Exhibit 10.02
Put Agreement among State Automobile Mutual Insurance Company,
State Auto Financial Corporation, and KeyBank National Association,
as Agent, dated November 12, 2003.
PUT AGREEMENT
among
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY,
STATE AUTO FINANCIAL CORPORATION,
and
KEYBANK NATIONAL ASSOCIATION,
as Agent
Dated as of November 12, 2003
PUT AGREEMENT
This Put Agreement, dated as of November 12, 2003, is among State
Automobile Mutual Insurance Company, a mutual insurance company duly organized
and validly existing under the laws of the State of Ohio ("State Auto Mutual"),
State Auto Financial Corporation, a corporation duly organized and validly
existing under the laws of the State of Ohio ("State Auto Financial" and,
together with State Auto Mutual, the "State Auto Obligors"), and KeyBank
National Association, as agent (in such capacity, together with its successors
in such capacity, the "Agent") for the Lenders party to the Credit Agreement
referred to below.
RECITALS:
A. SAF Funding Corporation (the "Borrower"), the lenders
party thereto from time to time (the "Lenders") and the Agent have entered into
that certain Credit Agreement, of even date herewith (as hereafter amended, the
"Credit Agreement").
B. To induce the Lenders to enter into the Credit
Agreement, the State Auto Obligors have agreed to enter into this Put Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend and restate the Existing Put Agreement as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions and Accounting Terms. Capitalized terms
used but not defined herein shall have the respective meanings, assigned to such
terms in the Credit Agreement. In addition, as used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.1 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, State Auto
Mutual. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee
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of State Auto Mutual or any of its Subsidiaries and (b) State Auto Mutual and
its Subsidiaries shall not be deemed to be Affiliates of one another.
"Agreement Accounting Principles" means generally accepted
accounting principles as in effect from time to time, consistently applied.
"Applicable Insurance Regulatory Authority" shall mean, when
used with respect to any Insurance Entity, the insurance department or similar
administrative authority or agency located in the State in which such Insurance
Entity is domiciled.
"Assumed Reinsurance" shall mean reinsurance assumed by any
Insurance Entity from another Person (other than from another Insurance Entity).
"Capital Expenditures" shall mean, for any period,
expenditures (including, without limitation, the aggregate amount of Capital
Lease Obligations incurred during such period) made by State Auto Mutual or any
of its Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with Agreement Accounting Principles.
"Ceded Reinsurance" shall mean reinsurance ceded by any
Insurance Entity to any other Person (other than to another Insurance Entity),
other than Surplus Relief Reinsurance.
"Default" (without limiting the generality and effect of the
first sentence of this Section 1.1) shall have the meaning assigned to such term
in the Credit Agreement.
"Environmental Claim" shall mean, with respect to any Person,
any written or oral notice, claim, demand or other communication (collectively,
a "claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law. The term "Environmental Claim" shall
include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing,
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distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
"Equity Public Offering" shall mean a public issuance or sale
by State Auto Mutual or any of its Material Subsidiaries after the Effective
Date pursuant to a registration statement filed under the Securities Act of
1933, as amended, of any common stock.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (a) described in Section
414(b) or (c) of the Code of which State Auto Mutual is a member and (b) solely
for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which State Auto Mutual is a member.
"Excluded Taxes" means, in the case of each Lender or
applicable Lending Installation and the Agent, taxes imposed on its overall net
income, and franchise taxes imposed on it, by (a) the jurisdiction under the
laws of which such Lender or the Agent is incorporated or organized or (b) the
jurisdiction in which the Agent's or such Lender's principal executive office or
such Lender's applicable Lending Installation is located.
"Farmers Casualty" means Farmers Casualty Insurance Company,
=an Iowa domiciled property and casualty insurance company.
"Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of (a) the sum of (i) the greater of (A) 10% of the
aggregate amount of statutory capital and surplus of each Subsidiary of State
Auto Financial which is engaged in the insurance business as of the most
recently ended calendar year or, if applicable, of the calendar year then ending
on such date of determination (determined without duplication in accordance with
SAP) or (B) the aggregate net income earned by each Subsidiary of State Auto
Financial which is engaged in the insurance business for the four fiscal quarter
period then ending on such date of determination (determined without duplication
in accordance with SAP), plus (ii) cash on hand at State Auto Financial on such
date of determination, plus (iii) the aggregate net income of each Subsidiary of
State Auto Financial which is not engaged in the insurance business for the four
fiscal quarter period then ending on such date of determination (determined
without duplication in accordance with Agreement Accounting Principles) to (b)
the sum (determined without duplication) of (i) interest payments payable on the
Indebtedness of State Auto Financial and its Subsidiaries on a consolidated
basis during the four fiscal quarter period then ending on such date of
determination, plus (ii) scheduled principal amortization payments payable on
the Indebtedness of State Auto Financial and its Subsidiaries on a consolidated
basis during the four fiscal quarters immediately following such date of
determination, plus (iii) dividends (or equivalent payments otherwise named)
required to be paid on all Trust Preferred Securities during the four fiscal
quarter period then ending on such date of determination, plus (iv) the
aggregate redemption
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price of all Trust Preferred Securities that are subject to mandatory redemption
during the four fiscal quarters immediately following such date of
determination.
"Hazardous Material" shall mean, collectively, (a) any
petroleum or petroleum products, flammable materials, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, and transformers or
other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any
chemicals or other materials or substances that are now or hereafter become
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", "contaminants",
"pollutants" or words of similar import under any Environmental Law and (c) any
other chemical or other material or substance, exposure to which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person; provided that Indebtedness shall not include (i)
obligations with respect to insurance policies, annuities, guaranteed investment
contracts and similar products underwritten by, or Reinsurance Agreements or
Retrocession Agreements entered into by, an Insurance Entity in the ordinary
course of its business, (ii) obligations with respect to Surplus Relief
Reinsurance ceded by an Insurance Entity and (iii) obligations of State Auto
Financial with respect to the Trust Preferred Securities.
"Insurance Entity" shall mean, collectively, State Auto Mutual
and the Subsidiaries of State Auto Mutual licensed to underwrite property and
casualty insurance.
"Intercompany Pooling Arrangement" shall mean the pooling
arrangement among State Auto Mutual, State Auto P&C, Milbank, State Auto
Insurance of Wisconsin, Farmers Casualty, State Auto Insurance of Ohio and State
Auto Florida pursuant to which (a) State Auto P&C cedes to State Auto Mutual all
of its insurance business, (b) Milbank cedes to State Auto Mutual its property
and casualty insurance business, (c) State Auto Insurance of Wisconsin cedes to
State Auto Mutual its property and casualty insurance business, (d) Farmers
Casualty cedes to State Auto Mutual its property and casualty insurance
business, (e) State Auto Insurance of Ohio cedes to State Auto Mutual its
property and casualty insurance business and (f) State Auto Mutual retains its
property and casualty insurance business, whereupon all such businesses are
pooled and a portion thereof is then ceded from State Auto Mutual to each of
State Auto P&C, Milbank, State Auto Insurance of Wisconsin, Farmers Casualty,
State Auto Insurance of Ohio
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and State Auto Florida and the balance thereof is retained by State Auto Mutual,
as such arrangement may be modified and supplemented and in effect from time to
time.
"Interest Rate Protection Agreement" shall mean, for any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specific
contingencies. For purposes hereof, the "credit exposure" at any time of any
Person under an Interest Rate Protection Agreement to which such Person is a
party shall be determined at such time in accordance with the standard methods
of calculating credit exposure under similar arrangements as prescribed from
time to time by the Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit or capital contribution to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person), but
excluding any such advance, loan or extension of credit having a term not
exceeding 90 days arising in connection with the sale of inventory or supplies
by such Person in the ordinary course of business; (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person; or (d) the entering
into of any Interest Rate Protection Agreement.
"License" shall have the meaning assigned to such term in
Section 3.17 hereof.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of State Auto Mutual and its Subsidiaries taken as
a whole, (b) the ability of State Auto Mutual to perform its obligations under
this Agreement, (c) the validity or enforceability of any of the Basic Documents
or (d) the rights and remedies of the Lenders and the Agent under any of the
Basic Documents.
"Material Subsidiary" shall mean, as at any time, any of State
Auto Financial, State Auto P&C, Milbank, State Auto National Insurance Company,
and any other Subsidiary of State Auto Mutual that holds, directly or
indirectly, more than 5% of the consolidated assets of State Auto Mutual and its
Subsidiaries at such time or that accounts for more than 5% of the consolidated
revenues of State Auto Mutual and its Subsidiaries at such time.
"Milbank" shall mean Milbank Insurance Company, a South Dakota
domiciled property and casualty insurance company.
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"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made by State
Auto Mutual or any ERISA Affiliate and that is covered by Title IV of ERISA.
"NAIC" shall mean the National Association of Insurance
Commissioners and any successor thereto.
"Net Available Proceeds" shall mean, with respect to any
Equity Public Offering, the aggregate amount of all cash received by State Auto
Mutual and its Material Subsidiaries in respect of such Equity Public Offering
net of reasonable expenses incurred by State Auto Mutual and its Material
Subsidiaries in connection therewith.
"Obligations" shall have the meaning assigned to such term in
Section 2.4 hereof.
"Other Taxes" is defined in Section 2.7(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Placed Debt" is defined in Section 4.7(d).
"Plan" shall mean an employee benefit or other plan
established or maintained by State Auto Mutual or any ERISA Affiliate and that
is covered by Title IV of ERISA, other than a Multiemployer Plan.
"Pledged Stock" shall mean the Preferred Stock pledged
pursuant to the Company Pledge Agreement to the Agent for the benefit of the
Lenders and all related rights in connection therewith.
"Premium to Surplus Ratio" shall mean, with respect to any
Person as at any date of determination thereof, the ratio (determined with
respect to such Person and its Subsidiaries in accordance with SAP) of (a) net
premiums written during the four consecutive calendar quarters ending on or most
recently ended prior to such date of determination to (b) Statutory Surplus as
at the last day of the calendar quarter ending on or most recently ended prior
to such date of determination.
"Put Event" shall mean one or more of the following events
shall have occurred and be continuing:
(a) a Default;
(b) either State Auto Obligor shall default in the
payment when due of any amount payable by it hereunder;
(c) State Auto Financial shall default in the payment
when due of any amount payable by it under the Standby Purchase
Agreement;
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(d) State Auto Mutual or any of its Material Subsidiaries
shall default in the payment when due of any principal of or interest
on any of its other Indebtedness aggregating $5,000,000 or more; or any
event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or
the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset
to a level so that securities evidencing such Indebtedness trade at a
level specified in relation to the par value thereof; or State Auto
Mutual or any of its Material Subsidiaries shall default in the payment
when due of any amount aggregating $10,000,000 or more under any
Interest Rate Protection Agreement; or State Auto Mutual or any of its
Material Subsidiaries shall default under any Interest Rate Protection
Agreement if the effect of such default is to cause, or (with the
giving of any notice or the lapse of time or both) to permit,
termination or liquidation payment or payments by State Auto Mutual or
any of its Material Subsidiaries aggregating $5,000,000 or more to
become due;
(e) any representation, warranty or certification made or
deemed made herein or in any other Basic Document (or in any
modification or supplement hereto or thereto) by either State Auto
Obligor party thereto, or any certificate furnished to any Lender or
the Agent pursuant to the provisions hereof or thereof, shall prove to
have been false or misleading as of the time made or furnished in any
material respect;
(f) State Auto Mutual shall default in the performance of
any of its obligations under any of Sections 4.5 through 4.9 or 4.12
through 4.17 hereof, or State Auto Financial shall default in the
performance of any of its obligations under the Standby Purchase
Agreement;
(g) either State Auto Obligor shall default in the
performance of any of its other obligations under this Agreement (that
is, obligations under this Agreement other than those described in any
of clauses (b), (e) and (f), above) and such default shall continue
unremedied for a period of 30 or more days after the occurrence of such
default;
(h) State Auto Mutual or any of its Material Subsidiaries
shall admit in writing its inability to, or be generally unable to, pay
its debts as such debts become due;
(i) State Auto Mutual or any of its Material Subsidiaries
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner or liquidator
of itself or of all or a substantial part of its Property, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Bankruptcy Code, (iv) file a petition seeking
to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition
filed against it
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in an involuntary case under the Bankruptcy Code or (vi) take any
corporate action for the purpose of effecting any of the foregoing;
(j) a proceeding or case shall be commenced, without the
application or consent of State Auto Mutual or any of its Material
Subsidiaries, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of State
Auto Mutual or such Material Subsidiary or of all or any substantial
part of its Property or (iii) similar relief in respect of State Auto
Mutual or such Material Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against State
Auto Mutual or such Material Subsidiary shall be entered in an
involuntary case under the Bankruptcy Code;
(k) any Applicable Insurance Regulatory Authority shall
appoint a rehabilitator, receiver, custodian, trustee, conservator or
liquidator or the like (collectively, a "conservator") for any
Insurance Entity, or cause possession of all or any substantial portion
of the property of any Insurance Entity to be taken by any conservator
(or any Insurance Regulatory Authority shall commence any action to
effect any of the foregoing);
(l) a final judgment or judgments for the payment of
money of $10,000,000 or more in the aggregate (exclusive of judgment
amounts fully covered by insurance where the insurer has admitted
liability in respect of such judgment) or of $25,000,000 or more in the
aggregate (regardless of insurance coverage) shall be rendered by one
or more courts, administrative tribunals or other bodies having
jurisdiction against State Auto Mutual or any of its Subsidiaries and
the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and State Auto Mutual or
the relevant Material Subsidiary shall not, within said period of 30
days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal;
(m) an event or condition specified in Section 4.1(j)
hereof shall occur or exist with respect to any Plan or Multiemployer
Plan and, as a result of such event or condition, together with all
other such events or conditions, State Auto Mutual or any ERISA
Affiliate shall incur or in the opinion of the Required Lenders shall
be reasonably likely to incur a liability to a Plan, a Multiemployer
Plan or the PBGC (or any combination of the foregoing) that, in the
determination of the Required Lenders, would (either individually or in
the aggregate) have a Material Adverse Effect;
(n) a reasonable basis shall exist for the assertion
against State Auto Mutual or any of its Subsidiaries, or any
predecessor in interest of State Auto Mutual or any of its
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Subsidiaries or Affiliates, of (or there shall have been asserted
against State Auto Mutual or any of its Subsidiaries) an Environmental
Claim that, in the judgment of the Required Lenders is reasonably
likely to be determined adversely to State Auto Mutual or any of its
Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect
(insofar as such amount is payable by State Auto Mutual or any of its
Subsidiaries but after deducting any portion thereof that is reasonably
expected to be paid by other creditworthy Persons jointly and severally
liable therefor);
(o) during any period of (i) 12 consecutive months if no
Loans are outstanding or (ii) 25 consecutive months if any Loans are
outstanding, a majority of the Board of Directors of State Auto Mutual,
State Auto Financial or State Auto P&C, as the case may be, shall no
longer be composed of individuals (x) who were members of said Board on
the first day of such period, (y) whose election or nomination to said
Board was approved by individuals referred to in clause (x) above
constituting at the time of such election or nomination at least a
majority of said Board or (z) whose election or nomination to said
Board was approved by individuals referred to in clauses (x) and (y)
above constituting at the time of such election or nomination at least
a majority of said Board;
(p) except for expiration in accordance with its terms,
any material provision of this Agreement or the Standby Purchase
Agreement shall for whatever reason be terminated or cease to be in
full force and effect without the consent of the Lenders as specified
in Section 10.17 of the Credit Agreement, or the validity or
enforceability thereof shall be contested by either State Auto Obligor;
(q) any "person" or "group" of "persons" (within the
meaning of Section 13(d) of the Securities and Exchange Act of 1934, as
amended) shall have the power, directly or indirectly, to vote or
direct the voting of a greater number of the voting capital stock
issued by State Auto Financial than State Auto Mutual; or State Auto
Financial shall fail to own and control, beneficially (free and clear
of all Liens), all of the capital stock issued by State Auto P&C (in
each case irrespective of whether or not at the time securities or
other ownership interests issued by State Auto Financial or State Auto
P&C, as the case may be, or any other class or classes might have
voting power by reason of the happening of any contingency); or
(r) the rating published by A.M. Best & Co. for (i) State
Auto Mutual shall be less than (x) "A", at any time prior to the date
of the occurrence of the catastrophe relating to the initial Loans
under the Credit Agreement, (y) "B+", at any time during the period
commencing on the first anniversary of the date of the occurrence of
such catastrophe to but excluding the fourth anniversary thereof, and
(z) "A-", at any time thereafter, or (ii) State Auto P&C shall be less
than "A" at any time prior to the date of the occurrence of such
catastrophe.
"Put Notice" shall mean an instrument executed by the Agent
substantially in the form of Exhibit A hereto.
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"Put Purchase Date" shall mean the date specified in a Put
Notice as the date on which State Auto Mutual shall purchase all of the Loans or
the Pledged Stock, as specified therein.
"Reinsurance Agreement" shall mean any agreement, contract,
treaty or other arrangement providing for Ceded Reinsurance by any Insurance
Entity or any Subsidiary of such Insurance Entity.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"Retrocession Agreement" shall mean any agreement, contract,
treaty or other arrangement (other than Surplus Relief Reinsurance) whereby any
Insurance Entity or any Subsidiary of such Insurance Entity cedes reinsurance to
other insurers (other than to another Insurance Entity or any of its
Subsidiaries).
"Risk-Based Capital Ratio" shall mean, with respect to any
Person as at any date of determination thereof, the ratio of (a) Total Adjusted
Capital (as defined by the NAIC) for such Person as at such date of
determination to (b) Authorized Control Level Risk-Based Capital (as defined by
the NAIC) for such Person as at such date of determination.
"SAP" shall mean, with respect to any Insurance Entity, the
accounting procedures and practices prescribed or permitted by the Applicable
Insurance Regulatory Authority, applied on a basis consistent with those that,
in accordance with the last sentence of Section 1.2(a) hereof, are to be used in
making the calculations for purposes of determining compliance with this
Agreement.
"State Auto Florida" means State Auto Florida Insurance
Company, a Florida corporation.
"State Auto Insurance of Ohio" means State Auto Insurance
Company of Ohio, an Ohio corporation.
"State Auto Insurance of Wisconsin" means State Auto Insurance
Company of Wisconsin, a Wisconsin domiciled property and casualty insurance
company.
"State Auto P&C" shall mean State Auto Property and Casualty
Insurance Company, a South Carolina corporation.
"State Auto Pool" shall mean, collectively, State Auto Mutual,
State Auto P&C, Milbank, State Auto Insurance of Wisconsin, Farmers Casualty,
State Auto Insurance of Ohio and State Auto Florida.
"Statutory Statement" shall mean, as to any Insurance Entity,
a statement of the condition and affairs of such Insurance Entity, prepared in
accordance with statutory accounting
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practices required or permitted by the Applicable Insurance Regulatory
Authority, and filed with the Applicable Insurance Regulatory Authority.
"Statutory Surplus" shall mean, as at any date for any
Insurance Entity, the aggregate amount of surplus as regards policyholders
(determined without duplication in accordance with SAP) of such Insurance
Entity.
"Surplus Relief Reinsurance" shall mean any transaction in
which any Insurance Entity or any Subsidiary of such Insurance Entity cedes
business under a reinsurance agreement that would be considered a
"financing-type" reinsurance agreement as determined by the independent
certified public accountants of State Auto Mutual in accordance with principles
published by the Financial Accounting Standards Board or the Second Edition of
the AICPA Audit Guide for Stock Life Insurance Companies (pp. 91-92), as the
same may be revised from time to time.
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and any and all
liabilities with respect to the foregoing, but excluding Excluded Taxes and
Other Taxes.
"Tax Sharing Agreement" shall mean any tax sharing or
allocation agreement to which State Auto Mutual or any of its Subsidiaries is a
party and all tax indemnity agreements as to which State Auto Mutual or any of
its Subsidiaries is the beneficiary or obligor.
"Trust Preferred Securities" means mandatorily redeemable
preferred securities (a) issued by one or more Delaware business trusts
(including, without limitation, STFC Capital Trust 1) and (b) guaranteed by
State Auto Financial, provided that the aggregate face amount of all Trust
Preferred Securities does not exceed $25,000,000 at any time.
"Wholly Owned Subsidiary" shall mean, with respect to any
Person, any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned or
controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
1.2 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements
and certificates and reports as to financial matters required to be delivered to
the Agent hereunder shall (unless otherwise disclosed to the Agent in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with Agreement Accounting Principals or with statutory
accounting practices applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Agent hereunder
(which, prior to the delivery of the first financial statements under Section
4.1 hereof, shall mean the audited, or annual statutory, financial statements as
at December 31, 2000 referred to in Section 3.2 hereof). All calculations made
for the purposes of determining compliance with this Agreement shall (except as
otherwise expressly
11
provided herein) be made by application of Agreement Accounting Principles or
with statutory accounting practices applied on a basis consistent with those
used in the preparation of the latest annual or quarterly financial statements
furnished to the Agent pursuant to Section 4.1 hereof (or, prior to the delivery
of the first financial statements under Section 4.1 hereof, used in the
preparation of the audited, or annual statutory, financial statements as at
December 31, 2000 referred to in Section 3.2 hereof) unless (i) State Auto
Mutual shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements or (ii) the Required Lenders
(through the Agent) shall so object in writing within 30 days after delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 4.1 hereof, shall mean the audited, or annual statutory, financial
statements referred to in Section 3.2 hereof).
(b) State Auto Mutual shall deliver to the Agent at the
same time as the delivery of any annual or quarterly financial statement under
Section 4.1 hereof (i) a description in reasonable detail of any material
variation between the application of accounting principles, or statutory
accounting practices, employed in the preparation of such statement and the
application of accounting principles, or statutory accounting practices,
employed in the preparation of the next preceding annual or quarterly financial
statements as to which no objection has been made in accordance with the last
sentence of subsection (a) above and (ii) reasonable estimates of the difference
between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Article IV hereof, State Auto Mutual
shall not change the last day of its fiscal year from December 31, or the last
days of the first three fiscal quarters in each of its fiscal years from March
31, June 30 and September 30 of each year, respectively.
ARTICLE II
PUT
2.1 Put. At any time after the occurrence and during the
continuance of a Put Event, the Agent may (with the approval of the Required
Lenders but not otherwise), by delivering to State Auto Mutual a Put Notice,
require State Auto Mutual to purchase (a) from each Lender, all (but not less
than all) of such Lender's Loans, Notes and Commitment or (b) from the Agent,
all (but not less than all) of the Pledged Stock. In the event that a Put Event
has occurred and the Agent (with the consent of the Required Lenders) has
elected to deliver a Put Notice, it shall first attempt to require State Auto
Mutual to purchase the Pledged Stock; provided that if the Agent shall not be
able for any reason whatsoever, within five Business Days following the Agent's
issuance of the Put Notice requiring a purchase of the Pledged Stock, to sell
the Pledged Stock to State Auto Mutual as contemplated hereby, it may deliver a
Put Notice requiring the purchase of each Lender's Loans, Notes and Commitments.
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2.2 Purchase of Loans.
(a) If such Put Notice requires that State Auto Mutual
purchase each Lender's Loans, Notes and Commitment, then, on the Put Purchase
Date specified in such Put Notice (which Put Purchase Date shall be at least
three Business Days after the date of delivery of such Put Notice), (i) State
Auto Mutual shall purchase from each Lender, and each Lender shall sell, assign
and transfer to State Auto Mutual, all of such Lender's Loans, Notes and
Commitment, as specified in such Put Notice and (ii) State Auto Mutual shall pay
to the Agent for account of each Lender an aggregate amount equal to the sum of
(x) the aggregate outstanding principal amount of Loans of such Lender plus (y)
all accrued and unpaid interest thereon to the Put Purchase Date plus (z) all
other amounts then payable to such Lender under the Basic Documents in respect
thereof (including all amounts that would be payable under Section 3.4 of the
Credit Agreement as if such portion of such Lender's Loans were being prepaid on
the Put Purchase Date) (such amounts to be determined by the Agent and notified
in writing by the Agent to State Auto Mutual prior to such Put Purchase Date).
Upon the occurrence of any Put Event referred to in clause (i), (j) or (k) of
the definition of such term in Section 1.1 hereof, State Auto Mutual shall
automatically and without any action (including, without limitation the giving
of notice) on the part of any other Person be required to purchase the entire
principal amount of the Loans then outstanding.
(b) Such sale, assignment and transfer shall be without
recourse to each Lender and without representation and warranty by such Lender,
except that such Lender will represent and warrant to State Auto Mutual that, on
the Put Purchase Date, such Lender is the legal and beneficial owner of such
portion of such Lender's Loans, Notes and Commitment so sold, assigned and
transferred, free and clear of any adverse claim. Upon such sale, assignment and
transfer and to the extent thereof, State Auto Mutual shall have the
obligations, rights and benefits of a "Lender" under the Credit Agreement
holding the Commitment and Loans so sold, assigned and transferred; and each
Lender shall be released from the Commitment so sold, assigned and transferred.
2.3 Purchase of Pledged Stock. If such Put Notice
requires that State Auto Mutual purchase the Pledged Stock, then, on the Put
Purchase Date specified in such Put Notice (which Put Purchase Date shall be at
least three Business Days after the date of delivery of such Put Notice), (a)
State Auto Mutual shall purchase from the Agent, and the Agent shall sell,
assign and transfer to State Auto Mutual, the Pledged Stock, (b) State Auto
Mutual shall pay to the Agent, for account of the Lenders, an amount equal to
the aggregate liquidation preference of such Pledged Stock and all accrued but
unpaid dividends thereon (such amount to be determined by the Agent and notified
in writing by the Agent to State Auto Mutual prior to such Put Purchase Date)
and (c) the Agent shall apply such amount to the payment of the Obligations
owing to the Lenders under the Credit Documents.
2.4 Obligations Unconditional. The obligations of State
Auto Mutual under Sections 2.1, 2.2, 2.3, 2.5, 2.7 and 5.3 hereof are absolute,
unconditional and irrevocable, irrespective of the value, genuineness, validity,
regularity or enforceability of the obligations of the Borrower or any other
Person under the Credit Agreement, the Notes, the Pledge Agreements or any other
agreement or instrument referred to therein (collectively, the "Obligations"),
or any
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substitution, release or exchange of any other guarantee of or security for any
of the Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense available to State Auto
Mutual, it being the intent of this Section 2.4 that the obligations of State
Auto Mutual hereunder shall be absolute, unconditional and irrevocable under any
and all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or impair the liability of State Auto Mutual hereunder which shall remain
absolute, unconditional and irrevocable as described above:
(a) at any time or from time to time, without notice to
State Auto Mutual, the time for any performance of or compliance with
any of the Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of
the Credit Agreement, the Notes, the Pledge Agreements or any other
agreement or instrument referred to therein shall be done or omitted;
(c) the maturity of any of the Obligations shall be
accelerated, or any of the Obligations shall be modified, supplemented
or amended in any respect, or any right under this Agreement, the
Notes, the Pledge Agreements or any other agreement or instrument
referred to therein shall be waived or any guarantee of any of the
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(d) any change in the financial condition (including,
without limitation, insolvency or bankruptcy) of the Borrower.
State Auto Mutual hereby expressly waives all of the defenses referred to above
and diligence, presentment, demand of payment, protest and all notices
whatsoever (other than the Put Notice), and any requirement that the Agent or
any Lender exhaust any right, power or remedy or proceed against the Borrower
under the Credit Agreement, the Notes, the Pledge Agreements or any other
agreement or instrument referred therein, or against any other Person under any
other guarantee of, or security for, any of the Obligations.
2.5 Reinstatement. If for any reason any payment received
by the Agent in respect of any of the Obligations prior to the consummation by
State Auto Mutual of a purchase contemplated by Section 2.2 or 2.3 hereof is
rescinded or must be otherwise restored by any Lender for any reason, whether as
a result of any proceedings in bankruptcy, insolvency or reorganization or
otherwise, following the consummation of such purchase, State Auto shall
purchase from such Lender, and such Lender shall sell, assign and transfer to
State Auto Mutual, all of the right, title and interest of such Lender in and to
the payment so rescinded or otherwise restored, and upon such sale, assignment
and transfer, State Auto Mutual shall pay to such Lender an amount equal to the
payment so rescinded or otherwise restored. State Auto Mutual hereby agrees that
it shall indemnify the Agent and such Lender on demand for all reasonable costs
and expenses (including, without limitation, fees of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration.
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2.6 Payments.
(a) Except to the extent otherwise provided herein, all
payments to be made by State Auto Mutual under this Agreement shall be made in
Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Agent at an account designated by the Agent to State Auto
Mutual in writing, not later than 12:00 noon (Cleveland time) time on the date
on which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day).
(b) The Agent may (but shall not be obligated to) debit
the amount of any such payment that is not made by such time to any ordinary
deposit account of State Auto Mutual with the Agent (with notice to State Auto
Mutual), provided that the Agent's failure to give such notice shall not affect
the validity thereof.
2.7 Taxes. (a) All payments by State Auto Mutual to or
for the account of any Lender or the Agent hereunder shall be made free and
clear of and without deduction for any and all Taxes. If State Auto Mutual shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.7) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) State Auto Mutual shall make
such deductions, (iii) State Auto Mutual shall pay the full amount deducted to
the relevant authority in accordance with applicable law and (iv) State Auto
Mutual shall furnish to the Agent the original copy of a receipt evidencing
payment thereof within 30 days after such payment is made.
(b) In addition, State Auto Mutual hereby agrees to pay
any present or future stamp or documentary taxes and any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution or delivery of, or otherwise with respect to,
this Agreement ("Other Taxes").
(c) State Auto Mutual hereby agrees to indemnify the
Agent and each Lender for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed on amounts payable under
this Section 2.7) paid by the Agent or such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Payments due under this indemnification shall be made within 30 days of the date
the Agent or such Lender makes demand therefor.
(d) For any period during which a Lender that is not
incorporated under the laws of the United States of America or a state thereof
(each a "Non-U.S. Lender") has failed to provide the Borrower with an
appropriate form pursuant to Section 3.5(d) of the Credit Agreement (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 2.7 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or
15
subject to a reduced rate of withholding tax become subject to Taxes because of
its failure to deliver a form required under Section 3.5(d) of the Credit
Agreement, State Auto Mutual shall take such steps as such Non-U.S. Lender shall
reasonably request to assist such Non-U.S. Lender to recover such Taxes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each State Auto Obligor represents and warrants (with respect
to itself and its Subsidiaries only) to the Agent and the Lenders that:
3.1 Corporate Existence. Each of such State Auto Obligor
and its Material Subsidiaries: (a) is a corporation, partnership or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
3.2 Financial Condition.
(a) State Auto Mutual has heretofore furnished to each of
the Lenders consolidated balance sheets of State Auto Financial and its
Subsidiaries as at December 31, 2002 and the related consolidated statements of
income, retained earnings and cash flows of State Auto Financial and its
Subsidiaries for the fiscal year ended on said date, with the opinion thereon of
Ernst & Young LLP, and the unaudited consolidated balance sheets of State Auto
Financial and its Subsidiaries as at June 30, 2003 and the related consolidated
statements of income, retained earnings and cash flows of State Auto Financial
and its Subsidiaries for the three-month period ended on such date. All such
financial statements present fairly in all material respects the consolidated
financial condition of State Auto Financial and its Subsidiaries as at said
dates and the consolidated results of their operations for the fiscal year and
three-month period ended on said dates (subject, in the case of such financial
statements as at June 30, 2003, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles and practices applied
on a consistent basis. None of State Auto Financial nor any of its Material
Subsidiaries has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in said balance sheets as at said dates. Since June
30, 2003, there has been no material adverse change in the consolidated
financial condition, operations, business or prospects taken as a whole of State
Auto Financial and its Subsidiaries from that set forth in said financial
statements as at June 30, 2003.
16
(b) State Auto Mutual has heretofore furnished to each of
the Lenders the annual Statutory Statement of each Insurance Entity for the
fiscal year ended December 31, 2002, and the quarterly Statutory Statement of
each Insurance Entity for the fiscal quarter ended June 30, 2003, in each case
as filed with the Applicable Insurance Regulatory Authority. All such Statutory
Statements present fairly in all material respects the financial condition of
each Insurance Entity as at, and the results of operations for, the fiscal year
ended December 31, 2002, and fiscal quarter ended June 30, 2003, in accordance
with statutory accounting practices prescribed or permitted by the Applicable
Insurance Regulatory Authority. Since June 30, 2003, there has been no material
adverse change in the consolidated financial condition, operations, business or
prospects taken as a whole of State Auto Mutual from that set forth in said
Statutory Statement as at June 30, 2003.
3.3 Litigation. Except as described on Schedule IV
hereto, there are no legal or arbitral proceedings, or any proceedings by or
before any governmental or regulatory authority or agency, now pending or (to
the knowledge such State Auto Obligor) threatened against State Auto Mutual or
any of its Subsidiaries that, if adversely determined could (either individually
or in the aggregate) have a Material Adverse Effect.
3.4 No Breach. None of the execution and delivery of this
Agreement and the other Basic Documents to which such State Auto Obligor is a
party, the consummation of the transactions herein and therein contemplated or
compliance with the terms and provisions hereof and thereof (including, without
limitation, issuance of the Preferred Stock) will conflict with or result in a
breach of, or require any consent under, the charter or by-laws (or equivalent
documents) of such State Auto Obligor, or any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which State Auto Mutual or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any Property of State Auto Mutual or any of its Subsidiaries pursuant to
the terms of any such agreement or instrument.
3.5 Action. Such State Auto Obligor has all necessary
corporate power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party and, in the
case of State Auto Financial, to issue the Preferred Stock; the execution,
delivery and performance by such State Auto Obligor of each of the Basic
Documents to which it is a party (and, in the case of State Auto Financial, the
issuance of the Preferred Stock) have been duly authorized by all necessary
corporate action on its part (including, without limitation, any required
shareholder approvals); and this Agreement has been duly and validly executed
and delivered by such State Auto Obligor and constitutes, and each of the other
Basic Documents to which such State Auto Obligor is a party when executed and
delivered will constitute, its legal, valid and binding obligation, enforceable
against such State Auto Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
17
3.6 Approvals. No authorizations, approvals or consents
of, and no filings or registrations with, any governmental or regulatory
authority or agency, or any securities exchange (other than any authorizations,
approvals, consents, filings and registrations heretofore duly made or obtained
and in full force and effect), are necessary for the execution, delivery or
performance by either State Auto Obligor of this Agreement or any of the other
Basic Documents to which it is a party (or, in the case of State Auto Financial,
for the issuance of the Preferred Stock) or for the legality, validity or
enforceability hereof or thereof.
3.7 ERISA. Each Plan, and, to the knowledge of the such
State Auto Obligor, each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
state law, and no event or condition has occurred and is continuing as to which
State Auto Mutual would be under an obligation to furnish a report to the Agent
under Section 4.1(j) hereof.
3.8 Taxes. State Auto Mutual and its Subsidiaries are
members of an affiliated group of corporations filing consolidated returns for
Federal income tax purposes, of which State Auto Mutual is the "common parent"
(within the meaning of Section 1504 of the Code) of such group. State Auto
Mutual and its Material Subsidiaries have filed all Federal income tax returns
and all other material tax returns that are required to be filed by them and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by State Auto Mutual or any of its Material Subsidiaries. The charges,
accruals and reserves on the books of State Auto Mutual and its Material
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of State Auto Mutual, adequate. State Auto Mutual has not given or been
requested to give a waiver of the statute of limitations relating to the payment
of any Federal, state, local and foreign taxes or other impositions, other than
(i) a waiver by State Auto Mutual in the ordinary course of its business of the
statute of limitations relating to the payment of Federal income taxes for the
year 1999 until September 17, 2004, and (ii) a waiver by State Auto Financial in
the ordinary course of its business of the statute of limitations relating to
the payment of Federal income taxes for the year 1999 until July 6, 2004.
3.9 Investment Company Act. Neither State Auto Mutual nor
any of its Subsidiaries is an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
3.10 Public Utility Holding Company Act. Neither State
Auto Mutual nor any of its Subsidiaries is a "holding company" or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
3.11 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct
list of each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement providing for or otherwise
relating to any Indebtedness or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, State Auto Mutual or any of its
18
Subsidiaries, outstanding on the date hereof the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $5,000,000, and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct
list of each Lien securing Indebtedness of any Person outstanding on the date
hereof the aggregate principal or face amount of which equals or exceeds (or may
equal or exceed) $5,000,000 and covering any Property of State Auto Mutual or
any of its Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Part B of said Schedule I.
3.12 Environmental Matters. Each of State Auto Mutual and
its Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to carry
on its business as now being or as proposed to be conducted, except to the
extent failure to have any such permit, license or authorization would not
(either individually or in the aggregate) have a Material Adverse Effect. Each
of such permits, licenses and authorizations is in full force and effect and
each of State Auto Mutual and its Subsidiaries is in compliance with the terms
and conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not (either individually or in the aggregate)
have a Material Adverse Effect.
3.13 Capitalization. The authorized capital stock of State
Auto Financial consists, on the date hereof, of an aggregate of 105,000,000
shares consisting of (a) 100,000,000 shares of common stock, no par value, of
which (as of October 20, 2003) 39,344,009 shares were duly and validly issued
and outstanding, each of which shares is fully paid and nonassessable, (b)
2,500,000 shares of Class A Preferred Stock, no par value, none of which shares
are issued and outstanding and (c) 2,500,000 shares of Class B Preferred Stock,
no par value, none of which shares are issued and outstanding. Upon issuance,
each share of Class A Preferred Stock will benefit from the Terms and Conditions
of Class A Preferred Stock attached to form of Class A Preferred Stock
Certificate attached to the Standby Purchase Agreement as Exhibit A. As of the
date hereof, 67% of such issued and outstanding shares of common stock are owned
beneficially and of record by State Auto Mutual. As of the date hereof, (i)
except for this Agreement and the Standby Purchase Agreement and as set forth in
Part A of Schedule III hereto, there are no outstanding Equity Rights with
respect to State Auto Financial and (ii) except as set forth in Part B of
Schedule III hereto, there are no outstanding obligations of State Auto
Financial or any of its Subsidiaries to repurchase, redeem, or otherwise acquire
any shares of capital stock of State Auto Financial nor are there any
outstanding obligations of State Auto Financial or any of its Subsidiaries to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
State Auto Financial or any of its Subsidiaries.
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3.14 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule II hereto is a
complete and correct list of all Subsidiaries of State Auto Mutual on the date
hereof and a specification of which of such Subsidiaries are Insurance Entities
and which are Material Subsidiaries.
(b) Set forth in Part B of Schedule II hereto is a
complete and correct list of all Investments (other than (x) Investments
disclosed in Part A of said Schedule II hereto and any other Investments
existing as of the date hereof permitted under Section 4.9 hereof and (y)
Guarantees of Indebtedness the aggregate principal or face amount of which
Indebtedness is less than $5,000,000) held by State Auto Mutual or any of its
Subsidiaries in any Person on the date hereof and, for each such Investment, (i)
the identity of the Person or Persons holding such Investment and (ii) the
nature of such Investment. Except as disclosed in Part B of Schedule II hereto,
each of State Auto Mutual and its Subsidiaries owns, free and clear of all
Liens, all such Investments.
3.15 True and Complete Disclosure. The information,
reports, financial statements, exhibits and schedules furnished in writing by or
on behalf of the State Auto Obligors to the Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Basic Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by State
Auto Mutual and its Subsidiaries to the Agent and the Lenders in connection with
this Agreement and the other Basic Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact known
to either State Auto Obligor that could have a Material Adverse Effect that has
not been disclosed herein, in the other Basic Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Agent for use in connection with the transactions contemplated
hereby or thereby.
3.16 No Reliance. State Auto Mutual has made,
independently and without reliance upon the Agent or any Lender, and based on
such documents and information as it has deemed appropriate, its own decision to
enter into this Agreement and has made (and will continue to make),
independently and without reliance upon the Agent or any Lender, and based on
such documents and information as it has deemed appropriate (or shall deem
appropriate at the time), its own legal, credit and tax analysis of the
transactions contemplated hereby.
3.17 Insurance Licenses. Schedule T to the most recent
Statutory Statement of each Insurance Entity described in Section 3.2(b) hereof
lists, as of the date hereof, all of the jurisdictions in which each of the
Insurance Entities holds active licenses (including, without limitation,
licenses or certificates of authority from Applicable Insurance Regulatory
Authorities), permits or authorizations to transact insurance and reinsurance
business or to act as an insurance agent or broker (collectively, the
"Licenses"). Each Insurance Entity is in compliance in all material respects
with each license held by it. No License (to the extent
20
material) is the subject of a proceeding for suspension or revocation or any
similar proceedings, there is no sustainable basis for such a suspension or
revocation, and to the knowledge of each State Auto Obligor no such suspension
or revocation has been threatened by any licensing authority except in any such
case where such proceedings would not have a Material Adverse Effect.
ARTICLE IV
COVENANTS OF STATE AUTO MUTUAL
State Auto Mutual covenants and agrees with the Agent that, so
long as any Obligations are outstanding or any Commitments are in effect:
4.1 Financial Statements Etc. State Auto Mutual shall
deliver to the Agent (with sufficient copies for each of the Lenders):
(a) as soon as available and in any event within 45 days
after the end of each quarterly fiscal period of each fiscal year of
State Auto Financial, consolidated statements of income, retained
earnings and cash flows of State Auto Financial and its Subsidiaries
for such period and for the period from the beginning of the respective
fiscal year to the end of such period, and the related consolidated
balance sheets of State Auto Financial and its Subsidiaries as at the
end of such period, setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year),
accompanied by a certificate of a senior financial officer of State
Auto Financial, which certificate shall state that said consolidated
financial statements present fairly in all material respects the
consolidated financial condition and results of operations of State
Auto Financial and its Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, as at the end of,
and for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days
after the end of each fiscal year of State Auto Financial, consolidated
statements of income, retained earnings and cash flows of State Auto
Financial and its Subsidiaries for such fiscal year and the related
consolidated balance sheets of State Auto Financial and its
Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated figures for the
preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements present fairly in all material respects the consolidated
financial condition and results of operations of State Auto Financial
and its Subsidiaries as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles;
(c) promptly after filing with the Applicable Insurance
Regulatory Authority and in any event within 45 days after the end of
each for the first three quarterly fiscal periods of each fiscal year
of each Insurance Entity, its quarterly Statutory Statement for
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such quarterly fiscal period, together with the opinion thereon of a
senior financial officer of such Insurance Entity stating that such
Statutory Statement presents the financial condition of such Insurance
Entity for such quarterly fiscal period in accordance with statutory
accounting practices required or permitted by the Applicable Insurance
Regulatory Authority;
(d) promptly after filing with the Applicable Insurance
Regulatory Authority and in any event within 90 days after the end of
each fiscal year of each Insurance Entity, the annual Statutory
Statement of such Insurance Entity for such year, together with (i) the
opinion thereon of a senior financial officer of such Insurance Entity
stating that said annual Statutory Statement presents the financial
condition of such Insurance Entity for such fiscal year in accordance
with statutory accounting practices required or permitted by the
Applicable Insurance Regulatory Authority and (ii) a certificate of a
valuation actuary affirming the adequacy of reserves taken by such
Insurance Entity in respect of future policyholder benefits as at the
end of such fiscal year (as shown on such Statutory Statement);
(e) within 180 days after the end of each fiscal year of
each Insurance Entity, the report of Ernst & Young LLP (or other
independent certified public accountants of recognized national
standing) on the annual Statutory Statements delivered pursuant to
Section 4.1(d) hereof;
(f) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that
State Auto Mutual or any of its Material Subsidiaries shall have filed
with the Securities and Exchange Commission (or any governmental agency
substituted therefor) or any national securities exchange;
(g) promptly upon the mailing thereof to the
policyholders of State Auto Mutual generally and to the shareholders of
State Auto Financial, copies of all financial statements, reports and
proxy statements so mailed;
(h) promptly after State Auto Mutual receives the results
of a triennial examination by the NAIC of the financial condition and
operations of State Auto Mutual and/or any of its Material
Subsidiaries, a copy thereof;
(i) promptly following the delivery or receipt by State
Auto Mutual or any of its Material Subsidiaries of any correspondence,
notice or report to or from any Applicable Insurance Regulatory
Authority that relates, to any material extent, to the financial
viability of State Auto Mutual or any of its Material Subsidiaries, a
copy thereof;
(j) as soon as possible, and in any event within ten days
after either State Auto Obligor knows or has reason to believe that any
of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a
senior financial officer of State Auto Mutual setting forth details
respecting such event or condition and the action, if any, that State
Auto Mutual or its ERISA
22
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to the PBGC by
State Auto Mutual or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section
4043(c) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which the PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard
of Section 412 of the Code or Section 302 of ERISA, including,
without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code
or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA
of a notice of intent to terminate any Plan or any action
taken by State Auto Mutual or an ERISA Affiliate to terminate
any Plan;
(iii) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by State Auto Mutual or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by State Auto Mutual or any ERISA Affiliate
that results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by State Auto
Mutual or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate
or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against State Auto Mutual
or any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA, would result in the loss of tax-exempt status of
the trust of which such Plan is a part if State Auto Mutual or
an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections;
(k) within five Business Days after receipt, notice from
any Applicable Insurance Regulatory Authority of any threatened or
actual proceeding for suspension or revocation of any License or any
similar proceeding with respect to any such License;
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(l) promptly, notice of any denial of coverage,
litigation, or arbitration arising out of any Reinsurance Agreements to
which any Insurance Entity is a party which denial, litigation or
arbitration involves $5,000,000 or more;
(m) promptly after either State Auto Obligor knows or has
reason to believe that any Put Event (or any event that with notice or
lapse of time or both would become a Put Event) has occurred, a notice
of such Put Event (or such event) describing the same in reasonable
detail and, together with such notice or as soon thereafter as
possible, a description of the action that State Auto Mutual has taken
or proposes to take with respect thereto;
(n) at the time it furnishes each set of financial
statements pursuant to paragraph (a) or (b) above, a certificate
(substantially in the form of Exhibit C hereto) of a senior financial
officer of State Auto Mutual (i) to the effect that no Put Event (or
any event that with notice or lapse of time or both would become a Put
Event) has occurred and is continuing (or, if any Put Event (or any
such event) has occurred and is continuing, describing the same in
reasonable detail and describing the action that State Auto Mutual has
taken or proposes to take with respect thereto) and (ii) setting forth
in reasonable detail the computations necessary to determine whether
the State Auto Obligors are in compliance with Section 4.10 hereof as
of the end of the respective quarterly fiscal period or fiscal year;
(o) at least five Business Days prior to the
effectiveness of any amendment to the terms of the Placed Debt, or the
effectiveness of any agreement governing any Indebtedness in
replacement or exchange thereof, a copy of such amendment or agreement;
and
(p) from time to time such other information regarding
the financial condition, operations, business or prospects of State
Auto Mutual or any of its Subsidiaries (including, without limitation,
any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA) as the Agent may reasonably request.
4.2 Litigation. State Auto Mutual shall promptly give to
the Agent (with sufficient copies for each Lender) notice of all legal or
arbitral proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and any material development in respect of such
legal or other proceedings, affecting State Auto Mutual or any of its
Subsidiaries, except proceedings that, if adversely determined, would not
(either individually or in the aggregate) have a Material Adverse Effect.
4.3 Existence. Etc. State Auto Mutual shall:
(a) and shall cause each of its Material Subsidiaries to,
preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in
this Section 4.3 shall prohibit any transaction expressly permitted
under Section 4.5 hereof);
24
(b) and shall cause each of its Subsidiaries to, comply
with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply
with such requirements could (either individually or in the aggregate)
have a Material Adverse Effect;
(c) and shall cause each of its Material Subsidiaries to,
pay and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained;
(d) and shall cause each of its Material Subsidiaries to,
keep adequate records and books of account, in which complete entries
shall be made in accordance with generally accepted accounting
principles (or, in the case of an Insurance Entity, statutory
accounting principles) consistently applied; and
(e) and shall cause each of its Material Subsidiaries to,
permit representatives of any Lender or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested
by such Lender or the Agent (as the case may be).
4.4 Insurance. State Auto Mutual shall, and shall cause
each of its Material Subsidiaries to, maintain insurance with financially sound
and reputable insurance companies, and with respect to Property and risks of a
character usually maintained by corporations engaged in the same or similar
business similarly situated, against loss, damage and liability of the kinds and
in the amounts customarily maintained by such corporations (including general
liability insurance, director's and officer's liability insurance, property
insurance and worker's compensation insurance), provided that, nothing in this
Section 4.4 shall be deemed to require State Auto Mutual or any of its Material
Subsidiaries to enter into any Reinsurance Agreement and provided, further, that
State Auto Mutual and its Material Subsidiaries may self-insure against such
hazards and risks, and in such amounts as is customary for corporations of a
similar size and in similar lines of business.
4.5 Prohibition of Fundamental Changes.
(a) State Auto Mutual shall not, nor shall it permit any
of its Material Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
(b) State Auto Mutual shall not, nor shall it permit any
of its Material Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person except for
purchases of inventory and other Property to be sold or used in the ordinary
course of business, Assumed Reinsurance in the ordinary course of business,
Investments permitted under Section 4.9 hereof, and Capital Expenditures.
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(c) State Auto Mutual shall not, nor shall it permit any
of its Material Subsidiaries to, convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or a substantial
part of its business or Property, whether now owned or hereafter acquired.
(d) Notwithstanding the foregoing provisions of this
Section 4.5:
(i) any Subsidiary of State Auto Mutual may be merged or
consolidated with or into: (x) State Auto Mutual if State Auto Mutual
shall be the continuing or surviving corporation or (y) any other such
Subsidiary; provided that (A) if any such transaction (other than a
transaction described in clause (B) below) shall be between a
Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary
shall be the continuing or surviving corporation and (B) if any such
transaction shall be between State Auto Financial and any other such
Subsidiary, State Auto Financial shall be the surviving corporation;
(ii) any Material Subsidiary of State Auto Mutual may
sell, lease, transfer or otherwise dispose of any or all of its
Property (upon voluntary liquidation or otherwise) to State Auto Mutual
or a Wholly Owned Subsidiary of State Auto Mutual;
(iii) State Auto Mutual may merge or consolidate with or
acquire any other Person if (w) in the case of a merger or
consolidation, State Auto Mutual is the surviving corporation, (x)
after giving effect thereto, no Put Event (and no event that with
notice or lapse of time or both would constitute a Put Event) would
exist hereunder, (y) the business activity engaged in by such other
Person would be permitted under Section 4.13 hereof if such other
Person were a Subsidiary of State Auto Mutual prior to such merger or
consolidation and (z) the aggregate amount of the Statutory Surplus
(determined as at the date of the relevant merger, consolidation or
acquisition) of all such other Persons that have been the subject of
any merger, consolidation or acquisition pursuant to this clause (iii)
after the date hereof (other than any such merger, consolidation or
acquisition financed solely with Net Available Proceeds) shall be less
than $250,000,000; and
(iv) any Material Subsidiary of State Auto Mutual may
merge or consolidate with or acquire any other Person if (w) in the
case of a merger or consolidation, the surviving corporation is a
Wholly Owned Subsidiary of State Auto Mutual; provided, that in the
case of any merger or consolidation involving State Auto Financial, the
surviving corporation is State Auto Financial, (x) after giving effect
thereto, no Put Event (and no event that with notice or lapse of time
or both would constitute a Put Event) would exist hereunder, (y) the
business activity engaged in by such other Person would be permitted
under Section 4.13 hereof if such other Person were a Subsidiary of
State Auto Mutual prior to such merger or consolidation and (z) the
aggregate amount of the Statutory Surplus (determined as at the date of
the relevant merger, consolidation or acquisition) of all such other
Persons that have been the subject of any merger, consolidation or
acquisition pursuant to this clause (iv) during any calendar year
(other than any such merger, consolidation or acquisition financed
solely with Net Available Proceeds) shall be less than $100,000,000.
26
4.6 Limitation on Liens. State Auto Mutual shall not, nor
shall it permit any of its Material Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon any of its Property, whether now owned or
hereafter acquired, except:
(a) Liens in existence on the date hereof and listed in
Part B of Schedule I hereto;
(b) Liens imposed by any governmental authority for
taxes, assessments or charges not yet due or that are being contested
in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of State Auto Mutual or the
affected Material Subsidiaries, as the case may be, in accordance with
Agreement Accounting Principles (or, in the case of any Insurance
Entity, SAP);
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings and
Liens securing judgments but only to the extent for an amount and for a
period not resulting in a Put Event under clause (l) of the definition
of "Put Event" in Section 1.1 hereof;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that do not in any case materially detract from the value of
the Property subject thereto or interfere with the ordinary conduct of
the business of State Auto Mutual or any of its Material Subsidiaries;
(g) Liens arising under escrows, trusts, custodianships,
separate accounts, funds withheld procedures, and similar deposits,
arrangements, or agreements established with respect to insurance
policies, annuities, guaranteed investment contracts and similar
products underwritten by, or Reinsurance Agreements entered into by,
any Insurance Entity in the ordinary course of business;
(h) deposits with insurance regulatory authorities;
(i) Liens on Property of any corporation that becomes a
Subsidiary of State Auto Mutual after the date hereof, provided that
such Liens are in existence at the time such corporation becomes a
Subsidiary of State Auto Mutual and were not created in anticipation
thereof;
27
(j) Liens upon real and/or tangible personal Property
acquired after the date hereof (by purchase, construction or otherwise)
by State Auto Mutual or any of its Material Subsidiaries, each of which
Liens either (i) existed on such Property before the time of its
acquisition and was not created in anticipation thereof or (ii) was
created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund, the cost (including the
cost of construction) of such Property; provided that (x) no such Lien
shall extend to or cover any Property of State Auto Mutual or such
Material Subsidiary other than the Property so acquired and
improvements thereon and (y) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 80% of the fair market
value (as determined in good faith by a senior financial officer of
State Auto Mutual) of such Property at the time it was acquired (by
purchase, construction or otherwise); and
(k) additional Liens upon real and/or personal Property
created after the date hereof, provided that the aggregate Indebtedness
secured thereby and incurred on and after the date hereof shall not
exceed $15,000,000 in the aggregate at any one time outstanding.
4.7 Indebtedness. State Auto Mutual shall not, nor shall
it permit any of its Material Subsidiaries to, create, incur or suffer to exist
any Indebtedness except:
(a) Indebtedness created pursuant hereto;
(b) Indebtedness outstanding on the date hereof and
listed in Part A of Schedule I hereto;
(c) Indebtedness of Material Subsidiaries of State Auto
Mutual to State Auto Mutual or to other Material Subsidiaries of State
Auto Mutual;
(d) Indebtedness not greater than $100,000,000 in
principal amount incurred after November 1, 2003 and no later than
December 31, 2003 by State Auto Financial pursuant to a note offering
exempt from the registration requirements of the Securities Act of
1933, as amended (the "Placed Debt"), which Placed Debt at all times
shall be on terms consistent in all material respects with those
disclosed to the Agent and the Lenders prior to the Effective Date (the
"Previously Disclosed Terms"), and any Indebtedness, not greater than
$100,000,000 in principal amount and otherwise on terms not more
restrictive on or otherwise less favorable to State Auto Financial in
any material respect than the Previously Disclosed Terms, in exchange
therefor, whether or not the notes, debentures or other instruments
evidencing such exchange Indebtedness are exempt from such registration
requirements (without limiting the generality of the foregoing, it is
the intention hereby that the terms of the Placed Debt, including the
effect of any modification thereof, and the terms of any Indebtedness
in exchange or replacement thereof, (i) provide for a final scheduled
maturity not earlier than December 31, 2010 and (ii) otherwise shall
not be more restrictive on, or otherwise less favorable to, State Auto
Financial in any material respect than the Previously Disclosed Terms);
and
28
(e) additional Indebtedness of State Auto Mutual and its
Material Subsidiaries (including, without limitation, Capital Lease
Obligations and other Indebtedness secured by Liens permitted under
Sections 4.6(j) or 4.6(k) hereof) up to but not exceeding $15,000,000
in the aggregate at any one time outstanding as to all such
Indebtedness described in this Section 4.7(e).
4.8 Sale/Leaseback Transactions. State Auto Mutual shall
not, nor shall it permit any of its Material Subsidiaries to, enter into any an
arrangement with any Person (other than State Auto Mutual or any of its Material
Subsidiaries) providing for the leasing to State Auto Mutual or any of its
Material Subsidiaries for a period of more than five years of any Property which
has been or is to be sold or transferred by State Auto Mutual or such Material
Subsidiary to such Person or to any other Person (other than State Auto Mutual
or any of its Material Subsidiaries), to which funds have been or are to be
advanced by such Person on the security of the Property subject to such lease (a
"Sale/Leaseback Transaction") if, after giving effect thereto, the Value (as
defined below) of all Sale/Leaseback Transactions at such time would exceed 10%
of the Statutory Surplus of State Auto Mutual at such time. For purposes of this
Section 4.8, "Value" shall mean, with respect to any Sale/Leaseback Transaction
as at any time, the amount equal to the greater of (a) the net proceeds of the
sale or transfer of the Property subject to such Sale/Leaseback Transaction and
(b) the fair value, in the opinion of the board of directors of State Auto
Mutual of such Property at the time of entering into such Sale/Leaseback
Transaction, in either case divided first by the number of full years of the
term of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in such lease.
4.9 Investments.
(a) State Auto Mutual shall not, nor shall it permit any
of its Material Subsidiaries to, make or permit to remain outstanding any
Investments except (i) Investments outstanding on the date hereof and identified
in Part B of Schedule II hereto, (ii) operating deposit accounts with banks,
(iii) Permitted Investments, (iv) Investments by State Auto Mutual and its
Material Subsidiaries in State Auto Mutual and its Subsidiaries, (v) Interest
Rate Protection Agreements, provided that, without limiting the obligation of
State Auto Mutual under Section 4.12 hereof, when entering into any Interest
Rate Protection Agreement that at the time has, or at any time in the future may
give rise to, any credit exposure, the aggregate credit exposure under all
Interest Rate Protection Agreements (excluding the Interest Rate Protection
Agreement being entered into pursuant to Section 4.12 hereof) shall not exceed
$10,000,000, and (vi) Investments of Insurance Entities not prohibited by clause
(b) of this Section 4.9.
(b) State Auto Mutual shall not permit any Insurance
Entity to make any Investment if, on the date of which such Investment is made
and after giving effect thereto, the aggregate value of Investments (other than
equity Investments) held by such Insurance Entity that are rated lower than "2"
by the NAIC or are not rated by the NAIC would exceed 5% of the value of total
invested assets. As used in this Section 4.9(b), the "value" of an Investment
refers to the value of such Investment that would be shown on the most recent
Statutory Statement of the relevant Insurance Entity prepared in accordance with
SAP.
29
4.10 Certain Financial Covenants.
(a) Statutory Surplus. State Auto Mutual shall not permit
its Statutory Surplus at any time to be less than (a) $775,000,000, at any time
prior to the occurrence of a catastrophe giving rise to Loans being outstanding
under the Credit Agreement (provided that no Loans are outstanding at such time)
and (b) $730,000,000, at any time during the period from and including the date
of occurrence of a catastrophe giving rise to Loans being outstanding under the
Credit Agreement to but excluding the date all Loans shall have been required to
be repaid in full pursuant to the terms of the Credit Agreement. State Auto
Mutual shall not permit the Statutory Surplus of State Auto P&C to be less than
(a) $242,000,000, at any time prior to the occurrence of a catastrophe giving
rise to Loans being outstanding under the Credit Agreement (provided that no
Loans are outstanding at such time) and (b) $228,000,000, at any time during the
period from and including the date of occurrence of a catastrophe giving rise to
Loans being outstanding under the Credit Agreement to but excluding the date all
Loans shall have been required to be repaid in full pursuant to the terms of the
Credit Agreement.
(b) Risk-Based Capital Ratio. State Auto Mutual shall not
permit its Risk-Based Capital Ratio at any time to be less than (a) 5.00 to 1,
at any time prior to the occurrence of a catastrophe giving rise to Loans being
outstanding under the Credit Agreement (provided that no Loans are outstanding
at such time) and (b) 3.00 to 1, at any time during the period from and
including the date of occurrence of a catastrophe giving rise to Loans being
outstanding under the Credit Agreement to but excluding the date all Loans shall
have been required to be repaid in full pursuant to the terms of the Credit
Agreement. State Auto Mutual shall not permit the Risk-Based Capital Ratio of
State Auto P&C to be less than (a) 4.00 to 1, at any time prior to the
occurrence of a catastrophe giving rise to Loans being outstanding under the
Credit Agreement (provided that no Loans are outstanding at such time) and (b)
3.00 to 1, at any time during the period from and including the date of
occurrence of a catastrophe giving rise to Loans being outstanding under the
Credit Agreement to but excluding the date all Loans shall have been required to
be repaid in full pursuant to the terms of the Credit Agreement.
(c) Premium to Surplus. State Auto Mutual shall not
permit its Premium to Surplus Ratio at any time to exceed (i) 2.00 to 1, at any
time prior to the occurrence of a catastrophe giving rise to Loans being
outstanding under the Credit Agreement (provided that no Loans are outstanding
at such time) and (ii) 2.50 to 1, at any time during the period from and
including the date of occurrence of a catastrophe giving rise to Loans being
outstanding under the Credit Agreement to but excluding the date all Loans shall
have been required to be repaid in full pursuant to the terms of the Credit
Agreement. State Auto Mutual shall not permit the Premium to Surplus Ratio of
State Auto P&C to exceed (x) 2.75 to 1 at any time prior to the occurrence of a
catastrophe giving rise to Loans being outstanding under the Credit Agreement
(provided that no Loans are outstanding at such time) and (y) 3.00 to 1, at any
time during the period from and including the date of occurrence of a
catastrophe giving rise to Loans being outstanding under the Credit Agreement to
but excluding the date all Loans shall have been required to be repaid in full
pursuant to the terms of the Credit Agreement. State Auto Mutual shall not
permit the Premium to Surplus Ratio of the State Auto Pool to exceed (x) 2.00 to
1 at any time prior to the occurrence of a catastrophe giving rise to Loans
being outstanding under the Credit Agreement (provided that no Loans are
outstanding at such time) and (y) 2.50 to 1 at any time during the period from
30
and including the date of occurrence of a catastrophe giving rise to Loans being
outstanding under the Credit Agreement to but excluding the date all Loans shall
have been required to be repaid in full pursuant to the terms of the Credit
Agreement.
(d) Fixed Charge Coverage Ratio. State Auto Financial
shall not permit its Fixed Charge Coverage Ratio, determined as of the end of
each of its fiscal quarters, to be less than 1.00 to 1.00 at any time during the
period from and including the date of occurrence of a catastrophe giving rise to
Loans being outstanding under the Credit Agreement to but excluding the date all
Loans shall have been required to be repaid in full pursuant to the terms of the
Credit Agreement.
4.11 NAIC Ratio. In the event that the NAIC or any
Applicable Insurance Regulatory Authority shall at any time promulgate any
risk-based capital ratio requirements or guidelines, State Auto Mutual shall
cause each Insurance Entity to comply with the minimum requirements or
guidelines applicable to it as established by the NAIC or such Applicable
Insurance Regulatory Authority.
4.12 Interest Rate Protection Agreements. State Auto
Mutual shall within five days after the date of each purchase of Preferred Stock
under the Standby Purchase Agreement, cause State Auto Financial to enter into,
and thereafter maintain in full force and effect, one or more Interest Rate
Protection Agreements with one or more of the Lenders (and/or with a bank or
other financial institution having capital, surplus and undivided profits of at
least $500,000,000), that effectively would enable State Auto Financial (in a
manner satisfactory to the Agent) to protect itself against floating interest
rates as to a notional principal amount at least equal to 100% of the aggregate
Redemption Value of the Preferred Stock for a period of at least five years
measured from the date of the purchase of the Preferred Stock.
4.13 Lines of Business. State Auto Mutual shall not, nor
shall it permit any of its Subsidiaries to, engage to any substantial extent in
any line or lines of business activity other than the business of owning and
operating property and casualty insurance companies as conducted on the date
hereof and businesses related or incidental thereto (it being understood that
the businesses of Strategic Insurance Software, Inc., Stateco Financial
Services, Inc. and 518 Property Management and Leasing, LLC, to the extent
conducted as of the date hereof, are related to the business of owning and
operating property and casualty insurance companies). It is also understood and
agreed that the foregoing includes State Auto Mutual assuming reinsurance with
premiums in an aggregate amount not to exceed $30,000,000 from third parties.
4.14 Ceded Reinsurance. State Auto Mutual shall not, nor
shall it permit any other Insurance Entity to:
(a) enter into any Reinsurance Agreement with any Person
other than (i) another Insurance Entity, (ii) any Person for which the
most recently published rating by A.M. Best & Co. is "B+" or higher or,
if such Person is not rated by A.M. Best & Co., which has a Statutory
Surplus (or the equivalent thereof) of not less than $100,000,000,
(iii) any Person that posts security under such Reinsurance Agreement
in an amount equal to the total liabilities assumed by such Person,
through a letter of credit issued by an
31
"authorized bank" (as such term is defined by the Applicable Insurance
Regulatory Authority) or cash collateral deposit or (iv) any other
reinsurers acceptable to the Agent, provided however, that for purposes
of the foregoing clause (ii), any "NA" designation shall not be
considered a rating of A.M. Best & Co.;
(b) enter into any Reinsurance Agreement or Reinsurance
Agreements with Lloyd's of London if the aggregate amount of
reinsurance ceded thereby would exceed 15% of the aggregate premium
volume of reinsurance ceded by the Insurance Entities.
(c) enter into any Surplus Relief Reinsurance except with
another Insurance Entity; or
(d) enter into any Reinsurance Agreement or Reinsurance
Agreements if such Reinsurance Agreements will result in a 20% or more
reduction of net premium volume for the Insurance Entities in any
12-month period.
4.15 Transactions with Affiliates. Except as expressly
permitted by this Agreement, State Auto Mutual shall not, nor shall it permit
any of its Material Subsidiaries to, directly or indirectly: (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any Property to an Affiliate; (c) merge into or consolidate with or
purchase or acquire Property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, Guarantees and assumptions of obligations of an
Affiliate); provided that (i) any Affiliate who is an individual may serve as a
director, officer or employee of State Auto Mutual or any of its Material
Subsidiaries and receive reasonable compensation for his or her services in such
capacity and (ii) State Auto Mutual and its Material Subsidiaries may enter into
transactions (other than extensions of credit by State Auto Mutual or any of its
Material Subsidiaries to an Affiliate) providing for the leasing of Property,
the rendering or receipt of services or the purchase or sale of inventory and
other Property in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to State
Auto Mutual and its Material Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not an
Affiliate.
4.16 Modifications of Certain Documents. State Auto Mutual
shall not, and shall not permit any of its Subsidiaries to, (a) consent to any
modification, supplement or waiver of (i) the charter or by-laws of State Auto
Mutual, (ii) the charter or by-laws of State Auto Financial, (iii) any material
term of any Retrocession Agreement or Reinsurance Agreement relating to property
and catastrophic risk insurance other than the Intercompany Pooling Arrangement
or (iv) without the prior consent of the Agent (with the approval of the
Required Lenders, such approval not to be unreasonably withheld), the
Intercompany Pooling Agreement if such modification, supplement or waiver would
result in the ceding to State Auto Mutual of 70% or more of the catastrophic
loss risk subject to such arrangement or (b) in any manner alter or change the
preferences, rights or powers of the Preferred Stock or permit State Auto
Financial to issue any additional securities so as to affect adversely the
Preferred Stock.
32
4.17 Indemnity for Certain Costs. State Auto Financial
agrees with the Agent that it shall indemnify the Borrower, promptly upon demand
therefor, for all or any portion of (a) the fees, costs and expenses payable by
the Borrower under Article III of the Credit Agreement including, without
limitation, in the event that interest for any Lender in respect of any period
is computed at the Base Rate, for the excess (if any) of the amount of such
interest computed at the Base Rate for such period over the amount of interest
that would have been payable in respect of such period had such interest been
computed at the relevant Eurodollar Rate for such period and (b) the excess of
interest in respect of any period payable by the Borrower under Section 2.11 of
the Credit Agreement at 2% over the interest in respect of such period that
would have been payable had the relevant Default not occurred. Each of State
Auto Financial, State Auto Mutual and the Agent agrees that the Borrower shall
be a third-party beneficiary of this Agreement.
4.18 Delivery of Documents on the Effective Date. Except
with respect to the item set forth in clause (f) (which shall be delivered on or
before the date of the initial Advance under the Credit Agreement), on the
Effective Date, State Auto Mutual shall deliver to the Agent (with sufficient
copies for each Lender) each of the following documents each of which shall be
satisfactory to the Agent in form and substance:
(a) certified copies of the charter and by-laws (or
equivalent documents) of each State Auto Obligor and of all corporate
authority for such State Auto Obligor (including, without limitation,
board of director resolutions and evidence of the incumbency, including
specimen signatures, of officers) with respect to the execution,
delivery and performance of such of the Basic Documents to which such
State Auto Obligor is intended to be a party and each other document to
be delivered by such State Auto Obligor from time to time in connection
herewith (and the Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from State Auto Mutual
to the contrary);
(b) a certificate of a senior officer of State Auto
Mutual, dated the Effective Date, to the effect that (i) no Put Event
(and no event that with notice or lapse of time or both would become a
Put Event) shall have occurred and be continuing and (ii) the
representations and warranties made by the State Auto Obligors in
Article III hereof shall be true and complete on and as of the
Effective Date with the same force and effect as if made on and as of
the Effective Date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date);
(c) an opinion, dated the Effective Date, of the general
counsel of each State Auto Obligor, substantially in form of Exhibit B
hereto and covering such other matters as the Agent or any Lender may
reasonably request (and each State Auto Obligor hereby instructs such
counsel to deliver such opinion to the Lenders and the Agent);
(d) certified true, correct and complete copies of all
Retrocession Agreements and Reinsurance Agreements in effect on the
Effective Date;
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(e) certified true, correct and complete copies of all
Tax Sharing Agreements in effect on the Effective Date;
(f) evidence that the transactions contemplated by the
Basic Documents shall have been approved by each Applicable Insurance
Regulatory Authority with respect to State Auto Mutual; and
(g) such other documents as the Agent or any Lender or
counsel to KeyBank may reasonably request.
4.19 Delivery of Documents on Each Borrowing Date. On the
date of each borrowing by the Borrower under the Credit Agreement (and as a
condition thereto), State Auto Mutual shall deliver to the Agent (with
sufficient copies for each Lender) each of the following documents each of which
shall be satisfactory to the Agent in form and substance:
(a) a certificate of a senior officer of State Auto
Mutual, dated the date of such borrowing, (1) to the effect that, both
immediately prior to the making of such Loan and also after giving
effect thereto and to the intended use thereof, (i) no Put Event (and
no event that with notice or lapse of time or both would become a Put
Event) shall have occurred and be continuing and (ii) the
representations and warranties made by the State Auto Obligors in
Article III hereof (excluding, in the case of the representation and
warranty made by the State Auto Obligors in the last sentence of
clauses (a) and (b) of Section 3.2 hereof, any such change to the
extent such change results from the catastrophic loss claims and/or
loss adjustment expenses to which the borrowing by the Borrower under
the Credit Agreement and related issuance of Preferred Stock relates)
shall be true and complete on and as of such date of borrowing with the
same force and effect as if made on and as of such date of borrowing
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date) and (2)
describing in reasonable detail the catastrophic loss claims and/or
loss adjustment expenses to which such borrowing relates;
(b) such other documents as the Agent or any Lender or
counsel to KeyBank may reasonably request (including, without
limitation, opinions of counsel to the State Auto Obligors relating to
the issuance of the Preferred Stock in connection with such borrowing).
4.20 Delivery of Documents in Connection with the
Extension of the Commitment Termination Date. On each of the "Request Date" and
the "Existing Commitment Termination Date" (in each case as defined in Section
2.19 of the Credit Agreement) State Auto Mutual shall deliver to the Agent (with
sufficient copies for each Lender) each of the following documents each of which
shall be satisfactory to the Agent in form and substance:
(a) a certificate of a senior officer of State Auto
Mutual, dated such date, to the effect that (i) no Put Event (and no
event that with notice or lapse of time or both would become a Put
Event) shall have occurred and be continuing and (ii) the
representations and warranties made by the State Auto Obligors in
Article III hereof shall
34
be true and complete on and as of such date of borrowing with the same
force and effect as if made on and as of such date of borrowing (or, if
any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date); and
(b) a certificate of a senior officer of State Auto
Mutual, dated such date, to the effect that (i) the "Probable Maximum
Loss" (as defined below) of the State Auto Obligors for the 250-year
return period shall not exceed (x) $100,000,000 for earthquake peril,
(y) $75,000,000 for hurricane peril and (z) $130,000,000 for
thunderstorm peril and (ii) attached thereto is a true, correct and
complete copy of the report prepared by the applicable Modelling Firm
(as defined below) in connection with the calculation referred to in
the definition of "Probable Maximum Loss" below. For purposes of this
clause (b), "Probable Maximum Loss" shall mean, for any date, the
"probable maximum loss" as most recently calculated prior to such date
by Risk Management Solutions, Inc., Applied Insurance Research, EQECAT
Inc., Xxxxxxxxxxx (a Towers Xxxxxx Company) or another independent
modelling firm satisfactory to the Agent (each, a "Modelling Firm") and
"thunderstorm peril" shall mean peril caused by lightning, straight
line wind, rain, hail and/or tornado.
4.21 Consent to Assignment, etc.
(a) To the extent contemplated by the Company Pledge
Agreement, or otherwise after and during the continuance of a Default,
the Agent and any designee or assignee thereof shall be entitled to
exercise any and all rights of the Borrower under the Standby Purchase
Agreement and the Pledged Stock in accordance with the terms of the
Standby Purchase Agreement and such Pledged Stock, and State Auto
Financial shall comply in all respects with such exercise. Without
limiting the generality of the foregoing, to the extent contemplated by
the Company Pledge Agreement, or otherwise after and during the
continuance of a Default, the Agent and any designee or assignee
thereof shall have the full right and power to enforce directly against
State Auto Financial all obligations of State Auto Financial under the
Standby Purchase Agreement and the Pledged Stock and otherwise to
exercise all remedies thereunder and to make all demands and give all
notices and make all requests required or permitted to be made by the
Borrower under the Standby Purchase Agreement or the Pledged Stock.
Nothing herein shall require the Agent or such designee or assignee to
cure any default of the Borrower under the Standby Purchase Agreement
or to perform any act, duty or obligation of the Borrower under the
Standby Purchase Agreement, but shall only give them the option so to
do.
(b) State Auto Financial shall not, without the prior
written consent of the Agent, (i) cancel, suspend or terminate the
Standby Purchase Agreement or consent to or accept any such
cancellation, suspension or termination thereof, (ii) amend, supplement
or otherwise modify the Standby Purchase Agreement or (iii) petition,
request or take any other legal or administrative action which seeks,
or may reasonably be expected, to so rescind, cancel, terminate or
suspend or amend or modify the Standby Purchase Agreement.
(c) A foreclosure of, or other exercise of remedies
under, the Company Pledge Agreement or any sale thereunder by the Agent
or its assignee or designee, whether by judicial
35
proceedings or under any power of sale contained therein, or any conveyance
from the Borrower to the Agent, the Lenders or any such assignee or designee, in
lieu thereof, shall not require the consent of State Auto Financial.
(d) Upon the exercise by the Agent of any of the remedies
set forth in Section 5.05 of the Company Pledge Agreement, the Agent may assign
its rights and interests and the rights and interests of the Borrower under the
Standby Purchase Agreement and/or the Pledged Stock to any other Person.
(e) State Auto Financial shall not be released from any
of its obligations under the Standby Purchase Agreement or the Pledged Stock
pursuant to any assignment or transfer (including by reason of a merger,
consolidation, sale of substantially all of its assets or otherwise), and shall
not delegate any of its obligations under the Standby Purchase Agreement or the
Pledged Stock, unless the Agent shall have previously consented in writing to
such release or delegation, as the case may be.
ARTICLE V
MISCELLANEOUS
5.1 Waiver. No failure on the part of the Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
5.2 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including electronic
transmission, facsimile transmission or similar writing) and shall be given to
such party at its address or facsimile number set forth on the signature pages
hereof or at such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower in accordance
with the provisions of this Section 5.2. Each such notice, request or other
communication shall be effective (a) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (b) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid, or (c) if given by any other means, when delivered (or, in the case
of electronic transmission, received) at the address specified in this Section.
5.3 Expenses; Indemnification. (a) State Auto Mutual and
State Auto Financial jointly and severally agree to reimburse the Agent for any
costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Agent, which attorneys may
be employees of the Agent) paid or incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, syndication, review, amendment,
modification, and administration of the Basic Documents. State Auto Mutual and
State Auto Financial also jointly and severally agree to reimburse the Agent and
the Lenders for
36
any costs, internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Agent and the Lenders, which
attorneys may be employees of the Agent or the Lenders) paid or incurred by the
Agent or any Lender in connection with the collection and enforcement of the
Loan Documents.
(b) State Auto Mutual and State Auto Financial hereby
jointly and severally agree to indemnify the Agent, each Lender, their
respective affiliates, and each of their directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent any Lender or any affiliate is a
party thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the other Basic Documents, the transactions contemplated hereby
or the direct or indirect application or proposed application of the proceeds of
any Loan except to the extent that they are determined in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the party seeking indemnification. The
obligations of State Auto Mutual and State Auto Financial under this Section 5.3
shall survive the termination of this Agreement.
5.4 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by each State Auto Obligor
and the Agent (with the consent of the Lenders as specified in Section 10.17 of
the Credit Agreement), and any provision of this Agreement may be waived by the
Agent (with the consent of the Lenders as specified in Section 10.17 of the
Credit Agreement).
5.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, provided, that neither State Auto Obligor may
assign any of its rights or obligations hereunder without the prior consent of
the Agent (with the consent of all of the Lenders).
5.6 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
5.7 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
5.8 CHOICE OF LAW. THE BASIC DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS, BUT WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF OHIO, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.
5.9 CONSENT TO JURISDICTION. EACH STATE AUTO OBLIGOR
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR OHIO STATE COURT SITTING IN CLEVELAND, OHIO
37
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND
EACH STATE AUTO OBLIGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING PROCEEDINGS AGAINST ANY STATE AUTO OBLIGOR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY STATE AUTO OBLIGOR
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CLEVELAND, OHIO.
5.10 WAIVER OF JURY TRIAL. EACH STATE AUTO OBLIGOR, THE
AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
5.11 Treatment of Certain Information; Confidentiality.
(a) Each State Auto Obligor acknowledges that from time
to time financial advisory, investment banking and other services may be offered
or provided to State Auto Mutual or one or more of its Subsidiaries (in
connection with this Agreement or otherwise) by any Lender or by one or more
subsidiaries or affiliates of such Lender and such State Auto Obligor hereby
authorizes each Lender to share any information delivered to such Lender by or
on behalf of State Auto Mutual and its Subsidiaries pursuant to this Agreement,
or in connection with the decision of such Lender to enter into the Credit
Agreement, to any such subsidiary or affiliate, it being understood that any
such subsidiary or affiliate receiving such information shall be bound by the
provisions of paragraph (b) below as if it were a Lender hereunder. Such
authorization shall survive the termination of this Agreement.
(b) The Agent and each Lender agrees to hold any
confidential information which it may receive from either State Auto Obligor
pursuant to this Agreement in confidence, except for disclosure (i) to its
Affiliates and to other Lenders and their respective Affiliates, so long as such
Affiliate or other Lender agrees to be bound by the provisions of this Section,
(ii) to legal counsel, accountants, and other professional advisors to such
Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as
requested pursuant to or as required by law, regulation, or legal process, (v)
to any Person in connection with any legal proceeding to which such Lender is a
party, (vi) to such Lender's direct or indirect contractual counterparties in
swap agreements or to legal counsel, accountants and other professional advisors
to such counterparties, and (vii) permitted by Section 12.4 of the Credit
Agreement.
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5.12 No Liability. Except as expressly provided herein,
neither the Agent nor any Lender shall be responsible or have any liability for
(a) any statements, warranties or representations made in or in connection with
the Credit Agreement, any other Basic Document or any other instrument or
document furnished pursuant thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Basic Document or any other instrument or document furnished pursuant
thereto and (b) the financial condition of the Borrower or any other Person or
any other obligation of or the performance or observance by the Borrower, any
other Person or any other obligor of any of their respective obligations under
the Credit Agreement or any other Basic Document or any other instrument or
document furnished pursuant thereto.
5.13 Further Assurances. Each State Auto Obligor agrees
that, from time to time upon the written request of the Agent, such State Auto
Obligor shall execute and deliver such further documents and do such other acts
and things as the Lender may reasonably request in order fully to effect the
purposes of this Agreement.
5.14 Severability of Provisions. Any provision in any
Basic Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Basic Documents are declared
to be severable.
5.15 Third-Party Beneficiaries. Each State Auto Obligor
agrees that each Lender shall be a third-party beneficiary of this Agreement and
shall be entitled to enforce its rights hereunder as fully as if it were a party
hereto.
[signature page follows]
39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Title: Senior Vice President
Address for Notices:
State Automobile Mutual Insurance Company
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
STATE AUTO FINANCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-----------------------
Title: Chairman, President, and Chief
Executive Officer
Addresses for Notices:
State Automobile Mutual Insurance Company
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
40
KEYBANK NATIONAL ASSOCIATION,
AS AGENT
By: /s/ Xxxx X. Xxxxx
------------------
Title: Vice President
Addresses for Notices:
000 Xxxxxx Xxxxxx
Mail Code: OH-01-27-0606
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
41
LIST OF SCHEDULES AND EXHIBITS TO PUT AGREEMENT
The following is a list of the schedules and exhibits to the foregoing
Put Agreement which have not been filed with this Form 8-K:
EXHIBITS
Exhibit A -- Form of Put Notice to be executed by the Agent.
Exhibit B -- Form of opinion of general counsel of each State Auto Obligor.
Exhibit C -- Form of certificate of senior financial officer of State Auto
Mutual (i) to the effect that no Put Event (or any event that with
notice or lapse of time or both would become a Put Event) has
occurred and is continuing (or, if any Put Event (or any such
event) has occurred and is continuing, describing the same in
reasonable detail and describing the action that State Auto Mutual
has taken or proposes to take with respect thereto) and (ii)
setting forth in reasonable detail the computations necessary to
determine whether the State Auto Obligors are in compliance with
Section 4.10 of the Put Agreement as of the end of the respective
quarterly fiscal period or fiscal year.