Exhibit 10.63
Form of Incentive Stock Option Agreement
INCENTIVE STOCK OPTION AGREEMENT
     This Agreement (the “Agreement”) is made as of the [___] day of [___20___],
between State Auto Financial Corporation, an Ohio corporation (the “Company”),
and ___(the “Grantee”). The Company hereby grants to the Grantee an option (the
“Option”) to purchase [___] shares (“Option Shares”), for a purchase price per
share (the “Option Price”) of $[___] per share. The fair market value of each of
the Option Shares on the date of grant is $[___] per share. The Option has been
granted pursuant to the State Auto Financial Corporation Amended and Restated
Equity Incentive Compensation Plan, as amended from time to time (the “Plan”),
attached hereto as Exhibit A, and it shall include and be subject to all
provisions of the Plan, which are incorporated herein by reference, and it shall
be subject to the following provisions of this Agreement:

  1.   Vesting Dates & Term. The Option shall be exercisable as follows:

  (i)   [                                        ] [(___)] Option
Shares may be purchased on or after [                    ].     (ii)  
[                                        ] [(___)] Option
Shares may be purchased on or after [                    ].     (iii)  
[                                        ] [(___)] Option
Shares may be purchased on or after [                    ].

     The Option shall not be exercisable for any Option Shares after [ten years
minus one day from grant date], at which date it shall expire.
     2. Method of Exercise. The Option shall be exercisable by written notice
(in substantially the form attached as Exhibit B), delivered in person or by
certified mail to the Secretary of the Company, which shall:

  (a)   state that the Option is thereby being exercised, the number of Option
Shares with respect to which the Option is being exercised, each person in whose
name any certificates for the Option Shares should be registered and his or her
address and social security number;     (b)   be signed by the person or persons
entitled to exercise the Option and, if the Option is being exercised by anyone
other than the Grantee, be accompanied by proof satisfactory to counsel for the
Company of the right of such person or persons to exercise the Option under the
Plan and all applicable laws and regulations;     (c)   be accompanied by such
representations, warranties or agreements with respect to the investment intent
of such person or persons exercising the Option as the Company may reasonably
request in form and substance satisfactory to counsel for the Company; and    
(d)   be accompanied by tender to the Company of payment in full for the Option
Shares being purchased as set forth in paragraph 3 hereof.

     3. Payment of Price. Upon exercise of the Option, the Company shall deliver
a certificate or certificates for such of the Option Shares being purchased to
the specified person or persons at the specified time upon receipt of the full
purchase price for such Option Shares: (i) by certified or bank cashier’s or
teller’s check, or (ii) by actual or constructive delivery of

 

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eligible Shares with a fair market value at the time of exercise equal to the
total Option Price of the Option Shares being purchased, or (iii) by any other
method of payment or combination thereof authorized by the Plan.
     4.  Transferability. The Option shall not be transferable by the Grantee
other than by will or by the laws of descent and distribution. During the
lifetime of the Grantee, the Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the Grantee for his or her own
account. Upon the death of the Grantee, the Option shall be exercisable (subject
to any other applicable restrictions on exercise) only by the Grantee’s estate
(acting through its fiduciary) or by a person who acquired the right to the
Option by bequest or inheritance.
     5. Termination of Employment. Except as set forth below, if the Grantee’s
employment with the Company and its Parent and Subsidiary Corporations
terminates or is terminated for any reason other than permanent and total
disability (as defined in the Plan) or death, the Grantee may exercise the
Option to the extent then exercisable within ninety days (90) after such
termination (but in no event after expiration of the original term of the
Option). If the Grantee’s employment with the Company and its Parent and
Subsidiary Corporations terminates or is terminated by reason of permanent and
total disability (as defined in the Plan) or death, the ninety-day period shall
instead be a one-year period as if the Grantee continued to fulfill the
conditions of the Option. If the Grantee’s employment with the Company and its
Parent and Subsidiary Corporations terminates or is terminated by reason of
retirement (as defined in the State Auto Insurance Companies Employee Retirement
Plan), permanent and total disability or death, all remaining Option Shares
which are not vested as of the date of such termination shall become fully
vested and exercisable.
     If the Grantee’s employment with the Company is terminated due to illegal
conduct engaged in by the Grantee, all Options granted and not exercised prior
to Grantee’s receiving notice of such employment termination, shall terminate.
     6. Restrictions on Exercise. The Option is subject to all restrictions in
this Agreement and in the Plan. As a condition of any exercise of the Option,
the Company may require the Grantee or the Grantee’s successor to make any
representation and warranty to comply with any applicable law or regulation or
to confirm any factual matters reasonably requested by counsel for the Company.
     7. Definitions. Unless otherwise defined in this Agreement, capitalized
terms will have the same meanings given them in the Plan.

     
 
  STATE AUTO FINANCIAL CORPORATION
 
   
Date of Grant: [                                        ]
 
By                                                                                

ACCEPTANCE OF AGREEMENT
     The Grantee hereby: (a) acknowledges receiving a copy of the Plan as
amended, which is attached to this Agreement as Exhibit A, and represents that
Grantee is familiar with all provisions of the Plan; (b) accepts this Agreement
and the Option granted under this Agreement subject to all provisions of the
Plan and this Agreement; and agrees to accept as binding, conclusive and final
all decisions or interpretations of the Committee.

     
 
 
                                                                                
 
  Grantee
 
   
 
  Date                                                            , [20___]