Exhibit 10.57

State Auto Insurance Companies
Quality Performance Bonus Plan
2005 Addendum

Effective April 1, 2005

 

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STATE AUTO INSURANCE COMPANIES
QUALITY PERFORMANCE BONUS PLAN
2005 ADDENDUM

Effective April 1, 2005

2005 Performance Standards Addendum:

This 2005 Performance Standards Addendum (the “2005 Addendum”) effective as of
the date set forth above, is attached to and hereby expressly made a part of the
State Auto Insurance Companies Quality Performance Bonus Plan (the “Plan”).
Capitalized terms not otherwise defined herein shall have the meaning given them
in the Plan. Each calendar quarter in which the conditions described below for
payment of QPB are met is referred to hereafter as a Performance Quarter. If the
terms of the Plan are inconsistent with the terms of the 2005 Addendum, the
terms of the Plan shall prevail. This 2005 Addendum shall be applicable until it
is replaced by a subsequently dated addendum or until the Plan is terminated,
whichever first occurs.

As a condition precedent to any QPB award, the Companies’ combined loss and
expense ratio in each respective calendar quarter as calculated on a gross basis
(i.e., before any reinsurance applicable) must be lower than 98%, based on
statutory accounting practices (the “CR Condition”).

Provided the CR Condition is met for the Performance Quarter, a QPB based on
underwriting profit shall be earned by all Eligible Employees, if the Companies’
gross loss ratio (i.e., before any reinsurance applicable) is less than the
percentage achieved by subtracting from 98% State Auto’s direct expense ratio
for the four consecutive calendar quarter period ending as of the last day of
the calendar quarter immediately preceding the commencement of the then current
Performance Quarter (the “Loss Ratio Target”). The total QPB Pool (as defined
below) will be reduced in the aggregate by 10% for any Performance Quarter in
which State Auto does not meet the then current year’s corporate sales goal
established for it by State Auto’s Chief Executive Officer.

Notwithstanding the foregoing, it is understood and agreed that no Eligible
Employee’s QPB award(s) earned during a particular calendar year shall
accumulate to an amount in excess of 35% of such employee’s annual Base
Compensation (the “35% Cap”), as described below.

2005 QPB Payment Formula:

The QPB Pool equals twenty percent (20%) of the underwriting profit derived from
the Companies having achieved a gross loss ratio less than the Loss Ratio Target
in a particular Performance Quarter. Stated as a formula, the QPB Pool = Loss
Ratio Target – Companies’ gross loss ratio for the Performance Quarter x
Companies’ earned premium for the Performance Quarter x 20%.

The formula varies depending on whether the Eligible Employee is a
branch/regional office employee (a “branch/regional office employee”) or a
corporate employee (a “corporate employee”), each as determined by management of
the Companies. For corporate employees, subject to the adjustment described
below, the QPB payment equals 20% of the underwriting profit derived from the
Companies’ having achieved a gross loss ratio less than the Loss Ratio Target.
Stated in a formula, the QPB percentage payout for a corporate employee is:

 

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.20 x (Loss Ratio Target – Companies’ gross loss ratio for the Performance
Quarter) x
Companies’ earned premium in the Performance Quarter
Quarterly Base Compensation of all Eligible Employees of the Companies

Subject to the adjustments described below, the resulting QPB percentage payout
is applied to each corporate employee’s Base Compensation paid in the respective
Performance Quarter.

For branch/regional office employees, the amount of the QPB payment depends on
(i) the amount by which the Companies’ gross loss ratio is less than the Loss
Ratio Target and (ii) the amount by which the gross loss ratio on business
produced by the branch/regional office is less than the Loss Ratio Target.
Thirty percent (30%) of the branch/regional office employee’s QPB payment is
based on the Companies’ gross loss ratio and seventy percent (70%) is based on
each respective branch/regional office’s gross loss ratio. Stated as a formula,
the QPB percentage payout for the branch/regional office employee equals:

.20 x (Loss Ratio Target – Companies’ gross loss ratio for the Performance
Quarter) x
Companies’ earned premium for the Performance Quarter x .30
Quarterly Base Compensation of all Eligible Employees of the Companies

PLUS

.20 x (Loss Ratio Target– branch/regional office gross loss ratio for the
Performance Quarter)
x Companies’ earned premium for the Performance Quarter x .70
Quarterly Base Compensation of all Eligible Employees of the Companies

(note: the Loss Ratio Target for State Auto National is the Companies’ Loss
Ratio Target plus five
(5) percentage points)

The results of these two calculations are added together to determine the QPB
payout percentage for each respective branch/regional office employee. Subject
to the adjustments described below, the resulting percentage is applied to each
branch/regional office employee’s Base Compensation paid in the Performance
Quarter.

In the event the dollars that would be paid out as a result of these
calculations exceed the amount of the QPB Pool, the payout percentages are
reduced pro rata so the total QPB payout does not exceed the amount of the QPB
Pool for a Performance Quarter.

The minimum amount of the QPB payment is 1% of each Eligible Employee’s
quarterly Base Compensation, provided the condition precedent set forth above is
met.

If the Companies’ corporate sales goal for the particular calendar year, as
established by the CEO and published internally, is not met in any particular
Performance Quarter, the total amount of the QPB Pool shall be reduced by 10%.

Each Eligible Employee’s QPB award shall be adjusted in any Performance Quarter
in which such QPB award causes such Eligible Employee’s cumulative QPB awards
earned during a calendar year to exceed the 35% Cap. This adjustment, if
applied, shall be limited to the amount necessary to cause the cumulative QPB
awards earned by such Eligible Employee during such calendar year to not exceed
the 35% Cap. This adjustment, if applied, shall be

 

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applied in the Performance Quarter producing a QPB award which causes such
employee’s cumulative QPB awards earned for that particular calendar year to
exceed the 35% Cap.

     
  /s/ Robert H. Moone
   
Robert H. Moone, CEO, Chairman and President