Document:

Exhibit

Exhibit 10.03
STATE AUTO FINANCIAL CORPORATION

ONE TEAM INCENTIVE PLAN

Effective January 1, 2016

SECTION 1.     INTRODUCTION

1.01    Purposes of the Plan.
The purposes of the State Auto Financial Corporation One Team Incentive Plan are to: (a) further the long-term profitable growth and earnings of the Company by providing incentives and rewards to all employees who achieve the stated performance goals and strategic objectives which contribute significantly to the achievement of that profitable growth; (b) focus employees on the key measures that align and drive superior performance and value over the long term; and (c) assist the Company in recruiting and maintaining highly talented associates by providing competitive total rewards. To accomplish these objectives, the Plan authorizes the grant of Awards, as further described herein.  The Plan is intended, in part, to provide for performance-based compensation which is not subject to the deduction limitation rules under Code Section 162(m) as in effect from time to time.  
1.02    Term of the Plan.
Subject to shareholder approval, the Plan shall be effective as of January 1, 2016, and shall remain in effect until terminated by the Board or the Committee in accordance with 0. Any Award granted before the termination of the Plan shall continue to be governed thereafter by the terms of the Plan, including the terms in effect on the termination date.
SECTION 2.     DEFINITIONS
2.01    Definitions.
Except where otherwise indicated, the following terms shall have the definitions set forth below for purposes of the Plan:
		
	(a)
	“Applicable Law” means the requirements of Code Section 162(m) applicable to performance-based compensation.

		
	(b)
	“Award” means a Performance Bonus Award granted under 0 or a Cash Bonus Award granted under Section 6 as established by the Committee for a Performance Period.

		
	(c)
	“Beneficiary” means the Participant’s surviving spouse, or if the Participant has no surviving spouse, the Participant’s estate.

		
	(d)
	“Board” or “Board of Directors” means the Board of Directors of State Auto Financial Corporation.

		
	(e)
	“Cash Bonus Award” means the dollar amount granted by members of Senior Leadership, or their designees, and payable to a Participant in accordance with Section 6.

		
	(f)
	“Change in Control” means one of the following events shall have taken place after January 1, 2016:

(1)    when any “person” as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Company and any employee benefit plan sponsored or maintained by the Company (including any trustee of such plan acting as trustee) and excluding State Automobile Mutual Insurance Company, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; or
(2)    when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority of the Board; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of, or with the approval of, at least two-thirds of the 

directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Section 2.01(f); or
(3)    the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company through purchase of assets, by merger or otherwise; or
(4)    the occurrence of a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Exchange Act) requiring approval by the shareholders of the Company.
A “Potential Change in Control” means the happening of any one of the following:
(5)    the approval by shareholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 2.01(f) above; or
(6)    the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or any Company employee benefit plan (including any trustee of such plan acting as such trustee) and other than State Automobile Mutual Insurance Company) of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.
		
	(g)
	“Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations and rulings of general applicability issued thereunder, as in effect from time to time.

		
	(h)
	“Committee” generally means the Compensation Committee of the Board or such other individuals designated by the Compensation Committee, in its discretion, to oversee the administration of the Plan, including members of the Company’s senior leadership; provided, however, with regard to the provisions of this Plan applicable to a Covered Employee, “Committee” means a committee of three or more persons appointed by the Board to administer the Plan, each member of whom shall be (1) an “independent director” as defined by the rules of the New York Stock Exchange, (2) a “non-employee director” within the meaning of Rule 16b-3 and (3) an “outside director” within the meaning of Section 162(m) of the Code.

		
	(i)
	“Company” means State Auto Financial Corporation and its related entities, subsidiaries and affiliates, including State Auto Mutual Insurance Company, or any successors thereto.  Notwithstanding the foregoing, whenever the terms of this Plan authorize the Company to take action, such action shall be considered properly authorized if taken by the Board or the Committee as defined herein.

		
	(j)
	“Covered Employee” means an Employee who is, or who is determined by the Committee to be likely to become, a “covered employee” within the meaning of Code Section 162(m).

		
	(k)
	“Disability” shall have the meaning ascribed to such term in the long term disability plan maintained by the Participant’s employer at the time that the determination regarding Disability is made hereunder.  Notwithstanding the foregoing, if a payment under this Plan is subject to Code Section 409A, “Disability” has the meaning ascribed to such term under that Code Section.

		
	(l)
	“Employee” means a regular, active employee of the Company.  Directors who are not employed by the Company shall not be considered Employees under the Plan, nor shall independent contractors, leased employees, consultants or anyone else designated as not eligible to participate in the Plan by the Committee.

		
	(m)
	“Final Bonus” means the actual Performance Bonus Award earned during a Performance Period by a Participant, as determined by the Committee.

		
	(n)
	“Participant” means an Employee who meets the eligibility requirements of Section 4 with respect to one or more Performance Periods.

		
	(o)
	“Performance Bonus Award” means an Award granted by the Committee and payable to a Participant in accordance with Section 5.

		
	(p)
	“Performance Criteria” shall have the meaning set forth in Section 5.

		
	(q)
	“Performance Period” means the twelve month period beginning on each January 1st and ending on the next succeeding December 31st during the term of the Plan, or such other time period established by the Committee from time to time with respect to which the attainment of Performance Criteria will be determined.

		
	(r)
	“Plan” means the State Auto Financial Corporation One Team Incentive Plan, as set forth herein and as amended from time to time.

		
	(s)
	“Retirement” means the attainment of age 55 and the completion of five years of service with the Company; provided, however, that if a Participant’s employment is terminated for cause after such Participant has satisfied the requirements for “retirement” as stated herein, such termination of employment shall not be an eligible “retirement” under the Plan.  For this purpose, a “year of service” and “for cause” shall be determined in the absolute discretion of the Committee, whose decision shall be final and binding on all parties.    

		
	(t)
	“Rule 16b-3” means Rule 16b-3 under the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto.

		
	(u)
	“Target Bonus Award” means the potential Award designated for a Participant in accordance with Section 5 that would be payable to the Participant for a Performance Period if the Performance Criteria for the Performance Period were fully (100%) achieved and no negative discretion was exercised by the Committee in regard to that Award.

		
	(v)
	“Termination of Employment” means, for purposes of this Plan, unless otherwise determined by the Committee, ceasing to be an Employee (as determined in accordance with Code Section 3401(c) and the regulations promulgated thereunder) of the Company.  Unless otherwise determined by the Committee, if a Participant’s employment with the Company terminates but such Participant continues to provide services to the Company in a non-employee director capacity, such change in status shall not be deemed a Termination of Employment within the Performance Period during which it occurs.  A Participant employed by, or performing services for, a related company or a division of the Company shall be deemed to incur a Termination of Employment if, as a result of a disaffiliation, such related company or division ceases to be a related company or division, as the case may be, and the Participant does not immediately thereafter become an Employee of the Company or another related company.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its related companies shall not be considered a Termination of Employment.  In addition, Termination of Employment shall mean a “separation from service” as defined in regulations issued under Code Section 409A whenever necessary to ensure compliance therewith for any payment of an Award conferred under this Plan that is subject to such Code Section, and, for such purposes, shall be determined based upon a reduction in the bona fide level of services performed to a level equal to twenty percent (20%) or less of the average level of services performed by the Employee during the immediately preceding 36-month period.

SECTION 3.     ADMINISTRATION
3.01    The Committee.
The Plan shall be administered by the Committee, or its designee, as defined in Section 2.01(h) and collectively referred to herein as the “Committee”. The Committee shall periodically determine, in its sole discretion, the amounts and other terms and conditions of Awards to be granted to Participants under the Plan. The Committee shall administer the Plan in accordance with applicable legal requirements.  All questions of interpretation and administration with respect to the Plan and Awards made hereunder shall be determined by the Committee in its sole and absolute discretion. All determinations by the Committee shall be final and conclusive upon all persons. The Committee shall act by vote or written consent of a majority of its members and its actions shall be recorded in the minutes of the Committee.  Notwithstanding any other provision of the Plan, the Committee shall not have any discretion or authority to make changes to any Award for a Covered Employee that is intended to qualify as “performance-based compensation” under Code Section 162(m) to the extent that the existence of such discretion or authority would cause such Award not to so qualify.  
3.02    Additional Powers of the Committee.
In addition to any implied powers and duties that are needed to carry out the provisions of the Plan, the Committee shall have the following specific powers and duties:
		
	(a)
	to make, amend, rescind and enforce any rules and regulations it shall deem necessary or proper for the efficient administration of the Plan;

		
	(b)
	to correct administrative errors;

		
	(c)
	to determine the terms and provisions for making or modifying Awards;

		
	(d)
	to make all other determinations necessary or advisable for the administration of the Plan;

		
	(e)
	to designate one or more officers of the Company to execute on behalf of the Company all agreements and other documents approved by the Committee under the Plan;

		
	(f)
	except to the extent prohibited by Applicable Law, to delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan, including the power to approve Awards to Employees who are not Covered Employees; provided, however, that such delegation may be revoked at any time and all determinations and decisions of any delegate as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all persons; and

		
	(g)
	to employ one or more persons to render advice with respect to any of its responsibilities under the Plan.

SECTION 4.     PARTICIPATION
4.01    Participation.
The Committee shall designate, or determine the methodology and criteria, if any, for the designation of the Employees who are eligible to receive an Award under the Plan.  In general, all Employees shall be eligible to participate in the Plan.  An individual who is not an Employee shall not be eligible to participate in the Plan.  Only the Committee may determine the eligibility of Employees who are Covered Employees.
4.02    Partial Performance Period Participation.
An Employee who becomes eligible after the beginning of a Performance Period and prior to the beginning of the fourth calendar quarter, may participate in the Plan for that Performance Period on a ratable basis.  Such situations may include, but are not limited to new hires.  The Committee, in its sole discretion, retains the right to prohibit or allow participation in the initial Performance Period of eligibility for any such Employee.  If an Employee participates for only a portion of a Performance Period for any reason, the Performance Criteria previously established under the Plan for that Performance Period shall apply to any Employee who becomes eligible after the beginning of the Performance Period, but his Award may be prorated.  Such proration may be based on the number of days the Employee performed services during the Performance Period while a Participant in the Plan over the total days in the Performance Period, or some similar method adopted by the Committee that results in a ratable reduction of the Award based on the partial Performance Period applicable to the Employee.  In addition, in the event a Participant changes job levels, sub-groups or business segments during a Performance Period, the Participant’s Award may be adjusted to reflect the amount of time at each job level, sub-group or business segment during the Performance Period, in the Committee’s discretion. Notwithstanding anything in this Section 4.02 or in the Plan to the contrary, the participation in the Plan for a Covered Employee who becomes eligible after the beginning of the Performance Period shall comply with the provisions of Code Section 162(m), as set forth in Section 5.
SECTION 5.     PERFORMANCE BONUS AWARDS
5.01    Establishment of Performance Criteria.
For each Performance Period, the Committee will establish in writing Performance Criteria based on one or more of the following performance measures of the Company (and/or one or more business segments or sub-groups of the Company, as applicable), applied to the Company as a whole or to a business segment or sub-group, either individually, alternatively or in any combination, and measured over the Performance Period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the award criteria or by duly adopted resolution: (i) combined ratio; (ii) premium growth; and (iii) policies in force.  Except as otherwise provided herein, the extent to which the Performance Criteria are satisfied will determine the amount, if any, of the Final Bonus that will be earned by each Participant (subject to Section 5.04).  The Performance Criteria may vary for different Performance Periods and need not be the same for each Participant eligible for a Performance Bonus Award for a Performance Period.  If the identified Performance Criteria are not met at the minimum level established by the Committee, no Performance Bonus Awards will be paid for the applicable Performance Period.  For purposes of this Plan, “policies in force” means, as of the applicable measurement date, the active policies underwritten by the Company’s Personal and Business (including workers’ compensation) Insurance Segments.

5.02    Adjustment of Performance Criteria.  
Once established, the Performance Criteria shall not be changed during the Performance Period.  Subject to the requirements of Code Section 162(m) with respect to Covered Employees, at the time a Performance Bonus Award is made and Performance Criteria are established, the Committee is authorized to determine the manner in which the Performance Criteria will be calculated or measured to take into account certain factors over which Participants have no or limited control, including, but not limited to, cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles or extraordinary charges to income.
5.03    Issuance of Awards.
For each Performance Period, the Committee may issue to Participants in the Plan, as the Committee shall determine in its sole discretion, a Target Bonus Award which is contingent on the achievement of established Performance Criteria during the Performance Period or, with respect to Employees who are not Covered Employees, the occurrence of another specified event as determined by the Committee in accordance with the terms of the Plan.  In determining the nature and amount of the Target Bonus Award, the Committee shall consider, among other factors, responsibility level, and performance.  Awards will be earned based upon the performance of the Company or one or more of its business segments and/or sub-groups and the attainment of the established Performance Criteria during the Performance Period.  In no event shall the maximum Award that may be paid to any single Participant for any single Performance Period exceed $3,000,000.00, such maximum Award amount to be pro-rated if the Performance Period is less than a full fiscal year of the Company.  The total amount of Performance Bonus Awards for the Performance Period will be calculated and allocated from a pool of incentive dollars established by the Company on an annual basis under an objective formula.  For each Performance Period, a specified share of the pool shall be determined as the Performance Bonus Award for each Participant, provided that the total shares shall not exceed 100% of the available pool.  In addition, should the Committee exercise its discretion to reduce a Covered Employee’s Performance Bonus Award, no reduction in a Covered Employee’s Performance Bonus Award shall result in an increase in the share of another Covered Employee’s Performance Bonus Award.
Performance Criteria and Target Bonus Awards shall be established prior to the beginning of each Performance Period or as soon as practicable thereafter.  If a Participant commences participation after the beginning of a Performance Period, Performance Criteria in effect for the Participant’s position shall apply for the remaining balance of the Performance Period, unless otherwise determined by the Committee within 90 days of the date the Employee becomes a Participant.  In all cases where the Participant is a Covered Employee, the Performance Criteria and Target Bonus Award shall be established in no event later than 90 days following the first day of the Performance Period or after twenty-five percent (25%) of the Performance Period has elapsed, if earlier, and the outcome relative to the attainment of the Performance Criteria shall not be substantially certain at the time the Performance Criteria and Target Bonus Award are established.  This Section 5.03 is intended to ensure compliance with the exception from Code Section 162(m) for qualified “performance-based compensation,” and shall be construed, applied and administered accordingly with respect to any Participant who is a Covered Employee.
5.04    Final Bonus Determinations.  
At the end of each Performance Period, the Committee shall certify in writing the extent to which the Performance Criteria were met during the Performance Period for any Performance Bonus Awards for Covered Employees.  If the Performance Criteria for the Performance Period are met, Covered Employees shall be entitled to the payment of the Performance Bonus Awards, subject to the Committee’s exercise of negative discretion to reduce any Final Bonus payable to a Covered Employee based on business objectives established for that Covered Employee or other factors as determined by the Committee in its sole discretion.  With respect to Participants who are not Covered Employees, the Committee will determine the Final Bonus for a Performance Period based on the Performance Criteria and other business and/or individual objectives.  The Committee may adjust (up or down) any Final Bonus for Participants who are not Covered Employees on the basis of such further considerations as the Committee shall determine in its sole discretion.  Subject to the maximum dollar amount for an Award provided in Section 5.03, no Final Bonus shall be greater than 200% of a Participant’s Target Bonus Award.  Further, should the Committee desire to provide any additional bonus amount or payment to a Covered Employee above the Performance Bonus Award issued to the Covered Employee for the Performance Period, such payment shall be a separate bonus payment and shall not be a Performance Bonus Award, meaning it shall not be subject to or covered by Section 162(m) of the Code as performance-based compensation. 
5.05    Change of Control or Potential Change of Control.
If a Change of Control or Potential Change of Control, as defined in Section 2.01(f), occurs prior to the end of a specified Performance Period, the Committee shall determine the Final Bonus in accordance with Section 5.04; provided, however, that such Final Bonus shall be determined based on the achievement of the Performance Criteria up to the date of the Change of Control 

or Potential Change of Control and then prorated based upon the length of time that the Participant was employed by the Company during the applicable Performance Period.  The Final Bonus, thus determined, shall be paid per the terms of the Plan.
5.06    Termination of Employment.  
		
	(a)
	Termination of Employment Due to Retirement, Death or Disability.  In the event of a Participant's Termination of Employment by reason of Retirement, death or Disability during the applicable Performance Period, the Final Bonus determined in accordance with Section 5.04 herein shall be reduced to reflect participation prior to termination only and as further described below.  

(1)    Death or Disability. If the Participant’s employment is terminated due to death or Disability, the Final Bonus, if any, shall be equal to 100% of the Participant’s Target Bonus Award, prorated by multiplying the Final Bonus by a fraction, the numerator of which is the number of days of employment in the Performance Period through the date of employment termination, and the denominator of which is the number of days in the Performance Period.  In the case of a Participant's Disability, the employment termination shall be deemed to have occurred as of the date that the Committee determines was the date on which the definition of Disability was satisfied.  Notwithstanding the foregoing, if the Participant is a Covered Employee, the Final Bonus, if any, shall be based upon the achievement of the Performance Criteria during the applicable portion of the Performance Period and then prorated as described above.  
(2)    Retirement.  If the Participant’s employment is terminated due to Retirement, the Final Bonus, if any, shall be based upon the achievement of the Performance Criteria during the applicable Performance Period and then prorated based upon the length of time that the Participant was employed by the Company during the Performance Period. 
The Final Bonus, thus determined, shall be paid as soon as possible and reasonable following the Participant’s death, and if paid due to Disability or Retirement, the Final Bonus shall be paid as soon as practicable and reasonable following the end of the Performance Period in which the Disability or Retirement occurs, and shall be made at the same time payments are made to Participants who did not incur a Disability or retire during the applicable Performance Period, unless otherwise elected by the Participant as provided in any deferred compensation plan sponsored by the Company and applicable to the Participant.  
		
	(b)
	Termination of Employment for Other Reasons.  In the event of a Participant's Termination of Employment before the fourth quarter of the Performance Period for a reason other than due to Retirement, death, Disability or involuntary termination by the Company other than for “Cause”, all of the Participant’s rights to any Final Bonus for that Performance Period shall be forfeited unless otherwise determined by the Committee in its sole discretion.  Except as provided in Section 5.06(a), only Participants who are, as of the date the Final Bonus, if any, is paid, either current, active Employees or current Employees who are on a leave of absence authorized by the Company shall be entitled to any Final Bonus earned for the Performance Period, unless otherwise determined by the Committee in its sole discretion.  Payment of the Final Bonus shall be made at the same time payments are made to Participants who did not have a Termination of Employment during the applicable Performance Period, unless otherwise elected by the Participant as provided in any deferred compensation plan sponsored by the Company and applicable to the Participant.  For purposes of this Section whether an involuntary termination is for “Cause” shall be determined in the absolute discretion of the Committee, whose decision shall be final and binding on all parties.

		
	(c)
	Other Forfeiture Events.  The Committee may, in its discretion, require that all or any portion of a Final Bonus be subject to an obligation of repayment to the Company upon the violation of a non-competition and confidentiality covenant applicable to the Participant.  The Committee may, in its discretion, also require repayment to the Company of all or any portion of a Final Bonus if the amount of the Final Bonus was calculated based upon the achievement of certain financial results that were subsequently the subject of a financial statement restatement or amendment to a previously filed financial statement and the amount of the Final Bonus would have been lower than the amount actually paid to the Participant had the financial results been properly reported, and the Committee shall require repayment to the Company of any Final Bonus to the extent such repayment is required by law.  Further, the Committee may, in its discretion, require that all or any portion of a Final Bonus paid to a Participant for the current or immediately preceding Performance Period be forfeited and returned to the Company if the Participant directly or indirectly solicits or causes to be solicited, or in any other way is responsible for, an offer of employment to be made to any Employee of the Company for twelve months after such Participant’s Termination of Employment from the Company, without the prior written consent of the Company.  This Section 5.06(c) shall not be the Company’s exclusive remedy with respect to such matters.  This Section 5.06(c) shall not apply after a Change in Control or Potential Change in Control except if required by law.  Notwithstanding the foregoing, if the Company adopts any policy requiring the repayment of bonus amounts due to financial restatements or other identified conduct (collectively, a “Clawback Policy”), the provisions of such Clawback Policy shall also apply 

to the Plan and in the event of any inconsistency between the Plan and the Clawback Policy, the terms of the Clawback Policy, as applicable, shall govern.
5.07    Payment of Performance Bonus Awards.
Each Participant’s Final Bonus, as determined by the Committee, shall be paid in cash, in one lump sum, subject to applicable tax and other authorized withholdings, on the last business day occurring on or before the 15th day of the third month after the end of each Performance Period.  If payment is delayed due to an unforeseeable event or other administrative delay, payment shall in no event be made later than the December 31st of the taxable year following the year in which the Final Bonus was earned.  Other withholdings may include, but not be limited to, amounts previously elected to be deferred to a tax-qualified or non-qualified retirement or deferred compensation plan.  In addition, the Committee may provide for deferred payment of any Final Bonus to a specified date or to a date not less than six months after Termination of Employment, in compliance with the requirements of Code Section 409A, as applicable.  
SECTION 6.     CASH BONUS AWARDS

6.01    Additional Cash Bonus Awards.
Senior Leadership (i.e., business segment leaders or their designees, a “Leader”) may also issue and pay “spot” Cash Bonus Awards at any other time as such Leader, in his discretion, determines to be appropriate in order to reward an Employee (who is not a Covered Employee) for exemplary performance results, as determined by the Leader in his sole discretion.  Any such Cash Bonus Awards are not intended to qualify as performance-based compensation within the meaning of Code Section 162(m).
6.02    Payment of Cash Bonus Awards.
The Leader may, but shall not be required to, issue Cash Bonus Awards to one or more Participants, including, but not limited to, a Participant to whom a Performance Bonus Award has been designated pursuant to Section 5 above (other than a Covered Employee).  A Cash Bonus Award as determined by the Leader shall be paid in cash, in one lump sum, subject to applicable tax and other authorized withholdings, no later than the last business day occurring on or before the 15th day of the third month after the end of the Performance Period for which the Cash Bonus Award was made.  
SECTION 7.     PAYMENT OF AWARDS

7.01    Awards Solely from General Assets.
The Awards under the Plan shall be paid solely from the general assets of the Company. Nothing herein shall be construed to require the Company or the Board to maintain any fund or to segregate any amount for the benefit of any Participant, and no Participant or other party claiming an interest in amounts earned under the Plan shall have any right against, right to, or security or other interest in, any fund, account, or asset of the Company from which the payment pursuant to the Plan may be made. The Plan is intended to constitute an unfunded plan for incentive compensation.  To the extent that any party acquires a right to receive a payment under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.  
7.02    Plan Expenses.
All reasonable expenses of administering the Plan shall be paid by the Company.
SECTION 8.     AMENDMENT AND TERMINATION

8.01    Amendment of Plan.
Except as otherwise provided in Section 8.02, the Committee, without notice, at any time and from time to time, may modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely; provided, however, that no such modification, amendment, suspension, or termination may, without the consent of a Participant, materially reduce the right of a Participant to a payment or distribution hereunder to which he has already become entitled, as determined under Sections 5 and 6 hereof.  Shareholder approval of any amendment will be required only as required by Applicable Law.  No new Award may be granted during any period of suspension of the Plan or after termination of the Plan.

8.02    Change in Control.
Notwithstanding Section 8.01, above, on or after the occurrence of a Change in Control, no direct or indirect alteration, amendment, suspension, termination or discontinuance of the Plan, no establishment or modification of rules, regulations or procedures under the Plan, no interpretation of the Plan or determination under the Plan, and no exercise of authority or discretion vested in the Committee under any provision of the Plan (collectively or individually, a “Change”) shall be made if the Change: (a) is not required by Applicable Law or necessary to meet the requirements of Rule 16b-3, Code Section 162(m) or Code Section 409A;, and (b) would have the effect of:
		
	(a)
	eliminating, reducing or otherwise adversely affecting a Participant’s, former Participant’s or beneficiary’s rights with respect to any Award granted prior to the Change in Control;

		
	(b)
	altering the meaning or operation of the definition of Change in Control in Section 2.01(f) (and of the definition of all the defined terms that appear in the definition of Change in Control), the provisions of this 0, or any rule, regulation, procedure, provision or determination made or adopted prior to the Change in Control pursuant to this 0 or any provision in any rule, regulation, procedure, provision or determination made or adopted pursuant to the Plan that becomes effective upon the occurrence of a Change in Control (collectively, the “Change in Control Provisions”); or

		
	(c)
	undermining or frustrating the intent of the Change in Control Provisions to secure for Participants, former Participants and beneficiaries the maximum rights and benefits that can be provided under the Plan.

Upon and after the occurrence of a Change in Control: (1) all rights of all Participants, former Participants and beneficiaries under the Plan (including without limitation any rules, regulations or procedures promulgated under the Plan) shall be contractual rights enforceable against the Company and any successor to all or substantially all of the Company’s business or assets; and (2) any Award (i) shall be deemed to have been earned at the annual target amount, regardless of whether the specified Performance Criteria have been satisfied and (ii) shall be payable immediately following the Change in Control. These Change in Control Provisions may be altered, amended or suspended at any time before the date on which a Change in Control occurs; provided, however, that any alteration, amendment or suspension of the Change in Control Provisions that is made before the date on which a Change in Control occurs, and at the request of a person who effectuates the Change in Control, shall be treated as though it occurred after the Change in Control and shall be subject to the restrictions and limitations imposed by the preceding provisions of the immediately preceding paragraph. 
8.03    Other Plans.
Nothing herein shall preclude the Committee from authorizing or approving other plans or forms of incentive or bonus compensation. The Committee shall have the right to determine the extent to which any Participant shall participate in this Plan in addition to any other plan or plans of the Company in which he shall participate.
SECTION 9.     MISCELLANEOUS

9.01    No Right to Employment.
The receipt of an Award under the Plan shall not give any Employee any right to continued employment by the Company, nor shall it limit or interfere in any way with the right of the Company to terminate the employment of any Participant at any time or to increase or decrease the compensation of any Participant. There is no obligation for uniformity of treatment of Participants under this Plan or otherwise. No person shall have any claim or right to be granted an Award under this Plan and the receipt of an Award shall not give an Employee the right to receive any subsequent Award.
9.02    Nontransferability.  
No right or interest of any Participant in the Plan shall be assignable or transferable, other than by will or pursuant to the laws of descent and distribution, or subject to any lien, directly, by operation of law or otherwise, including, but not limited to, by execution, levy, garnishment, attachment, pledge, or bankruptcy, and any attempt to take any such action shall be null and void.
9.03    Recipient of Payment.
		
	(a)
	Except as otherwise provided in paragraph (b), below, any Award under the Plan shall be paid to the Participant, or to the Beneficiary of a deceased Participant.

		
	(b)
	If the Committee deems any person entitled to receive any amount under the provisions of the Plan to be incapable of receiving or disbursing the same by reason of minority, illness or infirmity, mental incompetence, or incapacity of any kind, the Committee may, in its sole discretion: (1) apply such amount directly for the comfort, support and maintenance of such person; (2) reimburse any person for any such support theretofore supplied to the person entitled to receive any such payment; (3) pay such amount to any person selected by the Committee to disburse it for such comfort, support and maintenance, including without limitation, any relative who has undertaken, wholly or partially, the expense of such person’s comfort, care and maintenance, or any institution in whose care or custody the person entitled to the amount may be; or (4) with respect to any amount due to a minor, deposit such amount to his credit in any savings or commercial bank of the Committee’s choice, direct that such distribution be paid to the legal guardian, or if none, to a parent of such person or a responsible adult with whom the minor maintains his residence, or to the custodian for such person under the Uniform Gift to Minors Act or Gift to Minors Act, if such payment is permitted by the laws of the state in which the minor resides.  

		
	(c)
	If a payment is made under the Plan to a third party pursuant to Section 9.04(b), above, the Plan, the Board, the Committee and the Company shall be relieved, to the fullest extent permitted by law, of any obligation to make a duplicate payment to or on behalf of the Participant or Beneficiary.

9.04    Taxes.
The Committee may make any appropriate arrangements to deduct from amounts otherwise payable to a Participant any taxes that the Committee believes to be required to be withheld by any government or governmental agency in respect of an Award. The Participant and/or his Beneficiary shall bear all taxes on amounts paid under the Plan to the extent that no taxes are withheld, irrespective of whether withholding is required.
9.05    Headings.
Any headings used in this document are for convenience of reference only and may not be given any weight in interpreting any provision of the Plan.
9.06    Severability.
If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted herein.  In addition, if any provision of the Plan inadvertently causes an Award granted under the Plan to be “nonqualified deferred compensation” within the meaning of Code Section 409A, then such Award shall be construed and enforced as if the provision had never been inserted therein.
9.07    Governing Law.
The Plan and all agreements hereunder shall be construed, administered, and regulated in accordance with the laws of the State of Ohio (excluding the choice of law provisions thereof), except as to matters pre-empted or governed by federal law.
9.08    Gender and Number. 
Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular, and the singular shall include the plural.
9.09    Successors.
All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.Exhibit

Exhibit 10.04

EXECUTIVE CHANGE OF CONTROL AGREEMENT
This Executive Change of Control Agreement (this “Agreement”) is made as of December 1, 2015 (the “Effective Date”), by and among State Auto Financial Corporation, an Ohio corporation (“State Auto Financial”), State Auto Property and Casualty Insurance Company, an Iowa-domiciled insurance company (“State Auto P&C”), State Automobile Mutual Insurance Company, an Ohio-domiciled mutual insurance company (“State Auto Mutual”), and Kim B. Garland (“Executive”).  State Auto Financial, State Auto P&C, State Auto Mutual and each of their respective insurer subsidiaries and affiliates, present and future, are hereinafter collectively referred to as “State Auto.”
Background Information
		
	A.
	State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto.  State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual.  State Auto Mutual is the ultimate controlling person in the State Auto holding company system.

		
	B.
	State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively.  As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.

Statement of Agreement
The parties hereby acknowledge the accuracy of the foregoing Background Information and hereby agree as follows: 
Article I        Definitions.
As used in this Agreement, the following defined terms shall have the meanings set forth below:
1.1    ADEA means the Age Discrimination in Employment Act of 1967.
		
	1.2
	Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.

		
	1.3
	Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three calendar years immediately preceding the calendar year in which the Change of Control occurs.

		
	1.4
	Cause means any of the following:

		
	(a)
	the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or

		
	(b)
	the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or

		
	(c)
	the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or 

		
	(d)
	the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or

		
	(e)
	the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.  

For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Boards or upon the advice of counsel for State Auto, shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of State Auto.
		
	1.5
	Change of Control means the occurrence of any of the following:

		
	(a)
	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 30% 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 (iii) any acquisition by State Auto Mutual; or

		
	(b)
	A majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or

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

		
	(d)
	Any of the following occurs:

		
	(i)
	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;

		
	(ii)
	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;

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

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

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

		
	(i)  
	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; or

		
	(ii) 
	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.

Notwithstanding the foregoing, for purposes of this Change of Control definition, the percentage of securities ownership listed under subsection (a) above (i.e., 30%) 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 2009 Equity Incentive Compensation Plan, as amended from time to time.

		
	1.6
	Code means the Internal Revenue Code of 1986, as amended.

		
	1.7
	Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto.  For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.

		
	1.8
	Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either: 

		
	(a)
	first elected or appointed as a director on or prior to the Effective Date; or 

		
	(b)
	subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating Committee of State Auto Financial or State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.

		
	1.9
	Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.

		
	1.10
	Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.

		
	1.11
	Employee Benefits means the 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 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 State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.

		
	1.12
	Good Reason means the occurrence of any one or more of the following:

		
	(a)
	The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;

		
	(b)
	A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;

		
	(c)
	After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of 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);

		
	(d)
	The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement; 

		
	(e)
	The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of 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 a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
		
	(f)
	Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material 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 material reduction or material adverse change.

The existence of Good Reason shall not be affected by Executive’s subsequent incapacity due to physical or mental illness.  Executive’s continued employment shall not constitute a waiver of Executive’s rights with respect to any circumstance constituting Good Reason under this Agreement.  Executive shall provide State Auto 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.  State Auto shall have a period of 30 days in which it may remedy the condition and prevent Executive’s termination for Good Reason.
1.13    LBP means the State Auto Financial Corporation Leadership Bonus Plan.
		
	1.14
	QPB means the State Auto Financial Corporation Quality Performance Bonus Plan.

		
	1.15
	Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.

		
	1.16
	Short Term Incentive Plans means collectively, the LBP, the QPB and any other short term incentive compensation plan of State Auto.

		
	1.17
	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.

		
	1.18
	Term means the earlier of the period commencing on the Effective Date of this Agreement and ending on October 27, 2017, both dates inclusive, or the end of the month in which Executive attains age 65; provided, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for the lesser of 36 months beyond the end of the month in which any such Change of Control occurs, or the number of months beyond the end of the month in which any such Change of Control occurs until Executive attains age 65.  Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.  

Article II    Change of Control. 
2.1    Severance Benefits.  In the event that State Auto shall undergo a Change of Control, and if Executive then becomes entitled to receive Severance Benefits, State Auto or its respective successor, shall pay or provide to Executive the following Severance Benefits, adjusted by the applicable provisions of Section 9.1:
		
	(a)
	Annual Base Salary.  In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two, unless at the time of such employment termination Executive is within two years of age 65, in which case the benefit due under this subsection (a) shall not exceed Executive’s Annual Base Salary multiplied by a factor equal to the number of months remaining until 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 Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two, unless at the time of such employment termination Executive is within two years of age 65, in which case the benefit due under this subsection (b) shall not exceed Executive’s Average Annual Award multiplied by a factor equal to the number of months remaining until Executive attains age 65 presented as a whole integer and a fraction of a partial year (e.g., 15 months equals 1.25).  In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive.  Such prorated annual incentive amount, 

if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
		
	(c)
	Stock Options and Other Equity Awards.  Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.

		
	(d)
	Outplacement.  State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to 15% of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel.  Such expenses and reimbursements shall be limited to those expenses incurred within the two calendar years following the calendar year of Executive’s separation from service or prior to Executive’s attainment of age 65, if Executive is within two years of age 65 at the time of the Change in Control.  Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.

		
	(e)
	Health Insurance Reimbursement.  State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24, unless at the time of the Change in Control Executive is within two years of age 65, in which case the health insurance reimbursement provided in this Section 2.1(e) shall be multiplied by the number of months remaining until Executive attains age 65. 

In computing and determining Severance Benefits under subsections (a) and (b), above, a decrease in Executive’s salary or incentive bonus potential 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 and incentive bonus potential used to determine Severance Benefits shall be that in effect immediately before the decrease that is disregarded pursuant to this Section 2.1.
The Severance Benefits provided in subsections (a), (b) and (e) above shall be paid on the 60th business day following the date Executive’s employment terminates, provided that Executive has executed a general release and waiver of any claims against State Auto or its successors and the period of time during which Executive may revoke the general release and waiver has expired on or before the 60th day following Executive’s separation from service.  Notwithstanding the foregoing, if Executive is a “specified employee” as defined in Code Section 409A, such payment shall be subject to and paid according to the provisions of Section 2.4, as described below.
Executive acknowledges and agrees that the Severance Benefits provided in this Section 2.1 shall be the sole severance benefits payable to Executive in the event of any “change of control” (under any definition) of State Auto, and Executive hereby waives and relinquishes any and all rights or severance benefits under any other “change of control” provision applicable to Executive with respect to his employment by State Auto.  
2.2    Eligibility for Severance Benefits.  State Auto, or its respective successor, shall pay or provide to Executive the Severance Benefits as defined above, in the event that Executive becomes eligible for such Severance Benefits because, during the Term of this Agreement:
		
	(a)
	the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive, or Executive’s mandatory retirement at age 65 (or at the end of the calendar year in which Executive attains age 65), where permitted by law and the regulations under Section 1625.12 of the ADEA, within 24 months after a Change of Control; or

		
	(b)
	Executive terminates employment for Good Reason within 24 months after a Change of Control; or 

		
	(c) 
	the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive 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 termination.

Executive’s termination of employment for all purposes under this Agreement shall be determined to have occurred in accordance with the “separation from service” requirements of Code Section 409A and applicable Treasury Regulations and guidance issued thereunder.

2.3    Liquidated Damages; Mitigation.  State Auto hereby acknowledges that it will be difficult and may be impossible for Executive to find reasonably comparable employment, or to measure the amount of damages which Executive may suffer as a result of termination of employment hereunder.  Accordingly, the payment of the Severance Benefits by State Auto to Executive in accordance with the terms of this Agreement is hereby acknowledged by State Auto to be reasonable and will be liquidated damages, and 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 Executive hereunder or otherwise.  State Auto shall not be entitled to set off or counterclaim against amounts payable hereunder with respect to any claim, debt or obligation of Executive.
2.4    Specified Employee Delay.  In the event Executive is a “specified employee” as defined in Code Section 409A, any payments under this Agreement due to a separation from service and subject to Code Section 409A shall be delayed until a date that is six 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 six months following the date of separation shall be accumulated and paid as of the first date of the seventh month following the date of separation from service.  Interest shall be paid on any such delayed payment at the applicable federal rate under Code Section 7872(f)(2)(A).
Article III     Executive's Rights Under Certain Plans.
Any references to specific employee benefits arrangements in this Agreement are not intended to exclude Executive from participation in other benefits available to executive personnel generally or to preclude Executive’s right to other compensation or benefits as may be authorized by the Boards at any time; provided that such other compensation or benefits are not severance benefits payable upon a Change in Control.  The provisions of this Agreement and any payments provided for hereunder shall not reduce any amounts otherwise payable, or in any way diminish 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 contained herein, State Auto agrees that the severance benefits provided to Executive herein are in addition to any rights and privileges to which Executive may be entitled as an employee of State Auto under any retirement, pension, insurance, hospitalization or other plan which may now or hereafter be in effect, it being understood that, except to the extent currently provided in such plans, Executive shall have the same rights and privileges to participate in such plans or benefits as any other employee of State Auto.   
Article IV    Confidential Information; Forfeiture Events. 
4.1    Confidential Information.  Executive agrees to receive Confidential Information of State Auto in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means and other than as a result of disclosure by Executive.  Executive further agrees that, upon termination of his employment with State Auto, all documents, records, notebooks and similar repositories (including electronic formats) containing Confidential Information, including copies thereof, then in Executive's possession, whether prepared by him or others, will be left with and/or returned to State Auto.  Executive further agrees that the obligation to maintain confidentiality created by this Article IV shall continue in effect for the duration of this Agreement and following the termination of Executive’s employment with State Auto for any reason.
4.2    Forfeiture Events; Clawback Rights.  
		
	(a)
	The Board may, in its discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if: 

		
	(i)
	Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;

		
	(ii)
	It is later discovered that Executive engaged in conduct detrimental to State Auto during the Employment Term which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its discretion, acting in good faith; or

		
	(iii)
	(A)    The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;

(B)    Executive engaged in conduct detrimental to State Auto that caused or substantially contributed to the need for the financial statement restatement by State Auto; and
(C)    The amount of Executive’s Severance Benefits would have been lower than the amount actually awarded to Executive had the financial results been properly reported.
Notwithstanding the foregoing, if the Boards determine that Executive engaged in fraudulent conduct, then the Boards will seek repayment of the Severance Benefits.  This provision shall not be the exclusive remedy of State Auto with respect to such matters.
		
	(b)
	The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference.  In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.

Article V    Successors; Binding Agreement. 
5.1    As to State Auto.  This Agreement shall inure to the benefit of and be binding upon State Auto, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire voting control of State Auto Financial or all or substantially all of its assets and business, or which may be a party to any consolidation, merger or other transaction that results in a Change of Control of State Auto Financial or State Auto Mutual.   State Auto 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 State Auto (or of any division or Subsidiary thereof employing Executive) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that State Auto would be required to perform it if no such succession had taken place.  Failure of State Auto to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from State Auto in the same amount and on the same terms to which Executive would be entitled hereunder if Executive terminated employment for Good Reason following a Change of Control.
5.2    As to Executive.  This Agreement shall also inure to the benefit of and be binding on Executive, his heirs, successors and legal representatives.  This Agreement shall be enforceable by Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  Executive’s rights and benefits under this Agreement may not be assigned, except that if Executive dies while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid to the beneficiary indicated on the Beneficiary Designation attached as Exhibit A or, if there is no such beneficiary, to Executive’s estate.  Such payments, if any, shall be made in the same form and at the same time, as such payment would have been made to Executive.
Article VI    COBRA Continuation Coverage.
Notwithstanding any provision of this Agreement to the contrary, in the event of any “qualifying event,” as defined in Code Section 4980B(f), Executive and his qualifying beneficiaries shall be entitled to continuation of health care coverage, as provided under Code Section 4980B(f).  The foregoing is intended as a statement of Executive's continuation coverage rights and is in no way intended to limit any greater rights of Executive or his qualified beneficiaries. 
Article VII    Indemnification; Enforcement Costs; Interest.
7.1    Indemnification.  State Auto, as provided for in its Amended and Restated Articles of Incorporation and its Amended and Restated Bylaws, shall indemnify Executive to the full extent of the general laws of the State of Ohio, now or hereafter in force, including the advance of expenses under procedures provided by such laws.  From the date of a Change of Control, State Auto shall (a) for a period of five years after such Change of Control, provide Executive (including Executive’s heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at State Auto's expense, and (b) indemnify and hold harmless 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 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 Executive is or was a director, officer or employee of State Auto or any Subsidiary, or is or was serving at the request of State Auto or any Subsidiary, as a director, trustee, officer or employee of an insurance company, corporation, partnership, joint venture, trust, or other enterprise.  The indemnification provided by this Section 7.1 shall not be deemed exclusive of any other rights to which Executive may be entitled under the charter or bylaws of State Auto or of any Subsidiary, or any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in Executive’s official capacity and as 

to action in another capacity while holding such office, and shall continue as to Executive after Executive has ceased to be a director, trustee, officer or employee and shall inure to the benefit of the heirs, executors and administrators of Executive.
7.2    Enforcement Cost.  State Auto is aware that, upon the occurrence of a Change of Control, the Board or a shareholder or policyholder of State Auto, as the case may be, may then cause or attempt to cause State Auto to refuse to comply with their obligations under this Agreement, or may cause or attempt to cause State Auto 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 Executive the benefits intended under this Agreement.  In these circumstances, the purpose of this Agreement could be frustrated.  It is the intent of State Auto that Executive not be required to incur the expenses associated with the enforcement of Executive’s rights under this Agreement by litigation, arbitration or other legal action nor be bound to negotiate any settlement of 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 Executive under this Agreement.  Accordingly, if following a Change of Control it should appear to Executive that State Auto has failed to comply with any of their obligations under this Agreement, or in the event that State Auto or any other person takes any action to declare this Agreement void or unenforceable, or institute any litigation or other legal action designed to deny, diminish or to recover from Executive, the benefits intended to be provided to Executive hereunder, State Auto irrevocably authorizes Executive from time to time to retain counsel (legal and accounting) of Executive’s choice at the expense of State Auto as provided in this Section 7.2 to represent Executive in connection with the calculation of the Code Section 280G reduction, or the initiation or defense of any litigation or other legal action, whether by or against State Auto or any director, officer, stockholder or other person affiliated with State Auto.  Notwithstanding any existing or prior attorney-client relationship between State Auto and such counsel, State Auto irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection State Auto and Executive agree that a confidential relationship shall exist between Executive and such counsel.  The reasonable fees and expenses of counsel selected from time to time by Executive as provided in this Section 7.2 shall be paid or reimbursed to Executive by State Auto on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with their customary practices.  
7.3    Interest.  In any action involving this Agreement, 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 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 four percent.
Article VIII    Cooperation with Regard to Litigation.
Executive agrees to cooperate with State Auto for a period of two years following Executive’s termination of employment by making himself reasonably available to testify on behalf of State Auto in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and to assist State Auto in any such action, suit or proceeding by providing information and meeting and consulting with the Boards or their counsel or counsel to State Auto as reasonably requested by the Boards or such counsel.  Executive shall be reimbursed by State Auto for any expenses (including, but not limited to, legal fees) reasonably incurred by Executive in connection with his compliance with the foregoing covenant.
Article IX    Payment of Taxes and Timing.
9.1    Excess Severance Payment.  If any Severance Benefit or other benefit paid or provided under Section 2.1, or the acceleration of stock option vesting, would be subject to excise tax pursuant to Code Section 4999 (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 State Auto to have paid an Excess Severance Payment as defined in Code Section 280G(b)(1) and so Executive will not be subject to Excise Tax pursuant to Code Section 4999.  The calculation of the Code Section 280G reduction shall be approved by State Auto’s independent certified public accounting firm engaged by State Auto immediately prior to the Change of Control and the calculation shall be provided to Executive in writing.  Executive shall then be given 15 days, or such longer period as Executive reasonably requests and to which State Auto agrees, such agreement not to be unreasonably withheld, to accept or reject the calculation of the Code Section 280G reduction.  If Executive rejects the Code Section 280G reduction calculation and the parties are thereafter unable to agree within an additional 45 days, the arbitration provisions of Section 10.1 shall control.  State Auto shall reimburse Executive for all reasonable legal and accounting fees incurred with respect to the calculation of the Code Section 280G reduction and any disputes related thereto.  Any payments owed to Executive under this Section 9.1, which are subject to the rules under Code Section 409A and related regulations, shall be made to Executive no later than the end of the calendar year following the calendar year in which the taxes are remitted to the taxing authority.  In the event that the amount of any Severance Benefit that would be payable to or for the benefit of Executive under this Agreement must be modified or reduced to comply with this provision, it 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.

9.2    Withholding of Taxes.  State Auto may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as required by law; provided, however, that such payment may not exceed the amount of such taxes due as a result of the payments due under this Agreement.  
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 Code Section 409A in the event of a violation of Code Section 409A under this Agreement.
9.3    Delayed Payments.  In the event of a genuine dispute between State Auto or any Subsidiary and Executive regarding the amount or timing of benefits under this Agreement, a delay in the payment of amounts under this Agreement shall not cause Executive to violate Code Section 409A to the extent that such delay satisfies the conditions set forth in Code Section 409A and applicable regulations thereunder.
9.4    Savings Clause.  If any payments otherwise payable to 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)
	State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and

		
	(b)
	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 State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.

Following any such election, 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 its specific terms.
Article X    Arbitration.
10.1    Arbitration.  The method for resolving any dispute arising out of this Agreement shall be binding arbitration in accordance with this Section 10.1.  Except as provided otherwise in this Section 10.1, arbitration pursuant to this Section 10.1 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, State Auto and Executive shall each appoint an arbitrator.  The fees and expenses of these arbitrators shall be paid by the party that selected such 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 third arbitrator, and any American Arbitration Association fees, shall be paid equally by the parties.  Both State Auto and Executive may be represented by counsel (legal and accounting) and may present testimony and other evidence at the hearing.  Each party shall be responsible for the legal fees and other expenses incurred by each party.  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 be binding on the parties.  Executive shall be entitled to seek specific performance of Executive’s rights under this Agreement during the period of time that any dispute or controversy arising under or in connection with this Agreement is pending.
Article XI    General Provisions. 
11.1    Entire Agreement.  This Agreement contains the entire agreement of the parties hereto with respect to the impact of a Change of Control on Executive, and completely supersedes any prior verbal or written agreements or arrangements between the parties hereto, if any, related to a Change of Control.  The parties hereto agree that this Agreement cannot be hereafter amended, modified or supplemented in any respect, except by a subsequent written agreement signed by both parties hereto.  The parties also agree that this Agreement shall be amended and/or modified as necessary to comply with Code Section 409A or regulations issued thereunder as well as requirements or regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as applicable.

11.2    Applicable Law.  This Agreement shall be governed in all respects by the laws of the State of Ohio, without giving effect to any of its conflict of law provisions.
11.3    Notices.  All notices under this Agreement shall be in writing and will be duly given if sent by United States registered or certified mail, return receipt requested, to the respective parties to the addresses set forth below or such other addresses as the parties may hereafter designate in writing for such purpose:
		
	(a)
	If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio  43215, Attention: Corporate Secretary; and

		
	(b)
	If to Executive, to the address set forth in the attached 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.
11.4    Assignment.  Except as expressly provided herein, neither this Agreement nor any rights, benefits or obligations hereunder may be assigned by Executive without the prior written consent of State Auto Mutual and State Auto Financial. 
11.5    Capacity.
		
	(a)
	State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.

		
	(b)
	Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of his services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.

11.6    Waiver.  The failure by a party to exercise or enforce any of the terms or conditions of this Agreement will not constitute or be deemed a waiver of that party's rights hereunder to enforce each and every term of this Agreement.  The failure by a party to insist upon strict performance of any of the terms and provisions herein will not be deemed a waiver of any subsequent default in the terms or provisions herein. 
11.7    Rights and Remedies Cumulative.  All rights and remedies of the parties hereunder are cumulative. 
11.8    Divisibility.  The provisions of this Agreement are divisible.  If any such provision shall be deemed invalid or unenforceable, it shall not affect the applicability or validity of any other provision of this Agreement, and if any such provision shall be deemed invalid or unenforceable as to any periods of time, territory or business activities, such provision shall be deemed limited to the extent necessary to render it valid and enforceable.
11.9    Captions and Titles.  Captions and titles have been used in this Agreement only for convenience and in no way define, limit or describe the meaning of any Article or any part thereof. 
11.10    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.
11.11    Code Section 409A Compliance.  It is the intention of both Executive and State Auto that the benefits and rights to which Executive could be entitled to under this Agreement be exempt from or, to the extent that the requirements of Code Section 409A apply, comply with Code Section 409A and the Treasury Regulations thereunder, and the provisions of this Agreement shall be construed in a manner consistent with that intention.  If Executive or State Auto believes, at any time, that any such benefit or right that is subject to Code Section 409A does not so comply, it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the terms of such benefits and rights so that they comply with Code Section 409A (with the most limited possible economic effect on Executive and State Auto).

	
				
	STATE AUTO FINANCIAL CORPORATION
	 
	 

	 
	 
	 
	 

	By
	/s/ Mike E. LaRocco
	 
	/s/ Kim B. Garland

	 
	Mike E. LaRocco
	 
	Kim B. Garland

	 
	President and CEO
	 
	 

	 
	 
	 
	 

	STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
	 
	 

	 
	 
	 
	 

	By
	/s/ Mike E. LaRocco
	 
	 

	 
	Mike E. LaRocco
	 
	 

	 
	President and CEO
	 
	 

	 
	 
	 
	 

	STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
	 
	 

	 
	 
	 
	 

	By
	/s/ Mike E. LaRocco
	 
	 

	 
	Mike E. LaRocco
	 
	 

	 
	President and CEO
	 
	 

Exhibit A
Beneficiary Designation and Notice Form
Beneficiary Designation
In the event of my death, I direct that any amounts due me under this Agreement to which this Beneficiary Designation is attached shall be distributed to the person designated below.  If no beneficiary shall be living to receive such assets they shall be paid to the administrator or executor of my estate.
Notice
Until notified otherwise, pursuant to Section 11.3 of this Agreement, notices should be sent to me at the following address:
	
		
	 

	 

	 

	 
	 

	Date:
	 

	 
	 

                            
	
	
	Kim B. Garland

	 

	/s/ Kim B. Garland

	Signature of Executive

	 

	Kim B. Garland

	Print Name of Executive

	 

	Diane E. Garland

	Beneficiary Name

	 

	Spouse

	Relationship to Executive

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