Exhibit 10.60
Clyde H. Fitch
EXECUTIVE CHANGE OF CONTROL
AGREEMENT
This Executive Change of Control
Agreement (this “ Agreement ’) is made as
of April 25, 2008 (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 Clyde H. Fitch
(“ 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
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A.
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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.
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B.
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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.
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Statement of
Agreement
The parties hereby acknowledge the
accuracy of the foregoing Background Information and hereby agree
as follows:
Article 1
Definitions.
As used in this Agreement, the
following defined terms shall have the meanings set forth
below:
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1.1
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ADEA means the Age Discrimination in Employment Act
of 1967.
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1.2
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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.
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1.3
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Cause means any of the following:
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(a)
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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
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(b)
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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
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(c)
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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
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(d)
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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
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(e)
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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.
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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.
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1.4
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Change of Control
means the occurrence of any of the
following:
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(a)
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Any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “ Exchange Act
’)) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), Directly or
Indirectly, of securities of State Auto Financial representing 25%
or more of the combined voting power of State Auto
Financial’s then outstanding securities, excluding
(i) any acquisition by State Auto Financial or any Subsidiary;
(ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by State Auto Financial, a
Subsidiary or State Auto Mutual; or (iii) any acquisition by
State Auto Mutual; or
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(b)
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A majority of the Board of
Directors of State Auto Financial at any time is comprised of other
than Continuing Directors; or
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(c)
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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
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(d)
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Any of the following
occurs:
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(i)
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a merger or consolidation of
State Auto Financial, other than a merger or consolidation in which
the voting securities of State Auto Financial immediately prior to
the merger or consolidation continue to represent (either by
remaining outstanding or being converted into securities of the
surviving entity) more than 50% of the combined voting power of
State Auto Financial or surviving entity immediately after the
merger or consolidation with another entity;
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(ii)
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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;
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(iii)
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a reorganization, reverse stock
split, or recapitalization of State Auto Financial which would
result in any of the foregoing; or
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(iv)
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a transaction or series of
related transactions having, Directly or Indirectly, the same
effect as any of the foregoing.
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(e)
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As respects State Auto Mutual,
any of the following occurs:
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(i)
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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
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(ii)
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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.
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Notwithstanding the foregoing, for
purposes of this Change of Control definition, the percentage of
securities ownership listed under subsection (a) above (i.e.,
25%) shall increase or decrease, as the case may be, such that the
percentage of securities ownership is consistent with any future
changes to the percentage of securities ownership represented in
the Change of Control definition in Section 11 (B)(2)(a) (or
any successor Section) of the State Auto Financial Corporation
Amended and Restated Equity Incentive Compensation Plan, as amended
from time to time.
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1.5
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Code means the Internal Revenue Code of 1986, as
amended.
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1.6
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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.
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1.7
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Continuing Director
of State Auto Financial or State
Auto Mutual, as the case may be, means a director who was
either;
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(a)
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first elected or appointed as a
director on or prior to the Effective Date; or
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(b)
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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.
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1.8
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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.
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1.9
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Disability
means illness or other incapacity as
determined under State Auto’s long-term disability
policy.
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1.10
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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.
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1.11
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Good Reason
means the occurrence of any one or
more of the following:
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(a)
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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;
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(b)
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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 Potential
Annual Award prior to a Change of Control;
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(c)
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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);
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(d)
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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;
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(e)
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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
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(f)
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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.
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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.
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1.12
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LBP means the State Auto Financial Corporation
Leadership Bonus Plan.
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1.13
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Potential 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 two calendar
years immediately preceding the calendar year in which the Change
of Control occurs.
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1.14
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QPB means the State Auto Quality Performance Bonus
Plan.
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1.15
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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.
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1.16
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Short Term Incentive
Plans means collectively,
the LBP, the QPB and any other short term incentive compensation
plan of State Auto.
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1.17
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Subsidiary
means any corporation, insurance
company or other entity a majority of the voting control of which
is Directly or Indirectly owned or controlled at the time by State
Auto Financial.
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1.18
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Term means the three-year period commencing on the
Effective Date of this Agreement and ending on the third
anniversary thereof, both dates inclusive; 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 38
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.
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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:
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(a)
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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).
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(b)
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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 Potential 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
Potential 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).
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(c)
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Stock Options
. Stock options held by Executive
become exercisable upon a Change of Control according to the terms
of State Auto’s Stock Option Plans and any option agreements
affecting outstanding option grants, as interpreted by State
Auto’s Stock Option Committee as such Committee existed
immediately prior to the Change of Control.
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(d)
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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 and paid no later than December 31
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of the third
calendar year following the calendar year of Executive’s
separation from service.
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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
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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) and (b) above shall be paid not later
than 45 business days following the date Executive’s
employment terminates, unless Executive is a “specified
employee” as defined in Code Section 409A and described
below.
Executive acknowledges and agrees
that the Severance Benefits provided in this Section 2.1 shall
be the sole 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 benefits under any other “change of control”
provision applicable to Executive with respect to his employment by
State Auto. Executive also acknowledges and agrees that receipt of
any Severance Benefits provided in this Section 2.1 shall be
subject to and conditioned on Executive executing a general release
and waiver of any claims against State Auto or its
successors.
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:
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(a)
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State Auto Mutual or State Auto
Financial terminates the Executive’s employment for any
reason other than for Cause, the death or Disability of Executive
or Executive’s mandatory retirement at age 65, as permitted
under regulations Section 1625.12 of the ADEA, within 24
months after a Change of Control; or
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(b)
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Executive terminates his
employment for Good Reason within 24 months after a Change of
Control; or
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(c)
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State Auto Mutual or State Auto
Financial terminates the Executive’s employment 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.
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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 seek
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