Exhibit 10.29
EXECUTIVE
AGREEMENT
This Executive Agreement (this
“Agreement”) is made as of March 2, 2006, by and
among State Auto Financial Corporation, an Ohio corporation
(“State Auto Financial”), State Automobile Mutual
Insurance Company, an Ohio domiciled mutual insurance company
(“State Auto Mutual”), and Robert P. Restrepo, Jr. (the
“Executive”).
BACKGROUND
INFORMATION
State Auto Financial is a majority
controlled, publicly traded holding company subsidiary of State
Auto Mutual, which is the ultimate controlling person of the State
Auto holding company system and, together with their respective
operating subsidiaries and affiliates, State Auto Financial and
State Auto Mutual engage in the property casualty insurance
business. Each of State Auto Financial and State Auto Mutual
(collectively, the “Companies”) considers the
establishment and maintenance of a sound and vital management to be
an important part of their overall corporate strategy and to be
essential to protecting and enhancing the interests of the
Companies and their respective owners. As part of this corporate
strategy, the Companies wish to act to retain their well-qualified
executive officers notwithstanding any actual or threatened change
in control of State Auto Financial or State Auto Mutual.
Executive is a party to an
Employment Agreement with the Companies dated as of March 2,
2006, as it may be amended from time to time (the “Employment
Agreement”). The Employment Agreement does not address the
impact of a Change in Control (as defined below), except to
incorporate by reference the provisions of this
Agreement.
Executive is the Chairman and Chief
Executive Officer and will be President, as of March 3, 2006,
of State Auto Financial and State Auto Mutual and their respective
wholly owned subsidiaries and insurer affiliates, and the
Executive’s services, experience and knowledge of the
business of the Companies, and reputation and contacts in the
industry are extremely valuable to the Companies. The
Executive’s continued dedication, availability, advice, and
counsel to the Companies are deemed important to the Companies, the
Boards of Directors of State Auto Financial and State Auto Mutual
(collectively, the “Board”), and their shareholders and
policyholders, respectively. It is, therefore, in the best
interests of the Companies to secure the continued services of the
Executive notwithstanding any actual or threatened change in
control of the Companies. Accordingly, the Board of State Auto
Financial and State Auto Mutual, acting by and through the
Executive Compensation Committee and Nominating and Governance
Committee, respectively, has approved this Agreement with the
Executive and authorized its execution and delivery on behalf of
the Companies.
STATEMENT OF
AGREEMENT
In consideration of the mutual
covenants set forth herein and INTENDING TO BE LEGALLY BOUND
HEREBY, the Companies and Executive hereby agree as
follows:
1. Term of Agreement . This
Agreement will begin on the date entered above and will continue in
effect through March 1, 2009. The Agreement may be extended
for additional one-year terms upon the written consent of the
parties,; provided that this Agreement shall terminate concurrent
with the termination of the Employment Agreement. Notwithstanding
the above, if a
“Change of Control” (as defined
herein) of the Companies occurs during the term of this Agreement,
the term of this Agreement will be extended for thirty-six
(36) months beyond the end of the month in which any such
Change of Control occurs.
2. Definitions. The following
defined terms shall have the meanings set forth below, for purposes
of this Agreement:
(a) Annual Award.
“Annual Award” means the cash payment paid or payable
to the Executive with respect to a fiscal year under the
Companies’ Incentive Bonus Arrangement with
Executive.
(b) Annual Base Salary.
“Annual Base Salary” means the greater of (1) the
highest annual rate of base salary in effect for the Executive
during the 12 month period immediately prior to a Change of Control
or, (2) the annual rate of base salary in effect at the time
Notice of Termination is given (or on the date employment is
terminated if no Notice of Termination is required).
(c) Cause.
“Cause” shall be given the meaning used in the
Employment Agreement.
(d) Change of Control
.
“Change of Control”
means the occurrence of any of the following:
(1) 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 any such
acquisition by State Auto Mutual; or
(2) A majority of the Board of
Directors of State Auto Financial at any time is comprised of other
than Continuing Directors (for purposes of this Agreement, the term
“Continuing Director” means a director who was either
(A) first elected or appointed as a Director prior to the date
of this Agreement; or (B) subsequently elected or appointed as
a director if such director was nominated by the Nominating and
Governance Committee or appointed by at least two thirds of the
then Continuing Directors); or
(3) Any event or transaction if
State Auto Financial would be required to report it in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act; or
(4) Any of the following
occurs:
(A) 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
2
securities of the surviving entity)
51% or more of the combined voting power of State Auto Financial or
surviving entity immediately after the merger or consolidation with
another entity;
(B) 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;
(C) a reorganization, reverse stock
split, or recapitalization of State Auto Financial which would
result in any of the foregoing; or
(D) a transaction or series of
related transactions having, directly or indirectly, the same
effect as any of the foregoing.
(5) As respects State Auto Mutual,
any of the following occurs:
(A) 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
(as defined above).
(B) 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 (as
defined above).
(C) State Auto Mutual is subject to
an order of rehabilitation or liquidation entered by the insurance
commissioner of the state of domicile of State Auto Mutual, provide
that such order must be entered prior to February 9, 2008 for
such order to constitute a change in control.
(e) Change Year.
“Change Year” means the fiscal year in which a Change
of Control occurs.
(f) Disability.
“Disability” shall be given the meaning used in the
Employment Agreement.
(g) Employee Benefits.
“Employee Benefits” means the perquisites, 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 the 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 the Companies),
disability, salary continuation, expense reimbursement, and other
employee benefit policies, plans, programs, or arrangements that
may now exist or any equivalent successor policies, plans,
programs, or
3
arrangements that may be adopted
hereafter, providing perquisites and benefits at least as great in
a monetary equivalent as are payable thereunder prior to a Change
in Control.
(h) Employment Agreement.
“Employment Agreement” means as described
above.
(i) Good Reason. “Good
Reason” means the occurrence of any one or more of the
following:
(1) The assignment to the Executive
of duties which are materially and adversely different from or
inconsistent with the duties, responsibilities, and status of the
Executive’s position at any time during the 12 month period
prior to such Change of Control, or which result in a significant
change in the Executive’s authority and responsibility as the
Chief Executive Officer of the Companies;
(2) A reduction by the Companies in
the Executive’s Annual Base Salary in place as of the day
immediately prior to a Change of Control, or the failure to grant
salary increases and bonus payments on a basis comparable to those
granted to other executives of the Companies, or a reduction of the
Executive’s most recent highest incentive bonus potential
under the Executive’s Incentive Bonus Arrangement prior to
such Change of Control, or any successor to such
arrangement;
(3) A demand by the Companies that
the Executive relocate to a location in excess of 35 miles from the
location where the Executive is currently based, or in the event of
any such relocation with the Executive’s express written
consent, the failure of the Companies or a Subsidiary to pay (or
reimburse the Executive for) all reasonable moving expenses
incurred by the Executive relating to a change of principal
residence in connection with such relocation and to indemnify the
Executive against any loss in the sale of the 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);
(4) The failure of the Companies to
obtain a satisfactory agreement from any successor to the Companies
to assume and agree to perform this Agreement, as contemplated in
Section 16 of this Agreement;
(5) The failure of the Companies to
provide the Executive with substantially the same Employee Benefits
that were provided to him immediately prior to the Change in
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 such Change in Control, is substantially comparable in all
material respects to such Employee Benefits taken as a whole;
or
(6) Any reduction in the
Executive’s compensation or benefits or adverse change in the
Executive’s location or duties, if such reduction or adverse
change occurs at any time after the commencement of any discussion
with a third party relating to a possible Change of Control of the
Companies involving such third
4
party, if such reduction or 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 reduction or adverse change.
The existence of Good Reason shall
not be affected by the Executive’s incapacity due to physical
or mental illness. The Executive’s continued employment shall
not constitute a waiver of the Executive’s rights with
respect to any circumstance constituting Good Reason under this
Agreement. The Executive’s determination of Good Reason shall
be conclusive and binding upon the parties to this Agreement
provided such determination has been made in good faith.
(j) Highest Incentive Bonus.
“Highest Incentive Bonus” means the greater of the
Executive’s Potential Annual Award for (a) the Change
Year or (b) the year immediately preceding the Change
Year.
(k) Incentive Bonus
Arrangement. “Incentive Bonus Arrangement” means
the Companies’ Incentive Bonus Arrangement (including the
“Arrangement” as defined in the Employment Agreement
and the payment due under the Long Term Plan as defined in the
Employment Agreement) for the Executive in effect for any calendar
year(s) during the period this Agreement is in force.
(l) Notice of Termination.
“Notice of Termination” means a written notice
indicating the specific termination provision in this Agreement
relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
employment under the provision so indicated.
(m) Potential Annual Award.
“Potential Annual Award” means the maximum possible
Annual Award the Executive could receive according to his or her
Incentive Bonus Arrangement for the calendar year immediately
preceding the Change Year or the calendar year that is the Change
Year, whichever is higher, assuming that (1) the parameters
for the maximum Annual Award, under the Executive’s Incentive
Bonus Arrangement were met (whether or not such parameters for such
maximum Annual Award actually were or could be met) and
(2) the Executive’s Annual Base Salary is used to
determine the Potential Annual Award.
(n) Retirement.
“Retirement” means having reached normal retirement age
as defined in the State Auto Insurance Companies Employee
Retirement Plan (“State Auto Pension Plan”) or taking
early retirement in accordance with the terms of the State Auto
Pension Plan.
(o) Severance Benefits.
“Severance Benefits” means the benefits described in
Section 4 of this Agreement, as adjusted by the applicable
provisions of Section 5 of this Agreement.
(p) Subsidiary.
“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.
5
3. Eligibility for Severance Benefits.
The Companies or their successor shall pay or provide to the
Executive the Severance Benefits if the Executive’s
employment is terminated voluntarily or involuntarily during the
term of this Agreement, either:
(a) by the Companies at any time
within 24 months after a Change of Control; or
(b) by the Executive for Good Reason
at any time within 24 months after a Change of Control
or;
(c) By the Companies at any time
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.
4. Severance Benefits. The
Executive, if eligible under Section 3, shall receive the
following Severance Benefits, adjusted by the applicable provisions
of Section 5 (in addition to accrued compensation, bonuses,
and vested benefits and other equity based awards);
(a) Annual Base Salary. In
addition to any accrued compensation payable as of the
Executive’s termination of employment (either by reason of
Executive’s Employment Agreement or otherwise), a lump sum
cash amount equal to the Executive’s Annual Base Salary,
multiplied by 3, unless at the time of such employment termination
the Executive is within three years of mandatory retirement at age
65, in which case the benefit due under this Section 4(a)
shall not exceed Executive’s Annual Base Salary multiplied by
a factor equal to the number of months remaining until the
Executive attains age 65 presented a whole integer and a fraction
of a partial year (e.g., 15 months equals 1.25).
(b) Annual Incentive
Compensation. In addition to any compensation otherwise payable
pursuant to the Executive’s Incentive Bonus Arrangement and
the bonus payable under the Companies’ Quality Performance
Bonus Plan (“QPB Plan”), a lump sum cash amount equal
to the Executive’s Highest Incentive Bonus and the total
bonus under the QPB Plan paid to Executive during the calendar year
immediately preceding the Change Year, multiplied by 3 unless at
the time of such employment termination the Executive is within
three years of mandatory retirement at age 65, in which case the
benefit due under this Section 4(b) shall not exceed the
Executive’s Highest Incentive Bonus and total bonus under the
QPB Plan, as aforesaid multiplied by a factor equal to the number
of months remaining until the Executive attains age 65 presented a
whole integer and a fraction of a partial year (e.g., 15 months
equals 1.25). In order to be entitled to a payment pursuant to this
Section 4(b), the Executive must have been a party to
Incentive Bonus Arrangement at some time during the 12 month period
immediately preceding the Change of Control.
(c) Insurance Benefits. For a
three year period, commencing on the date the employment is
terminated, the Companies will arrange to provide to the Executive
at the Companies’ expense, subject to the then current
employee contribution being paid by Executive, with:
(1) Health Care. Health care
coverage comparable to that in effect for the Executive immediately
prior to the termination (or, if more favorable to the
6
Executive, that furnished generally
to salaried employees of the Companies on the date immediately
preceding th
