohio Corporation Law
------------------------------------------------------------
Section 1. GENERAL.
The certificate to which these Terms and Conditions are
attached represents one or more shares of CLASS A PREFERRED STOCK, no par value
(the "Class A Preferred Stock"), of State Auto Financial Corporation, an Ohio
corporation (the "CORPORATION"). The stated value and liquidation preference per
share of the Class A Preferred Stock shall be equal to $1,000,000 (the
"REDEMPTION VALUE").
Section 2. DEFINITIONS.
Capitalized terms used herein shall have the meanings set
forth in this SECTION 2:
"APPLICABLE REDEMPTION DATE" means, with respect to any shares
of Class A Preferred Stock, each of the ▇▇▇, ▇▇▇, ▇▇▇, ▇▇▇, 11th, 13th, 15th,
17th, 19th, 21st, 23rd and 25th Quarterly Dates immediately following the date
of issuance of such shares of Class A Preferred Stock.
"BOARD OF DIRECTORS" means the Board of Directors of the
Corporation.
"BUSINESS DAY" shall mean any day on which (a) commercial
banks are not authorized or required to close in New York City and (b) (prior to
the Rate Conversion Date) dealings in Dollar deposits are carried out in the
London interbank market.
"BY-LAWS" means the Code of Regulations of the Corporation, as
amended or restated from time to time.
35
- 34 -
"CERTIFICATE OF INCORPORATION" means the Articles of
Incorporation of the Corporation, as amended or restated from time to time.
"CHASE" means The Chase Manhattan Bank and any successor
entity.
"CLASS A PREFERRED STOCK" has the meaning assigned to such
term in Section 1 hereof.
"CLASS B PREFERRED STOCK" means all Class B Preferred Stock,
no par value, issued by the Corporation.
"COMMON STOCK" means all common stock, of any series and of
any par value or no par value issued by the Corporation.
"CORPORATION" means State Auto Financial Corporation, an Ohio
corporation.
"CREDIT AGREEMENT" means the Credit Agreement dated as of
August 16, 1996 between SAF Funding, the Lenders party thereto and Chase, as
Administrative Agent, as modified and supplemented and in effect from time to
time, a copy of which is maintained on file in the Principal Corporate Office.
"DIVIDEND RATE" means, for each Eurodollar Rate Period
relating to any Class A Preferred Stock, the Eurodollar Rate for such Eurodollar
Rate Period PLUS 3/4 of 1% per annum; PROVIDED, that from and after the Rate
Conversion Date, the "Dividend Rate" means a rate per annum equal to 8%.
"DOLLARS" and "$" mean lawful money of the United States of
America.
"EURODOLLAR BASE RATE" means, with respect to any shares of
Class A Preferred Stock for any Eurodollar Rate Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by Chase
at approximately 11:00 a.m. London time (or as soon thereafter as practicable)
on the date two Business Days prior to the first day of such Eurodollar Rate
Period for the offering by Chase to leading banks in the London interbank market
of Dollar deposits having a term comparable to such Eurodollar Rate Period and
in an amount comparable to the aggregate Redemption Value of such shares of
Class A Preferred Stock.
"EURODOLLAR RATE" means, for any shares of Class A Preferred
Stock for any Eurodollar Rate Period therefor, a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined by Chase (and
advised to the Holder and the Corporation) to be equal to the Eurodollar Base
Rate for a Loan in a principal amount equal to the aggregate Redemption Value
for such shares of Class A Preferred Stock for such Eurodollar Rate Period
divided by 1 minus the Reserve Requirement (if any) for such Loan for such
Eurodollar Rate Period.
"EURODOLLAR RATE PERIOD" means, with respect to any shares of
Class A Preferred Stock, each period commencing on the date such Class A
Preferred Stock is issued or (in the case of a continuation of one Eurodollar
Rate Period to the next) the last day of the next preceding Eurodollar Rate
Period for such Class A Preferred Stock and ending on the numerically
corresponding day in the third
36
- 35 -
calendar month thereafter, except that each Eurodollar Rate Period that
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month. Notwithstanding the foregoing: (a) no Eurodollar Rate Period may commence
before and end after any Applicable Redemption Date unless, after giving effect
thereto, the aggregate Redemption Value of shares of Class A Preferred Stock
having Eurodollar Rate Periods that end after such Applicable Redemption Date
shall be equal to or less than the aggregate Redemption Value of shares of Class
A Preferred Stock scheduled to be outstanding after giving effect to the
redemption payments required to be made on such Applicable Redemption Date; and
(b) each Eurodollar Rate Period that would otherwise end on a day that is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (c) notwithstanding clause (a) above, no Eurodollar
Rate Period shall have a duration of less than three months.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by Chase.
"HOLDER" means SAF Funding or any subsequent holder of shares
of Class A Preferred Stock.
"LOANS" means the Loans made to SAF Funding under the Credit
Agreement.
"PERSON" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a trust, a limited liability company or other entity.
"PRINCIPAL CORPORATE OFFICE" means the principal corporate
office of the Corporation located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇.
"QUARTERLY DATES" means the last Business Day of March, June,
September and December in each year, the first of which shall be the last
Business Day of September, 1996.
"RATE CONVERSION DATE" shall mean the first date upon which
the Holder is a person or entity other than any of SAF Funding, State Automobile
Mutual Insurance Company, an Ohio mutual insurance company, any Lender party to
the Credit Agreement or the Administrative Agent under the Credit Agreement.
"REDEMPTION VALUE" has the meaning assigned to such term in
Section 1 hereof.
"RESERVE REQUIREMENT" has the meaning assigned to such term in
the Credit Agreement.
37
- 36 -
"SAF FUNDING" means SAF Funding Corporation, a Delaware
corporation.
"SECRETARY" means the Secretary of the Corporation.
"TRIGGER EVENT" means the occurrence of (a) any "Event of
Default" described in the Credit Agreement (other than those events described in
Sections 9(e) or (f) thereof) and the acceleration of the Loans thereunder; or
(b) an "Event of Default" described in Sections 9(e) or (f) of the Credit
Agreement.
Section 3. DIVIDENDS AND DISTRIBUTIONS.
(a) The Holder, in preference to the holders of shares of
Class B Preferred Stock and the holders of shares of Common Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds of the Corporation legally available for the payment of dividends,
dividends at the Dividend Rate on the Redemption Value of each share, payable in
arrears in cash. Accrued dividends on the Class A Preferred Stock shall be
payable on the last day of each Eurodollar Rate Period for the applicable Class
A Preferred Stock and upon the redemption of any Class A Preferred Stock (but
only on the aggregate Redemption Value of the Class A Preferred Stock so
redeemed), PROVIDED that after the Rate Conversion Date, said dividends shall be
payable quarterly on the last Business Day of March, June, September and
December of each year.
(b) Dividends payable with respect to any share of Class A
Preferred Stock shall begin to accrue and be cumulative from the date issuance
of such Class A Preferred Stock (whether or not such dividends have been
declared and whether or not there shall be net profits or net assets of the
Corporation legally available for the payment of such dividends). Dividends paid
on the shares of Class A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated PRO RATA on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of Holder entitled to receive payment of a dividend declared thereon, which
record date shall be no more than thirty (30) days prior to the date fixed for
the payment thereof.
(c) The Holder shall not be entitled to receive any dividends
or other distributions except as provided in these Terms and Conditions.
(d) Whenever (i) any dividend payable pursuant to paragraph
(a) of this Section 3 has not been paid when due, thereafter and until all
accrued and unpaid dividends payable pursuant to paragraph (a) of this Section 3
have been paid in full or (ii) the Corporation shall not have redeemed shares of
Class A Preferred Stock on the date such redemption is required pursuant to
Section 5 hereof, thereafter and until such redemption payment shall have been
made the Corporation shall not (A) declare or pay dividends on any shares of
Class B Preferred Stock or Common Stock or make any other distributions on any
shares of Class B Preferred Stock or Common Stock, whether upon liquidation,
redemption or otherwise; or (B) redeem or purchase or otherwise acquire for
consideration any shares of Class B Preferred Stock or Common Stock, whether
upon liquidation, redemption, or otherwise.
38
- 37 -
Section 4. VOTING RIGHTS.
Except as provided in the Certificate of Incorporation, and
except for any voting rights provided by law, the Holder shall have no voting
rights and its consent shall not be required for the taking of any corporate
action.
Section 5. REDEMPTION.
(a) On each of the first eleven Applicable Redemption Dates
for any shares of Class A Preferred Stock the Corporation shall redeem, without
prior notice to the Holder, out of funds legally available therefor, one-twelfth
of the number of shares of Class A Preferred Stock issued on the date of
issuance of such shares of Class A Preferred Stock, by paying to the Holder the
aggregate Redemption Value for such Class A Preferred Stock so redeemed plus any
accrued but unpaid dividends thereon. On the twelfth Applicable Redemption Date
for such shares of Class A Preferred Stock the Corporation shall redeem, without
prior notice to the Holder, out of funds legally available therefor, the balance
of the number of shares of Class A Preferred Stock issued on such date of
issuance, by paying to the Holder the aggregate Redemption Value for such Class
A Preferred Stock so redeemed plus any accrued but unpaid dividends thereon.
(b) Upon the occurrence and during the continuance of any
Trigger Event, the Holder may require the Corporation to redeem out of funds of
the Corporation legally available therefor, all or any portion of the Class A
Preferred Stock for a redemption price equal to the aggregate Redemption Value
for the Class A Preferred Stock so redeemed plus any accrued but unpaid
dividends thereon. Upon written notice delivered by the Holder to the President
of the Corporation, such Redemption Value plus such dividends shall be
immediately due and payable.
(c) The Corporation may, by delivering written notice that is
received by the Holder not later than 10:00 a.m. New York time on the third
Business Day prior to the date of the relevant redemption, redeem out of funds
of the Corporation legally available therefor, all or any portion of the Class A
Preferred Stock for a redemption price equal to the aggregate Redemption Value
for the Class A Preferred Stock so redeemed plus any accrued but unpaid
dividends thereon.
(d) From and after the date of a redemption, unless default
shall be made by the Corporation in providing for the payment of the aggregate
Redemption Value for the Class A Preferred Stock so redeemed plus accrued but
unpaid dividends thereon, all dividends on the Class A Preferred Stock so
redeemed shall cease to accrue, and from and after the date of redemption so
specified, unless default shall be made by the Corporation as aforesaid, all
rights of the Holder with respect to such shares, except the right to receive
such Redemption Value and dividends, shall cease and terminate.
Section 6. REACQUIRED SHARES.
Any shares of Class A Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition
39
- 38 -
thereof and shall be restored to the status of authorized but unissued shares of
Class A Preferred Stock of the Corporation and may thereafter be issued. Upon
any redemption pursuant to Section 5 hereof of a fractional number of shares of
Class A Preferred Stock, the Corporation shall reissue to the Holder Class A
Preferred Stock having an aggregate Redemption Value equal to the $1,000,000
multiplied by the sum of 1 MINUS such fractional number.
Section 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the Holder shall be entitled
to receive out of the assets of the Corporation available for distribution to
its stockholders an amount equal to the Redemption Value per share plus all
accrued and unpaid dividends thereon to the date of such payment, and no
distribution shall be made (i) to the holders of shares of Common Stock, the
Class B Preferred Stock or any other capital stock of the Corporation unless
prior thereto the Holder shall have received an amount equal to the Redemption
Value per share plus all accrued and unpaid dividends thereon, to the date of
such payment.
Section 8. RANK.
The Class A Preferred Stock shall rank as to dividends and
distribution of assets prior to the Class B Preferred Stock, the Common Stock
and all other shares of stock of the Corporation.
Section 9. PAYMENTS.
Except to the extent otherwise provided herein, all payments
to be made by the Corporation in respect of the Class A Preferred Stock shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Holder at an account designated by the Holder, not later
than 12:00 p.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). If the due date of any payment
hereunder would otherwise fall on a day that is not a Business Day, such date
shall be extended to the next succeeding Business Day, and dividends shall be
payable on the aggregate Redemption Value of any shares of Class A Preferred
Stock for the period of such extension.
Section 10. FISCAL YEAR.
The Corporation will not change the last day of its fiscal
year from December 31 of each year.
40
- 39 -
EXHIBIT B to the
Standby Purchase Agreement
[Form of Purchase Notice]
[Date]
SAF Funding Corporation
Re: Standby Purchase Agreement dated as of August 16,
1996, among State Auto Financial Corporation and SAF
Funding Corporation (as modified and supplemented and
in effect from time to time, the "STANDBY PURCHASE
AGREEMENT").
Ladies and Gentlemen:
Reference is made to the Standby Purchase Agreement referred
to above. Capitalized terms used but not defined herein shall have the
respective meanings assigned to such terms in the Standby Purchase Agreement.
Pursuant to Section 2.02 of the Standby Purchase Agreement,
State Auto Financial hereby notifies you that it intends to sell to you _____
shares of Class A Preferred Stock with an aggregate Redemption Value of
$_____________(1) on ______________, 199_(2).
STATE AUTO FINANCIAL CORPORATION
By_________________________
Title:
--------
1 Insert an amount at least equal to $10,000,000 or a larger multiple of
$1,000,000.
2 Insert a date falling on or after the fourth Business Day following the
date of this Purchase Notice.
41
- 40 -
EXHIBIT C to the
Standby Purchase Agreement
[Form of Opinion of General Counsel of State Auto Financial]
__________, 199_
SAF Funding Corporation (the "Company")
To The Chase Manhattan Bank,
as ADMINISTRATIVE AGENT (the
"Administrative Agent") under, and
each of the Lenders party to, the
Credit Agreement dated as of
August 16, 1996 among the Company, the
Administrative Agent and such Lenders
Ladies and Gentlemen:
I am the general counsel of State Auto Financial Corporation
("STATE AUTO FINANCIAL) and have acted as counsel to State Auto Financial in
connection with the Standby Purchase Agreement dated as of August 16, 1996 (the
"STANDBY PURCHASE AGREEMENT") among State Auto Financial and the Company,
pursuant to which the Company has agreed to purchase, from time to time, a
certain number of shares of State Auto Financial's Class A Redeemable Preferred
Stock, no par value per share (the "CLASS A PREFERRED STOCK"). This opinion
letter is delivered to you pursuant to Section 3(b) of the Standby Purchase
Agreement in connection with the proposed issuance and sale by State Auto
Financial, and the purchase by the Company, on the date hereof, of _____ shares
of the Class A Preferred Stock (the "PURCHASED STOCK").
In rendering the opinions expressed below, I have examined the
following agreements, instruments and other documents:
(a) the Standby Purchase Agreement;
(b) certificates evidencing the Purchased Stock (the "PURCHASED
STOCK CERTIFICATES"); and
(c) such records of State Auto Financial and such other documents
as I have deemed necessary as a basis for the opinions
expressed below.
In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals and
the conformity with authentic original documents of all documents submitted to
me as copies. When relevant facts were not independently established, I have
42
- 41 -
relied upon certificates of governmental officials and appropriate
representatives of State Auto Financial and upon representations made in or
pursuant to the Standby Purchase Agreement.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered such
questions of law as I have deemed necessary as a basis for the opinions
expressed below, I am of the opinion that:
1. State Auto Financial is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio.
2. State Auto Financial has all requisite corporate power and
authority to issue and sell the Purchased Stock and execute and deliver
the Purchased Stock Certificates.
3. The issuance and sale of the Purchased Stock to the Company
and execution and delivery by State Auto Financial of the Purchased
Stock Certificates have been duly authorized by all necessary corporate
action on the part of State Auto Financial.
4. The Purchased Stock Certificates have been duly executed
and delivered by State Auto Financial.
5. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency
of the United States of America or the State of Ohio (other than any
authorizations, approvals, consents, filings and registrations
heretofore duly made or obtained and in full force and effect) is
required on the part of State Auto Financial for issuance and sale of
the Purchased Stock to the Company and the execution and delivery of
the Purchased Stock Certificates.
6. The issuance and sale of the Purchased Stock to the Company
and the execution and delivery of the Purchased Stock do not and will
not (a) violate any provision of the Articles of Incorporation or Code
of Regulations of State Auto Financial, (b) violate any applicable law,
rule or regulation of the United States of America or the State of
Ohio, (c) violate any order, writ, injunction or decree of any court or
governmental authority or agency or any arbitral award applicable to
State Auto Financial of which I have knowledge (after due inquiry) or
(d) result in a breach of, constitute a default under, require any
consent under, or result in the acceleration or required prepayment of
any indebtedness pursuant to the terms of, any agreement or instrument
of which I have knowledge (after due inquiry) to which such State Auto
Financial or any of its Subsidiaries is a party or by which any of them
is bound or to which any of them is subject, or result in the creation
or imposition of any Lien upon any Property of State Auto Financial or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
7. The Purchased Shares are validly issued and outstanding,
are fully paid and non-assessable and have, and entitle the holders
thereof to, the relative rights and preferences set forth with respect
to the Class A Preferred Stock in the Purchased Stock Certificates.
43
- 42 -
8. I have no knowledge (after due inquiry) of any legal or
arbitral proceedings, or any proceedings by or before any governmental
or regulatory authority or agency, now pending or threatened against or
affecting State Auto Financial or any of its Property that, if
adversely determined, could have a Material Adverse Effect (excluding
any Material Adverse Change resulting from the catastrophic loss claims
and/or loss adjustment expenses to which the issuance of the Purchased
Stock relates).
The foregoing opinions are limited to matters involving the
Federal laws of the United States of America and the law of the State of Ohio,
and I do not express any opinion as to the laws of any other jurisdiction. The
opinions contained in this letter are rendered only as of the date hereof
and I undertake no obligation to update this letter or the opinions contained
herein after the date hereof. The opinions contained in this letter only
constitute my professional judgment as to the consequences of and the
applicability of certain laws to the documents and agreements referred to and
the parties thereto and should not be considered to be a guarantee of any
particular result.
At the request of my clients, this opinion letter is provided
to you by me in my capacity as counsel to State Auto Financial, and this opinion
letter may not be relied upon by any Person for any purpose other than in
connection with the transactions contemplated by the Basic Documents without, in
each instance, my prior written consent.
Very truly yours,
