Exhibit 10.54

EXECUTIVE AGREEMENT

This Executive Agreement (this “Agreement”) is made as of March 1, 2009, by and
among State Auto Financial Corporation, an Ohio corporation (“State Auto
Financial”), State Automobile Mutual Insurance Company, an Ohio domiciled mutual
insurance company (“State Auto Mutual”), and Robert P. Restrepo, Jr. (the
“Executive”).

BACKGROUND INFORMATION

State Auto Financial is a majority-controlled, publicly-traded holding company
subsidiary of State Auto Mutual, which is the ultimate controlling entity of the
State Auto holding company system and, together with their respective operating
subsidiaries and affiliates, State Auto Financial and State Auto Mutual engage
in the property casualty insurance business. Each of State Auto Financial and
State Auto Mutual (collectively, the “Companies”) considers the establishment
and maintenance of a sound and vital management to be an important part of their
overall corporate strategy and to be essential to protecting and enhancing the
interests of the Companies and their respective owners. As part of this
corporate strategy, the Companies wish to act to retain their well-qualified
executive officers notwithstanding any actual or threatened change in control of
State Auto Financial or State Auto Mutual.

Executive is a party to an Employment Agreement with the Companies dated as of
March 1, 2009, as it may be amended from time to time (the “Employment
Agreement”). The Employment Agreement does not address the impact of a Change in
Control (as defined below), except to incorporate by reference the provisions of
this Agreement.

Executive is the Chairman, Chief Executive Officer and President of State Auto
Financial and State Auto Mutual and their respective subsidiaries and
affiliates, and the Executive’s services, experience and knowledge of the
business of the Companies, and reputation and contacts in the industry are
extremely valuable to the Companies. The Executive’s continued dedication,
availability, advice, and counsel to the Companies are deemed important to the
Companies, the Boards of Directors of State Auto Financial and State Auto Mutual
(collectively, the “Board”), and their shareholders and policyholders,
respectively. It is, therefore, in the best interests of the Companies to secure
the continued services of the Executive notwithstanding any actual or threatened
change in control of the Companies. Accordingly, the Boards of State Auto
Financial and State Auto Mutual, acting by and through the Compensation
Committee and Nominating and Governance Committee, respectively, have approved
this Agreement with the Executive and authorized its execution and delivery on
behalf of the Companies.

STATEMENT OF AGREEMENT

In consideration of the mutual covenants set forth herein and INTENDING TO BE
LEGALLY BOUND HEREBY, the Companies and Executive hereby agree as follows:

1. Term of Agreement. This Agreement will begin on the date entered above and
will continue in effect through December 31, 2011; provided, that this Agreement
shall terminate concurrent with the termination of the Employment Agreement.
Notwithstanding the above, if a “Change of Control” (as defined herein) of the
Companies occurs during the term of this Agreement, the term of this Agreement
will be extended for the lesser of thirty-six (36) months beyond the end of the
month in which any such Change of Control occurs, or until Executive attains age
65.

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2. Definitions. The following defined terms shall have the meanings set forth
below, for purposes of this Agreement:

(a) Annual Award. “Annual Award” means the cash payment paid or payable to the
Executive with respect to a fiscal year under the Companies’ Incentive Bonus
Arrangement with Executive.

(b) Annual Base Salary. “Annual Base Salary” means the greater of (1) the
highest annual rate of base salary in effect for the Executive during the 12
month period immediately prior to a Change of Control or, (2) the annual rate of
base salary in effect at the time Notice of Termination is given (or on the date
employment is terminated if no Notice of Termination is required).

(c) Cause. “Cause” shall be given the meaning used in the Employment Agreement.

(d) Change of Control. “Change of Control” means the occurrence of any of the
following:

(1) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of State Auto Financial representing 25%
or more of the combined voting power of State Auto Financial’s then outstanding
securities, excluding (i) any acquisition by State Auto Financial or any
Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by State Auto Financial, a Subsidiary or State Auto
Mutual or any such acquisition by State Auto Mutual; or

(2) A majority of the Board of Directors of State Auto Financial at any time is
comprised of other than Continuing Directors (for purposes of this Agreement,
the term “Continuing Director” means a director who was either (A) first elected
or appointed as a Director prior to the date of this Agreement; or
(B) subsequently elected or appointed as a director if such director was
nominated by the Nominating and Governance Committee of State Auto Financial or
appointed by at least two thirds of the then Continuing Directors); or

(3) Any event or transaction if State Auto Financial would be required to report
it in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act; or

(4) Any of the following occurs:

(A) a merger or consolidation of State Auto Financial, other than a merger or
consolidation in which the voting securities of State Auto Financial immediately
prior to the merger or consolidation continue to represent (either by remaining
outstanding or being converted into securities of the surviving entity) more
than 50% of the combined voting power of State Auto Financial or surviving
entity immediately after the merger or consolidation with another entity;

 

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(B) a sale, exchange, lease, mortgage, pledge, transfer, or other disposition
(in a single transaction or a series of related transactions) of all or
substantially all of the assets of State Auto Financial which shall include,
without limitation, the sale of assets or earning power aggregating more than
50% of the assets or earning power of State Auto Financial on a consolidated
basis;

(C) a reorganization, reverse stock split, or recapitalization of State Auto
Financial which would result in any of the foregoing; or

(D) a transaction or series of related transactions having, directly or
indirectly, the same effect as any of the foregoing.

(5) As respects State Auto Mutual, any of the following occurs:

(A) State Auto Mutual affiliates with or is merged into or consolidated with a
third party and as a result, a majority of the Board of Directors of State Auto
Mutual or its successor is comprised of other than Continuing Directors (as
defined above); or

(B) State Auto Mutual completes a conversion to a stock insurance company and as
a result of which a majority of the Board of Directors of State Auto Mutual or
its successor is comprised of other than Continuing Directors (as defined
above).

(6) Notwithstanding the foregoing, for purposes of this Change of Control
definition, the percentage of securities ownership listed under subsection
(d)(1) above (i.e., 25%) shall increase or decrease, as the case may be, such
that the percentage of securities ownership is consistent with any future
changes to the percentage of securities ownership represented in the Change of
Control definition in Section 11(B)(2)(a) (or any successor Section) of the
State Auto Financial Corporation Amended and Restated Equity Incentive
Compensation Plan, as amended from time to time.

(e) Change Year. “Change Year” means the fiscal year in which a Change of
Control occurs.

(f) Disability. “Disability” shall be given the meaning used in the Employment
Agreement.

(g) Employee Benefits. “Employee Benefits” means the perquisites, benefits, and
service credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs, or arrangements in which
the Executive is entitled to participate, including without limitation any stock
option, stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Companies), disability, salary continuation, expense
reimbursement, and other employee benefit policies, plans, programs, or
arrangements that may now exist or any equivalent successor policies, plans,
programs, or arrangements that may be adopted hereafter, providing perquisites
and benefits at least as great in a monetary equivalent as are payable
thereunder prior to a Change in Control.

 

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(h) Employment Agreement. “Employment Agreement” means as described above.

(i) Good Reason. “Good Reason” means the occurrence of any one or more of the
following:

(1) The assignment to the Executive of duties which are materially and adversely
different from or inconsistent with the duties, responsibilities, and status of
the Executive’s position at any time during the 12 month period prior to such
Change of Control, or which result in a significant change in the Executive’s
authority and responsibility as the Chief Executive Officer of the Companies;

(2) A material reduction by the Companies in the Executive’s Annual Base Salary
in place as of the day immediately prior to a Change of Control, or the failure
to grant salary increases and bonus payments on a basis comparable to those
granted to other executives of the Companies, or a reduction of the Executive’s
most recent highest incentive bonus potential under the Executive’s Incentive
Bonus Arrangement prior to such Change of Control, or any successor to such
arrangement;

(3) A demand by the Companies that the Executive relocate to a location in
excess of 35 miles from the location where the Executive is currently based, or
in the event of any such relocation with the Executive’s express written
consent, the failure of the Companies or a Subsidiary to pay (or reimburse the
Executive for) all reasonable moving expenses incurred by the Executive relating
to a change of principal residence in connection with such relocation and to
indemnify the Executive against any loss in the sale of the Executive’s
principal residence in connection with any such change of residence and any
expenses incurred by Executive that are directly attributable to such sale (for
purposes of this provision, “loss” is understood to mean a sale of such
principal residence at a price less than the adjusted basis in such residence);

(4) The failure of the Companies to obtain a satisfactory agreement from any
successor to the Companies to assume and agree to perform this Agreement, as
contemplated in Section 17 of this Agreement;

(5) The failure of the Companies to provide the Executive with substantially the
same Employee Benefits that were provided to him immediately prior to the Change
in Control, or with a package of Employee Benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change in
Control, is substantially comparable in all material respects to such Employee
Benefits taken as a whole; or

(6) Any material reduction in the Executive’s compensation or benefits or
adverse change in the Executive’s location or duties, if such reduction or
adverse change occurs at any time after the commencement of any discussion with
a third party relating to a possible Change of Control of the Companies
involving such third party, if such reduction or adverse change is in
contemplation of such possible Change of Control and such Change of Control is
actually consummated within 12 months after the date of such reduction or
adverse change.

 

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The existence of Good Reason shall not be affected by the Executive’s incapacity
due to physical or mental illness. The Executive’s continued employment shall
not constitute a waiver of the Executive’s rights with respect to any
circumstance constituting Good Reason under this Agreement. The Executive’s
determination of Good Reason shall be conclusive and binding upon the parties to
this Agreement provided such determination has been made in good faith.
Executive shall provide the Companies with written notice of his intent to
terminate with Good Reason within a period not to exceed 90 days of the initial
existence of the condition constituting Good Reason. The Companies shall have a
period of 30 days in which it may remedy the condition and prevent Executive’s
termination for Good Reason.

(j) Highest Incentive Bonus. “Highest Incentive Bonus” means the greater of the
Executive’s Potential Annual Award for (a) the Change Year or (b) the year
immediately preceding the Change Year.

(k) Incentive Bonus Arrangement. “Incentive Bonus Arrangement” means the
Companies’ Incentive Bonus Arrangement (including the “LBP” as defined in the
Employment Agreement and the payment due under the LTIP as defined in the
Employment Agreement) for the Executive in effect for any calendar year(s)
during the period this Agreement is in force.

(l) Notice of Termination. “Notice of Termination” means a written notice
indicating the specific termination provision in this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for the separation from service under the provision so
indicated.

(m) Potential Annual Award. “Potential Annual Award” means the maximum possible
Annual Award the Executive could receive according to his or her Incentive Bonus
Arrangement for the calendar year immediately preceding the Change Year or the
calendar year that is the Change Year, whichever is higher, assuming that
(1) the parameters for the maximum Annual Award, under the Executive’s Incentive
Bonus Arrangement were met (whether or not such parameters for such maximum
Annual Award actually were or could be met) and (2) the Executive’s Annual Base
Salary is used to determine the Potential Annual Award.

(n) Retirement. “Retirement” means having reached normal retirement age as
defined in the State Auto Insurance Companies Employee Retirement Plan (“State
Auto Pension Plan”) or taking early retirement in accordance with the terms of
the State Auto Pension Plan.

(o) Severance Benefits. “Severance Benefits” means the benefits described in
Section 4 of this Agreement, as adjusted by the applicable provisions of
Section 5 of this Agreement.

(p) Subsidiary. “Subsidiary” means any corporation, insurance company, or other
entity a majority of the voting control of which is directly or indirectly owned
or controlled at the time by State Auto Financial.

 

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3. Eligibility for Severance Benefits. The Companies or their successor shall
pay or provide to the Executive the Severance Benefits if the Executive incurs a
voluntary or involuntary separation from service (as defined in Section 409A of
the Code), during the term of this Agreement, either:

(a) by the Companies at any time within 24 months after a Change of Control; or

(b) by the Executive for Good Reason at any time within 24 months after a Change
of Control; or

(c) by the Companies at any time after an agreement has been reached with an
unaffiliated third party, the performance of which agreement would result in a
Change of Control involving such third party, if such Change of Control is
actually consummated within 12 months after the date of such separation from
service.

4. Severance Benefits. The Executive, if eligible under Section 3, shall receive
the following Severance Benefits, adjusted by the applicable provisions of
Section 5 (in addition to accrued compensation, bonuses, and vested benefits and
other equity based awards);

(a) Annual Base Salary. In addition to any accrued compensation payable as of
the Executive’s separation from service (either by reason of Executive’s
Employment Agreement or otherwise), a lump sum cash amount equal to the
Executive’s Annual Base Salary, multiplied by 2.99, unless at the time of such
separation from service the Executive is within three years of mandatory
retirement at age 65, in which case the benefit due under this Section 4(a)
shall not exceed Executive’s Annual Base Salary multiplied by a factor equal to
the number of months remaining until the Executive attains age 65, presented as
a whole integer and a fraction of a partial year (e.g., 15 months equals 1.25).

(b) Annual Incentive Compensation. In addition to any compensation otherwise
payable pursuant to the Executive’s Incentive Bonus Arrangement and the bonus
payable under the Companies’ Quality Performance Bonus Plan (“QPB Plan”), a lump
sum cash amount equal to the Executive’s Highest Incentive Bonus and the total
bonus under the QPB Plan paid to Executive during the calendar year immediately
preceding the Change Year, multiplied by 2.99 unless at the time of such
separation from service the Executive is within three years of mandatory
retirement at age 65, in which case the benefit due under this Section 4(b)
shall not exceed the Executive’s Highest Incentive Bonus and total bonus under
the QPB Plan, as aforesaid multiplied by a factor equal to the number of months
remaining until the Executive attains age 65, presented as a whole integer and a
fraction of a partial year (e.g., 15 months equals 1.25). In order to be
entitled to a payment pursuant to this Section 4(b), the Executive must have
been a party to an Incentive Bonus Arrangement at some time during the 12 month
period immediately preceding the Change of Control.

(c) Insurance Benefits. For a three year period, commencing on the date the
employment is terminated, the Companies will arrange to provide to the Executive
at the Companies’ expense, subject to the then current employee contribution
being paid by Executive, with:

(1) Health Care. Health care coverage comparable to that in effect for the
Executive immediately prior to the separation from service (or, if more
favorable to the Executive, that furnished generally to salaried employees of
the Companies on

 

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the date immediately preceding the Change in Control), including, but not
limited to, hospital, surgical, medical, dental, prescription, and dependent
coverage. In complete fulfillment of its obligations under this paragraph, the
Companies shall pay Executive an amount equal to the Companies’ then current
monthly per employee cost of providing State Auto’s health insurance benefit
multiplied by 36, plus such additional amount that represents a gross up of the
taxes due for that particular amount of income.

(2) Life Insurance. Life and accidental death and dismemberment insurance
coverage (including any supplemental coverage, purchase opportunity, and double
indemnity for accidental death that was available to the Executive) equal
(including policy terms) to that in effect at the time Notice of Termination is
given (or on the date the employment is terminated if no Notice of Termination
is required) or, if more favorable to the Executive, equal to that in effect at
the date immediately prior to the Change of Control.

(3) Disability Insurance. Disability insurance coverage (including policy terms)
equal to that in effect at the time Notice of Termination is given (or on the
date employment is terminated if no Notice of Termination is required) or, if
more favorable to the Executive, equal to that in effect immediately prior to
the Change of Control; provided, however, that no income replacement benefits
will be payable under such disability policy with regard to the three year
period following a separation from service provided that the payments payable
under Sections 4(a) and (b) above have been made.

In the event the Executive’s participation in any such plan or program is not
permitted, the Companies will directly provide, at no after-tax cost to the
Executive, the benefits to which the Executive would be entitled under such
plans and programs. Any taxable welfare benefits provided to Executive pursuant
to this section 4(c) that are not “disability pay” or “death benefits” within
the meaning of Treasury Regulation Section 1.409A-1(a)(5) (collectively, the
“Applicable Benefits”) shall be subject to the following requirements in order
to comply with Section 409A of the Code. The amount of any Applicable Benefits
provided during one taxable year shall not affect the amount of the Applicable
Benefits provided in any other taxable year. No Applicable Benefits may be
liquidated or exchanged for another benefit. During the period of 6 months
immediately following Executive’s separation from service, Executive shall be
obligated to pay the Companies the full cost for any Applicable Benefits that do
not constitute health benefits of the type required to be provided under
Section 4980B of the Code, and the Companies shall reimburse Executive for any
such payments on the first business day that is more than 6 months after
Executive’s separation from service.

(d) Retirement Benefits. The Executive will be entitled to receive retirement
benefits as provided herein, so that the total retirement benefits the Executive
receives from the Companies will approximate the total retirement benefits the
Executive would have received under the Companies’ defined benefit (qualified
and nonqualified) retirement plans (which shall include the Supplemental
Executive Retirement Plan (“SERP”), but not include any severance plans) of the
Companies in which the Executive participates were the Executive fully vested
under such retirement plans and had the Executive continued in the employ of the
Companies for 36 months following the date of the Executive’s separation from
service or until the Executive’s

 

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Retirement, if earlier (provided that such additional period shall be inclusive
of and shall not be in addition to any period of service credited under any
severance plan of the Companies). The benefits specified in this subsection will
be paid under the SERP or other similar nonqualified arrangement designated by
the Companies according to its terms and conditions. The benefits specified in
this subsection will include all ancillary benefits, such as early retirement
and survivor rights and benefits available at retirement. The amount payable to
the Executive or the Executive’s beneficiaries under this subsection shall equal
the excess of (1) the retirement benefits that would be paid to the Executive or
the Executive’s beneficiaries, under such defined benefit retirement plans of
the Companies in which the Executive participates if (A) the Executive were
fully vested under such plans, (B) the 36-month period (or the period until the
Executive’s Retirement, if less) following the date of the Executive’s
separation from service were added to the Executive’s credited service under
such plans, (C) the terms of such plans were those most favorable to the
Executive in effect at any time during the period commencing prior to the Change
of Control and ending on the date of Notice of Termination (or on the separation
from service date if no Notice of Termination is required), and (D) the
Executive’s highest average annual compensation as defined under such defined
benefit retirement plans and was calculated as if the Executive had been
employed by the Companies for a 36-month period (or the period until the
Executive’s Retirement, if earlier) following the date of the Executive’s
separation from service and had the Executive’s compensation during such period
been equal to the Executive’s compensation used to calculate the Executive’s
benefit under Sections 4(a), and 4(b); over (2) the retirement benefits that are
payable to the Executive or the Executive’s beneficiaries under such defined
benefit retirement plans of the Companies in which the Executive participates.

(e) Outplacement. The Companies shall pay all reasonable fees Executive actually
incurs for appropriate outplacement services up to a maximum equal to 15% of the
Executive’s Annual Base Salary used to calculate the Executive’s benefit under
Section 4(a), plus provide a travel expense account of up to $5,000 to reimburse
job search travel. Such reimbursements shall be limited to those amounts paid
within 24 months of the Executive’s date of separation from service with the
Companies.

(f) Stock Options. Stock Options or other Equity based awards held by the
Executive become exercisable upon a Change of Control according to the terms of
the Companies’ equity compensation plans and any option agreements effecting
outstanding option grants or other equity based awards, as interpreted by State
Auto Financial’s Compensation Committee as such Committee existed immediately
prior to the Change of Control.

In computing and determining Severance Benefits under Sections 4(a), (b), (c),
(d), (e), and (f) above, a decrease in the Executive’s salary, incentive bonus
potential, or insurance benefits shall be disregarded if such decrease occurs
within six months before a Change of Control, is in contemplation of such Change
of Control, and is taken to avoid the effect of this Agreement should such
action be taken after such Change of Control. In such event, the salary,
incentive bonus potential, and/or insurance benefits used to determine Severance
Benefits shall be that in effect immediately before the decrease that is
disregarded pursuant to this Section 4.

 

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The Severance Benefits provided in Sections 4(a), and (b) above shall be paid
not later than 45 business days following the date the Executive’s employment
terminates. Notwithstanding the foregoing, in the event Executive is a
“specified employee” as defined in Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), any payments under this Agreement due to a
separation from service (as defined in Section 409A of the Code) and subject to
Section 409A of the Code shall be delayed until a date that is 6 months after
the date of separation from service (or, if earlier, the date of death of
Executive). Payments to which a “specified employee” would otherwise be entitled
during the first 6 months following the date of separation shall be accumulated
and paid as of the first day of the seventh month following the date of
separation from service.

5. Tax Gross-Up. If any Severance Benefit or other benefit paid or provided
under Section 4, or the acceleration of stock option vesting, or the payment or
distribution of any Employee Benefit or similar benefit is subject to excise tax
pursuant to Section 4999 of the Internal Revenue of 1986, as amended (the
“Code”) (or any similar federal or state excise tax), the Companies shall pay to
the Executive such additional compensation as is necessary (after taking into
account all federal, state and local income taxes payable by the Executive as a
result of the receipt of such additional compensation) to place the Executive in
the same after-tax position he would have been in had no such excise tax (or any
interest or penalties thereon) been paid or incurred with respect to any of such
amounts (the “Tax Gross-Up”). The Companies shall pay such additional
compensation at the time when the Companies withholds such excise tax from any
payments to the Executive. The calculation of the Tax Gross-Up shall be approved
by the Companies’ independent certified public accounting firm engaged by the
Companies immediately prior to the Change in Control and the calculation shall
be provided to the Executive in writing. The Executive shall then be given 15
days, or such longer period as the Executive reasonably requests, to accept or
reject the calculation of the Tax Gross-Up. If the Executive rejects the Tax
Gross-Up calculation and the parties are thereafter unable to agree within an
additional 45 days, the arbitration provisions of Section 13 shall control. The
Companies shall reimburse the Executive for all reasonable legal and accounting
fees incurred with respect to the calculation of the Tax Gross-Up and any
disputes related thereto.

For purposes of determining the amount of the Tax Gross-Up, the Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Tax Gross-Up is to be made and
state and local income taxes at the highest marginal rates of taxation in the
state and locality of the Executive’s residence on the date of separation from
service.

Notwithstanding anything to the contrary in this Section 5, if any Severance
Benefit or other benefit paid or provided under Section 4, or the acceleration
of stock option vesting, or the payment or distribution of any Employee Benefits
or similar benefits would be subject to excise tax pursuant to Section 4999 of
the Code (or any similar federal or state excise tax), but would not be so
subject if the total of such payments would be reduced by 10% or less, then such
payment shall be reduced by the minimum amount necessary so as not to cause
Companies to have paid an Excess Severance Payment as defined in
Section 280G(b)(1) of the Code and so the Executive will not be subject to
Excise Tax pursuant to Section 4999 of the Code. The calculation of any
potential reduction pursuant to this paragraph or any disputes related thereto
shall be resolved as described above with respect to the calculation of the Tax
Gross-Up. In the event that the amount of any Severance payments that would be
payable to or for the benefit of Executive under this Agreement must be modified
or reduced to comply with this provision, they shall be modified or reduced on a
pro-rata basis. In no event shall the total payments be reduced by more than 10%
in order to avoid treatment as an Excess Severance Payment.

 

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6. Withholding of Taxes. The Companies may withhold from any amounts not subject
to Section 409A of the Code and payable under this Agreement all federal, state,
city or other taxes as required by law. The Companies may withhold from any
amounts subject to Section 409A of the Code and payable under this Agreement all
federal employment tax withholding obligations (FICA). In the event Section 409A
of the Code is amended or revised to permit withholding of other federal, state
or city taxes required by law, this provision of the Agreement shall be
interpreted to permit the same.

7. Payments of Employment Taxes and Upon Violation of Code Section 409A. In
accordance with Code Section 409A and the regulations issued thereunder, this
Agreement shall permit the payment of amounts necessary to (a) satisfy the
employment tax withholding obligations that arise under this Agreement prior to
the date that payment may otherwise be made under this Agreement and/or
(b) satisfy the excise tax or underpayment penalties owed under Section 409A of
the Code in the event of a violation of Section 409A of the Code under this
Agreement.

8. Delayed Payments. In the event of a genuine dispute between the Companies or
any Subsidiary and the Executive regarding the amount or timing of benefits
under this Agreement, a delay in the payment of amounts under this Agreement
shall not cause the Executive to violate Section 409A of the Code to the extent
that such delay satisfies the conditions set forth in Section 409A of the Code
and applicable regulations thereunder.

9. Acknowledgement. The Companies hereby acknowledges that it will be difficult
and may be impossible for the Executive to find reasonably comparable
employment, or to measure the amount of damages which the Executive may suffer
as a result of separation from service hereunder. Accordingly, the payment of
the Severance Benefits by the Companies to the Executive in accordance with the
terms of this Agreement is hereby acknowledged by the Companies to be reasonable
and will be liquidated damages, and the Executive will not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor will any profits, income, earnings, or other
benefits from any source whatsoever create any mitigation, offset, reduction, or
any other obligation on the part of the Executive hereunder or otherwise, except
for a reduction in health insurance coverage as provided in Section 4(c)(1). The
Companies shall not be entitled to set off or counterclaim against amounts
payable hereunder with respect to any claim, debt, or obligation of the
Executive.

10. Enforcement Costs; Interest. The Companies is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of the Companies
may then cause or attempt to cause the Companies to refuse to comply with their
obligations under this Agreement, or may cause or attempt to cause the Companies
to institute, or may institute, litigation, arbitration, or other legal action
seeking to have this Agreement declared unenforceable, or may take, or attempt
to take, other action to deny the Executive the benefits intended under this
Agreement. In these circumstances, the purpose of this Agreement could be
frustrated. It is the intent of the Companies that the Executive not be required
to incur the expenses associated with the enforcement of the Executive’s rights
under this Agreement by litigation, arbitration, or other legal action nor be
bound to negotiate any settlement of the Executive’s rights hereunder under
threat of incurring such expenses because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the Executive
under this Agreement. Accordingly, if following a Change in Control it should
appear to the Executive that the Companies has failed to comply with any of
their obligations under this Agreement, including the proper calculation of the
Tax Gross-Up, or in the event that the Companies or any other person takes any
action to declare this Agreement

 

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void or unenforceable, or institute any litigation or other legal action
designed to deny, diminish or to recover from the Executive, the benefits
intended to be provided to the Executive hereunder, the Companies irrevocably
authorizes the Executive from time to time to retain counsel (legal and
accounting) of the Executive’s choice at the expense of the Companies as
provided in this Section 10 to represent the Executive in connection with the
calculation of the Tax Gross-Up, or the initiation or defense of any litigation
or other legal action, whether by or against the Companies or any director,
officer, stockholder, or other person affiliated with the Companies.
Notwithstanding any existing or prior attorney-client relationship between the
Companies and such counsel, the Companies irrevocably consents to the Executive
entering into an attorney-client relationship with such counsel, and in that
connection the Companies and the Executive agree that a confidential
relationship shall exist between the Executive and such counsel. The reasonable
fees and expenses of counsel selected from time to time by the Executive as
provided in this Section 10 shall be paid or reimbursed to the Executive by the
Companies on a regular, periodic basis upon presentation by the Executive of a
statement or statements prepared by such counsel in accordance with their
customary practices; provided, however, that the amount of expenses eligible for
reimbursement during a calendar year may not affect the expenses eligible for
reimbursement in any other calendar year, and provided further, that the
reimbursement of any eligible expenses shall be made on or before the last day
of the calendar year following the calendar year in which such expense was
incurred. In any action involving this Agreement, the Executive shall be
entitled to prejudgment interest on any amounts found to be due him from the
date such amounts would have been payable to the Executive pursuant to this
Agreement at an annual rate of interest equal to the prime commercial rate in
effect at the corporation’s principal bank or their successor from time to time
during the prejudgment period plus 4 percent.

11. Forfeiture Events. The Board may, in its discretion, require that all or any
portion of the Severance Benefits defined under Section 4 above is subject to an
obligation of repayment to the Companies upon: (i) the violation of any
non-competition and confidentiality covenant applicable to the Executive,
including such covenants in Article VI of the Employment Agreement; (ii) a
financial restatement where (1) the amount of Executive’s Severance Benefits
were calculated based upon the achievement of certain financial results that
were subsequently the subject of a financial statement restatement;
(2) Executive engaged in fraudulent misconduct that caused or substantially
contributed to the need for the financial statement restatement; and (3) the
amount of Executive’s Severance Benefits would have been lower than the amount
actually awarded to such Executive had the financial results been properly
reported; or (iii) Executive has engaged in any wrongful conduct during the
employment term which has a material adverse effect on the Companies as
determined by the Board, in good faith. This Section 11 shall not be the
Companies’ exclusive remedy with respect to such matters.

12. Indemnification. From and after the earliest to occur of a Change of Control
or separation from service, the Companies shall (a) for a period of five years
after such occurrence, provide the Executive (including the Executive’s heirs,
executors, and administrators) with coverage under a standard directors’ and
officers’ liability insurance policy at the Companies’ expense, and
(b) indemnify and hold harmless the Executive, to the fullest extent permitted
or authorized by the law of the State of Ohio as it may from time to time be
amended, if the Executive is (whether before or after the Change of Control)
made or threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that the Executive is or was a director,
officer, or employee of the Companies or any Subsidiary, or is or was serving at
the request of the Companies or any Subsidiary, as a director, trustee, officer,
or employee of an insurance company,

 

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corporation, partnership, joint venture, trust, or other enterprise. The
indemnification provided by this Section 12 shall not be deemed exclusive of any
other rights to which the Executive may be entitled under the charter or bylaws
of the Companies or of any Subsidiary, or any agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in the Executive’s
official capacity and as to action in another capacity while holding such
office, and shall continue as to the Executive after the Executive has ceased to
be a director, trustee, officer, or employee and shall inure to the benefit of
the heirs, executors, and administrators of the Executive.

13. Arbitration. The initial method for resolving any dispute arising out of
this Agreement shall be nonbinding arbitration in accordance with this Section.
Except as provided otherwise in this Section, arbitration pursuant to this
Section shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association. A party wishing to obtain arbitration of an issue shall
deliver written notice to the other party, including a description of the issue
to be arbitrated. Within 15 days after either party demands arbitration, the
Companies and the Executive shall each appoint an arbitrator. Within 15
additional days, these two arbitrators shall appoint the third arbitrator by
mutual agreement; if they fail to agree within this 15 day period, then the
third arbitrator shall be selected promptly pursuant to the rules of the
American Arbitration Association for Commercial Arbitration. The arbitration
panel shall hold a hearing in Columbus, Ohio, within 90 days after the
appointment of the third arbitrator. The fees and expenses of the arbitrator,
and any American Arbitration Association fees, shall be paid by the Companies.
Both the Companies and the Executive may be represented by counsel (legal and
accounting) and may present testimony and other evidence at the hearing. Within
90 days after commencement of the hearing, the arbitration panel will issue a
written decision; the majority vote of two of the three arbitrators shall
control. The majority decision of the arbitrators shall not be binding on the
parties, and the parties may pursue other available legal remedies if the
parties are not satisfied with the majority decision of the arbitrator, however,
the Companies are no longer obligated to reimburse Executive’s legal expenses if
the arbitration award is appealed by the Executive, as described in this
sentence. The Executive shall be entitled to seek specific performances of the
Executive’s rights under this Agreement during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

14. Employment Rights. This Agreement sets forth the Severance Benefits payable
to the Executive in the event the Executive’s employment with the Companies is
terminated under certain conditions specified in Section 3. This Agreement is
not an employment contract nor shall it confer upon the Executive any right to
continue in the employ of the Companies or their Subsidiaries and shall not in
any way affect the right of the Companies or their Subsidiaries to dismiss or
otherwise terminate the Executive’s employment at any time with or without
cause.

15. Arrangements Not Exclusive. The specific benefit arrangements referred to in
this Agreement are not intended to exclude the Executive from participation in
or from other benefits available to executive personnel generally or to preclude
the Executive’s right to other compensation or benefits as may be authorized by
the Board at any time. The provisions of this Agreement and any payments
provided for hereunder shall not reduce any amounts otherwise payable, or in any
way diminish the Executive’s existing rights, or rights which would accrue
solely as the result of the passage of time under any compensation plan, benefit
plan, incentive plan, stock option plan, employment agreement, or other
contract, plan, or arrangement except as may be specified in such contract, plan
or arrangement. Notwithstanding anything to the contrary in this Section 15, the
Severance Benefits provided in Section 4 are in lieu of any benefits to which
the Executive would be entitled following the Executive’s separation from
service pursuant to any Employment Agreement with the Companies, if the
separation from service is due to a Change of Control.

 

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16. Termination. This Agreement shall terminate if the employment of the
Executive with the Companies shall terminate prior to a Change of Control;
provided, however, that this Agreement shall not terminate upon Executive’s
separation from service in the event of a pending Change of Control event as
described in Section 3(c) above.

17. Successors; Binding Agreements. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. The Executive’s rights and benefits under this Agreement may not be
assigned, except that if the Executive dies while any amount would still be
payable to the Executive hereunder if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement, to the beneficiaries designated by the Executive to
receive benefits under this Agreement in a writing on file with the Companies at
the time of the Executive’s death or, if there is no such beneficiary, to the
Executive’s estate. The Companies will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Companies (or of any
division or Subsidiary thereof employing the Executive) to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Companies would be required to perform it if no such succession had taken
place. Failure of the Companies to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Companies in the same
amount and on the same terms to which the Executive would be entitled hereunder
if the Executive terminated employment for Good Reason following a Change of
Control.

18. No Vested Interest. Neither the Executive nor the Executive’s beneficiaries
shall have any right, title, or interest in any benefit under this Agreement
prior to the occurrence of the right to the payment of such benefit.

19. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
such addresses as each party may designate from time to time to the other party
in writing in the manner provided herein. Unless designated otherwise, notices
to the Companies should be sent to the Companies at:

State Auto Financial Corporation

518 East Broad Street

Columbus, Ohio 43215

Attention: General Counsel

Until designated otherwise, notices shall be sent to the employee at the address
indicated on the Beneficiary Designation and Notice form attached hereto as
Exhibit A. If the parties by mutual agreement supply each other with telecopier
numbers for the purposes of providing notice by facsimile, such notice shall
also be proper notice under this Agreement. Notice sent by certified or
registered mail shall be effective two days after deposit by delivery to the
U.S. Post Office.

 

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20. Savings Clause. If any payments otherwise payable to the Executive under
this Agreement are prohibited or limited by any statute or regulation in effect
at the time the payments would otherwise be payable (any such limiting statute
or regulation a “Limiting Rule”):

(a) Companies will use their best efforts to obtain the consent of the
appropriate governmental agency to the payment by Companies to the Executive of
the maximum amount that is permitted (up to the amounts that would be due to the
Executive absent the Limiting Rule); and

(b) the Executive will be entitled to elect to have apply, and therefore to
receive benefits directly under, either (i) this Agreement (as limited by the
Limiting Rule) or (ii) any generally applicable Companies severance, separation
pay, and/or salary continuation plan that may be in effect at the time of the
Executive’s separation from service.

Following any such election, the Executive will be entitled to receive benefits
under this Agreement or plan elected only if and to the extent the Agreement or
plan is applicable and subject to their specific terms.

21. Amendment; Waiver. This Agreement may not be amended or modified and no
provision may be waived unless such amendment, modification, or waiver is agreed
to in writing and signed by the Executive and the Companies; provided, however,
that this Agreement shall be amended and/or modified as necessary to comply with
Section 409A of the Code or regulations issued thereunder.

22. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

23. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

24. Governing Law. Except as otherwise provided, this Agreement shall be
governed by the laws of the State of Ohio, without giving effect to any conflict
of law provisions.

25. Venue. The Companies and Executive designate either the Court of Common
Pleas of Franklin County, Ohio or the U.S. District Court in Columbus, Ohio as
the exclusive courts of competent jurisdiction and venue for any actions or
proceedings related to this Agreement and hereby irrevocably consent to such
designation, jurisdiction and venue.

SIGNATURES APPEAR ON NEXT PAGE

 

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IN WITNESS WHEREOF, the parties have signed this Agreement on March 6, 2009 to
be effective on the date and year first above written.

 

State Auto Financial Corporation: By:   /s/ Paul S. Williams   Paul S. Williams,
Chair of Compensation Committee State Automobile Mutual Insurance Company By:  
/s/ Michael J. Fiorile   Michael J. Fiorile, Chair of Nominating and Governance
Committee Executive: /s/Robert P. Restrepo, Jr.   Robert P. Restrepo, Jr.

 

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