Document:

Exhibit 10.59

 

Exhibit 10.59

FIRST AMENDMENT

TO

EMPLOYMENT AGREEMENT

This First Amendment to the Employment Agreement dated as of May 22, 2003 (the “Employment
Agreement”) by and between Robert H. Moone and State Auto Financial Corporation is entered into and
effective the 11th day of May, 2005.

Background Information

Robert H. Moone (“Executive”) is currently serving as Chairman, President and Chief Executive
Officer of State Auto, pursuant to the terms and provisions of the Employment Agreement.

The parties to the Employment Agreement desire to amend the Employment Agreement as of the
effective date hereof, as set forth above, in the manner set forth herein.

Statement of Agreement

Intending to be legally bound hereby and in consideration of the mutual covenants set forth herein,
the parties hereby agree to amend the Employment Agreement as follows:

	 	1.	 	Recitals; Definitions. The Background Information contained in the Agreement
and in the Background Information to this Amendment are each hereby incorporated by
reference into the body of this Amendment. Capitalized terms not otherwise defined in
this Amendment shall have the meanings set forth in the Agreement. All references in the
Agreement to “this Agreement” shall be deemed to refer to the Agreement as amended hereby.
	 
	 	2.	 	Amendment of the Agreement. Subject to the satisfaction of the condition set
forth in Section 4 below, effective as of the date first written above, the Agreement
shall be deemed amended and supplemented by this Amendment. To the extent not expressly
amended or supplemented by this Amendment, the terms and provisions of the Agreement shall
remain in full force and effect without alteration for the remaining term thereof. Until
the deemed effective date of this Amendment as set forth in Section 4 below, the Agreement
shall be deemed to have governed the rights and obligations of the parties thereto in
accordance therewith, without taking into account the amendments contemplated hereby.

3.  Change
to Article II(B).

Article II(B) Term is hereby deleted in its entirety and replaced by the following:

(B) Term.

Executive’s employment and the initial term of this Agreement shall be for a period commencing
on the date hereof (“Commencement Date”), and ending on May 31, 2006, unless terminated at an
earlier date pursuant to an event described in Article IV of this Agreement (referred to
hereafter as the “Employment Period”). This

 

 

Agreement may be renewed at the end of the term hereof for a period of up to one additional
year, provided the parties mutually agree in writing to such renewal.The absence of a renewal
offers no basis for either party to make any claim against the other for damages described
herein. It is further understood and agreed that should Executive’s successor be named and
elected by the Board of Directors to serve as Chief Executive Officer prior to May 31, 2006,
Executive agrees to resign his offices and director’s positions concurrent with the election
of a successor Chief Executive Officer and Executive shall continue to be paid the salary and
bonus otherwise contemplated by the Employment Agreement through May 31, 2006, which shall be
the effective date of Executive’s retirement.

	 	4.	 	Effectiveness. This Amendment shall be deemed effective as of May 11, 2005,
upon the unanimous approval of the Board of Directors of State Auto. Unless and until such
approval is received, this Amendment shall not bind the parties hereto or amend or
supplement the Agreement.
	 
	 	5.	 	Reaffirmation of Balance of the Agreement. Except as expressly amended
hereby, the Agreement is hereby reaffirmed by the parties hereto. All terms and
provisions of Article X of the Agreement shall apply to and be deemed incorporated into
this Amendment.

          IN WITNESS WHEREOF, each of the parties hereto has subscribed its name below effective as of
the date first above written.

	 	 	 	 	 	 	 
	 

	 	Attest
	 	State Auto Financial Corporation
	 	 
	 
	 	 	 	 	 	 
	 

	 	By /s/ John R. Lowther
	 	By /s/William J. Lhota	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	John R. Lowther, Secretary
	 	William J. Lhota, Chairman	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Compensation Committee	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Executive	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Robert H. Moone	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert H. Moone	 	 
	 
	 	 	 	 	 	 
	Amendmen/first Amd to RHM 5-03 employment agrmtExhibit 10.60

 

Exhibit 10.60

STATE AUTO FINANCIAL CORPORATION

AMENDED AND RESTATED

EQUITY INCENTIVE COMPENSATION PLAN

Background Information

     
The directors and shareholders of State Auto
Financial Corporation, an Ohio Corporation (the
“Company”), previously approved the Company’s
2000 Stock Option Plan (the “2000 Plan”) to provide
for stock option awards to key employees of the Company and its
affiliates in order to more closely align the interests of the
recipient key employees with the interests of Company’s
shareholders. The 2000 Plan is hereby amended and restated in
its entirety and renamed the Amended and Restated Equity
Incentive Compensation Award Plan (the “Plan”).

Section 1. Purposes of
Plan

     
The Plan is intended to advance the interests of
the Company and its shareholders by enhancing the ability of the
Company and its subsidiaries to attract and retain highly
qualified key employees and by providing additional incentives
and compensation to such employees to achieve the Company’s
long-term business plans and objectives. The Plan is also
intended to encourage and enable key employees to participate in
the Company’s future prosperity and growth by providing the
participants with incentives and compensation based on the
Company’s performance, development and financial success.
The Plan is not intended to be, and shall not be construed as, a
deferred compensation plan.

     
These purposes will be achieved by granting to
key employees equity-based awards (the “Awards”) under
the Plan in the form of: (A) Incentive Stock Options
(“ISOs”), which are intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”); (B) stock options which are
not intended to qualify as ISOs (“NQSOs”) (ISOs and
NQSOs are referred to together hereinafter as “Stock
Options”); (C) common shares of the Company (the
“Shares”), which will be subject to a vesting schedule
based on the recipient’s continued employment
(“Restricted Shares”); (D) Shares which will be
subject to a vesting schedule based on certain performance
objectives (“Performance Shares”),
(E) Performance Units as described in Section 9, and
(F) Other Stock-Based Awards as described in
Section 10. For purposes of this Plan, the terms
“parent” and “subsidiary” mean “parent
corporation” and “subsidiary corporation”
respectively, as those terms are defined in Code
Section 424.

Section 2. Administration

     
The Plan shall be administered by a committee
(the “Committee”) which shall be the Compensation
Committee of the Company’s Board of Directors (the
“Board”). The members of the Committee shall serve at
the pleasure of the Board, which may remove members from the
Committee or appoint new members to the Committee from time to
time and members of the Committee may resign by written notice
to the Chairman of the Board or the Secretary of the Company.
The members of the Committee shall not be eligible to
participate in the Plan while serving on the Committee, and each
member shall be a “non-employee director” within the
meaning of Rule 16b-3, as amended,

1

 

under the Securities Exchange Act of 1934 (the
“Exchange Act”). Additionally, each member of the
Committee shall be an “outside director” within the
meaning of Code Section 162(m).

     
Unless otherwise determined by the Board, the
Committee shall have full and final authority to administer the
Plan in accordance with its terms, including, without
limitation, authority, to the extent not inconsistent with the
specific provisions of the Plan, to: (A) interpret all
provisions of the Plan consistent with law; (B) designate
the key employees to receive Awards under the Plan (such
recipients, “Participants”); (C) determine the
frequency of Awards; (D) determine the number and type of
Awards to be granted to each key employee; (E) determine
the terms and conditions, not inconsistent with the terms
hereof, of any Award, including without limitation, time and
performance restrictions; (F) prescribe the form and terms
of instruments evidencing any Awards granted under this Plan;
(G) determine the vesting requirement, if any, for Awards;
(H) make special Award grants when appropriate;
(I) adopt, amend and rescind general and special rules and
regulations for the Plan’s administration including
administrative rules, guidelines and practices governing the
Plan as it shall, from time to time, deem advisable;
(J) direct employees of the Company, its parent and
subsidiary corporations, and advisors to prepare such materials
or perform such analyses as the Committee deems necessary and
appropriate; (K) interpret the terms and provisions of the
Plan and any Award granted and any agreements relating thereto;
(L) make all other determinations necessary or advisable
for the administration of this Plan; and (M) take any other
actions the Committee considers appropriate in connection with,
and otherwise supervise the administration of, the Plan.

     
The Committee may designate selected Committee
members or certain employees of the Company to assist the
Committee in the administration of the Plan and may grant
authority to such persons to execute documents on behalf of the
Committee.

     
Any interpretation or administration of the Plan
by the Committee, and all actions of the Committee, shall be
made in the Committee’s sole discretion and shall be final,
binding and conclusive on the Company, its shareholders, its
parent and subsidiary corporations, and all Participants in the
Plan, their respective legal representatives, successors and
assigns, and upon all persons claiming under it through any of
them.

     
Service on the Committee shall constitute service
as a member of the Board of Directors of the Company, so that
members of the Committee shall be entitled to indemnification,
reimbursement and other protections as directors of the Company
as set forth in the Company’s Amended and Restated Articles
of Incorporation and Amended and Restated Code of Regulations,
as each may be further amended from time to time, as set forth
in the Indemnity Agreements between the Company and each of its
directors, and additionally as provided, and to the full extent
not prohibited, by law.

 

		
	Section  3. 	
    Eligibility and Factors to be Considered in
    Granting Awards

     
The employees eligible to receive Awards under
the Plan (“Eligible Employees”) shall include only
employees of the Company or its parent or subsidiary
corporations who are executive, administrative, professional, or
technical personnel who, in the opinion of the Committee, have
responsibilities affecting the management, development, or
financial success of the Company or one or more of its
subsidiaries or other affiliated entities. No director of the
Company who is not also an employee of the Company or its
subsidiary corporations shall be eligible to participate in the
Plan.

     
In making any determination as to the employees
to whom Awards shall be granted, the Committee shall take into
account, in each case, the level and responsibility of the
employee’s

2

 

position, the level of the employee’s
performance, the employee’s level of compensation, the
assessed potential of the employee and such other factors as the
Committee in its sole discretion shall deem relevant to the
accomplishment of the purposes of the Plan.

Section 4. Shares Subject to
Plan

     
The maximum aggregate number of common shares,
without par value, of the Company (“Shares”) which may
be issued under the Plan shall be 3,500,000 Shares, which
shall include Shares subject to Awards granted under the 2000
Plan which are outstanding as of the Effective Date (as defined
in Section 11(P)). No more than 33% of the Shares
authorized for issuance under the Plan may be granted in the
form of Awards other than Stock Options.

     
For each calendar year, the maximum number of
Shares which may be granted to Participants during that year in
the form of Awards of Stock Options, Restricted Shares and
Performance Shares shall not exceed 1.5% of the total number of
Shares outstanding as of December 31 of the prior year. For
each calendar year, the maximum number of Shares which may be
granted to any individual during that year in the form of Awards
of Stock Options, Restricted Shares and Performance Shares shall
not exceed 250,000 Shares.

     
The Shares which may be issued under the Plan may
be authorized but unissued Shares or issued Shares reacquired by
the Company and held as treasury Shares. If any Shares subject
to a Stock Option granted under the Plan or the 2000 Plan are
forfeited by the holder thereof, or if any Restricted Shares or
Performance Shares granted under the Plan are forfeited by the
holder thereof, or if any Stock Option or other Award granted
under the Plan or the 2000 Plan terminates without a payment or
transfer being made to the Award recipient in the form of
Shares, then such Shares shall again be available for
distribution in connection with future Awards under the Plan. If
any Award granted under the Plan expires or terminates for any
reason without having been fully exercised, the unpurchased
Shares which had been subject to that Award shall again be
available for other Awards to be granted under the Plan. The
aggregate number of Shares shall be subject to adjustment under
Section 11(A) of the Plan.

Section 5. Grant of Awards

     
Any Awards may be granted alone or in addition to
other Awards granted under the Plan. Any Awards granted under
the Plan shall be in such form as the Committee may from time to
time approve, consistent with the Plan, and the provisions of
Awards need not be the same with respect to each Participant.

     
Each Award granted under the Plan shall be
authorized by the Committee and shall be evidenced by a written
award agreement (the “Award Agreement”), in the form
approved by the Committee from time to time, which shall be
dated as of the date approved by the Committee in connection
with the grant, signed by an officer of the Company authorized
by the Committee, and signed by the Participant, and which shall
describe the Award and state that the Award is subject to all
the terms and provisions of the Plan and such other terms and
provisions, not inconsistent with the Plan, as the Committee may
approve. The date on which the Committee approves the granting
of an Award shall be deemed to be the date on which the Award is
granted for all purposes, unless the Committee otherwise
specifies. The granting of an Award under the Plan, however,
shall be effective only if and

3

 

when a written Award Agreement is duly executed
and delivered by or on behalf of the Company and the Participant.

Section 6. Stock Options

     
The Committee may, in its sole discretion and
subject to the provisions of the Plan, grant to Eligible
Employees at such times as it deems appropriate, Stock Options
to purchase Shares. Stock Options granted under this Plan may
be: (i) Options which are intended to qualify as ISOs under
Code Section 422; and/or (ii) Stock Options which are
not intended to qualify under Code Section 422. Stock
Options may be allotted to Eligible Employees in such amounts,
subject to the limitations specified in this Section and
Sections 3 and 4 of the Plan, as the Committee, in its sole
discretion, may from time to time determine.

     
Stock Options granted hereunder shall be
evidenced by a Stock Option Award Agreement executed as set
forth in Section 5 above, containing such terms and
provisions not inconsistent with the terms of the Plan as are
recommended and approved from time to time by the Committee.
Each Stock Option Award Agreement shall be consistent with the
Plan, including, without limitation, the following provisions:

		
	 	     
    (A) Exercise Price. The exercise
    price per Share at which each Stock Option granted under the
    Plan may be exercised shall not be less than the Fair Market
    Value per Share at the time such Stock Option is granted. In the
    case of an Eligible Employee who owns Shares representing more
    than 10% of the total combined voting power of all classes of
    the Company’s stock, or the stock of any subsidiary, at the
    time an ISO is granted, the exercise price of the ISO shall not
    be less than 110% of the Fair Market Value of the Shares at the
    time the ISO is granted.
    
	 
	 	     
    For the purposes of the Plan “Fair Market
    Value” means, as of any given date, the following:
    (1) if the Company’s Shares are listed on a national
    securities exchange at the time of granting a Stock Option, then
    the Fair Market Value of each Share shall be no less than the
    average of the highest and lowest selling price on such exchange
    on the date such Stock Option is granted or, if there were no
    sales on said date, then on the next prior business day on which
    there were sales; (2) if the Company’s Shares are
    traded other than on a national securities exchange at the time
    of the granting of a Stock Option, then the Fair Market Value of
    each Share shall be not less than the last sale price as
    reported on the Nasdaq National Market System as of the close of
    the regular trading day or the mean between the bid and asked
    price as reported on the National Association of Securities
    Dealers as the case may be, on the date the Stock Option is
    granted or, if there is no sale price or bid and asked price on
    said date, then on the next prior business date on which there
    was a sale price or bid or asked price.
    
	 
	 	     
    If the Company’s Shares are not traded on
    any security exchange or reported on the Nasdaq National Market
    System or by the National Association of Securities Dealers,
    then the Committee shall exercise its best judgment to make a
    good faith determination of the fair market value per Share.
    Such determination shall include a valuation of the
    Company’s present and future earnings capacity for the
    purpose of determining the fair market value of a Share of the
    Company’s Shares as of a specified date. The value
    determined shall be defined as the fair market value of a Share
    of stock for a specified period of time as defined by the
    Committee.
    

4

 

		
	 	     
    The Committee retains the right to determine the
    price per Share at which each NQSO granted under the Plan may be
    exercised, provided that no NQSO shall be granted at less than
    Fair Market Value.
    
	 
	 	     
    (B) Option Period and Vesting. Stock
    Options granted under the Plan are exercisable at such time or
    times as may be determined by the Committee (the “Vesting
    Date”). A Stock Option shall be exercisable only with
    respect to the Shares which have become vested pursuant to the
    terms of that Stock Option. Each Stock Option shall become
    vested with respect to Shares subject to that Stock Option on
    such date or dates and on the basis of such other criteria,
    including, without limitation, the performance of the Company,
    as the Committee may determine, in its discretion, and as shall
    be specified in the applicable Stock Option Award Agreement. The
    Committee shall have the authority, in its discretion, to
    accelerate the time at which a Stock Option shall be exercisable
    whenever it may determine that such action is appropriate by
    reason of changes in applicable tax or other law or other
    changes in circumstances occurring after the grant of such Stock
    Option.
    
	 
	 	     
    A Stock Option granted under the Plan shall
    terminate, and the right of the Participant (or the
    Participant’s estate, personal representative, or
    beneficiary) to purchase Shares upon exercise of the Stock
    Option shall expire, after the date determined by the Committee
    at the time the Stock Option is granted (the “Expiration
    Date”). No Stock Option, however, may have a life of more
    than ten years after the date the Stock Option is granted. In
    the case of a Participant who owns stock representing more than
    10% of the total combined voting power of all classes of the
    Company’s stock, or the stock of any subsidiary at the time
    an ISO is granted, the ISO may not have a life of more than five
    years after the date on which it is granted. The date on which
    the Committee approves the granting of a Stock Option shall be
    deemed the date on which the Stock Option is granted, unless the
    Committee specifically designates a different date on which the
    Stock Option shall be deemed to have been granted, subject to
    Section 6(A) of the Plan.
    
	 
	 	     
    (C) Exercise of Stock Options
    

		
	 	     
    (1) By an Eligible Employee During
    Continuous Employment. Subject to
    Section 6(E) below, during the lifetime of an Eligible
    Employee to whom a Stock Option is granted, the Stock Option may
    be exercised only by the Eligible Employee.
    
	 
	 	     
    An Eligible Employee who has been continuously
    employed by the Company or its subsidiaries since the date of
    the Stock Option grant is eligible to exercise all Stock Options
    granted beginning on the Vesting Date, or on the date on which
    the Stock Option is granted, whichever is later, and continuing
    up to and including the Expiration Date. The Committee will
    decide in each case to what extent leaves of absence for
    government or military service, illness, temporary disability,
    or other reasons shall not for this purpose be deemed
    interruptions of continuous employment.
    
	 
	 	     
    (2) By a Former Employee. If a
    Participant’s employment by the Company and its
    subsidiaries terminates for any reason other than death,
    disability, or retirement (as each is defined below) then
    (a) to the extent any Stock Option held by such Participant
    is not vested as of the date of such termination, such Stock
    Option shall automatically terminate on such date; and
    (b) to the extent any Stock Option held by such Participant
    is vested as of the date of such termination, such Stock Option
    may thereafter be exercised for a period of 90 days (or,
    with respect to NQSOs, such longer period as the Committee may
    specify at or after
    

5

 

		
	 	
    grant) from the date of such termination or until
    the expiration of the stated term of such Stock Option,
    whichever period is shorter; provided that, upon the termination
    of the Participant’s employment by the Company or its
    subsidiaries for illegal conduct, any and all unexercised Stock
    Options granted to such Participant shall immediately lapse and
    be of no further force or effect.
    
	 
	 	     
    (3) In Case of Retirement. If a
    Participant who was granted a Stock Option terminates employment
    due to retirement, as such term is defined in the State Auto
    Insurance Companies Employee Retirement Plan, the Stock Option
    must be exercised as follows: (a) ISOs must be exercised
    within ninety (90) days of such termination (but no later
    than the Expiration Date) and (b) NQSOs must be exercised
    on or before the Expiration Date. If the Participant should
    become permanently and totally disabled, as defined in Code
    Section 22(e)(3), or die within the aforementioned 90-day
    period following termination due to retirement, the provisions
    contained in Section 6(C), paragraphs 4 and 5 hereof
    respectively, shall apply. Notwithstanding Section 6(B),
    all Stock Options previously granted to the Participant may be
    immediately exercised by a Participant whose employment
    terminates due to retirement prior to the Vesting Date.
    
	 
	 	     
    (4) In Case of Permanent and Total
    Disability. If a Participant who was granted a Stock Option
    terminates employment with the Company and its subsidiaries
    because of permanent and total disability, as defined in Code
    Section 22(e)(3), such Stock Option must be exercised as
    follows: (a) ISOs must be exercised within one year of such
    termination (but no later than the Expiration Date) and
    (b) NQSOs must be exercised on or before the Expiration
    Date. If the Participant should die within the aforementioned
    one-year period following termination due to such permanent and
    total disability, the provisions contained in Section 6(C),
    paragraph 5 hereof, shall apply. Notwithstanding
    Section 6(B), all Stock Options previously granted to the
    Participant may be immediately exercised by the Participant who
    becomes permanently and totally disabled, as defined in Code
    Section 22(e)(3), prior to the Vesting Date.
    
	 
	 	     
    (5) In Case of Death. If a
    Participant who was granted a Stock Option dies, such Stock
    Options must be exercised as follows: (a) ISOs must be
    exercised within one year of such death (but no later than the
    Expiration Date) and (b) NQSOs must be exercised on or
    before the Expiration Date, provided that if such Participant
    dies with less than ninety (90) days remaining prior to the
    Expiration Date, the estate or successor(s) in interest of such
    Participant shall have a period of 180 days from the date
    of death of such Participant to exercise such Stock Option,
    regardless of the Expiration Date.
    
	 
	 	     
    (6) Sequential Exercise Requirement.
    ISOs and NQSOs may be exercised in any order the Participant may
    deem appropriate.
    
	 
	 	     
    (7) Termination of Stock Options. A
    Stock Option granted under this Plan shall be considered
    terminated in whole or in part, to the extent that, in
    accordance with the provisions of this Plan, it can no longer be
    exercised for Shares originally subject to the Stock Option.
    Except as otherwise permitted by the Committee in its sole
    discretion, no Stock Option held by a transferee of a
    Participant pursuant to Section 6(E)(3), below, shall
    remain exercisable for any period of time longer than would
    otherwise be permitted under
    

6

 

		
	 	
    Sections 6(C)(2),(3),(4) and
    (5) without specification of other periods by the Committee
    as provided therein.
    

		
	 	     
    (D) Method of Exercise. Any Stock
    Option granted hereunder shall be exercisable at such times and
    under such conditions as shall be permissible under terms of the
    Plan and of the Stock Option Award Agreement between the Company
    and the Participant.
    
	 
	 	     
    Each Stock Option granted under this Plan shall
    be deemed exercised, in whole or in part, when the Participant
    shall indicate the decision to do so by written notice delivered
    in person or by facsimile or electronic transmission or by
    certified mail to the Secretary of the Company. The notice shall
    state the election to exercise the Stock Option, the number of
    Shares with respect to which it is being exercised, the person
    in whose name the stock certificate or certificates is to be
    registered and the address and Social Security Number of such
    recipient. The notice shall be signed by the person or persons
    entitled to exercise the Stock Option and, if the Stock Option
    is being exercised by any person or persons other than the
    Participant, be accompanied by proof, satisfactory to legal
    counsel of the Company, of the right of such person to exercise
    the Stock Option. The Participant shall at the same time tender
    to the Company payment in full, in cash or by certified bank
    cashier’s or teller’s check, for the Shares for which
    the Stock Option is exercised and shall comply with such other
    reasonable requirements as the Committee may establish, pursuant
    to Section 11(D) of the Plan. These provisions shall not
    preclude exercise of, or payment for a Stock Option by any other
    proper legal method specifically approved by the Committee,
    including, but not limited to, the constructive delivery or
    actual delivery of eligible, unrestricted Shares with a Fair
    Market Value equal to the total option price at the time of
    exercise in accordance with rules and procedures prescribed or
    approved by the Committee.
    
	 
	 	     
    Except as otherwise set forth in any agreement
    between the Participant and the Company with respect to the
    Stock Option, as approved by the Committee, no person, estate or
    other entity shall have any of the rights of the shareholder
    with reference to Shares subject to a Stock Option until a
    certificate for the Shares has been issued by the Company.
    
	 
	 	     
    A Stock Option granted under this Plan may be
    exercised for any lesser number of Shares than the full amount
    for which it could be exercised. Such a partial exercise of a
    Stock Option shall not affect the right to exercise the Stock
    Option from time to time in accordance with this Plan for the
    remaining Shares subject to the Stock Option. The Stock Option
    may be exercised only with respect to full Shares and no
    fractional Shares of common stock shall be issued upon exercise
    of the Option.
    
	 
	 	     
    (E) Non-Transferability. Except as
    provided in this paragraph, no Stock Option granted to an
    Eligible Employee under the Plan shall be transferable other
    than by will or the laws of descent and distribution and shall
    be exercisable during the Participant’s lifetime only by
    such Participant, or the Participant’s legal
    representative. Any attempted transfer (other than as provided
    in this paragraph) shall be null and void. Without limiting the
    generality of the foregoing, (1) ISOs may be transferred
    only upon the Participant’s death and only by will or the
    laws of descent and distribution and, in the case of such a
    transfer, shall be exercisable only by the transferee or such
    transferee’s legal representative, (2) NQSOs may be
    transferred by will or the laws of descent and distribution and,
    in the case of such a transfer, shall be exercisable only by the
    transferee or such transferee’s legal representative, and
    (3) the Committee may, in its sole discretion and in the
    manner established by the Committee, provide for the irrevocable
    transfer,
    

7

 

		
	 	
    without payment of consideration, of any NQSO by
    a Participant to such Participant’s parent(s), spouse,
    children, grandchildren, nieces, or nephews or to the trustee of
    a trust for the principal benefit of one or more such persons or
    to a partnership whose only partners are one or more such
    persons, and, in the case of such transfer, such NQSO shall be
    exercisable only by the transferee or such transferee’s
    legal representative. In addition, NQSOs and, if permitted by
    applicable law, ISOs may be transferred pursuant to Qualified
    Domestic Relations Orders, as defined in Code
    Section 414(p), to a Participant’s former spouse. Any
    such Stock Option which is transferred shall continue to be
    subject to all provisions and conditions of the Plan and the
    Stock Option Award Agreement applicable to the Stock Option
    prior to its transfer, including without limitation, vesting
    requirements, restrictions on transferability and limitations on
    exercise following termination of employment or death or
    disability, provided that the person receiving the transfer
    shall have the same right to exercise as the Participant who
    transferred the Option, notwithstanding Section 11(D) to
    the contrary. Notwithstanding the foregoing, the Committee shall
    only have authority to grant Stock Options which may be
    transferred pursuant to this Section if it is reasonably
    satisfied that such grant will not cause other Stock Options
    under the Plan to lose the exemption provided by Rule 16b-3
    promulgated under the Exchange Act, as amended from time to time.
    
	 
	 	     
    (F) No Stock Option Repricing without
    Shareholder Approval. The exercise price per Share of any
    Stock Option granted under the Plan shall not be changed or
    modified after the time such Stock Option is granted unless such
    change or modification is made with the prior approval of the
    Company’s shareholders.
    

Section 7. Restricted
Shares

     
Restricted Shares awarded under the Plan shall be
subject to the following terms and conditions and such
additional terms and conditions not inconsistent with the terms
of the Plan as the Committee deems appropriate. Each Restricted
Share grant shall be evidenced by a Restricted Share Award
Agreement, executed as set forth in Section 5, above, which
shall be consistent with the Plan, including without limitation,
the following provisions:

		
	 	     
    (A) Price. The purchase price for
    Restricted Shares shall be any price set by the Committee and
    may be zero. Payment in full of the purchase price shall be made
    by certified or bank cashier’s check or other form of
    payment acceptable to the Company, or, if approved by the
    Committee, by (1) actual or constructive delivery of
    unrestricted Shares having a fair market value on the date of
    such delivery equal to the total purchase price, or (2) a
    combination of the preceding methods.
    
	 
	 	     
    (B) Acceptance of Restricted Shares.
    At the time of the Restricted Share Award, the Committee may
    determine that such Shares shall, after vesting, be further
    restricted as to transferability or be subject to repurchase by
    the Company or forfeiture upon the occurrence of certain events
    determined by the Committee, in its sole discretion, and
    specified in the Restricted Share Award Agreement. Awards of
    Restricted Shares must be accepted by the Participant within
    30 days (or such other period as the Committee may specify
    at grant) after the grant date by executing the Restricted Share
    Award Agreement. The Participant shall not have any rights with
    respect to the grant of Restricted Shares unless and until the
    Participant has executed the Restricted Share Award Agreement,
    delivered a fully executed copy thereof to the Company, and
    otherwise complied with the applicable terms and conditions of
    the Award.
    

8

 

		
	 	     
    (C) Share Restrictions. Subject to
    the provisions of the Plan and the applicable Restricted Share
    Award Agreement, during such period as may be set by the
    Committee, in its discretion, and as shall be set forth in the
    applicable Restricted Share Award Agreement (the
    “Restriction Period”), the Participant shall not be
    permitted to sell, transfer, pledge, assign, or otherwise
    encumber the Restricted Shares. Furthermore, the Committee shall
    have the authority, in its sole discretion, to determine the
    voting rights (which may be full or limited), dividend rights
    (which may be full or limited), or other shareholder rights
    associated with the Restricted Shares during the Restriction
    Period, which rights shall be set forth in the applicable
    Restricted Share Award Agreement.
    
	 
	 	     
    The Committee shall have the authority, in its
    sole discretion, to accelerate the time at which any or all of
    the restrictions shall lapse with respect to any Restricted
    Shares or to remove any or all restrictions after the grant of
    such Restricted Shares. Unless otherwise determined by the
    Committee at or after grant or termination of the
    Participant’s employment, if the Participant’s
    employment by the Company and its parent or subsidiaries
    terminates during the Restriction Period, all Restricted Shares
    held by such Participant and still subject to restriction shall
    be forfeited by the Participant.
    
	 
	 	     
    (D) Stock Issuances and Restrictive
    Legends. Upon execution and delivery of the Restricted Share
    Award Agreement as described above and receipt of payment of the
    full purchase price for the Restricted Shares subject to such
    Restricted Share Award Agreement, the Company shall, no later
    than 30 days thereafter, issue the Restricted Shares.
    Restricted Shares may be issued in the form of a certificate, by
    book entry, or otherwise, in the Company’s sole discretion,
    and shall bear an appropriate restrictive legend.
    Notwithstanding the foregoing to the contrary, the Company may,
    in the Committee’s sole discretion, issue Restricted Shares
    (whether or not such Restricted Shares are, at the time of such
    issuance, the subject of an Award) to the trustee of a trust set
    up by the Committee, consistent with the terms and conditions of
    the Plan, to hold such Restricted Shares until the restrictions
    thereon have lapsed (in full or in part, in the Committee’s
    sole discretion), and the Committee may require that, as a
    condition of any Restricted Share Award, the Participant shall
    have delivered to the Company or such trustee, as appropriate, a
    stock power, endorsed in blank, relating to the Restricted
    Shares covered by the Award.
    
	 
	 	     
    (E) Stockholder Rights. Unless
    otherwise provided in the applicable Restricted Share Award
    Agreement, no Participant (or his executor or administrator or
    other transferee) shall have any rights of a stockholder in the
    Company with respect to the Restricted Shares covered by an
    Award unless and until the Restricted Shares have been duly
    issued and delivered to him under the Plan.
    
	 
	 	     
    (F) Expiration of Restriction Period.
    Upon the expiration of the Restriction Period without prior
    forfeiture of the Restricted Shares (or rights thereto) subject
    to such Restriction Period, unrestricted Shares shall be issued
    and delivered to the Participant.
    

Section 8. Performance
Shares

     
Performance Shares awarded under the Plan shall
be subject to the following terms and conditions and such
additional terms and conditions not inconsistent with the terms
of the Plan as the Committee deems appropriate. Each Performance
Share grant shall be evidenced by a Performance

9

 

Share Award Agreement, executed as set forth in
Section 5, above, which shall be consistent with the Plan,
including without limitation the following provisions:

		
	 	     
    (A) Performance Periods and Goals
    

		
	 	     
    (1) The performance period for each Award of
    Performance Shares shall be of such duration as the Committee
    shall establish at the time of the Award (the “Performance
    Period”), but in no event less than one calendar year.
    There may be more than one Award in existence at any one time,
    and Performance Periods may differ.
    
	 
	 	     
    (2) The Committee shall establish in writing
    a range of performance goals (the “Performance Goals”)
    to be achieved during the established Performance Period at the
    time of each Award of Performance Shares (but in no event later
    than 90 days after the commencement of the Performance
    Period). The Performance Goals shall be determined by the
    Committee using such measures of the performance of the Company
    over the Performance Period as the Committee shall select,
    including, without limitation, earnings, return on capital,
    revenue, premiums, net income, earnings per share, combined
    ratio, loss ratio, expense ratio, assets, equity, cash flows,
    stock price, total shareholders return, or any other performance
    goal approved by the stockholders of the Company in accordance
    with Code Section 162(m). Performance Shares awarded to
    Participants will be earned as determined by the Committee with
    respect to the attainment of the Performance Goals set for the
    Performance Period. At the end of each Performance Period, the
    Committee shall certify the extent to which the Performance
    Goals were met during the Performance Period. Attainment of the
    highest Performance Goal for the Performance Period will earn
    100% of the Performance Shares awarded for the Performance
    Period; failure to attain the lowest Performance Goal for the
    Performance Period will earn none of the Performance Shares
    awarded for the Performance Period.
    
	 
	 	     
    (3) Attainment of the Performance Goals will
    be calculated from the consolidated financial statements of the
    Company but shall exclude (a) the effects of changes in
    federal income tax rates, (b) the effects of unusual,
    non-recurring, and extraordinary items as defined by United
    States generally accepted accounting principles
    (“GAAP”), and (c) the cumulative effect of
    changes in accounting principles in accordance with GAAP. The
    Performance Goals may vary for different Performance Periods and
    need not be the same for each Participant receiving an Award for
    a Performance Period. The Committee may, in its sole discretion,
    subject to the limitations of Section 11(J), vary the terms
    and conditions of any Performance Share Award, including,
    without limitation, the Performance Period and Performance
    Goals, without stockholder approval, as applied to any recipient
    who is not a “covered employee” with respect to the
    Company as defined in Code Section 162(m). In the event
    applicable tax or securities laws change to permit the Committee
    discretion to alter the governing performance measures as they
    pertain to covered employees without obtaining stockholder
    approval of such changes, the Committee shall have sole
    discretion to make such changes without obtaining stockholder
    approval.
    

		
	 	     
    (B) Price. The purchase price for
    Performance Shares shall be any price set by the Committee and
    may be zero. Payment in full of the purchase price shall be made
    by certified or bank cashier’s check or other form of
    payment acceptable to the Company, or, if approved by
    

10

 

		
	 	
    the Committee, by (1) delivery of
    unrestricted Shares having a fair market value on the date of
    such delivery equal to the total purchase price, or (2) a
    combination of the preceding methods.
    
	 
	 	     
    (C) Acceptance of Performance Shares.
    At the time of the Performance Share Award, the Committee may
    determine that such Shares shall, after vesting pursuant to the
    Performance Period and Performance Goal provisions described
    above, be further restricted as to transferability or be subject
    to repurchase by the Company or forfeiture upon the occurrence
    of certain events determined by the Committee, in its sole
    discretion, and specified in the Performance Share Award
    Agreement. Awards of Performance Shares must be accepted by the
    Participant within 30 days (or such other period as the
    Committee may specify at grant) after the grant date by
    executing the Performance Share Award Agreement. The Participant
    shall not have any rights with respect to the grant of
    Performance Shares unless and until the Participant has executed
    the Performance Share Award Agreement, delivered a fully
    executed copy thereof to the Company, and otherwise complied
    with the applicable terms and conditions of the Award.
    
	 
	 	     
    (D) Share Restrictions. Subject to
    the provisions of the Plan and the applicable Performance Share
    Award Agreement, during the Performance Period and any
    additional Restriction Period (as defined in Section 7(C),
    above), the Participant shall not be permitted to sell,
    transfer, pledge, assign or otherwise encumber the Performance
    Shares. Furthermore, the Committee shall have the authority, in
    its sole discretion, to determine the voting rights (which may
    be full or limited), dividend rights (which may be full or
    limited), or other shareholder rights associated with the
    Performance Shares during the Restriction Period, which rights
    shall be set forth in the applicable Performance Share Award
    Agreement.
    
	 
	 	     
    The Committee shall have the authority, in its
    sole discretion, to accelerate the time at which any or all of
    the restrictions shall lapse with respect to any Performance
    Shares. Unless otherwise determined by the Committee at or after
    grant or termination of the Participant’s employment, if
    the Participant’s employment by the Company and its
    subsidiaries terminates during the Performance Period or the
    Restriction Period, all Performance Shares held by such
    Participant and still subject to restriction shall be forfeited
    by the Participant.
    
	 
	 	     
    (E) Stock Issuances and Restrictive
    Legends. Despite the execution and delivery of the
    Performance Share Award Agreement as described above, the
    Company shall have no obligation to issue the Performance Shares
    prior to the vesting of the Performance Shares, provided that
    the Company shall issue the Performance Shares no later than
    30 days after such vesting and after payment
    in full of the purchase price for such Performance Shares.
    Performance Shares may be issued, whenever issued, in the form
    of a certificate, by book entry, or otherwise, in the
    Company’s sole discretion, and shall bear such restrictive
    legend as is consistent with applicable restrictions, if any,
    including without limitation those represented by the
    Performance Period and Performance Goals and those described in
    Section 8(D), above. The Committee may require that,
    whenever issued, the Performance Shares be issued to and held by
    the Company or a trustee until the restrictions on such
    Performance Shares have lapsed (in full or in part), and that,
    as a condition of any Performance Share Award, the Participant
    shall have delivered a stock power, endorsed in blank, relating
    to the Performance Shares covered by the Award.
    
	 
	 	     
    (F) Stockholder Rights. Unless
    otherwise provided in the applicable Performance Share Award
    Agreement, no Participant (or his executor or administrator or
    other transferee) shall have any rights of a stockholder in the
    Company with respect to the Performance Shares covered by
    

11

 

		
	 	
    an Award unless and until the Performance Shares
    have been duly issued and delivered to him under the Plan.
    
	 
	 	     
    (G) Expiration of Restriction Period.
    Subject to fulfillment of the terms and conditions of the
    applicable Performance Share Award Agreement and any other
    vesting requirements related to the applicable Performance
    Period or Performance Goals, upon the expiration of the
    Restriction Period without prior forfeiture of the Performance
    Shares (or rights thereto) subject to such Restriction Period,
    unrestricted Shares shall be issued and delivered to the
    Participant.
    
	 
	 	     
    (H) Termination of Employment. If a
    Participant’s employment by the Company and its
    subsidiaries terminates before the end of any Performance Period
    due to the Participant’s death, disability (as defined by
    the Committee in its discretion at the time of grant and set
    forth in the Performance Share Award Agreement), or Change in
    Control, the Committee, taking into consideration the
    performance of such Participant, the level of attainment of the
    Participant’s Performance Goals and the performance of the
    Company over the Performance Period, may authorize the issuance
    to such Participant (or his legal representative or designated
    beneficiary) of all or a portion of the Performance Shares which
    would have been issued to him had his employment continued to
    the end of the Performance Period. If the Participant’s
    employment by the Company and its subsidiaries terminates before
    the end of any Performance Period for any other reason, all
    Performance Shares shall be forfeited.
    

Section 9. Performance
Units

     
The Committee may award performance units under
the Plan (“Performance Units”), which shall represent
the right of the Participant to receive an amount equal to the
value related to the Performance Units awarded, such value to be
determined in the manner established by the Committee at the
time of the Award, but may not be less than a value per
Performance Unit equal to the Fair Market Value of a Share. For
each calendar year, the maximum number of Performance Units
which may be granted to any individual during that year shall
not exceed 100,000 Performance Units. Each Performance Unit
grant shall be evidenced by a Performance Unit Award Agreement
as provided in Section 5, above, which shall be consistent
with the Plan, including without limitation the following
provisions:

		
	 	     
    (A) Establishment of Performance
    Accounts. At the time of an Award consisting in whole or in
    part of Performance Units, the Company shall establish an
    account (the “Performance Account”) in the name of the
    Participant to whom such Performance Units are awarded.
    Performance Units awarded to a Participant shall be credited to
    such Participant’s Performance Account.
    
	 
	 	     
    (B) Performance Periods and Goals.
    

		
	 	     
    (1) The Performance Period for each Award of
    Performance Units shall be of such duration as the Committee
    shall establish at the time of the Award, but in no event less
    than one calendar year. There may be more than one Award
    outstanding at any one time, and Performance Periods may differ
    for different Awards.
    
	 
	 	     
    (2) The Committee shall establish in writing
    a range of Performance Goals to be achieved during the
    established Performance Period at the time of each Award of
    Performance Units (but in no event later than 90 days after
    the commencement of the
    

12

 

		
	 	
    Performance Period). The Performance Goals shall
    be determined by the Committee using such measures of the
    performance of the Company over the Performance Period as the
    Committee shall select, including without limitation earnings,
    return on capital, revenue, premiums, net income, earnings per
    share, combined ratio, loss ratio, expense ratio, assets,
    equity, cash flows, stock price, total shareholders return, or
    any other performance goal approved by the stockholders of the
    Company in accordance with Code Section 162(m). Performance
    Units awarded to Participants will be earned as determined by
    the Committee with respect to the attainment of the Performance
    Goals set for the Performance Period. At the end of each
    Performance Period, the Committee shall certify the extent to
    which the Performance Goals were met during the Performance
    Period. Attainment of the highest Performance Goal for the
    Performance Period will earn 100% of the Performance Units
    awarded for the Performance Period; failure to attain the lowest
    Performance Goal for the Performance Period will earn none of
    the Performance Units awarded for the Performance Period.
    
	 
	 	     
    (3) Attainment of the Performance Goals will
    be calculated from the consolidated financial statements of the
    Company but shall exclude (a) the effects of changes in
    federal income tax rates, (b) the effects of unusual,
    non-recurring, and extraordinary items as defined by GAAP, and
    (c) the cumulative effect of changes in accounting
    principles in accordance with GAAP. The Performance Goals may
    vary for different Performance Periods and need not be the same
    for each Participant receiving an Award for a Performance
    Period. The Committee may, in its sole discretion, subject to
    the limitations of Section 11(J), vary the terms and
    conditions of any Performance Unit Award, including without
    limitation the Performance Period and Performance Goals, without
    stockholder approval, as applied to any recipient who is not a
    “covered employee” with respect to the Company as
    defined in Code Section 162(m). In the event applicable tax
    or securities laws change to permit the Committee discretion to
    alter the governing performance measures as they pertain to
    covered employees without obtaining stockholder approval of such
    changes, the Committee shall have sole discretion to make such
    changes without obtaining stockholder approval.
    

		
	 	     
    (C) Rights and Benefits During
    Performance Period. The Committee may provide that amounts
    equivalent to interest at such rates as the Committee may
    determine shall be payable with respect to Performance Units.
    All amounts payable pursuant to this Section 9(C) shall be
    credited for valuation purposes to the Participant’s
    Performance Account.
    
	 
	 	     
    (D) Payment Respecting Performance
    Units.
    

		
	 	     
    (1) Performance Units shall be earned to the
    extent that the terms and conditions of the Plan and the
    applicable Performance Unit Award Agreement are met.
    Notwithstanding the foregoing, Performance Units and any other
    amounts credited to the Participant’s Performance Account
    shall be payable to the Participant only when, if, and to the
    extent that the Committee determines to make such payment.
    
	 
	 	     
    (2) Any payment determination with respect
    to each Award of Performance Units and the corresponding
    Performance Period shall be made by the Committee during the
    first two months following the end of the Performance Period.
    

13

 

		
	 	     
    (3) Payment for Performance Units and any
    related amounts equivalent to interest may be made in a lump sum
    or in installments, in cash, Shares, other Awards, other
    property, or a combination thereof, and may have such other
    terms as the Committee may determine.
    

		
	 	     
    (E) Termination of Employment. If a
    Participant’s employment by the Company and its
    subsidiaries terminates before the end of any Performance Period
    due to the Participant’s death, disability (as defined by
    the Committee in its discretion at the time of Grant and set
    forth in the Performance Unit Award Agreement), or Change in
    Control, the Committee, taking into consideration the
    performance of such Participant, the level of attainment of the
    Participant’s Performance Goals and the performance of the
    Company over the Performance Period, may authorize the payment
    to such Participant (or his legal representative or designated
    beneficiary) of all or a portion of the amount which would have
    been paid to him had his employment continued to the end of the
    Performance Period. If the Participant’s employment by the
    Company and its subsidiaries terminates for any other reason,
    all Performance Units and amounts credited to the
    Participant’s Performance Account shall be forfeited.
    

Section 10. Other Stock-Based
Awards

     
The Committee is authorized, subject to
limitations under applicable law, to grant such other Awards
that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, the
Stock and factors that may influence the value of the Stock, as
deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with
value and payment contingent upon performance of the Company or
any other factors designated by the Committee and Awards valued
by reference to the book value of Stock or the value of
securities of or the performance of specified Subsidiaries
(“Other Stock-Based Awards”). The Committee shall
determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted
under this Section 10 shall be purchased for such
consideration, paid for at such times, by such methods, and in
such forms, including, without limitation, cash, Stock, other
Awards, or other property, as the Committee shall determine.
Cash awards, as an element of or supplement to any other Award
under the Plan, may be granted pursuant to this Section 10.

Section 11. Other
Provisions

     
(A) Adjustments upon Changes in
Capitalization. In the event the Company changes its
outstanding Shares by reason of stock splits, stock dividends,
or any other increase or reduction of the number of outstanding
Shares without receiving consideration in the form of money,
services, or property deemed appropriate by the Board, the
aggregate number of Shares subject to the Plan shall be
proportionately adjusted, and the number of Shares and the
option price for each Share subject to the unexercised portion
of any then outstanding Award shall be proportionately adjusted
with the objective that the Participant’s proportionate
interest in the Company shall remain the same as before the
change without any change in the total option price applicable
to the unexercised portion of the then outstanding Awards, all
as determined by the Committee in its sole discretion.

     
In the event of any other recapitalization or any
merger, consolidation, or other reorganization of the Company,
the Committee shall make such adjustment, if any, as it may deem
appropriate to

14

 

accurately reflect the number and kind of Shares
deliverable, and the option prices payable, upon subsequent
exercise of any then outstanding Awards, as determined by the
Committee in its sole discretion.

     
The Committee’s determination of the
adjustments appropriate to be made under this Section 11(A)
shall be conclusive upon all Participants and other Eligible
Employees under the Plan. Notwithstanding anything in this
Section 11(A) to the contrary, any adjustment made under
this Section 11(A) shall be made in a manner that will not
constitute a “modification” within the meaning defined
in Code Section 424(h).

     
(B) Change in Control

		
	 	     
    (1) Impact of Event. Notwithstanding
    any provision of this Plan or any Award Agreement to the
    contrary (unless such Award Agreement contains a provision
    referring specifically to this Section 11(B) and stating
    that this Section 11(B) shall not be applicable to the
    Award evidenced by such Award Agreement), if a Change in Control
    or a Potential Change in Control (each as defined below) occurs,
    then:
    

		
	 	     
    (a) Any and all Stock Options theretofore
    granted and not fully vested shall thereupon become vested and
    exercisable in full and shall remain so exercisable in
    accordance with their terms, and the restrictions applicable to
    any or all Restricted Shares, Performance Shares, and
    Performance Units shall lapse and such Shares and Awards shall
    be fully vested; provided that no Stock Option or other Award
    right which has previously been exercised or otherwise
    terminated shall become exercisable; and
    
	 
	 	     
    (b) The Company may, at its option,
    terminate any or all outstanding, unexercised Stock Options and
    portions thereof not more than 30 days after such Change in
    Control or Potential Change in Control; provided that the
    Company shall, upon such termination and with respect to each
    Stock Option so terminated, pay to the Participant of each
    terminated Stock Option (or such Participant’s transferee,
    if applicable) cash, less applicable withholding taxes, in an
    amount equal to the difference between the option price, as
    described in Section 6(C), and the “Change in Control
    Price” (as defined in Section 11(B)(4)) as of the date
    such Change in Control or such Potential Change in Control is
    determined to have occurred or such other date as the Company
    may determine prior to the Change in Control; and provided
    further that if such Change in Control Price is less than such
    option price, then the Board may, in its sole discretion,
    terminate such Stock Option without any payment.
    

		
	 	     
    (2) Definition of Change in Control.
    For purposes of Section 11(B)(1), a Change in Control means
    the happening of any of the following:
    

		
	 	     
    (a) 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 subsidiary and
    any employee benefit plan sponsored or maintained by the Company
    or any subsidiary (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
    

15

 

		
	 	
    20% or more of the combined voting power of the
    Company’s then outstanding securities; or
    
	 
	 	     
    (b) 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 11(B)(2)(b); or
    
	 
	 	     
    (c) The occurrence of a transaction
    requiring shareholder approval for the acquisition of the
    Company by an entity other than the Company or subsidiary
    through purchase of assets, by merger or otherwise; or
    
	 
	 	     
    (d) 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.
    

		
	 	     
    (3) Definition of Potential Change in
    Control. For purposes of Section 11(B)(1), a Potential
    Change in Control means the happening of any one of the
    following:
    

		
	 	     
    (a) 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 11(B)(2) above; or
    
	 
	 	     
    (b) The acquisition of beneficial ownership,
    directly or indirectly, by any entity, person or group (other
    than the Company, a subsidiary 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 20% 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.
    

		
	 	     
    (4) Definition of Change in Control
    Price. For purposes of this Section 11, Change in
    Control Price means the highest price per share bid or paid, as
    applicable, in any transaction reported by the National
    Association of Securities Dealers on the Nasdaq National Market
    System or otherwise or on any stock exchange on which the Shares
    are listed or paid or offered in any bona fide transaction
    related to a potential or actual Change in Control of the
    Company at any time during the 60-day period immediately
    preceding the occurrence of the Change in Control (or, where
    applicable, the occurrence of the Potential Change in Control
    event).
    

     
(D) Compliance with Law and Approval of
Regulatory Bodies. No right under the Plan shall be
exercisable and no Shares will be delivered under this Plan
except in compliance with all applicable Federal and State laws
and regulations including, without limitation, compliance with
withholding tax requirements, compliance with Federal and State
securities laws and regulations and with the rules of all
domestic stock exchanges on which the Company’s Shares may
be listed. Any Share certificate issued to evidence shares for
which a Stock Option is exercised may bear legends and
statements the Committee shall deem advisable to assure
compliance with Federal and State laws

16

 

and regulations, to implement buy-sell
restrictions, or for other purposes deemed appropriate by the
Committee. No Stock Option shall be exercisable and no Shares
will be delivered under this Plan, until the Company has
obtained consent or approval from regulatory bodies, Federal or
State, having jurisdiction over such matters as the Committee
may deem advisable. The Company shall not be required to deliver
any Shares or other securities under the Plan prior to such
registration or other qualification of such Shares or other
securities under any State or Federal law, rule or regulation as
the Committee shall determine to be necessary or advisable.

     
In the case of the exercise of any Stock Option
by a person or estate acquiring the right to exercise the Stock
Option by bequest or inheritance, the Committee may require
reasonable evidence as to the ownership of the Stock Option and
may require consents and releases of taxing authorities that it
may deem advisable.

     
The Committee may require each person acquiring
Shares under the Plan (1) to represent and warrant to and
agree with the Company in writing that such person is acquiring
the Shares without a view to the distribution thereof, and
(2) to make such additional representations, warranties,
and agreements with respect to the investment intent of such
person or persons as the Committee may reasonably request. Any
certificates for such Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on
transfer.

     
All Shares or other securities delivered under
the Plan shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Shares
are then listed, and any applicable federal or state securities
law, and the Committee may cause a legend or legends to be put
on any certificates evidencing such Shares to make appropriate
reference to such restrictions.

     
(E) No Right to Employment. The
adoption of the Plan, its operation, any document describing or
referring to the Plan, or any part thereof, or the grant of one
or more Awards to an Eligible Employee of the Company or any of
its subsidiaries shall not confer upon any Participant under
this Plan any right to continue in the employ of the Company or
its subsidiaries or any other affiliated entity, or shall not in
any way affect the right and power of the Company to terminate
the employment of any Participant under this Plan at any time
with or without assigning a reason therefor, to the same extent
as the Company might have done if this Plan had not been adopted.

     
(F) Restriction on Exercise After
Termination. Notwithstanding any provision of this Plan to
the contrary, no unexercised right created under this Plan (an
“Unexercised Right”) and held by a Participant on the
date of termination of such Participant’s employment by the
Company and its subsidiaries for any reason shall be exercisable
after such termination if, prior to such exercise, the
Participant violates any non-competition or confidentiality
agreement or similar provision set forth in the Award Agreement
pursuant to which such Unexercised Right was awarded.

     
(G) Successors in Interest. This Plan
shall be binding upon, inure to the benefit of, and be
enforceable by and against successors, assignees and transferees
of the Company and, if appropriate, the personal representatives
and heirs of the Eligible Employee.

     
(H) Rights as a Stockholder. No
Participant or his executor or administrator or other transferee
shall have any rights of a stockholder in the Company with
respect to the Shares covered by an Award unless and until such
Shares have been duly issued and delivered to him under the Plan.

17

 

     
(I) Acceleration of Rights. The
Committee shall have the authority, in its discretion, to
accelerate the time at which a Stock Option or other Award right
shall be exercisable whenever it may determine that such action
is appropriate by reason of changes in applicable tax or other
laws or other changes in circumstances occurring after the grant
of the Award.

     
(J) Interpretation, Amendment or
Termination of the Plan. The interpretation by the Committee
of any provision of the Plan or of any Award Agreement executed
pursuant to the grant of an Award under the Plan shall be final
and conclusive upon all Participants or transferees under the
Plan. The Board, without further action on the part of the
stockholders of the Company, may from time to time alter, amend,
or suspend the Plan or may at any time terminate the Plan,
provided that: (1) no such action shall materially and
adversely affect any outstanding Stock Option or other right
under the Plan without the consent of the holder of such Stock
Option or other right; and (2) except for the adjustments
provided for in Section 11(A), above, no amendment may be
made by Board action without stockholder approval if the
amendment would (a) materially increase the benefits
accruing to Participants under the Plan, (b) materially
increase the number of Shares which may be issued under the
Plan, (c) materially modify the requirements as to
eligibility for participation in the Plan, (d) extend the
maximum option period of Stock Options, or (e) effect any
other change which requires stockholder approval under
applicable law or regulation. Subject to the above provisions,
the Board shall have authority to amend the Plan to take into
account changes in applicable tax and securities laws and
accounting rules, as well as other developments.

     
(K) Unfunded Status of the Plan. The
Plan is intended to constitute an “unfunded” plan for
incentive compensation. With respect to any payments or
deliveries of Shares not yet made by the Company to a
Participant or transferee nothing contained herein shall give
any such Participant or transferee any rights that are greater
than those of a general creditor of the Company. The Committee
may authorize the creation of trusts or other arrangements to
meet obligations created under the Plan to deliver Shares or
payments hereunder consistent with the foregoing.

     
(L) Protection of Board and
Committee. No member of the Board or the Committee shall
have any liability for any determination or other action made or
taken in good faith with respect to the Plan or any Award
granted under the Plan.

     
(M) Government Regulations.
Notwithstanding any provision of the Plan or any Award Agreement
executed pursuant to the Plan, the Company’s obligations
under the Plan and such Award Agreement shall be subject to all
applicable laws, rules, and regulations and to such approvals as
may be required by any governmental or regulatory agencies,
including without limitation any stock exchange on which the
Company’s Shares may then be listed.

     
(N) Genders and Numbers. When
permitted by the context, each pronoun used in the Plan shall
include the same pronoun in other genders and numbers.

     
(O) Captions. The captions of the
various sections of the Plan are not part of the context of the
Plan, but are only labels to assist in locating those sections,
and shall be ignored in construing the Plan.

     
(P) Effective Date of the Plan. This
Plan was originally effective on July 1, 2000. This Plan as
amended and restated shall be effective upon approval by the
shareholders of the Company (the “Effective Date”).
This Plan as amended and restated shall be submitted to the
shareholders of the

18

 

Company for approval at the Company’s 2005
annual meeting of shareholders, anticipated to be held on
May 11, 2005.

     
(Q) Duration of the Plan. Unless
previously terminated by the Board, this Plan shall terminate
ten years from the original effective date of July 1, 2000
and no Award shall be granted under it thereafter, but such
termination shall not affect any Award theretofore granted.

     
(R) Governing Law. The Plan shall be
construed and governed by the laws of the State of Ohio.

     
(S) Withholding Tax. The Company, at
its option, shall have the right to require the Participant or
any other person receiving Shares, Restricted Shares,
Performance Shares or Performance Units (including cash
payments) to pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Shares,
Restricted Shares, Performance Shares, or Performance Units or,
in lieu of such payment, to retain or sell without notice a
number of such Shares subject to the applicable Award sufficient
to cover the amount required to be so withheld. The Company, at
its option, shall have the right to deduct from all dividends
paid with respect to Shares, Restricted Shares, Performance
Shares, and Performance Units the amount of any taxes which the
Company is required to withhold with respect to such dividend
payments. The Company, at its option, shall also have the right
to require a Participant to pay to the Company the amount of any
taxes which the Company is required to withhold with respect to
the receipt by the Participant of Shares pursuant to the
exercise of a Stock Option, or, in lieu thereof, to retain, or
sell without notice, a number of Shares sufficient to cover the
amount required to be withheld. The obligations of the Company
under the Plan shall be conditional on such payment or other
arrangements acceptable to the Company.

     
(T) Savings Clause. In case any one
or more of the provisions of this Plan or any Award shall be
held invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby,
and the invalid, illegal, or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law,
any provision which could be deemed null and void shall first be
construed, interpreted, or revised retroactively to permit this
Plan or such Award, as applicable, to be construed so as to
foster the intent of this Plan. This Plan and all Awards are
intended to comply in all respects with applicable law and
regulation, including Code Section 422, Rule 16b-3
under the 1934 Act (with respect to persons subject to
Section 16 of the 1934 Act (“Reporting
Persons”)), and Code Section 162(m) (with respect to
covered employees as defined under Code Section 162(m)
(“Covered Employees”)). In case any one or more of the
provisions of this Plan or any Award shall be held to violate or
be unenforceable in any respect under Code Section 422,
Rule 16b-3, or Code Section 162(m), then, to the
extent permissible by law, any provision which could be deemed
to violate or be unenforceable under Code Section 422,
Rule 16b-3, or Code Section 162(m) shall first be
construed, interpreted, or revised retroactively to permit the
Plan or such Award, as applicable, to be in compliance with Code
Section 422, Rule 16b-3, and Code Section 162(m).
Notwithstanding anything in this Plan to the contrary, the
Committee, in its sole discretion, may bifurcate the Plan so as
to restrict, limit, or condition the use of any provision of
this Plan to Participants who are Reporting Persons or Covered
Employees without so restricting, limiting, or conditioning this
Plan with respect to other Participants.

19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}]]