Form DEFA14A State Auto Financial

---

TABLE OF CONTENTS

EXHIBITS

SCHEDULES

Section 5.13     Insurance Business.

(a)          All STFC Insurance Contracts that are In Force as of the date of this Agreement and any and all marketing materials utilized by STFC and its Subsidiaries in the marketing and sale of STFC Insurance Contracts since December 31, 2018, are, to the extent required under applicable Laws, on forms and at rates approved by the Insurance Regulator of the jurisdiction where issued or, to the extent required by applicable Laws, have been filed with and not objected to by such authority within the period provided for objection, except as would not, individually or in the aggregate, have a STFC Material Adverse Effect.

(b)          Except as would not, individually or in the aggregate, have a STFC Material Adverse Effect, since December 31, 2018, to the Knowledge of STFC (i) each STFC Producer, at the time such STFC Producer sold or produced any STFC Insurance Contract, was duly and appropriately appointed by a STFC Insurance Company, in compliance with applicable Law, to act as a STFC Producer for a STFC Insurance Company and was duly and appropriately licensed as a STFC Producer (for the type of business sold or produced by such STFC Producer on behalf of a STFC Insurance Company), in each jurisdiction in which such STFC Producer was required to be so licensed, and no such STFC Producer violated any term or provision of applicable Law relating to the sale or production of any STFC Insurance Contract, (ii) no STFC Producer has breached the terms of any agency or broker contract with a STFC Insurance Company or violated any Law or policy of a STFC Insurance Company in the solicitation, negotiation, writing, sale or production of business for any STFC Insurance Company, (iii) no STFC Producer has been enjoined, indicted, convicted or made the subject of any consent decree or judgment on account of any violation of applicable Law in connection with such STFC Producer’s actions in his, her or its capacity as a STFC Producer for a STFC Insurance Company or any enforcement or disciplinary proceeding alleging any such violation and (iv) neither STFC nor any STFC Insurance Company has received any written notice or inquiry from any Governmental Authority with respect to any STFC Producer regarding any of the matters described in clauses (i) through (iii), or the STFC Producer’s compliance therewith.  Except as would not, individually or in the aggregate, have a STFC Material Adverse Effect, there are no outstanding (x) disputes with STFC Producers concerning commissions or other incentive compensation, (y) to the Knowledge of STFC, errors and omissions claims against any STFC Producer or (z) material amounts owed by any STFC Producer to STFC or any of the STFC Insurance Companies.

(c)          Since December 31, 2018, all claims presented by any Person under any STFC Insurance Contract issued by any STFC Insurance Company have in all material respects been acknowledged, and either paid, provision for payment thereof has been made, or appropriate notice and objection for any disputed claim has been sent to the claimant in accordance with the terms of such STFC Insurance Contract and the Laws under which they arose, except for any such claims made for which the applicable STFC Insurance Company reasonably believes or believed that there is a reasonable basis to contest payment.

(d)          Since December 31, 2018, the STFC Insurance Contracts have been marketed, sold and issued in compliance in all material respects with all applicable Laws.

(e)          Each of the STFC Insurance Companies has timely filed, on forms prescribed or permitted by the applicable Governmental Authorities, all required Holding Company System Regulatory Act filings with the applicable Governmental Authorities since December 31, 2018.  STFC has made available to LMHC all material Holding Company System Regulatory Act filings or submissions made by STFC or any of the STFC Insurance Companies with any Insurance Regulator since December 31, 2018, including any requests for extraordinary dividends, notifications of ordinary dividends, prior approvals for intercompany agreements, guarantees, cost sharing agreements, purchases, extensions of credit, investments, and reinsurance agreements, as required, and any material written communication received from any Insurance Regulator relating thereto, including approvals from any Insurance Regulator related to the foregoing.

(f)          STFC has made available to LMHC true, complete and correct copies of all material Risk-Based Capital reports for STFC or any of the STFC Insurance Companies that cover periods beginning on or after December 31, 2018.  None of STFC or any of the STFC Insurance Companies has suffered a decrease in its Risk-Based Capital to “Company Action Level.”

(g)          STFC has made available to LMHC copies of all (i) Own Risk Solvency Assessment reports filed with Superintendent and (ii) Corporate Governance Annual Disclosures filed with Superintendent, in each case, since December 31, 2018.

Section 5.14     Reinsurance.

(a)          (i) Section 5.14(a)(i) of the STFC Disclosure Letter sets forth a list of each reinsurance or retrocession Contract to which any STFC Insurance Company is a party and under which the STFC Insurance Companies party thereto have ceded or retroceded reserves, individually or in the aggregate, of $1,000,000 or more as of the date hereof (the “STFC Ceded Reinsurance Contracts”) and (ii) Section 5.14(a)(ii) of the STFC Disclosure Letter sets forth a list of each reinsurance or retrocession Contract to which any STFC Insurance Company is a party and under which the STFC Insurance Companies party thereto have assumed reserves, individually or in the aggregate, of $1,000,000 or more as of the date hereof (the “STFC Assumed Reinsurance Contracts,” and, together with the STFC Ceded Reinsurance Contracts, the “STFC Reinsurance Contracts”).  STFC has made available to LMHC a copy of each STFC Reinsurance Contract.

(b)          Assuming the due authorization, execution and delivery thereof by the other party or parties thereto (i) each STFC Reinsurance Contract is a valid and binding obligation of any of the STFC Insurance Companies party thereto and, to the Knowledge of STFC, each other party or parties thereto, in accordance with its terms, subject to the Bankruptcy and Equity Exception, (ii) each STFC Reinsurance Contract is in full force and effect, (iii) no termination, springing collateral or other trigger event or similar circumstance or condition applicable to any STFC Insurance Company has occurred with respect to any STFC Reinsurance Contract, (iv) any applicable STFC Insurance Company is not and, to the Knowledge of STFC, no other party thereto is in default in the performance, observation or fulfillment of any obligation, covenant or condition contained in each STFC Reinsurance Contract, (v) no event has occurred that, with or without notice, lapse of time or both, would constitute a default by any of the STFC Insurance Company, or to the Knowledge of STFC, by any other party thereto, under any STFC Reinsurance Contract and (vi) each STFC Ceded Reinsurance Contract to which STFC took credit on the STFC Statutory Statements contains all terms and conditions necessary for any STFC Insurance Company party thereto to take full credit on its statutory financial statements for the reinsurance provided thereunder, except, with respect to each of the foregoing clauses (i), (ii), (iii), (iv), (v) and (vi) as would not, individually or in the aggregate, have a STFC Material Adverse Effect.

(c)          Section 5.14(c)(i) of the STFC Disclosure Letter sets forth a list of each reinsurance or retrocession claim under the STFC Ceded Reinsurance Contracts with ceded recoverables and ceded reserves of $1,000,000 or more (the “STFC Ceded Claims”) and Section 5.14(c)(ii) of the STFC Disclosure Letter sets forth a list of each assumed claim under the STFC Assumed Reinsurance Contracts with assumed recoverables and assumed reserves of $1,000,000 or more (the “STFC Assumed Claims”).  With respect to the STFC Ceded Claims and the STFC Assumed Claims, (i) no recoverables with respect to the STFC Ceded Claims are in dispute or over ninety (90) days past due, (ii) no payables with respect to the STFC Assumed Claims are in dispute or over ninety (90) days past due, (iii) no arbitration demands have been issued with respect to any STFC Ceded Claim or STFC Assumed Claim and no arbitration proceedings have been instituted with respect to any STFC Ceded Claim or STFC Assumed Claim and (iv) to the Knowledge of STFC, there are no pending or threatened arbitration demands or proceeding with respect to any STFC Ceded Claim or STFC Assumed Claim, except, with respect to each of the foregoing clauses (i), (ii), (iii) or (iv) where such disputed or past due amounts, arbitration demands, arbitration proceedings or impending arbitration demands or proceedings would not, individually or in the aggregate, have a STFC Material Adverse Effect.

Section 5.15     Actuarial Reports.  As of the date of this Agreement, with respect to the SAM Insurance Companies, SAM has made available to LMHC all material actuarial reports in SAM’s possession and prepared by actuaries, independent or otherwise, that cover periods beginning on or after December 31, 2018.  The information and data furnished by the SAM Insurance Companies to its independent actuaries in connection with the preparation of such actuarial reports were accurate and complete in all material respects for the periods covered in such reports.

Section 5.16     STFC Investment Assets.

(a)          Except as would not, individually or in the aggregate, have a STFC Material Adverse Effect, (i) as of the date hereof, each of the investment assets owned by a STFC Insurance Company (the “STFC Investment Assets”) complies with the investment policies and guidelines of the applicable STFC Insurance Company and (ii) STFC and each of the STFC Insurance Companies has good and marketable title in and to all of the STFC Investment Assets it purports to own, free and clear of all Liens, other than Permitted Liens.

(b)          Neither STFC nor any of its Subsidiaries has any funding obligations of any kind, or obligation to make any additional advances, capital contributions or investments (including any obligation relating to any currency or interest rate swap, hedge or similar arrangement) in respect of, any of the STFC Investment Assets that are in excess of $100,000,000.  There are no outstanding commitments, options, put agreements or other arrangements relating to the STFC Investment Assets to which STFC or any of its Subsidiaries may be subject upon or after the Closing that are in excess of $100,000,000.

Section 5.17     Taxes.

(a)          All income, premium and other material Tax Returns required to be filed by or with respect to STFC or any of its Subsidiaries have been timely filed (taking into account valid extensions), and all such Tax Returns are true, correct and complete in all material respects.  All income, premium and other material Taxes required to be paid by or on behalf of or with respect to STFC or any of its Subsidiaries, whether or not shown as due on any such Tax Returns, have been timely paid to the appropriate Governmental Authority.  With respect to any period for which Tax Returns have not yet been filed or for which Taxes are not yet due or payable, STFC and its Subsidiaries have made adequate accruals for such Taxes on the STFC Financial Statements.  No material Tax Liability has been incurred by or with respect to STFC or any of its Subsidiaries since the date of the STFC Financial Statements, except for Taxes incurred in the ordinary course of business.

(b)          (i) All material Taxes required to be withheld under applicable Law in connection with amounts paid by STFC or any of its Subsidiaries to any employee, independent contractor, creditor, shareholder or other third party have been withheld and timely paid to the appropriate Governmental Authority and (ii) STFC and each of its Subsidiaries have otherwise complied in all material respects with all applicable Laws relating to the withholding, collection and remittance of Taxes (including information reporting requirements).

(c)          None of STFC or any of its Subsidiaries has received any written notice of any actions for the assessment or collection of material Taxes, and there are no pending, and to the Knowledge of STFC, no proposed or threatened audits, investigations, examinations, or other proceedings by a Governmental Authority with respect to any material Taxes or Tax Returns of STFC or any of its Subsidiaries.

(d)          There are no currently pending written requests for waivers of the time to assess any material Tax of STFC or any of its Subsidiaries.  None of STFC or any of its Subsidiaries has waived any statute of limitations with respect to material Taxes, or agreed to any extension of time with respect to a material Tax assessment or deficiency, which waiver or extension is currently in effect.

(e)          No written claim has been made by a Governmental Authority in a jurisdiction in which STFC or any of its Subsidiaries does not file Tax Returns or pay Taxes of a particular type claiming that STFC or any such Subsidiary, as applicable, is subject to taxation by that jurisdiction, required to file such Tax Returns, or required to pay such Taxes.  There are no rulings, special Tax incentives, closing agreements, or similar arrangements with any Governmental Authority with regard to material Taxes, Tax Returns, or the determination of a material Tax Liability of STFC or any of its Subsidiaries that would have continuing effect or be binding for periods (or portions thereof) ending after the Closing Date.

(f)          There are no Liens for material Taxes against any of the assets of STFC or any of its Subsidiaries, except for Permitted Liens.

(g)          None of STFC or any of its Subsidiaries is a party to, or bound by, any Tax allocation, indemnification or sharing agreement or arrangement (other than agreements between or among STFC and its Subsidiaries or between or among such Subsidiaries), other than any agreements entered into in the ordinary course of business the primary purpose of which does not relate to Taxes.

(h)          None of STFC or any of its Subsidiaries (i) is or has been a member of any affiliated, consolidated, combined, unitary, loss sharing or similar group for Tax purposes (other than any such group of which STFC is the common parent) or (ii) has any Liability for material Taxes of any other Person under Treasury Regulations section 1.1502-6 (or any similar provision of state, local, or non-U.S. Law), as a transferee or successor, or otherwise under any provision of applicable Law.

(i)          Neither STFC nor any of its Subsidiaries will be required to include any material amount of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date as a result of (i) an adjustment pursuant to Section 481(a) or Section 807(f) of the Code with respect to a change in accounting method that occurred on or before the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any comparable, analogous or similar provision of state, local or non-U.S. Law) entered into on or before the Closing Date, (iii) intercompany transaction consummated on or before the Closing Date or excess loss account existing on or before the Closing Date, in either case described under Section 1502 of the Code (or any comparable, analogous or similar provision of state, local or non-U.S. Law), (iv) installment sale or open transaction disposition occurring on or before the Closing Date or (v) prepaid amount or deposit received on or before the Closing Date.  Neither STFC nor any of its Subsidiaries is required to pay any Tax following the Closing Date as a result of the application of Section 13523(e) of the Tax Cuts and Jobs Act, P.L. No. 115-97.

(j)          None of STFC or any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a transaction intended to qualify pursuant to Section 355 of the Code.

(k)          None of STFC or any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulations section 1.6011-4 (or any similar provision of state, local or non-U.S. Law).

(l)          Each of STFC and its Subsidiaries has, since the date of its inception, been taxed as an insurance company pursuant to Section 831 of the Code.

(m)          STFC and its Subsidiaries have not (i) deferred the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, (ii) claimed any Tax credits under Sections 7001 through 7005 of the Families First Act and Section 2301 of the CARES Act, (iii) sought a covered loan under paragraph (36) of Section 7(a) of the Small Business Act (15 U.S.C. 636(a)), as added by Section 1102 of the CARES Act and (iv) elected to defer any payroll, employment, or similar Taxes pursuant to any Payroll Tax Executive Order.

Section 5.18     STFC Related Party Transactions.  Since December 31, 2018 and through the date hereof, there has been no transaction, or series of related transactions, agreements, arrangements or understandings to which STFC or any of its Subsidiaries was or is to be a party, that would be required to be disclosed, but has not been, under Item 404 of Regulation S-K promulgated under the Securities Act.

Section 5.19     Employee Benefit Plans.

(a)          Section 5.19(a) of the STFC Disclosure Letter sets forth a list of each material STFC Benefit Plan.  With respect to each material STFC Benefit Plan required to be set forth on Section 5.19(a) of the STFC Disclosure Letter, to the extent applicable, STFC has made available to LMHC (i) the plan document (including all amendments thereto) or, if such plan is not in writing, a written summary of such plan, (ii) a copy of any trust or other funding arrangement, (iii) each ERISA summary plan description and summary of material modifications, (iv) the most recently filed annual report on IRS Form 5500, including all schedules thereto, (v) the most recent financial statement and actuarial or other valuation reports prepared with respect thereto, (vi) the most recently received IRS determination letter (or opinion or advisory letter, if applicable) regarding the tax-qualified status of each STFC Benefit Plan that is intended to be tax-qualified and (vii) all material non-routine correspondence to and from any Governmental Authority within the last three (3) years addressing any matter involving actual or potential material Liability relating to a STFC Benefit Plan.

(b)          Except for such matters that, individually or in the aggregate, could not reasonably be expected to result in a STFC Material Adverse Effect, (i) each STFC Benefit Plan has been operated and administered in accordance with its terms and applicable Laws, including but not limited to ERISA, the Code and the Affordable Care Act, and complies in form to the requirements of such applicable Laws and (ii) all contributions required to be made with respect to any STFC Benefit Plan have been timely made and deposited.  All material reports, returns, notices and similar documents required to be filed with any Governmental Authority or distributed to any STFC Benefit Plan participant have been timely filed or distributed.

(c)          During the previous six (6) years, neither STFC, any of its Subsidiaries nor any of their respective ERISA Affiliates have maintained, sponsored, participated in or contributed to (or been obligated to maintain, sponsor, participate in or contribute to), (i) except as set forth on Section 5.19(c)(i) of the STFC Disclosure Letter, a Title IV Plan, (ii) a Multiemployer Plan, (iii) a multiple employer plan as described in Sections 4063 or 4064 of ERISA or Section 413(c) of the Code or (iv) a “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA.  With respect to each STFC Benefit Plan that is a Title IV Plan:

(i)          The minimum funding standards under Section 302 of ERISA and Section 412 of the Code have been satisfied in all material respects and no waiver of any minimum funding standard or extension of any amortization period has been requested or granted.

(ii)         No proceedings have been commenced or threatened by the PBGC to terminate such Title IV Plan.

(iii)        Neither STFC nor any of its ERISA Affiliates has made or suffered a “complete withdrawal” or a “partial withdrawal,” as such terms are respectively defined in Sections 4203 and 4205 of ERISA, from a Multiemployer Plan (or any Liability resulting therefrom has been satisfied in full).  Neither STFC nor any ERISA Affiliate has any contingent Liability under Section 4204 of ERISA.

(iv)        No “reportable event” (within the meaning of Section 4043 of ERISA) has occurred or is expected to occur as a result of the transactions contemplated by this Agreement (other than an event for which the 30-day notice requirement has been waived under applicable PBGC regulations).

(v)         No such Title IV Plan is in “at risk” status within the meaning of Section 430 of the Code or Section 303(i) of ERISA.

(vi)          None of STFC, any of its Subsidiaries or any of their respective ERISA Affiliates has engaged in any transaction described in Section 4069 or 4212(c) of ERISA.

(d)          With respect to each STFC Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code, (i) each such STFC Benefit Plan has received a favorable determination letter or opinion letter from the IRS with respect to its qualification, (ii) the trusts maintained thereunder have been determined to be exempt from taxation under Section 501(a) of the Code and (iii) no event has occurred that would reasonably be likely to result in disqualification or adversely affect such tax-qualification or exemption.

(e)          There are no pending, anticipated or, to the Knowledge of STFC, threatened actions, suits, disputes, hearings or claims against STFC or any of its Subsidiaries with respect to any STFC Benefit Plan or SAM Benefit Plan, by or on behalf of any current or former participant or beneficiary covered under any such plan (other than routine claims for benefits) that, individually or in the aggregate, could reasonably be expected to result in a STFC Material Adverse Effect.  Neither STFC nor any of its Subsidiaries has received written notice of and, to the Knowledge of STFC, there are no audits or investigations by any Governmental Authority with respect to or involving any STFC Benefit Plan and no STFC Benefit Plan is the subject of an application or filing under, or a participant in, a government-sponsored amnesty, voluntary compliance, self-correction or similar program.

(f)          Except as set forth on Section 5.19(f) of the STFC Disclosure Letter, none of the STFC Benefit Plans obligates STFC or any of its Subsidiaries to provide a current or former officer, employee, natural independent contractor or director (or any beneficiary or dependent thereof) of STFC, SAM or any of their respective Subsidiaries with any life insurance or medical, health or disability benefits after his or her termination of employment or service with STFC, SAM or any of their respective Subsidiaries, other than as required under COBRA, except with respect to a contractual or statutory obligation to reimburse any premiums such person may pay in order to obtain health coverage under COBRA.  To the Knowledge of STFC, no circumstance exists that would prohibit LMHC, STFC or any Subsidiaries of STFC from amending or terminating any STFC Benefit Plan that provides retiree welfare benefits, or reducing or eliminating such benefits provided thereunder, at any time.

(g)          Neither STFC nor its Subsidiaries have engaged in, and to the Knowledge of STFC no other Person has engaged in, any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any STFC Benefit Plan or SAM Benefit Plan that could reasonably be expected to result in a STFC Material Adverse Effect and none of STFC or any of its Subsidiaries or, to the Knowledge of STFC, any other “fiduciary” (as defined in Section 3(21) of ERISA) has breached a fiduciary duty or otherwise failed to act or comply in connection with the administration or investment of the assets of such STFC Benefit Plan or SAM Benefit Plan in a manner that could reasonably be expected to result in a STFC Material Adverse Effect.  Neither STFC nor any of its Subsidiaries have incurred any material Liability for any Tax or civil penalty imposed under Chapter 43 of the Code or Sections 409 or 502 of ERISA that has not been satisfied in full.

(h)          Neither STFC nor any of its Subsidiaries have any obligation to gross-up, indemnify or otherwise reimburse any current or former officer, employee, natural independent contractor or director of STFC, SAM or any of their respective Subsidiaries for any Taxes, including under Code Section 409A or Code Section 4999, or any interest or penalty related thereto.

(i)          Except as set forth on Section 5.19(i) of the STFC Disclosure Letter or as contemplated in this Agreement, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement will (whether alone or upon the occurrence of any other events) (i) entitle any current or former officer, employee, natural independent contractor or director of STFC or any of its Subsidiaries to any payment, benefit or other compensation, (ii) increase any payment, benefit or other compensation that becomes due or payable to any current or former officer, employee, natural independent contractor or director of STFC or any of its Subsidiaries, (iii) accelerate the time of payment, vesting or funding (through a grantor trust or otherwise) of any payment, benefit or other compensation that becomes due or payable to any current or former officer, employee, natural independent contractor or director of STFC or any of its Subsidiaries, (iv) result in any payment or benefit that would constitute an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code) or (v) result in the application of any limitation or restriction on the ability of STFC or its Subsidiaries to amend or terminate any STFC Benefit Plan.

Section 5.20     Labor and Employment Matters.

(a)          STFC and its Subsidiaries are neither party to, bound by or in the process of negotiating any collective bargaining agreement or other labor-related agreement or arrangement with any labor union, trade union, labor organization or other employee representative body and no employees of STFC or its Subsidiaries are represented by any labor union, labor organization or works council with respect to their employment with STFC or its Subsidiaries.  To the Knowledge of STFC, there have been no labor union organizing activities with respect to any employees of STFC or its Subsidiaries.

(b)          In the last three (3) years, none of STFC or any of its Subsidiaries has entered into a settlement agreement with a current or former officer, employee or independent contractor of STFC or its Subsidiaries who made allegations of discrimination or sexual harassment by either (i) an officer of STFC or its Subsidiaries or (ii) an employee of STFC or its Subsidiaries at the level of Director or above.  To the Knowledge of STFC, in the last three (3) years, there have been no formal allegations of discrimination or sexual harassment made against (A) any officer of STFC or its Subsidiaries or (B) an employee of STFC or its Subsidiaries at the level of Director or above.

(c)          To the Knowledge of STFC, no current employee of STFC or its Subsidiaries, who is at the level of Director or above, intends to terminate his or her employment with STFC or any of its Subsidiaries prior to the twelve (12) month anniversary of the Closing.

(d)          Except as would not, individually or in the aggregate, have a STFC Material Adverse Effect, each release of employment claims in favor of STFC and its Subsidiaries obtained from an employee of STFC or its Subsidiaries since December 31, 2018 is effective and binding to release all employment claims purported to be released therein by such employee, subject to applicable Law.

(e)          Except as would not, individually or in the aggregate, reasonably be expected to result in material Liability to SAM or any of its Subsidiaries, to the Knowledge of STFC, (i) each individual who is currently providing services to STFC or any of its Subsidiaries, or who provided services to STFC or any of its Subsidiaries since December 31, 2018, as an independent contractor or consultant is or was properly classified and properly treated as an independent contractor or consultant by STFC and its Subsidiaries, (ii) each individual who is currently providing services to STFC or any of its Subsidiaries through a third-party service provider, or who provided services to STFC or any of its Subsidiaries through a third-party service provider since December 31, 2018, is not or was not an employee of STFC or any of its Subsidiaries and (iii) none of STFC or any of its Subsidiaries has a single employer, joint employer, alter ego or similar relationship with any other company not affiliated with STFC.

(f)          To the Knowledge of STFC, no employee of STFC or its Subsidiaries is in any respect in material violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, non-competition agreement or other restrictive covenant: (i) to STFC or any of its Subsidiaries or (ii) to a former employer of any such employee relating (A) to the right of any such employee to be employed by STFC or its Subsidiaries or (B) to the knowledge or use of trade secrets or proprietary information.

Section 5.21     Intellectual Property.

(a)          Section 5.21 of the STFC Disclosure Letter sets forth a list of all patents and pending patent applications, trademark registrations and pending trademark applications, copyright registrations and domain name registrations, in each case which are owned by STFC or a Subsidiary of STFC as of the date hereof.  STFC or a Subsidiary of STFC owns, or is licensed or otherwise has the right to use, all Intellectual Property that is used in and material to the conduct of the business of STFC and its Subsidiaries as presently conducted.

(b)          To the Knowledge of STFC, the conduct of the business of STFC and its Subsidiaries does not and, since December 31, 2018, did not infringe, misappropriate or otherwise violate any Intellectual Property rights of any Person, and, as of the date hereof, there is no Action pending or, to the Knowledge of STFC, threatened in writing that STFC or any of its Subsidiaries is infringing, misappropriating or otherwise violating the Intellectual Property rights of any Person.  To the Knowledge of STFC, no Person is infringing any Intellectual Property rights owned by STFC or a Subsidiary of STFC.

(c)          To the Knowledge of STFC, none of the Software owned by STFC or any of its Subsidiaries that is used in and material to the conduct of the business of STFC and its Subsidiaries as presently conducted includes any “open source” or “copyleft” software that would require, based on the use of such software as used prior to the date hereof, any material components of such software to be licensed, disclosed or distributed to any non-Affiliated Person under any terms, including making the source code publicly available.

(d)          At all times since December 31, 2018, STFC and its Subsidiaries have taken reasonable steps, including implementing administrative, technical, and physical security measures, to protect Personal Data and confidential information in their possession or control against damage, loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse, including any of the foregoing required by any applicable Privacy and Data Security Laws, Privacy Agreements and its Privacy and Data Security Policies.  Except as set forth in Section 5.21(d) of the STFC Disclosure Letter, since December 31, 2018, there has been no unauthorized access, use, or disclosure of Personal Data or confidential information in the possession or control of STFC, its Subsidiaries and any of their contractors with regard to any Personal Data and confidential information obtained from or on behalf of STFC or its Subsidiaries.

(e)          STFC and its Subsidiaries have, and since December 31, 2018 had, fully implemented written Privacy and Data Security Policies.  STFC and its Subsidiaries are, and at all times since December 31, 2018 have been in compliance in all material respects with (i) all Privacy and Data Security Laws, (ii) all Privacy Agreements and (iii) their Privacy and Data Security Policies.  Neither the execution, delivery, or performance of this Agreement, nor the consummation of any of the transactions contemplated under this Agreement, nor LMHC’s or its Subsidiaries’ possession or Processing of Personal Data consistent with STFC and its Subsidiaries’ current operations will violate any of the Privacy Agreements, its Privacy and Data Security Policies, or any applicable Privacy and Data Security Laws.

(f)          There is no pending, nor since December 31, 2018 has there ever been any, complaint, audit, proceeding, investigation, or claim against STFC or its Subsidiaries initiated by any Person or any Governmental Authority alleging that any Processing of Personal Data by STFC or its Subsidiaries (i) is in violation of any applicable Privacy and Data Security Laws, (ii) is in violation of any Privacy Agreements, (iii) is in violation of any of their Privacy and Data Security Policies or (iv) otherwise constitutes an unfair, deceptive, misleading, or abusive trade practice.

(g)          STFC and its Subsidiaries have in place commercially reasonable procedures to contractually require all third parties, including vendors, Affiliates, and other Persons providing services to STFC or its Subsidiaries that have access to or receive Personal Data from or on behalf of STFC or its Subsidiaries to comply with all applicable Privacy and Data Security Laws, to have a written contract requiring compliance with applicable Privacy and Data Security Laws, and to take reasonable steps to ensure that all Personal Data and confidential information in such third parties’ possession or control is protected against damage, loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse.

Section 5.22     Insurance Coverage.  STFC and its Subsidiaries maintain policies of insurance in such amounts and against such risks as STFC believes to be commercially reasonable.  Except as would not, individually or in the aggregate, have a STFC Material Adverse Effect, (a) all such insurance policies are in full force and effect and (b) STFC and its Subsidiaries are not and, to the Knowledge of STFC, as of the date hereof, no insurer is in default or breach of any terms and conditions under any such insurance policy.  As of the date hereof, neither STFC nor any of its Subsidiaries is in receipt of any notice of cancellation or termination with respect to any such policy or any denial of coverage or reservation of rights with respect to any material claim made pursuant to any such insurance policy.

Section 5.23     Real Property.

(a)          STFC does not own any real property.

(b)          Section 5.23(b) of the STFC Disclosure Letter sets forth a list of all of the real property leased, licensed, subleased or otherwise used or occupied by STFC and its Subsidiaries as of the date hereof (the “STFC Leased Real Property”).  STFC and its Subsidiaries have a valid and enforceable leasehold interest in all leases, subleases, licenses and occupancy agreements, as the same may have been amended, supplemented or otherwise modified from time to time (the “STFC Leases”), free and clear of all subtenancies and other occupancy rights and Liens, with respect to the STFC Leased Real Property.  With respect to the STFC Leases, neither STFC nor any of its Subsidiaries are in breach thereof or default thereunder and there does not exist under any STFC Lease any event which, with or without the giving of notice or the lapse of time or both, would constitute such a breach or default by STFC or its Subsidiaries, except for such breaches and defaults as to which requisite waivers or consents have been obtained or which would not have a STFC Material Adverse Effect.  (i) No action, suit, investigation, arbitration, or administrative or other proceeding is pending or, to the Knowledge of STFC, threatened that would reasonably be expected to curtail or interfere with the current use and operation of any STFC Leased Real Property in any material respect, (ii) all Permits have been obtained which are required by Law for the current uses of all STFC Leased Real Property for the conduct of business as currently conducted and as planned to be conducted as of the date of this Agreement, and (iii) STFC has no Knowledge and has not received any written notice of a violation applicable to any building, zoning, health or other Law, contractual restriction or covenant or easements in respect of the use or occupation of the property and improvements subject to any STFC Lease for the conduct of business as currently conducted or as planned to be conducted as of the date of this Agreement, in each case, which would have a STFC Material Adverse Effect.

(c)          (i) There are no condemnation, eminent domain or similar proceedings affecting any STFC Leased Real Property that are currently pending or, to the Knowledge of STFC, threatened and (ii) to the Knowledge of STFC, the buildings, structures and material fixtures located upon the STFC Leased Real Property are, in all material respects, in good repair, working order and condition, and free from any known defects (subject to normal wear and tear) and, in the case of buildings and other structures, are structurally sound.

Section 5.24     Environmental Matters.  Except as would not, individually or in the aggregate, reasonably be likely to have a STFC Material Adverse Effect, (a) since December 31, 2018, neither STFC nor any of its Subsidiaries has (i) received written notice from any Governmental Authority or other Person alleging that STFC or any of its Subsidiaries is in violation of any applicable Environmental Law or has Liability pursuant to any Environmental Law or with respect to Hazardous Substances or (ii) been subject to an Action pursuant to Environmental Law, (b) since December 31, 2018, STFC and its Subsidiaries have been and are in compliance with applicable Environmental Laws, (c) neither STFC nor any of its Subsidiaries is subject to any Order pursuant to Environmental Law, (d) neither STFC nor any of its Subsidiaries have assumed or retained by contract or agreement Liabilities arising pursuant to Environmental Law or with respect to Hazardous Substances of any other Person in connection with the sale or conveyance of any real property, business or entity, excluding any such agreements that have expired or been terminated and (e) to the Knowledge of STFC, there are no facts, circumstances, events, occurrences or conditions that would reasonably be expected to cause STFC or any of its Subsidiaries to incur Liability pursuant to Environmental Law or with respect to Hazardous Substances.

Section 5.25     Reserves.  The reserves, funds or provisions for losses (including incurred by not reported losses), claims, premiums, unearned premiums, loss and loss adjustment expenses (whether allocated or unallocated) of each STFC Insurance Company contained in its STFC Statutory Statements (a) were, except as otherwise noted in the applicable STFC Statutory Statement, determined in accordance with generally accepted actuarial standards consistently applied, (b) are fairly stated in accordance with sound actuarial principles and applicable SAP and (c) satisfied the requirements of all applicable Laws in all material respects. Notwithstanding anything to the contrary in this Agreement or any other agreement, document or instrument delivered or to be delivered in connection herewith, each of LMHC, Merger Sub I and Merger Sub II acknowledges and agrees that STFC and its Subsidiaries make no representations or warranties with respect to, and nothing contained in this Agreement or in any other agreement, document or instrument to be delivered in connection herewith is intended or shall be construed to be a representation or warranty, express or implied, for any purposes of this Agreement or any other agreement, document or instrument to be delivered in connection herewith or therewith, in respect of the adequacy or sufficiency of reserves.

Section 5.26     Proxy Statement.  The Proxy Statement will, when filed, comply as to form with the applicable requirements of the Exchange Act.  None of the information provided by STFC to be included in the Proxy Statement, at the date the Proxy Statement is first mailed to STFC Shareholders, at the time of any amendment thereof or supplement thereto, and at the time of STFC Shareholders Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding the foregoing, STFC makes no representation or warranty with respect to any information supplied by LMHC that is contained or incorporated by reference in any of the foregoing documents.

Section 5.27     Takeover Statutes.  The STFC Board has taken or shall have taken all action prior to the Closing to ensure that no restrictions included in any “fair price,” “moratorium,” “control share acquisition” or other similar antitakeover statute or regulation (including Section 1701.831 of the OGCL and Chapter 1704 of the Ohio Revised Code) enacted under state or federal laws in the United States applicable to STFC are applicable to this Agreement and the STFC Merger or the other transactions contemplated hereby.

Section 5.28     Financial Advisor Opinion.  The STFC Special Committee has received the opinion of Houlihan Lokey Capital, Inc. to the effect that, as of the date of such opinion and based on and subject to the assumptions, limitations, qualifications and other matters considered in connection with the preparation of such opinion, the Merger Consideration to be received by the holders of Shares, other than SAM or any of STFC’s Subsidiaries, in the STFC Merger pursuant to this Agreement is fair, from a financial point of view, to such holders (other than SAM or any of STFC’s Subsidiaries).

Section 5.29     Brokers or Finders.  No broker, finder or investment banker (other than Houlihan Lokey Capital, Inc.) is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the STFC Merger or the other transactions contemplated hereby based upon arrangements made by or on behalf of STFC, its Subsidiaries or any of their respective directors, officers or employees.  STFC has heretofore delivered to LMHC on a confidential basis a copy of STFC’s engagement letter with Houlihan Lokey Capital, Inc. or any Affiliate thereof, all agreements under which any fees or expenses in connection with the Transactions are payable and all indemnification and other agreements related to the engagement of Houlihan Lokey Capital, Inc.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF LMHC

Except as set forth in the LMHC Disclosure Letter (it being understood that any information set forth in one section or subsection of the LMHC Disclosure Letter shall be deemed to apply to and qualify the Section or subsection of this Agreement to which it corresponds in number and each other Section or subsection of this Agreement or the LMHC Disclosure Letter to the extent that the relevance of such information is reasonably apparent on the face of such disclosure), LMHC represents and warrants to each of SAM and STFC as follows:

Section 6.01     Organization and Good Standing; Organizational Documents.

(a)          Each of LMHC and its Subsidiaries, including Merger Subs, (i) is a corporation or other legal entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of its jurisdiction of incorporation or organization, except where any failure to be so organized, existing or in good standing would not, individually or in the aggregate, have a LMHC Material Adverse Effect, (ii) has full corporate or similar power and authority to own, lease and operate its properties and assets and to conduct its business as presently conducted, except where any failure to have such power or authority would not, individually or in the aggregate, have a LMHC Material Adverse Effect, and (iii) is duly qualified or licensed to do business as a foreign corporation or entity and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a LMHC Material Adverse Effect.

(b)          LMHC has made available to SAM and STFC copies of its Organizational Documents.  LMHC is not in violation of any of the provisions of its Organizational Documents.

Section 6.02     Authority for Agreement.  Each of LMHC and Merger Subs has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions and the other transactions contemplated hereby.  The execution, delivery and performance by LMHC and Merger Subs of this Agreement, and the consummation by LMHC and Merger Subs of the Transactions and the other transactions contemplated hereby, have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of LMHC or Merger Subs, and no other votes or approvals of any class or series of capital stock of LMHC or Merger Subs (other than by the shareholder of the Merger Subs), are necessary to authorize this Agreement or to consummate the Transactions or the other transactions contemplated hereby.  This Agreement has been duly executed and delivered by LMHC and Merger Subs and, assuming the due authorization, execution and delivery by SAM and STFC, constitutes a legal, valid and binding obligation of LMHC and Merger Subs enforceable against LMHC and Merger Subs in accordance with its terms, except as enforcement thereof may be limited against LMHC or Merger Subs by the Bankruptcy and Equity Exception.  Each of LMHC and the Merger Subs have adopted resolutions approving this Agreement, the Transactions and the other transactions contemplated by this Agreement.

Section 6.03     No Conflict; Required Filings and Consents.

(a)          The execution and delivery of this Agreement by LMHC and Merger Subs do not, and the performance of this Agreement by LMHC and Merger Subs and the consummation of the Transactions and the other transactions contemplated hereby will not, (i) constitute or result in a conflict, breach or violation of or default under, the Organizational Documents of LMHC, the Merger Subs, or LMHC’s other Subsidiaries, (ii) assuming that all consents, approvals, authorizations and waivers contemplated by Section 6.03(b) have been obtained, and all filings described therein have been made, and assuming the accuracy and completeness of the representations and warranties set forth in Section 4.04(b) and Section 5.05(b), conflict with or violate any Law applicable to LMHC or its Subsidiaries or by which any property or asset of LMHC or any of its Subsidiaries is bound or affected, (iii) require any consent or other action by any Person under, result in a breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to others (immediately or with notice or lapse of time or both) any right of termination, amendment, acceleration or cancellation of, result (immediately or with notice or lapse of time or both) in triggering any payment or other obligations under, or result in the loss of any right or benefit to which LMHC or any of its Subsidiaries is entitled under, any Contract to which LMHC or any of its Subsidiaries is a party or by which LMHC or any of its Subsidiaries, or any property or asset of LMHC or any of its Subsidiaries, is bound or affected or (iv) result (immediately or with notice or lapse of time or both) in the creation of a Lien on any property or asset of LMHC or its Subsidiaries, except in the case of clauses (ii), (iii) and (iv) for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, have a LMHC Material Adverse Effect.

(b)          The execution and delivery of this Agreement by LMHC and Merger Subs do not, and the performance of this Agreement by LMHC and Merger Subs and the consummation of the Transactions and the other transactions contemplated by this Agreement will not, require any action, consent, approval, authorization or waiver of or filing with or notification to, or registration or qualification with, any Governmental Authority, except for applicable requirements, if any, of (i) the Securities Act, the Exchange Act, state securities laws or “blue sky” laws, (ii) the HSR Act, (iii) the NASDAQ Global Select Market, (iv) filing and recordation of the SAM Certificate of Merger and the STFC Certificate of Merger, as required by the Ohio Revised Code, (v) the consents, approvals, authorizations, waivers, filings and notifications set forth in Section 6.03(b) of the LMHC Disclosure Letter and (vi) such other consents, approvals, authorizations, waivers, filings and notifications that would not, individually or in the aggregate, have a LMHC Material Adverse Effect.

Section 6.04     Compliance with Laws.  LMHC and its Subsidiaries are, and since December 31, 2018 have been, in compliance with all Laws, except as would not, individually or in the aggregate, have a LMHC Material Adverse Effect.  Since December 31, 2018 and through the date hereof, neither LMHC nor any of its Subsidiaries has received any written notification or, to the Knowledge of LMHC, oral notification from any Governmental Authority of any violation of Law applicable to LMHC or any of its Subsidiaries or by which any of their businesses, operations, properties or assets are bound, except as would not, individually or in the aggregate, have a LMHC Material Adverse Effect.

Section 6.05     Litigation; Orders.

(a)          There is no Action pending or, to the Knowledge of LMHC, threatened in writing against LMHC or any of its Subsidiaries, including Merger Subs, or their respective directors or officers in their capacities as such, that, if determined adversely, would, individually or in the aggregate, have a LMHC Material Adverse Effect.

(b)          There is no Order outstanding against LMHC or any of its Subsidiaries, including Merger Subs, or their respective businesses that would, individually or in the aggregate, have a LMHC Material Adverse Effect.

Section 6.06     Financial Statements.  LMHC has made available to SAM and STFC copies of (i) the audited consolidated balance sheets of LMHC as of December 31, 2020 and December 31, 2019 and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for the fiscal years then ended and (ii) the unaudited consolidated balance sheet of LMHC as of March 31, 2021 and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for the fiscal quarter then ended (collectively, the “LMHC Financial Statements”).  The LMHC Financial Statements were prepared and fairly present in accordance with GAAP, in each case, consistently applied for the periods involved, the consolidated financial position of LMHC and its consolidated Subsidiaries at the respective dates thereof and the consolidated income, comprehensive income, changes in total equity and cash flows for the respective periods indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments consistent with GAAP).

Section 6.07     Financial Capacity.  LMHC and its Subsidiaries has, as of the date of this Agreement and will have as of the Closing Date, sufficient cash, available lines of credit or other sources of funds at the Closing necessary to fund the aggregate Merger Consideration contemplated by this Agreement and any other amount required to be paid by them in connection with the consummation of the Transactions and to perform the other obligations of LMHC contemplated by this Agreement.

Section 6.08     Interim Operations of Merger Sub I.  Merger Sub I was formed solely for the purpose of engaging in the transactions contemplated hereby, and all of the outstanding shares of capital stock of Merger Sub I have been duly authorized and are validly issued, fully paid and non-assessable and owned by Liberty Mutual Group Inc.  Merger Sub I has not, and as of the Closing Date will not have, conducted any business and has no assets, Liabilities or obligations of any nature, in each case other than those incident to its formation and pursuant to this Agreement and the transactions contemplated by this Agreement.

Section 6.09    Interim Operations of Merger Sub II; Reorganization.  Merger Sub II was formed solely for the purpose of engaging in the transactions contemplated hereby, and all of the outstanding shares of capital stock of Merger Sub II have been duly authorized and are validly issued, fully paid and non-assessable and owned by LMHC.  Merger Sub II has not, and as of the Closing Date will not have, conducted any business and has no assets, Liabilities or obligations of any nature, in each case other than those incident to its formation and pursuant to this Agreement and the transactions contemplated by this Agreement.  Neither LMHC nor Merger Sub II has taken (or agreed to take) any action or has Knowledge of any facts or circumstances relating to LMHC, Merger Sub II or any Affiliates of the foregoing that is reasonably likely to adversely affect the status of the SAM Transaction as reorganizations under Section 368(a) of the Code.

Section 6.10     Ownership of Shares.  Neither LMHC nor any of its Subsidiaries, including Merger Subs, beneficially owns (within the meaning of Section 13 of the Exchange Act), or will prior to the Closing Date beneficially own, any Shares, or is a party, or will prior to the Closing Date become a party, to any Contract (other than this Agreement) for the purpose of acquiring, holding, voting or disposing of any Shares.

Section 6.11     Certain Arrangements.  As of the date of this Agreement, except for this Agreement and the Voting Agreement (if and when fully executed), neither LMHC nor any of its Subsidiaries has entered into any contract (a) with any director or officer of SAM or STFC with respect to employment or consulting arrangements effective at or following the Closing, (b) with any STFC Shareholder pursuant to which such STFC Shareholder would be entitled to receive consideration of a different amount or nature than the Merger Consideration, (c) with any STFC Shareholder pursuant to which such SAM Member agrees to vote to approve the Plan of Reorganization and the Amended Organizational Documents, (d) with any STFC Shareholder pursuant to which such STFC Shareholder agrees to vote to adopt this Agreement or against any Superior Proposal or (e) with any holder of STFC Equity Awards pursuant to which such holder would be entitled to receive consideration of a different amount or nature than the consideration payable pursuant to Section 3.02(a) and Section 3.02(d).

Section 6.12     Proxy Statement; Information Statement and Related Materials.

(a)          None of the information provided by LMHC to be included in the Proxy Statement, at the date the Proxy Statement is first mailed to STFC Shareholders, at the time of any amendment thereof or supplement thereto, and at the time of STFC Shareholders Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding the foregoing, LMHC makes no representation or warranty with respect to any information supplied by STFC that is contained in any of the foregoing documents.

(b)          None of the information provided by LMHC to be included in the Information Statement and Related Materials, at the date the Information Statement and Related Materials is first mailed to the SAM Members, at the time of any amendment thereof or supplement thereto, and at the time of SAM Members Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding the foregoing, LMHC makes no representation or warranty with respect to any information supplied by SAM that is contained or incorporated by reference in any of the foregoing documents.

Section 6.13     Statutory Statement.

(a)          Since December 31, 2018, each of the LMHC Existing Reorganized Insurers has filed or submitted all annual, quarterly and other periodic statements, together with all exhibits, interrogatories, notes, schedules, affirmations or certifications, in each case, required by applicable Law to be filed with or submitted to the appropriate Insurance Regulator of each jurisdiction in which it is licensed, authorized or otherwise eligible with respect to the conduct of the business of insurance or reinsurance, as applicable (collectively, the “LMHC Statutory Statements”).

(b)          Prior to the date hereof, LMHC has made available to SAM, to the extent required to be filed with the applicable Insurance Regulator as of the date of this Agreement, all LMHC Statutory Statements as of December 31, 2019, and December 31, 2020, and for the annual periods then ended, each in the form filed with the applicable Insurance Regulator.  The financial statements included in such LMHC Statutory Statements were prepared in accordance with SAP, in each case, consistently applied for the periods involved (except as may have been noted therein), and fairly present in all material respects, the statutory financial position of the relevant LMHC Existing Reorganized Insurers at the respective dates thereof and the results of operations and changes in capital and surplus of such LMHC Existing Reorganized Insurer for the respective periods then ended.  Such LMHC Statutory Statements complied in all material respects with all applicable Laws when filed or submitted and no material violation or deficiency has been asserted in writing by any Insurance Regulator with respect to any of such LMHC Statutory Statements that has not been cured or otherwise resolved to the satisfaction of such Insurance Regulator.

Section 6.14     Reserves.  The reserves, funds or provisions for losses (including incurred by not reported losses), claims, premiums, unearned premiums, loss and loss adjustment expenses (whether allocated or unallocated) of each LMHC Existing Reorganized Insurer contained in its LMHC Statutory Statements (a) were, except as otherwise noted in the applicable LMHC Statutory Statement, determined in accordance with generally accepted actuarial standards consistently applied, (b) are fairly stated in accordance with sound actuarial principles and applicable SAP and (c) satisfied the requirements of all applicable Laws in all material respects.  Notwithstanding anything to the contrary in this Agreement or any other agreement, document or instrument delivered or to be delivered in connection herewith, each of SAM and STFC acknowledges and agrees that LMHC and its Subsidiaries make no representations or warranties with respect to, and nothing contained in this Agreement or in any other agreement, document or instrument to be delivered in connection herewith is intended or shall be construed to be a representation or warranty, express or implied, for any purposes of this Agreement or any other agreement, document or instrument to be delivered in connection herewith or therewith, in respect of the adequacy or sufficiency of reserves.

Section 6.15    Financial Advisor Opinion.

(a)          The board of directors of LMHC has received the opinion of Waller Helms Advisors LLC to the effect that, as of the date of such opinion and based on and subject to the assumptions, limitations, qualifications and other matters considered in connection with the preparation of such opinion, the Transactions are fair, from a financial point of view, to the LMHC Members (excluding the SAM Members which become LMHC Members as a result of the Transactions), taken as a group.

(b)          The board of directors of LMHC has received the oral opinion of Goldman Sachs & Co. LLC (to be confirmed by the delivery of a written opinion) to the effect that, as of the date of such opinion and based on and subject to the assumptions, limitations, qualifications and other matters set forth in such written opinion, the aggregate Merger Consideration to be paid, taken together with the aggregate Equity Rights to be issued, by LMHC pursuant to this Agreement is fair, from a financial point of view, to LMHC.

Section 6.16     Brokers or Finders.  No broker, finder or investment banker (other than Waller Helms Advisors LLC and Goldman Sachs & Co. LLC) is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the Transactions or the other transactions contemplated hereby based upon arrangements made by or on behalf of LMHC or Merger Subs or any of their respective directors, officers or employees.

Section 6.17     Absence of Certain Changes or Events.  Except in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, (a) since December 31, 2020 and through the date hereof, LMHC and its Subsidiaries have conducted their respective businesses in the ordinary course of business in all material respects (other than with respect to Pandemic Measures) and (b) since December 31, 2020, no LMHC Material Adverse Effect has occurred.

ARTICLE VII

COVENANTS

Section 7.01     Conduct of Business by SAM and STFC Pending the Transactions.

(a)          During the period from the date of this Agreement through the earlier of the Closing and the termination of this Agreement, except as otherwise expressly required by this Agreement, as set forth in Section 7.01(a) of the SAM Disclosure Letter or Section 7.01(a) of the STFC Disclosure Letter, as applicable, or as required by applicable Law or with the prior written consent of LMHC (which consent shall not be unreasonably withheld, delayed or conditioned), each of SAM and STFC shall, and shall cause each of its respective Subsidiaries, (x) to use reasonable best efforts to conduct their respective businesses and operations in the ordinary course of business, (y) to use reasonable best efforts to (1) preserve their respective business organizations substantially intact, (2) maintain their respective existing relations and goodwill with Governmental Authorities, members, policyholders, customers, suppliers, distributors, employees and others having significant business dealings with them and (3) keep available the services of their and their Subsidiaries’ directors, officers, employees and agents, and (z) not to (it being understood that with respect to the matters specifically addressed by any provision of this clause (z), references to “it” or “its” shall be interpreted to mean each of SAM, STFC and their respective Subsidiaries unless expressly otherwise described below)):

(i)          in the case of STFC, declare, set aside, establish a record date for, accrue, make or pay any dividends or other distributions (whether in cash, stock or property) in respect of any of its or its Subsidiaries’ capital stock or other equity securities, other than (A) quarterly cash dividends paid by STFC on the Shares not in excess of $0.10 per Share, per quarter, with record and payment dates as set forth in Section 7.01(a)(i) of the STFC Disclosure Letter or (B) any dividends or distributions by its Subsidiary, as applicable;

(ii)          in the case of SAM, declare, set aside, establish a record date for, accrue, make or pay any dividends or other distributions (whether in cash, stock or property) to any SAM Member in their capacity as SAM Members, or take any other action giving rise to (A) any obligation of SAM to make any such payment or (B) any claim by any SAM Member to any such payment, in each case, other than payments to SAM Members required under ordinary course Contracts with such SAM Members not related to the Transactions or this Agreement;

(iii)        split, combine, subdivide, or reclassify, repurchase, redeem or otherwise acquire (or offer to do any of the foregoing), any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock (including with respect to STFC, for the avoidance of doubt, the Shares) or other equity or voting interests or any options, restricted shares, warrants, calls or rights to acquire any such shares or other securities, including STFC Equity Awards, except pursuant to the forfeiture provisions of such STFC Equity Awards or the cashless exercise of Tax withholding provisions of such STFC Equity Awards, in each case, if and only to the extent required by the terms of such STFC Equity Awards so in effect on the date of this Agreement;

(iv)        (A) issue, deliver, offer, grant or sell any shares of its or its Subsidiaries capital stock or other equity securities, (B) in the case of SAM, SAM Subsidiary Share Rights or (C) in the case of STFC, STFC Share Rights or STFC Subsidiary Share Rights, except upon exercise, vesting and settlement, as applicable, of STFC Equity Awards outstanding as of the date of this Agreement in accordance with their terms and, as applicable, the STFC Equity Plans as in effect on the date of this Agreement;

(v)         incur or commit any capital expenditures or any obligations or Liabilities in connection therewith, in excess of $500,000 in any calendar quarter or $2,000,000 in the aggregate, other than as may be necessary in connection with any emergency repair, maintenance or replacement or for the protection of human health and safety;

(vi)        adopt or propose any amendments (whether by merger, consolidation or otherwise) in its Organizational Documents;

(vii)       purchase or agree to purchase an equity interest in, or a portion of the assets of, any Person or any division or business thereof, or merge, consolidate, demutualize, affiliate with or engage in any other similar transaction with any Person, in each case, other than (A) any such action solely between or among it and its wholly-owned Subsidiaries, (B) acquisitions of assets in the ordinary course of business consistent with past practice, (C) acquisitions for consideration of $25,000,000 or less individually or $50,000,000 in the aggregate, in the case of this clause (C) only, in consultation with LMHC (provided, that such acquisition does not require a consent, approval, authorization or waiver from any Governmental Authority), or (D) investment portfolio transactions in the ordinary course of business consistent with past practice and in all material respects pursuant to the investment policies and guidelines of it or any of its Subsidiaries (in each case, in effect as of the date hereof);

(viii)      sell, lease, pledge, deliver, guarantee, license, allow to lapse, abandon, mortgage, encumber or otherwise dispose of (without replacement) any of its properties or assets (including capital stock or equity securities of any of its Subsidiaries) that are material, individually or in the aggregate, to it and its Subsidiaries, taken as a whole, other than (A) solely between or among it and its Subsidiaries or solely between or among two or more of its wholly-owned Subsidiaries, (B) investment portfolio transactions in the ordinary course of business consistent with past practice and in all material respects pursuant to its investment policies and guidelines or any of its Subsidiaries (in each case, in effect as of the date hereof), (C) sales or other dispositions of other assets in the ordinary course of business consistent with past practice, or (D) dispositions for consideration of $25,000,000 or less individually or $50,000,000 in the aggregate, in the case of this clause (D) only, in consultation with LMHC (provided, that such disposition does not require a consent, approval, authorization or waiver from any Governmental Authority);

(ix)        directly or indirectly incur, create or assume any indebtedness for borrowed money, issue or sell any debt securities or warrants or other rights to acquire any debt securities of it or any of its Subsidiaries, guarantee any such indebtedness or any debt securities of another Person or enter into any “keep well” or other agreement to maintain any financial statement condition of another Person (collectively, “Indebtedness”), other than, in consultation with LMHC, (A) Indebtedness for borrowed money incurred in the ordinary course of business consistent with past practice (under its existing credit facilities and any trade letters of credit existing on the date hereof and included in the SAM Disclosure Letter or STFC Disclosure Letter (as applicable) in an aggregate amount not in excess of $50,000,000), (B) Indebtedness to refinance any Indebtedness existing on the date of this Agreement or permitted to be incurred, assumed or otherwise entered into hereunder, in each case provided the terms of such Indebtedness are no less favorable (in the aggregate) to it and LMHC than the Indebtedness that is being repaid or (C) guarantees by it of Indebtedness of its wholly-owned Subsidiaries or guarantees by the Subsidiaries of Indebtedness of it or any of its Subsidiaries;

(x)         make any loans, advances, guarantees or capital contributions to, or investments in any Person, other than (A) to it or any of its wholly-owned Subsidiaries, or (B) investment portfolio transactions in the ordinary course of business consistent with past practice and in all material respects pursuant to the investment policies and guidelines of it or any of its Subsidiaries (in each case, in effect as of the date hereof);

(xi)        pay, satisfy, commence, waive, compromise, settle or otherwise discharge any Actions (or agree to do any of the foregoing) made or pending against it or any of its Subsidiaries, or any of their respective directors or officers in their capacities as such, or waive any claims of material value, other than any settlements or waivers (A) against it or any of its Subsidiaries in connection with an ordinary course claim made under SAM Insurance Contracts or STFC Insurance Contracts (so long as such payment, satisfaction, waiver, compromise or settlement is within applicable policy limits), or (B) that provides for a full release of Liability against it and its Subsidiaries and that is (1) for amounts not to exceed, for any such settlement, $2,000,000 individually, or $5,000,000 in the aggregate (net the amount specifically reserved for such matters by STFC or SAM, as applicable, or amounts actually received from non-Affiliated insurance policies) and (2) that would not reasonably be expected to prohibit or restrict or impair it and its Subsidiaries from operating their business in substantially the same manner as operated on the date of this Agreement;

(xii)       cancel any material Indebtedness of another Person or waive any material benefits, rights or claims;

(xiii)      write down any of its material assets or make material change (A) in any accounting methods, principles, procedures or practices, (B) to the investment policies and guidelines of it or any of its Subsidiaries or (C) to any of the actuarial, reserving, underwriting, claims administration or reinsurance policies, practices or principles of any SAM Insurance Company or STFC Insurance Company, in each case, other than as required by GAAP or SAP or as required by the applicable Insurance Regulator and accounting pronouncements by the SEC, the National Association of Insurance Commissioners and the Financial Accounting Standards Board;

(xiv)      reduce or strengthen in any material respect any reserves, funds or provisions for losses (including incurred by not reported losses), claims, premiums, unearned premiums, loss and loss adjustment expenses (whether allocated or unallocated) in respect of any Policy, SAM Assumed Reinsurance Contract or STFC Assumed Reinsurance Contract, other than (A) as required by GAAP or SAP or as required by the applicable Insurance Regulator and accounting pronouncements by the SEC, the National Association of Insurance Commissioners and the Financial Accounting Standards Board or (B) in the ordinary course of business consistent with past practice;

(xv)       except as required by the terms of a SAM Benefit Plan as in effect on the date hereof and set forth in Section 4.17(a) of the SAM Disclosure Letter, a STFC Benefit Plan as in effect on the date hereof and set forth in Section 5.19(a) of the STFC Disclosure Letter or as required by applicable Law or the terms of this Agreement (A) adopt, enter into, terminate or amend in any material respect any SAM Benefit Plan or STFC Benefit Plan (or any arrangement that would be a SAM Benefit Plan or STFC Benefit Plan if in effect on the date hereof), other than any changes to such benefit plans made during the annual open enrollment process in the ordinary course of business consistent with past practice that do not materially increase benefits or result in a material increase in administrative costs, (B) increase the compensation or benefits of, or pay any bonus to, any current or former officer, employee, individual independent contractor or director of SAM, STFC or any of their respective Subsidiaries, (C) grant any change in control, retention, severance or termination pay to, or grant any equity or equity-based awards to, or accelerate the vesting or payment of any such awards held by, any current or former officer, employee, individual independent contractor or director of SAM, STFC or any of their respective Subsidiaries, (D) accelerate funding of any payments or benefits that are payable or to be provided under any SAM Benefit Plan or STFC Benefit Plan (through a grantor trust or otherwise), (E) amend the funding obligation or contribution rate of any SAM Benefit Plan or STFC Benefit Plan or change any underlying assumptions to calculate benefits payable under any SAM Benefit Plan or STFC Benefit Plan, except as may be required by GAAP or SAP or (F) take any action to implement any material compensation or benefit reductions in respect of any employees of SAM, STFC and their respective Subsidiaries;

(xvi)      (A) terminate the employment or engagement of any employee or natural independent contractor of SAM, STFC or any of their respective Subsidiaries whose annual base salary is in excess of $100,000 other than for cause (determined consistent with past practice), (B) terminate the employment of more than ten (10) employees whose annual base compensation is $100,000 or less at any single site of employment in any rolling ninety (90)-day period, (C) hire or engage, or make an offer to hire or engage, any individual to become employed or engaged by SAM, STFC or any of their respective Subsidiaries, other than a new hire to replace an employee at the product manager/product director level or below the level of Director whose employment or engagement terminates after the date hereof or to fill open positions at the product manager/product director level or below the level of Director existing as of the date hereof and set forth on Section 7.01(a)(xvi) of the STFC Disclosure Letter, and in each case with compensation and benefits provided to such new hire that are not more favorable than those provided to similarly situated employees of SAM, STFC and their respective Subsidiaries or (D) waive the restrictive covenant obligations of any current or former employee or natural independent contractor of SAM, STFC or any of their respective Subsidiaries;

(xvii)     (A) make, revoke or change any material Tax election, (B) change any material Tax accounting method or change any Tax accounting period, (C) settle or compromise any claim, audit, assessment or other proceeding relating to a material amount of Taxes, (D) file any material amended Tax Return, (E) surrender any right to claim a material Tax refund, (F) enter into any closing agreement with any Governmental Authority relating to material Taxes or a material Tax Return, (G) extend the statute of limitations period for the assessment or collection of any material Tax (other than by making an ordinary course statutory extension) or (H) cause or permit any other Person to take any of the actions described in clauses (A) through (G) with respect to SAM, STFC, or any of their respective Subsidiaries;

(xviii)          terminate or materially amend, modify, supplement or waive any material right to enforce, relinquish, release, transfer or assign any material rights or claims under any SAM Material Contract or STFC Material Contract, or enter into any Contract that would be a SAM Material Contract or a STFC Material Contract, in each case, other than in the ordinary course of business consistent with past practice;

(xix)      adopt or enter into any plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

(xx)       (A) enter into any new material line of business or abandon or discontinue any existing material line of business or (B) change any material operating or enterprise risk management policies;

(xxi)      enter into any material agreement or commitment with any Insurance Regulators, other than in the ordinary course of business consistent with past practice;

(xxii)     sell or lease any SAM Owned Real Property, other than the in the ordinary course of business consistent with past practice; or

(xxiii)    agree, authorize or commit to take any of the actions described in this Section 7.01(a).

(b)          Notwithstanding anything to the contrary in this Agreement (including Section 7.01(a)), STFC, SAM and any of their respective Subsidiaries may, in response to COVID-19 and in consultation with LMHC, take reasonable measures (including as a response to any Pandemic Measure) deemed reasonably advisable or necessary to preserve the businesses of STFC, SAM and their respective Subsidiaries, and any such action shall not be deemed itself a breach of this Agreement, including Section 7.01(a).  Nothing contained in this Agreement is intended to give LMHC, directly or indirectly, the right to control or direct STFC’s, SAM’s or any of their respective Subsidiaries’ businesses or operations prior to the Closing.

Section 7.02     Access to Information; Confidentiality.

(a)          During the period from the date of this Agreement through the earlier of the Closing and the termination of this Agreement, each of SAM and STFC shall, and shall cause their respective Subsidiaries and Representatives to, upon reasonable notice, afford LMHC and its Subsidiaries and Representative reasonable access during normal business hours to the officers, employees, advisors, properties, and books and records of SAM, STFC or their respective Subsidiaries, as applicable, and each of SAM and STFC shall, and shall cause their respective Subsidiaries to, furnish reasonably promptly to LMHC such other information concerning the business and properties of SAM, STFC or their respective Subsidiaries, as applicable, as LMHC may reasonably request from time to time in each case for the purposes of integration planning and the consummation of the transactions contemplated by this Agreement, including furnishing, not later than fifteen (15) days following the end of each calendar month, the gross and net premiums written by the SAM Insurance Companies and the STFC Insurance Companies in such month.  None of SAM, STFC or their respective Subsidiaries shall be required to provide any such access or information to the extent that doing so (i) would cause a waiver of an attorney-client privilege or loss of attorney work product protection, (ii) would constitute a violation of any applicable Law or the provisions of any Contract to which SAM, STFC or any of their respective Subsidiaries is a party or (iii) would interfere unreasonably with the business or operations of SAM, STFC or their respective Subsidiaries.  Without limiting the foregoing, in the event that SAM or STFC does not provide access or information in reliance on the immediately preceding sentence, it shall provide notice to LMHC that it is withholding such access or information and shall use its commercially reasonable efforts to communicate, to the extent feasible, the applicable information in a way that would not cause such a waiver or loss, violation or interference, as the case may be.  No investigation shall affect SAM’s or STFC’s representations, warranties, covenants or agreements contained herein or limit or otherwise affect the remedies available to any party pursuant to this Agreement.

(b)          Each of LMHC, SAM and STFC shall comply with their respective obligations under the Confidentiality Agreement, which shall survive any termination of this Agreement in accordance with the terms set forth therein; provided, however, to the extent of any conflict between the provisions of the Confidentiality Agreement and this Agreement, the terms of this Agreement shall govern.

Section 7.03     Reasonable Best Efforts; Regulatory Matters.

(a)          Upon the terms and subject to the conditions set forth in this Agreement, each of LMHC, SAM and STFC shall, and shall cause their respective Affiliates to, use reasonable best efforts to fulfill all conditions applicable to such party pursuant to this Agreement and to consummate and make effective, as promptly as practicable, the transactions contemplated hereby, including using reasonable best efforts to (i) obtain all necessary, proper or advisable consents, approvals, authorizations or waivers from Governmental Authorities and make all necessary, proper or advisable registrations, filings and notices and take all steps as may be reasonably necessary to obtain a consent, approval, authorization or waiver from any Governmental Authority (including under Insurance Laws and the HSR Act), (ii) reasonably cooperate with each other in promptly seeking all such consents, approvals, authorizations or waivers, and (iii) provide such other information, execute and deliver any additional agreements, documents or instruments, and provide notice of this Agreement to Governmental Authorities as is reasonably necessary, proper or advisable to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.

(b)          In furtherance of and without limiting the foregoing, as promptly as practicable after the date of this Agreement (i) and in any event not later than twenty (20) Business Days after the date hereof, LMHC shall file a “Form A” Approval of Acquisition with the Insurance Regulators set forth in Section 7.03(b) of the LMHC Disclosure Letter (other than biographical affidavits, finger print cards, background checks, projections and business plans, which shall follow as promptly as practicable thereafter), (ii) and in any event not later than ten (10) Business Days after the date hereof, each of LMHC, SAM and STFC shall file a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the transactions contemplated hereby and requesting “early termination” of any applicable waiting period under the HSR Act, (iii) LMHC shall file, or cause to be filed, any pre-acquisition notifications on “Form E” or similar market share notifications to be filed in each jurisdiction where required by applicable Laws and (iv) each of LMHC, SAM and STFC shall file all other necessary, proper or advisable registrations, filings and notices with any Governmental Authority.

(c)          Each of LMHC, SAM and STFC shall consult with one another with respect to the obtaining of all consents, approvals, authorizations or waivers of Governmental Authorities necessary, proper or advisable to consummate the transactions contemplated hereby and each of LMHC, SAM and STFC shall keep the others apprised on a prompt basis of the status of matters relating to such consents, approvals, authorizations or waivers.  Each of LMHC, SAM and STFC shall have the right to review in advance (with the exception of any initial filing pursuant to the HSR Act) and, to the extent practicable, and subject to any restrictions under applicable Law, each shall consult with the others with respect to, any registration, filing or notice made with, or written materials submitted to, any Governmental Authority in connection with the transactions contemplated hereby and each shall in good faith consider and reasonably accept comments of the others thereon.  Each of LMHC, SAM and STFC shall promptly furnish to the others copies of all such filings and written materials after their filing or submission (with exception of any initial filing pursuant to the HSR Act), in each case subject to applicable Laws.  Each of LMHC, SAM and STFC shall promptly advise the others upon receiving any communication from any Governmental Authority with respect to any consent, approval, authorization or waiver that is necessary, proper or advisable to consummate the transactions contemplated hereby, including promptly furnishing each other with copies of any such written or electronic communication.  Each of LMHC, SAM and STFC shall, and shall cause their respective Subsidiaries and Representatives to, with respect to any live or substantive discussions via telephonic meeting (other than Governmental Authority-initiated unscheduled telephone calls) with any Governmental Authority in respect of any filing, investigation or other inquiry relating to the transactions contemplated hereby, consult with the others in advance and, to the extent reasonably practicable and permitted by applicable Law and by such Governmental Authority, give the other party the opportunity to attend and participate in such meeting.  Notwithstanding the foregoing, in no event will any party be required to disclose to any other party any personally identifiable information.  This Section 7.03(c) shall not apply with respect to Tax matters.

(d)          Notwithstanding anything to the contrary set forth in this Agreement, LMHC shall not be obligated to take or refrain from taking or to agree to it, its Subsidiaries or SAM, STFC or their respective Subsidiaries taking or refraining from taking any action (including any amendment, waiver or termination of any agreement, exhibit or schedule, including this Agreement, the Voting Agreement (if and when fully executed) and the Exhibits and Schedules to this Agreement and the Voting Agreement (if and when fully executed)) or to suffer to exist any limitation, action, restriction, condition or requirement which, individually or together with all other such limitations, actions, restrictions, conditions or requirements, would, or would reasonably be expected to, (i) have a material adverse effect on the business, financial condition, assets and Liabilities (considered together), operations or results of operations of SAM, STFC and their respective Subsidiaries, taken as a whole or (ii) have a material adverse effect on the business, financial condition, assets and Liabilities (considered together), operations or results of operations of LMHC and its Subsidiaries (including, following the Closing, SAM, STFC and their respective Subsidiaries); provided that, for purposes of determining whether any limitation, action, restriction, condition or requirement has had or would reasonably be expected to have a material adverse effect on the business, financial condition, assets and Liabilities (considered together), operations or results of operations of LMHC and its Subsidiaries (including, following the Closing, SAM, STFC and their respective Subsidiaries), LMHC and its Subsidiaries collectively shall be deemed to be a company the size of the SAM, STFC and their respective Subsidiaries, taken as a whole (each of (i) and (ii), a “Burdensome Condition”).  Without the prior written consent of LMHC, each of SAM and STFC shall not, and shall cause their respective Subsidiaries not to, take any action or agree to the taking or refraining from any action or accept any limitation, action, restriction, condition or requirement that, individually or in the aggregate, would, or would be reasonably expected to, result in a Burdensome Condition.

Section 7.04     SAM Information Statement.  As promptly as practicable after the date of this Agreement, SAM shall, in consultation with LMHC, prepare and file with the Superintendent no later than the earlier of twenty (20) Business Days after the date hereof and ninety (90) days after the adoption of the Plan of Reorganization and the Amended Organizational Documents by the SAM Board, (a) the Plan of Reorganization, (b) the forms of notices to be provided to the SAM Members under division (B) of Section 3913.27 of the Ohio Revised Code, (c) the form of proxy to be solicited from SAM Members, and (d) the proposed articles of incorporation and code of regulations to become effective for Reorganized SAM (the “Amended Organizational Documents”), each as signed by the chairperson of the SAM Board, the president or vice president, and the secretary or an assistant secretary of SAM.  Thereafter, SAM shall, in consultation with LMHC, prepare and file with the Superintendent such other documents or information as the Superintendent may require (such documents or information, together with the items described in clauses (a) through (d) of this Section 7.04, collectively, the “Information Statement and Related Materials”).  For the avoidance of doubt, neither SAM nor the SAM Board shall amend the Plan of Reorganization without the prior written consent of LMHC.  SAM shall provide LMHC a reasonable opportunity to review and comment on the Information Statement and Related Materials and shall in good faith consider comments of LMHC thereon.  As promptly as practicable after comments are received from the Ohio Department of Insurance thereon and after the furnishing by SAM and LMHC of all information required to be contained therein, SAM shall, in consultation with LMHC, prepare and SAM shall file any required amendments to the Information Statement and Related Materials with the Ohio Department of Insurance.  SAM shall notify LMHC promptly of the receipt of any formal comments from the Ohio Department of Insurance and of any request by the Ohio Department of Insurance for amendments or supplements to the Information Statement and Related Materials or for additional information and shall consult with LMHC regarding, and concurrently provide LMHC with copies of, all correspondence between SAM or any of its Representatives, on the one hand, and the Ohio Department of Insurance, on the other hand, with respect to the Information Statement and Related Materials.  Prior to filing or mailing any proposed amendment of or supplement to the Information Statement and Related Materials, SAM shall provide LMHC a reasonable opportunity to review and comment on such document and shall in good faith consider comments of LMHC thereon.  SAM shall use reasonable best efforts to have the Information Statement and Related Materials (in each case, to the extent applicable) mailed to the SAM Members as promptly as practicable and in compliance with all requirements imposed by the Ohio Department of Insurance or otherwise under applicable Law.

Section 7.05     STFC Proxy Statement.  As promptly as practicable after the date of this Agreement, STFC shall, in consultation with LMHC, prepare, and STFC shall file with the SEC no later than twenty (20) Business Days after the date of this Agreement, preliminary proxy materials which shall constitute the Proxy Statement.  STFC shall provide LMHC a reasonable opportunity to review and comment on such document and shall in good faith consider comments of LMHC thereon.  As promptly as practicable after comments are received from the SEC or the staff of the SEC thereon and after the furnishing by STFC and LMHC of all information required to be contained therein, STFC shall, in consultation with LMHC, prepare and STFC shall file any required amendments to the Proxy Statement with the SEC.  STFC shall notify LMHC promptly of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement or for additional information and shall consult with LMHC regarding, and concurrently provide LMHC with copies of, all written correspondence between STFC or any of its Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the Proxy Statement.  Prior to filing or mailing any proposed amendment of or supplement to the Proxy Statement, STFC shall provide LMHC a reasonable opportunity to review and comment on such document and shall in good faith consider comments of LMHC thereon.  If at any time prior to the STFC Shareholders Meeting any information should be discovered by STFC or LMHC which should be set forth in an amendment or supplement to the Proxy Statement, so that the Proxy Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such information shall promptly notify the other, and an appropriate amendment or supplement describing such information shall be filed with the SEC as promptly as practicable and, to the extent required by Law, disseminated to the STFC Shareholders.  STFC shall use reasonable best efforts to have the Proxy Statement cleared by the SEC (the “SEC Clearance”) as promptly as practicable and shall use reasonable best efforts to cause the Proxy Statement and all other proxy materials for the STFC Shareholders Meeting to be mailed to the STFC Shareholders as promptly as practicable thereafter and in any event within seven (7) Business Days after the SEC Clearance.

Section 7.06     SAM Members Meeting.  SAM shall in accordance with applicable Law and SAM’s Organizational Documents establish a record date for, duly call, give notice of, convene and hold, as promptly as practicable, the SAM Members Meeting for the purpose of considering and voting upon the approval of the Plan of Reorganization and the Amended Organizational Documents.  The SAM Board shall recommend approval of the Plan of Reorganization and the Amended Organizational Documents by the SAM Members (the “SAM Recommendation”) and include the SAM Recommendation in the Information Statement and Related Materials.  SAM shall solicit from the SAM Members proxies in favor of the proposal to approve the Plan of Reorganization and the Amended Organizational Documents, and shall use reasonable best efforts to take all other action reasonably necessary, proper or advisable to secure the SAM Member Approval.  SAM shall not submit any other proposals for approval at the SAM Members Meeting without the prior written consent of LMHC.  SAM shall not adjourn or postpone the SAM Members Meeting without the prior written consent of LMHC; provided that SAM, after consultation with LMHC, may (and, if requested by LMHC, shall (provided, that LMHC shall only make up to two (2) such requests, and no such request for a postponement shall be permitted if it would require a change in the record date for the SAM Members Meeting)) adjourn or postpone the SAM Members Meeting (a) if as of the time for which the SAM Members Meeting is originally scheduled (as set forth in the Information Statement and Related Materials), there are insufficient SAM Members represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the SAM Members Meeting or to obtain the SAM Member Approval or (b) if such adjournment or postponement is required by Law or a court or other Governmental Authority of competent jurisdiction in connection with any Action in connection with this Agreement or the Transactions or has been requested by the Ohio Department of Insurance (in each case, other than as initiated by SAM, STFC or any of their respective Subsidiaries).  SAM shall keep LMHC reasonably updated with respect to proxy solicitation results.

Section 7.07     STFC Shareholders Meeting.  STFC shall in accordance with applicable Law, STFC’s Organizational Documents and the rules and regulations of the NASDAQ Global Select Market establish a record date for, duly call, give notice of, convene and hold, as promptly as practicable after the SEC Clearance, the STFC Shareholders Meeting for the purpose of considering and voting upon the adoption of this Agreement; provided that in no event shall the STFC Shareholders Meeting be any later than forty-five (45) days after the date of the SEC Clearance (subject to adjournment or postponement as provided below).  Unless the STFC Board has effected an Adverse Recommendation Change in accordance with Section 7.08, the STFC Board shall recommend adoption of this Agreement by the STFC Shareholders (the “STFC Recommendation”) and include the STFC Recommendation in the Proxy Statement.  Unless the STFC Board has effected an Adverse Recommendation Change in accordance with Section 7.08, STFC shall solicit from the STFC Shareholders proxies in favor of the proposal to adopt this Agreement and shall use reasonable best efforts to take all other action reasonably necessary, proper or advisable to secure the STFC Shareholder Approval.  STFC shall not submit any other proposals for approval at the STFC Shareholders Meeting without the prior written consent of LMHC (other than the non-binding proposal on executive compensation and a customary proposal regarding adjournment of the STFC Shareholders Meeting).  STFC shall not adjourn or postpone the STFC Shareholders Meeting without the prior written consent of LMHC; provided that STFC, after consultation with LMHC, may (and, if requested by LMHC, shall (provided, that LMHC shall only make up to two (2) such requests, and no such request for a postponement shall be permitted if it would require a change in the record date for the STFC Shareholders Meeting)) adjourn or postpone the STFC Shareholders Meeting (a) for a period of not more than ten (10) days to the extent necessary to ensure that any legally required supplement or amendment to the Proxy Statement is provided to the STFC Shareholders, (b) if as of the time for which the STFC Shareholders Meeting is originally scheduled (as set forth in the Proxy Statement), there are insufficient Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the STFC Shareholders Meeting or to obtain the STFC Shareholder Approval or (c) if such adjournment or postponement is required by Law or a court or other Governmental Authority of competent jurisdiction in connection with any Action in connection with this Agreement or the Transactions (in each case, other than as initiated by SAM, STFC or any of their respective Subsidiaries).  STFC shall keep LMHC reasonably updated with respect to proxy solicitation results.  Unless the Voting Agreement shall not have been fully executed as of the applicable date, STFC shall (x) recognize the proxy and power of attorney granted in the Voting Agreement at any meeting of the STFC Shareholders during the term of this Agreement (and subject to the terms of the Voting Agreement) and (y) not recognize, register or give effect to any transfer of any Shares made in violation of the Voting Agreement.  Notwithstanding anything to the contrary set forth in this Agreement, unless this Agreement shall have been terminated prior to the date of the STFC Shareholders Meeting in accordance with its terms, the obligation of STFC to duly call, give notice of, convene and hold the STFC Shareholders Meeting in accordance with this Section 7.07 shall not be limited or otherwise affected by the making of an Adverse Recommendation Change.

Section 7.08     No Solicitation of Transactions.

(a)          Each of SAM and STFC shall not, and shall cause their respective Subsidiaries not to, and shall not authorize or permit their respective or their respective Subsidiaries’ directors, officers, employees or other Representatives to, directly or indirectly, (i) solicit, initiate or knowingly encourage or knowingly facilitate the making of any submission, announcement, proposal, offer or inquiry that constitutes or would reasonably be expected to lead to a Takeover Proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding any submission, announcement, proposal, offer or inquiry that constitutes or would reasonably be expected to lead to a Takeover Proposal, or furnish any non-public information with respect to SAM, STFC or any of their respective Subsidiaries to any Person (or their Representatives) who has made any submission, announcement, proposal, offer or inquiry that constitutes or would reasonably be expected to lead to a Takeover Proposal, (iii) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of STFC (unless, and only to the extent, the STFC Board or STFC Special Committee determines in good faith, after consultation with its financial advisor and outside counsel, that the failure to do so would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law, in which case it may enable such Persons to submit and pursue a Takeover Proposal), (iv) enter into any Takeover Proposal Documentation with respect to a Takeover Proposal or (v) publicly propose to or agree to do any of the foregoing.  Each of SAM and STFC shall, and shall cause their respective Subsidiaries and direct their respective Representatives to, immediately cease and cause to be terminated all existing discussions and negotiations as of the date of this Agreement with any Person conducted theretofore with respect to any submission, announcement, proposal, offer or inquiry that constitutes or would reasonably be expected to lead to a Takeover Proposal.  Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement, at any time prior to obtaining the STFC Shareholder Approval, in response to a bona fide written Takeover Proposal received after the date hereof and prior to obtaining the STFC Shareholder Approval that did not result from a breach of this Section 7.08, (I) STFC may (and may authorize and permit its Subsidiaries and Representatives to) contact the Person or any of its Representatives who has made such Takeover Proposal solely to clarify the terms of such Takeover Proposal so that the STFC Board or STFC Special Committee, as applicable, may reasonably inform itself about such Takeover Proposal and (II) if the STFC Board or STFC Special Committee, as applicable, determines in good faith, after consultation with its financial advisor and outside counsel, that (A) such Takeover Proposal constitutes or would reasonably be expected to lead to a Superior Proposal and (B) that the failure to do so would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law, STFC may (and may authorize and permit its Subsidiaries and Representatives to), subject to compliance with Section 7.08(c), (x) furnish information with respect to SAM, STFC and their respective Subsidiaries to the Person making such Takeover Proposal (and its Representatives) pursuant to a confidentiality agreement containing provisions that are not more favorable to such Person than those contained in the Confidentiality Agreement are to LMHC (it being understood that such confidentiality agreement need not contain any standstill provisions); provided that all such information has previously been provided to LMHC or is provided to LMHC prior to or substantially concurrently with the time it is provided to such Person or any of its Representatives, and (y) participate in discussions and negotiations with the Person making such Takeover Proposal (and its Representatives) regarding such Takeover Proposal.

(b)          Neither the SAM Board nor any committee thereof shall (i) withdraw or withhold (or modify in a manner adverse to LMHC), or publicly propose to withdraw or withhold (or modify in a manner adverse to LMHC), the approval, declaration of advisability or recommendation by the SAM Board or any such committee of this Agreement, the SAM Transaction, the Plan of Reorganization, the Amended Organizational Documents or the other transactions contemplated hereby, (ii) approve, declare advisable or recommend the adoption of, or publicly propose to approve, declare advisable or recommend the adoption of, any Takeover Proposal or (iii) fail to publicly reaffirm the SAM Recommendation within five (5) Business Days of a written request by LMHC to make such public reaffirmation following the receipt by SAM of a public Takeover Proposal that has not been withdrawn; provided that LMHC may make any such request only twice with respect to a particular Takeover Proposal (and, additionally, once per material modification to any such Takeover Proposal that is made public).

(c)          Excepted to the extent permitted by and in compliance with Section 7.08(d), neither the STFC Board nor any committee thereof shall (i) withdraw or withhold (or modify in a manner adverse to LMHC), or publicly propose to withdraw or withhold (or modify in a manner adverse to LMHC), the approval, declaration of advisability or recommendation by the STFC Board or any such committee of this Agreement, the STFC Merger or the other transactions contemplated hereby, (ii) approve, declare advisable or recommend the adoption of, or publicly propose to approve, declare advisable or recommend the adoption of, any Takeover Proposal or (iii) fail to publicly reaffirm the STFC Recommendation within five (5) Business Days of a written request by LMHC to make such public reaffirmation following the receipt by STFC of a public Takeover Proposal (other than in the case of a Takeover Proposal in the form of a tender offer or exchange offer) that has not been withdrawn; provided that LMHC may make any such request only twice with respect to a particular Takeover Proposal (and, additionally, once per material modification to any such Takeover Proposal that is made public) or (iv) fail to recommend against acceptance of such a tender or exchange offer by the close of business on the earlier of (A) the tenth (10th) Business Day after the commencement of such tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act and (B) the third (3rd) Business Day prior to the STFC Shareholders Meeting (each of (i), (ii), (iii) and (iv), an “Adverse Recommendation Change”; it being understood that any customary “stop, look and listen” or similar communication of the type contemplated by Rule 14d-9(f) of the Exchange Act shall not, in and of itself, be deemed to be an Adverse Recommendation Change).

(d)          Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement, at any time prior to obtaining the STFC Shareholder Approval, the STFC Board or STFC Special Committee, as applicable, may, if it determines in good faith, after consultation with its financial advisor and outside counsel, that the failure to take such action would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law, (A) make an Adverse Recommendation Change in response to an Intervening Event and (B)(x) make an Adverse Recommendation Change in response to a Superior Proposal or (y) cause or permit STFC to terminate this Agreement in order to enter into a definitive written agreement to implement a Superior Proposal, in each case, if and only if:

(i)          STFC shall have given LMHC notice at least five (5) Business Days prior to making any such Adverse Recommendation Change pursuant to clause (A) or (B)(x) above or causing or permitting STFC to terminate this Agreement pursuant to clause (B)(y) above, which notice shall (I) in the case of an Intervening Event, include a reasonably detailed description of the material Effects comprising such Intervening Event and (II) in the case of a Superior Proposal, include (A) a statement that the STFC Board or STFC Special Committee, as applicable, intends to take such action and specifying the reasons therefor, (B) the most current version of all proposed documents to effect such Superior Proposal in the possession of STFC or any of its Representatives or, if there is no such proposed written documentation, a reasonably detailed summary of the material terms and conditions of any Superior Proposal and (C) the identity of the Person making such Superior Proposal (it being understood and agreed that (1) each amendment to the financial or other material terms of such Superior Proposal shall require a new notice and a three (3) Business Day period following delivery of such new notice prior to taking any specified action and (2) in determining whether to make an Adverse Recommendation Change or to cause or permit STFC to so terminate this Agreement, the STFC Board or STFC Special Committee, as applicable, shall take into account any changes to the financial or other material terms of this Agreement proposed by LMHC in writing to STFC in response to any such notice or otherwise within the periods described above);

(ii)          STFC has and has caused its Subsidiaries and its and their respective Representatives to negotiate in good faith with LMHC and its Representatives during the applicable periods referred to in clause (i) above in order to permit LMHC to propose one or more amendments to this Agreement so that the failure to take such action would no longer reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law; and

(iii)          after considering any proposed amendments to this Agreement made by LMHC in writing during the applicable periods referred to in clause (i) above, if any, the STFC Board or STFC Special Committee, as applicable, shall have determined in good faith, after consultation with its financial advisor and outside counsel, that (A) the failure to make the Adverse Recommendation Change in response to such Superior Proposal or cause or permit STFC to terminate this Agreement in order to enter into a definitive written agreement to implement a Superior Proposal would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law or (B) the failure to make the Adverse Recommendation Change in response to such Intervening Event would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law, as applicable.

(e)          In addition to the obligations of each of SAM and STFC set forth in Section 7.08(a), Section 7.08(b) and Section 7.08(c), each of SAM and STFC shall as promptly as practicable (and in any event within twenty-four (24) hours after receipt thereof) advise LMHC of the receipt of any submission, announcement, proposal, offer or inquiry that constitutes or would reasonably be expected to lead to a Takeover Proposal after the date of this Agreement, provide LMHC with a copy of any written materials received in connection with any such submission, announcement, proposal, offer or inquiry or, where no written materials are available, provide a summary of the material terms and conditions of any such submission, announcement, proposal, offer or inquiry and the identity of the Person making any such submission, announcement, proposal, offer or inquiry.  Each of SAM and STFC shall keep LMHC reasonably informed on a reasonably prompt basis of any material developments with respect to any such submission, announcement, proposal, offer or inquiry (including any material changes thereto) and shall provide LMHC as promptly as practicable (and in no event later than twenty-four (24) hours after receipt by SAM, STFC or any of their Affiliates or Representatives of or twelve (12) hours after delivery by SAM, STFC or any of their Affiliates or Representatives of) any draft documents to effect, or any material correspondence with respect to, any such submission, announcement, proposal, offer or inquiry.

(f)          Nothing contained in this Section 7.08 shall prohibit STFC from taking and disclosing to the STFC Shareholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act, or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder, or making any disclosure to its shareholders if the STFC Board or STFC Special Committee determines in good faith, after consultation with its outside legal counsel, that the failure to make such disclosure would reasonably be likely to constitute a breach of its fiduciary duties to its shareholders under Ohio Law; it being understood, however, that nothing in foregoing shall be deemed to alter the definition of an Adverse Recommendation Change as provided by Section 7.08(c) or permit the STFC Board to make an Adverse Recommendation Change except to the extent permitted by and in compliance with Section 7.08(d).

Section 7.09     Public Announcements.  Each of LMHC, SAM and STFC shall agree on a press release announcing the entering into of this Agreement and the transactions contemplated hereby.  Thereafter, each of LMHC, SAM and STFC shall consult with each other before issuing any press release or otherwise making any public statements (including scheduling of a press conference or conference call with investors or analysts) with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement without the prior consent of the other parties, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that a party may, without the prior consent of the other parties, issue such press release or make such public statement (a) as may be required by Law, the applicable rules and regulations of the NASDAQ Global Select Market or any listing agreement with the NASDAQ Global Select Market or (b) to enforce its rights and remedies under this Agreement; provided, further, however, that (i) without prior consent of the other parties, each party may disseminate information consistent with information included in a press release or other document previously approved for external distribution by the other parties pursuant to this Section 7.09, and (ii) this Section 7.09 shall not apply to any press release or other public announcement or disclosure in connection with any Adverse Recommendation Change effected by the STFC Board or STFC Special Committee, as applicable, to the extent permitted by and in compliance with Section 7.08(d).

Section 7.10     Post Closing Commitments.

(a)          During the period beginning on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, SAM and STFC shall continue to operate out of their current Columbus, Ohio office; provided, however, that, within such two (2)-year period, LMHC shall be entitled to exercise its business judgment to make such changes to the size or location of such office as it deems necessary and appropriate, based upon business needs.

(b)          During the period beginning on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, SAM and STFC shall continue to utilize the “State Auto” trademarks and brand associated with the lines of property and casualty insurance and insurance products of SAM, STFC and their respective Subsidiaries as of the date hereof, either independently or in conjunction with one or more trademarks and brands of LMHC or one of its Affiliates.

(c)          During the period beginning on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date, SAM and STFC shall substantially maintain the philanthropic and charitable contributions and activities described in Section 7.10(c) of the SAM Disclosure Letter consistent with the historical practices of SAM and STFC from December 31, 2018 through the date hereof.

(d)          During the period beginning on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, (i) SAM shall not redomesticate or voluntarily adopt or enter into any plan of complete or partial liquidation or dissolution and (ii) all of the issued and outstanding capital stock of Reorganized SAM shall be owned, at all times, directly or indirectly, by LMHC.

Section 7.11     Employee Matters.

(a)          During the period beginning on the Closing Date and ending on the first (1st) anniversary of the Closing Date (the “Protection Period”), or if earlier, the termination of employment of a STFC Employee, LMHC shall provide, or shall cause to be provided to: (i) each employee of STFC and its Subsidiaries who is employed as of immediately prior to the Closing (each such employee, a “STFC Employee”), a base salary or hourly base wage rate that is at least equal to the base salary or hourly base wage rate provided to such STFC Employee immediately prior to the Closing; (ii) each STFC Employee, a target annual short-term cash bonus opportunity or target annual cash commission opportunity that is at least equal to the target annual short-term cash bonus opportunity or target annual cash commission opportunity provided to such STFC Employee immediately prior to the Closing; and (iii) the STFC Employees, as a group, group employee health, group welfare and retirement benefits (other than severance benefits) that are no less favorable in the aggregate than those provided to such STFC Employees immediately prior to the Closing.  Without limiting the generality of the foregoing, during the Protection Period, LMHC shall not amend or modify any of the STFC Benefit Plans listed on Section 7.11(a) of the STFC Disclosure Letter to reduce or cease benefit accruals in respect of any plan participant as of immediately prior to the Closing under such plan below the rate in effect immediately prior to the Closing, except to the extent any such amendments or modifications are required by applicable Law.

(b)          For all purposes (including purposes of vesting, eligibility to participate and level of benefits) under any employee benefit plans of LMHC and its Subsidiaries (exclusive of SAM, STFC and their respective Subsidiaries) solely to the extent such plans provide benefits to any STFC Employee after the Closing Date (the “New Plans”), each such STFC Employee shall be credited with his or her years of service with STFC and its Subsidiaries and their respective predecessors before the Closing, to the same extent as such STFC Employee was entitled, before the Closing, to credit for such service under any STFC Benefit Plan or SAM Benefit Plan; provided that the foregoing service credit shall not apply for purposes of benefit accruals under any New Plan that is a defined benefit plan, retiree welfare arrangement or long-term incentive arrangement or to the extent that its application would result in a duplication of benefits with respect to the same period of service.  In addition, LMHC shall provide that (i) each STFC Employee shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan is replacing comparable coverage under a STFC Benefit Plan or SAM Benefit Plan in which such STFC Employee participated immediately before the Closing Date (such plans, collectively, the “Old Plans”), and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any STFC Employee, LMHC shall use commercially reasonable efforts to provide that (x) all pre-existing condition exclusions and actively-at-work requirements of such New Plan shall be waived for such STFC Employee and his or her covered dependents, to the extent such conditions were inapplicable or waived under the comparable Old Plans in which such STFC Employee participated immediately prior to the Closing Date and (y) any eligible expenses incurred by any STFC Employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the date such STFC Employee’s participation in the corresponding New Plan begins shall be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such STFC Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.

(c)          Prior to the Effective Time, the STFC Board or the appropriate committee thereof shall take all actions reasonably necessary, including adopting any resolutions or amendments and providing any notices to participants, (which resolutions, amendments and notices, if applicable, shall be subject to the prior review and approval of LMHC) to provide that, on and following the Effective Time, the “company stock fund” shall be removed as an investment option under the applicable STFC Benefit Plans.  As of the Effective Time, LMHC shall assume the STFC Benefit Plans, including the Executive Change of Control Agreements.

(d)          On and after the date hereof, any broad-based employee notices or communication materials (including any website posting) provided to employees of SAM, STFC or any of their respective Subsidiaries by SAM, STFC or any of their respective Subsidiaries pertaining to employment, compensation or benefits matters that are or may be affected by this Agreement or the transactions contemplated by this Agreement shall be subject to the prior prompt review and comment of LMHC, and SAM, STFC and their respective Subsidiaries shall consider, in good faith, revising such notice or communication to reflect any comments or advice that LMHC provides within three (3) Business Days of receiving such notice or communication from SAM, STFC or any of their respective Subsidiaries.

(e)          During the period beginning on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, or if earlier, the termination of employment of a STFC Employee, LMHC shall provide, or shall cause to be provided to, each STFC Employee with severance benefits in accordance with the terms set forth on Section 7.11(e) of the STFC Disclosure Letter.

(f)          In respect of STFC’s One Team Incentive Plan for the 2022 fiscal year (the “OTIP”), (i) prior to January 1, 2022, STFC shall establish, in consultation with LMHC, the applicable “Performance Criteria” (as defined in the OTIP) in respect of the 2022 fiscal year in the ordinary course of business consistent with past practice, (ii) STFC shall, or shall cause to, pay each STFC Employee participating in the OTIP as of immediately prior to the Closing a cash bonus in respect of the period from January 1, 2022 through the Closing Date (the “Pre-Closing Period”) based on the actual level of performance achieved (as determined by STFC, subject to the prior review and approval of LMHC), multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Period and the denominator of which is 365 (the “Pre-Closing Bonus”), and (iii) subject to the terms and conditions of the OTIP as amended herein with respect to the 2022 fiscal year, LMHC shall, or shall cause to, pay to each STFC Employee participating in the OTIP as of immediately prior to the Closing a cash bonus in respect of the period from the day immediately following the Closing Date through December 31, 2022 (the “Post-Closing Period”) based on the greater of the actual performance achieved and 75% of the target level of performance (as determined by STFC, subject to the prior review and approval of LMHC), multiplied by a fraction, the numerator of which is the number of days in the Post-Closing Period and the denominator of which is 365 (the “Post-Closing Bonus”).  The Pre-Closing Bonus, subject to applicable Tax withholdings, shall be paid, without interest, as promptly as practicable following the Effective Time, but in no event later than the first regularly scheduled payroll date that occurs at least five (5) Business Days following the Effective Time.  The Post-Closing Bonus shall be paid in accordance with the terms and conditions of the OTIP as amended herein with respect to the 2022 fiscal year.

(g)          During the Protection Period, neither LMHC nor any of its Subsidiaries will terminate or take any action to terminate or liquidate the State Auto Insurance Companies Amended and Restated Directors Deferred Compensation Plan or the STFC Outside Directors Restricted Share Unit Plan.

(h)          This Section 7.11 shall be binding upon and shall inure solely to the benefit of each of the parties to this Agreement and nothing in this Section 7.11 or any other provision of this Agreement or any other related Contract, express or implied (i) shall be construed to establish, amend or modify any STFC Benefit Plan, SAM Benefit Plan or any other benefit plan, program, agreement or arrangement, (ii) shall alter or limit the ability of STFC, SAM or any of their respective Subsidiaries, or LMHC or any of its Subsidiaries to amend, modify or terminate any benefit plan, program, agreement or arrangement or (iii) is intended to or shall confer upon any current or former employee of STFC, SAM or any of their respective Subsidiaries or any other person any right to employment or continued employment or service for any period of time by reason of this Agreement or any other related agreement, or any right to a particular term or condition of employment.

Section 7.12     Directors’ and Officers’ Indemnification and Insurance.

(a)          LMHC agrees that all rights to indemnification, advancement of expenses and exculpation by each of SAM and STFC (or any of their respective Subsidiaries) now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing a director or officer of SAM, STFC or any of their respective Subsidiaries (each an “Indemnified Party”) as provided in the Organizational Documents of SAM, STFC or any of their respective Subsidiaries, or in any written indemnification agreement to which SAM, STFC or any of their respective Subsidiaries is a party as of March 31, 2021, in each case as in effect on the date of this Agreement shall be assumed by Reorganized SAM or the Surviving Corporation, as applicable in the Transactions, without further action, and shall survive the Transactions and shall remain in full force and effect in accordance with their terms.  During the period beginning on the Closing Date and ending on the sixth (6th) anniversary of the Closing Date, each of Reorganized SAM and the Surviving Corporation shall, and LMHC shall cause each of Reorganized SAM and the Surviving Corporation to, maintain in effect the exculpation, indemnification and advancement of expenses equivalent to the provisions of the Organizational Documents of SAM and STFC, as applicable, as in effect immediately prior to the Closing with respect to acts or omissions by any Indemnified Party occurring at or prior to the Closing, and shall not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any Indemnified Party, except as amendments may be required by applicable Law during such period.

(b)          LMHC shall obtain as of the Closing “tail” directors’ and officers’ liability insurance policies with a claims period of six (6) years from the Closing with at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the Indemnified Parties, in each case with respect to claims arising out of or relating to events which occurred before or at the Closing; provided, however, that in no event will LMHC be required to expend an aggregate premium for such coverage in excess of 300% of the last annual premium paid by SAM, STFC or any of their respective Subsidiaries for such insurance prior to the date of this Agreement (the “Maximum Premium”).  If such insurance coverage cannot be obtained at an aggregate premium equal to or less than the Maximum Premium, LMHC shall obtain the greatest coverage available for a cost not exceeding an aggregate premium equal to the Maximum Premium.  For the avoidance of doubt, SAM and STFC and their respective subsidiaries shall reasonably cooperate with LMHC in connection with LMHC’s procurement of the directors’ and officers’ liability and any other “tail” insurance policies.

(c)          This Section 7.12 shall survive the consummation of the Transactions, is intended to benefit and shall be enforceable by each Indemnified Party and their respective successors, heirs and representatives and shall not be amended in such a manner as to adversely affect any Indemnified Party without the prior written consent of such affected Indemnified Party.

(d)          Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or has been in existence with respect to SAM, STFC or any of their respective Subsidiaries or its directors and officers, it being understood and agreed that the indemnification provided for in this Section 7.12 is not prior to, or in substitution for, any such claims under any such policies.

(e)          In the event that LMHC, Reorganized SAM or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors or assigns of LMHC, Reorganized SAM or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 7.12.

Section 7.13     Tax Treatment.  SAM, Merger Sub II and LMHC intend the SAM Transaction to qualify as reorganizations under Section 368(a) of the Code, and each of LMHC and SAM shall, and shall cause their respective Subsidiaries to, use commercially reasonable efforts to cause the SAM Transaction to so qualify.  Each of LMHC, Merger Sub II and SAM shall not, and shall cause their respective Subsidiaries not to, take any action that would reasonably be expected to adversely affect the status of the SAM Transaction as, or cause the SAM Transaction not to qualify as, reorganizations under Section 368(a) of the Code.

Section 7.14     Section 16 Matters.  Prior to the Closing, STFC shall take all such steps as may be required to cause to be exempt under Rule 16b-3 promulgated under the Exchange Act any dispositions of Shares (including derivative securities with respect to Shares) resulting from the transactions contemplated hereby by each director or officer of STFC who is subject to the reporting requirements of Section 16(a) of the Exchange Act (or who will become subject to the reporting requirements of Section 16(a) of the Exchange Act as a result of the transactions contemplated hereby) with respect to equity securities of STFC.

Section 7.15     Stock Exchange Delisting; Deregistration.  Each of LMHC and STFC shall use commercially reasonable efforts to enable the delisting by STFC of the Shares from the NASDAQ Global Select Market and the deregistration of the Shares under the Exchange Act as promptly as practicable following the Closing.

Section 7.16     Takeover Laws.  If any “control share acquisition,” “fair price,” “moratorium,” or other anti-takeover Law or any takeover-related provision in the STFC Articles of Incorporation or STFC Code of Regulations becomes or is deemed to be applicable to this Agreement, the STFC Merger or any of the other transactions contemplated hereby (other than those arising under insurance acquisition of control Laws), then each of STFC and the STFC Board shall grant such approvals and take such actions within STFC’s control as are permitted under applicable Law and necessary to eliminate, or if not possible to eliminate, to minimize the effect of such Law or such takeover-related provision in the STFC Articles of Incorporation or STFC Code of Regulations on this Agreement, the STFC Merger and the other transactions contemplated hereby.

Section 7.17     Litigation.  Each of SAM and STFC shall promptly advise LMHC orally and in writing of any Action brought by any SAM Member or other interested party against SAM or its directors, officers or employees or any STFC Shareholder against STFC or its directors, officers or employees, as applicable, in each case, relating to (as applicable) this Agreement, the Plan of Reorganization, the Amended Organizational Documents, the SAM Transaction, the STFC Merger or the other transactions contemplated hereby and shall keep LMHC reasonably informed regarding any such Action.  Each of SAM and STFC shall give LMHC the opportunity to participate (at its own expense) in, subject to a customary joint defense agreement, but not control the defense of any such litigation, shall give due consideration to LMHC’s advice with respect to such litigation and shall not settle any such litigation without the prior written consent of LMHC, such consent not to be unreasonably withheld, delayed or conditioned.  LMHC shall promptly advise each of SAM and STFC orally and in writing of any Action brought by any member of LMHC against LMHC or its directors, officers or employees relating to this Agreement or the transactions contemplated hereby and shall keep each of SAM and STFC reasonably informed regarding any such litigation.

Section 7.18     Due Diligence Investigation; No Other Representations.

(a)           Each of LMHC and its Subsidiaries is an informed and sophisticated Person.  LMHC has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed decision with respect to the execution, delivery and performance of this Agreement and the transactions contemplated hereby.  LMHC has been provided access to certain materials relating to the business of SAM, STFC and their respective Subsidiaries and has been given access to certain Representatives of SAM, STFC and their respective Subsidiaries.  Without limiting the generality of the foregoing, LMHC acknowledges that (1) none of SAM, STFC, their respective Subsidiaries, nor any of their respective Representatives makes any representation or warranty with respect to (i) any estimates, budgets, projections or predictions delivered to or made available to LMHC or any other Person of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of SAM, STFC and their respective Subsidiaries or the future business and operations of SAM, STFC and their respective Subsidiaries or (ii) any other information or documents made available to LMHC or its Representatives with respect to SAM, STFC and their respective Subsidiaries, or any of their respective businesses, assets, Liabilities or operations, except in each case of clauses (i) and (ii) as expressly set forth in Article IV or Article V hereof, and (2) LMHC has not relied nor will it rely upon any of the information described in sub clauses (i) and (ii) of clause (1) above or any other information, representation or warranty, except those representations or warranties set forth in Article IV and/or Article V hereof (in each case, as expressly qualified by the SAM Disclosure Letter or the STFC Disclosure Letter).

(b)          Each of SAM, STFC and their respective Subsidiaries is an informed and sophisticated Person.  Each of SAM and STFC has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed decision with respect to the execution, delivery and performance of this Agreement and the transactions contemplated hereby.  Each of SAM and STFC has been provided access to certain materials relating to the business of LMHC and its Subsidiaries and has been given access to certain Representatives of LMHC and its Subsidiaries.  Without limiting the generality of the foregoing, LMHC acknowledges that (1) none of LMHC, its Subsidiaries, nor any of their respective Representatives makes any representation or warranty with respect to (i) any estimates, budgets, projections or predictions delivered to or made available to SAM or STFC or any other Person of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of LMHC and its Subsidiaries or the future business and operations of LMHC and its Subsidiaries or (ii) any other information or documents made available to SAM, STFC or their respective Representatives with respect to LMHC and its Subsidiaries, or any of their respective businesses, assets, Liabilities or operations, except in each case of clauses (i) and (ii) as expressly set forth in Article VI hereof, and (2) neither SAM nor STFC has relied nor will it rely upon any of the information described in sub clauses (i) and (ii) of clause (1) above or any other information, representation or warranty, except those representations or warranties set forth in Article VI hereof (in each case, as expressly qualified by the LMHC Disclosure Letter).

Section 7.19     A.M. Best Rating.

(a)          LMHC shall use reasonable best efforts to cause the SAM Insurance Companies and the STFC Insurance Companies to achieve an A.M. Best rating that is equivalent to the LMHC group rating (either as a group rating, through reinsurance or otherwise), including as part of such efforts, (i) the establishment of a quota share reinsurance or reinsurance pooling arrangement among one or more SAM Insurance Companies or STFC Insurance Companies and one or more LMHC Existing Reorganized Insurers or other insurance company Subsidiary thereof, subject to receiving required regulatory approvals and (ii) making any required filings with Insurance Regulators in connection therewith within ninety (90) days of the date hereof.  In the event the SAM Insurance Companies and the STFC Insurance Companies have not received an A.M. Best rating that is equivalent to the LMHC group rating as of the Closing, LMHC shall continue to use reasonable best efforts to cause the SAM Insurance Companies and the STFC Insurance Companies to achieve such rating (either as a group rating, through reinsurance or otherwise) within six (6) months of the Closing.  If the SAM Insurance Companies and the STFC Insurance Companies have not achieved such rating (either as a group rating, through reinsurance or otherwise), within such six (6) month period, then, subject, in each case, to receiving required regulatory approvals, LMHC shall promptly thereafter (and in no event later than the end of the ninth (9th) month following the Closing) make any required filings with Insurance Regulators either to enter into a financial guarantee agreement, provide a capital infusion in support of the SAM Insurance Companies and the STFC Insurance Companies or take such other reasonable steps in order to achieve such rating action and, subject to receipt of required regulatory approval(s), implement such measure(s).

(b)          Solely to the extent the SAM Insurance Companies and the STFC Insurance Companies have not received an A.M. Best rating that is equivalent to the LMHC group rating as of the Closing, during the period beginning on the Closing Date and ending on the date the SAM Insurance Companies and the STFC Insurance Companies have first achieved such rating (the “Advisory Board Term”), there shall be established an advisory board (jointly and not severally; and acting collectively, not individually; the “Advisory Board”) initially comprised of the three (3) persons listed on Schedule II.

(i)          The Advisory Board duties shall consist of consulting with and providing advice and recommendations to the officers of LMHC with respect to compliance with Section 7.19(a).  The Advisory Board shall not have the authority to approve, initiate, or disapprove any actions on behalf of any entity or communicate with any rating agency, Governmental Authority or policyholder, and the officers of LMHC shall not be under any obligation to accept any advice or recommendations of the Advisory Board.

(ii)         The members of the Advisory Board shall receive annual remuneration for their services during the Advisory Board Term in an amount equal to the base annual retainer they were paid as members of SAM Board during the twelve (12) months prior to the Closing (excluding any amounts or supplemental fees paid for participation on committees, leadership roles, or in connection with any incentive-based compensation, phantom equity, or similar compensation plans or arrangements).

(iii)        In the event of a vacancy on the Advisory Board, the remaining members of the Advisory Board shall determine whether to fill such vacancy and, subject to the approval of LMHC, the identity of the successor member.

(iv)        The rights granted hereunder may only be exercised by the collective action of the Advisory Board.  No member of the Advisory Board, acting in his or her individual capacity, is granted any authority hereunder.

(v)          LMHC shall deliver to the Advisory Board, not later than fifteen (15) days following the end of each calendar month, a report of LMHC’s efforts with respect to achieving such A.M. Best rating in such preceding month.

(vi)        The Advisory Board may from time to time receive confidential information relating to the business and operations of LMHC and its Affiliates.  Each member of the Advisory Board shall keep such confidential information strictly confidential and may not disclose such confidential information to any Person (other than other members of the Advisory Board) and may not use such confidential information for any purpose other than fulfilling his or her responsibilities as a member of the Advisory Board.

(c)          During the Advisory Board Term, if any, LMHC shall cause Reorganized SAM to not pay any shareholder dividends or make any other distributions with respect to its capital stock.

ARTICLE VIII

CONDITIONS TO CLOSING

Section 8.01     Conditions to the Obligations of Each Party.  The obligations of each party to effect the Transactions on the Closing Date are subject to the satisfaction or waiver by each of LMHC, SAM and STFC (to the extent permitted by applicable Law) as of the Closing Date of the following conditions:

(a)          SAM Member Approval.  The SAM Member Approval shall have been obtained.

(b)          STFC Shareholder Approval.  The STFC Shareholder Approval shall have been obtained.

(c)          Governmental Consents.  The Governmental Consents shall have been made or obtained, as applicable, and shall be in full force and effect.  The waiting periods applicable to the Transactions under the HSR Act, together with any extensions thereof, shall have expired or been terminated.

(d)          No Legal Prohibition.  No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Laws (whether temporary, preliminary or permanent), in each case, that is in effect and that enjoins, prevents or otherwise prohibits consummation of the Transactions (a “Restraint”).

Section 8.02     Conditions to the Obligations of LMHC, Merger Sub I and Merger Sub II.  The obligations of LMHC, Merger Sub I and Merger Sub II to effect the Transactions on the Closing Date are further subject to the satisfaction or waiver by LMHC (to the extent permitted by applicable Law) as of the Closing Date of the following conditions:

(a)          Representations and Warranties.

(i)          The representations and warranties of SAM (A) set forth in Section 4.01(a), Section 4.02, clauses (y) and (z) of the second sentence of Section 4.03(a), Section 4.04(a)(i), Section 4.25 and Section 4.27 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time) and (B) set forth in Section 4.07(b) shall be true and correct as of the date of this Agreement and as of the Closing Date.  LMHC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of SAM.

(ii)          The representations and warranties of STFC (A) set forth in Section 5.03(a) shall be true and correct, subject only to de minimis exceptions, as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time), (B) set forth in Section 5.01(a), Section 5.02, Section 5.03(b), clause (y) of the second sentence of Section 5.04(a), Section 5.05(a)(i), Section 5.27 and Section 5.29 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time) and (C) set forth in Section 5.09(b) shall be true and correct as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date.  LMHC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of STFC.

(iii)        The representations and warranties of SAM set forth in Article IV (other than those described in Section 8.02(a)(i)) and the representations and warranties of STFC set forth in Article V (other than those described in Section 8.02(a)(ii)) shall be true and correct as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that such representations and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be likely to have a SAM Group Material Adverse Effect; provided, however, that for purposes of determining the satisfaction of this Section 8.02(a)(iii), no effect shall be given to any exception or qualification in such representations and warranties relating to “material,” “materiality,” “SAM Material Adverse Effect” or “STFC Material Adverse Effect.”  LMHC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of each of SAM and STFC.

(b)          Covenants and Agreements.

(i)          The covenants and agreements of SAM set forth in this Agreement to be performed or complied with at or prior to the Closing Date shall have been duly performed or complied with in all material respects.  LMHC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of SAM.

(ii)          The covenants and agreements of STFC set forth in this Agreement to be performed or complied with at or prior to the Closing Date shall have been duly performed or complied with in all material respects.  LMHC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of STFC.

(c)          Burdensome Condition.  No Burdensome Condition shall have been imposed in connection with any Governmental Consent.

Section 8.03    Conditions to the Obligation of SAM and STFC.  The obligation of SAM to effect the SAM Transaction and STFC to effect the STFC Merger on the Closing Date are further subject to the satisfaction or waiver by each of SAM and STFC (to the extent permitted by applicable Law) as of the Closing Date of the following conditions:

(a)          Representations and Warranties.  The representations and warranties of LMHC (i) set forth in Section 6.01(a), Section 6.02, Section 6.03(a)(i) and Section 6.16 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time), (ii) set forth in Section 6.17(b) shall be true and correct as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date and (iii) set forth in Article VI (other than those described in clauses (i) and (ii)) shall be true and correct as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent that such representations and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time), except in the case of this clause (iii) where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be likely to have a LMHC Material Adverse Effect; provided, however, that for purposes of determining the satisfaction of clause (iii) of this condition, no effect shall be given to any exception or qualification in such representations and warranties relating to “material,” “materiality” or “LMHC Material Adverse Effect.”  Each of SAM and STFC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of LMHC.

(b)          Covenants and Agreements.  The covenants and agreements of LMHC, Merger Sub I and Merger Sub II set forth in this Agreement to be performed or complied with at or prior to the Closing Date shall have been duly performed or complied with in all material respects.  Each of SAM and STFC shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized executive officer of LMHC.

ARTICLE IX

TERMINATION

Section 9.01     Termination.  This Agreement may be terminated and the Transactions and the other transactions contemplated hereby may be abandoned at any time prior to the Closing (notwithstanding if the SAM Member Approval or the STFC Shareholder Approval has been obtained):

(a)          by mutual written consent of LMHC, SAM and STFC, which consent shall have been approved by the action of their respective Boards of Directors;

(b)          by LMHC, SAM or STFC, if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Laws, in each case, permanently preventing or otherwise permanently prohibiting the SAM Transaction or the STFC Merger and such Law shall have become final and nonappealable; provided that a party shall not have the right to terminate this Agreement pursuant to this Section 9.01(b) if such party’s failure to fulfill any obligation under this Agreement has been the cause of, or results in, the issuance of such Law;

(c)          by LMHC, SAM or STFC, if the SAM Member Approval shall not have been obtained following a vote thereon having been taken at the SAM Members Meeting;

(d)          by LMHC, SAM or STFC, if the STFC Shareholder Approval shall not have been obtained following a vote thereon having been taken at the STFC Shareholders Meeting;

(e)          by STFC, prior to the receipt of the STFC Shareholder Approval in accordance with Section 7.08(d)(B)(y) with respect to a Superior Proposal concurrently with entering into a definitive agreement to implement a Superior Proposal; provided, however, that prior to or concurrently with such termination STFC (without duplication) pays or causes to be paid to LMHC the Termination Fee pursuant to Section 9.02(b)(i);

(f)          by LMHC, (i) prior to the receipt of the STFC Shareholder Approval, if STFC shall have made an Adverse Recommendation Change or (ii) there has been a willful and material breach by SAM or STFC of any covenant or agreement set forth in Section 7.06, Section 7.07 or Section 7.08;

(g)          by LMHC, SAM or STFC, if the Transactions shall not have been consummated prior to May 12, 2022 (as such date may be extended pursuant to the second proviso below, the “Outside Termination Date”); provided that a party shall not have the right to terminate this Agreement pursuant to this Section 9.01(g) if such party’s failure to fulfill any obligation under this Agreement has been the cause of, or results in, the failure of the Transactions to occur on or before such date; provided, further, that, if on a date that would have been the Outside Termination Date the conditions set forth in Section 8.01(c) or Section 8.01(d) (to the extent any such Restraint is in respect of Orders that relate to the subject matter of Section 8.01(c)) or Section 8.02(c) are the only conditions in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing) that shall not have been satisfied or waived on or before such date, then the Outside Termination Date shall automatically be extended without further action by the parties hereto up to two (2) times, each time for a period of three (3) months, in which case the Outside Termination Date shall be deemed for all purposes to be such later date;

(h)          by LMHC, if (i) there has been a breach by SAM or STFC of any representation, warranty, covenant or agreement set forth in this Agreement that would, individually or in the aggregate, result in a failure of a condition set forth in Section 8.02(a) or Section 8.02(b) if continuing on the Closing Date and (ii) such breach has not been cured (or is not capable of being cured) by the earlier of (A) thirty (30) days after the giving of written notice to SAM and STFC of such breach and (B) the Outside Termination Date; provided that LMHC shall not have the right to terminate this Agreement pursuant to this Section 9.01(h) if LMHC, Merger Sub I or Merger Sub II is then in material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement;

(i)          by SAM or STFC, if (i) there has been a breach by LMHC of any representation, warranty, covenant or agreement set forth in this Agreement that would, individually or in the aggregate, result in a failure of a condition set forth in Section 8.03(a) or Section 8.03(b) if continuing on the Closing Date and (ii) such breach has not been cured (or is not capable of being cured) by the earlier of (A) thirty (30) days after the giving of written notice to LMHC of such breach and (B) the Outside Termination Date; provided that neither SAM nor STFC shall have the right to terminate this Agreement pursuant to this Section 9.01(i) if SAM or STFC is then in material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement; or

(j)          by LMHC, if the Voting Agreement shall not have been executed by SAM, and delivered to LMHC, by 11:59 p.m., New York time, on the date hereof.

The party desiring to terminate this Agreement pursuant to this Section 9.01 (other than clause (a) hereof) shall give written notice of such termination to the other party in accordance with Section 10.02, specifying the provision or provisions hereof pursuant to which such termination is effected.

Section 9.02     Fees and Expenses.

(a)          Expense Allocation.  Except as otherwise specified in this Section 9.02, all costs and expenses (including fees and expenses payable to Representatives) incurred in connection with this Agreement, the Transactions and the other transactions contemplated hereby shall be paid by the party incurring such cost or expense, whether or not the Transactions are consummated.

(b)          Termination Fee.

(i)          If this Agreement is terminated (A) by STFC pursuant to Section 9.01(e) or (B) by LMHC pursuant to Section 9.01(f), STFC (or if this Agreement is terminated by LMHC pursuant to Section 9.01(f)(ii) in respect of a breach by SAM, SAM) shall pay LMHC, as liquidated damages and not as a penalty, the Termination Fee.  If the Termination Fee is payable pursuant to clause (A) of the preceding sentence, the Termination Fee shall be paid prior to or concurrently with such termination and if the Termination Fee is payable pursuant to clause (B) of the preceding sentence, the Termination Fee shall be paid within two (2) Business Days after the date of such termination, in each case, by wire transfer of immediately available funds to an account designated by LMHC in writing.

(ii)          If this Agreement (A) is terminated (I) by LMHC, SAM or STFC pursuant to Section 9.01(d) and at any time after the date hereof and prior to the STFC Shareholder Meeting, a Takeover Proposal shall have become public and shall not have been publicly withdrawn at least five (5) Business Days prior to the STFC Shareholders Meeting, (II) by LMHC, SAM or STFC pursuant to Section 9.01(g) and at any time after the date hereof and prior to the Outside Termination Date, a Takeover Proposal shall have been made known to the STFC Board or shall have become public and shall not have been withdrawn at least five (5) Business Days prior to the Outside Termination Date or (III) by LMHC pursuant to Section 9.01(h) and at any time after the date hereof and prior to the breach giving rise to LMHC’s right to terminate under Section 9.01(h), a Takeover Proposal shall have been made known to the STFC Board or shall have become public and shall not have been withdrawn prior to such breach and (B) within twelve (12) months of such termination, STFC either consummates any Takeover Proposal or enters into a definitive agreement to consummate any Takeover Proposal and STFC thereafter consummates such Takeover Proposal (whether or not within such twelve (12) month period), then STFC shall pay LMHC, as liquidated damages and not as a penalty, the Termination Fee; provided that for the purposes of this Section 9.02(b)(ii), all references in the term Takeover Proposal to “15% or more” shall be deemed to be references to “more than 50%.”  If the Termination Fee is payable pursuant to this Section 9.02(b)(ii), the Termination Fee shall be paid prior to or concurrently with the consummation of the Takeover Proposal by wire transfer of immediately available funds to an account designated by LMHC in writing.

(c)          Regulatory Costs.  Notwithstanding Section 9.02(a), at Closing, LMHC shall reimburse SAM for all out-of-pocket costs and expenses assessed to SAM by, or payable by SAM to, an Insurance Regulator in connection with its review of the SAM Transaction.

(d)          Modified Termination Fee.  If this Agreement is terminated by LMHC pursuant to Section 9.01(j), then STFC shall pay LMHC, as liquidated damages and not as a penalty, an amount equal to 50% of the Termination Fee (such amount, the “Modified Fee”).  If the Modified Fee is payable pursuant to this Section 9.02(d), the Modified Fee shall be paid within one (1) Business Days after the date of such termination by wire transfer of immediately available funds to an account designated by LMHC in writing.

(e)          Enforcement Costs; Interest; Other.  The parties acknowledge that the agreements set forth in this Section 9.02 are an integral part of the transactions contemplated hereby and that, without these agreements, the parties would not enter into this Agreement.  Accordingly, if any party fails promptly to pay any amount due pursuant to this Section 9.02, such party shall also pay any out-of-pocket costs and expenses (including reasonable out-of-pocket legal fees and expenses) incurred by the other parties in connection with an Action to enforce this Section 9.02 that results in an Order for such amount against the non-paying party.  Any amount not paid when due pursuant to this Section 9.02 shall bear interest from the date such amount is due until the date paid at a rate equal to the prime rate as published in The Wall Street Journal, Eastern Edition in effect on the date of such payment.  The parties agree and understand that in no event shall the Termination Fee be required to be paid more than once or on more than one occasion.  Notwithstanding anything to the contrary set forth in this Agreement (other than Liability for any willful and material breach of any provision of this Agreement prior to termination or for actual, common law fraud with respect to the representations and warranties contained in this Agreement), following the termination of this Agreement in accordance with Section 9.01 (for the avoidance of doubt, without limiting any parties rights to specific performance pursuant to Section 10.10 prior to such termination), LMHC’s right to receive payment from STFC (or SAM, as applicable) of the Termination Fee pursuant to Section 9.02(b) or the Modified Fee pursuant to Section 9.02(d), as applicable, shall, solely in circumstances in which the Termination Fee or the Modified Fee, as applicable, is payable hereunder and is paid in full, constitute the sole and exclusive remedy of LMHC, Merger Sub I and Merger Sub II against SAM, STFC and their Affiliates and any of their respective former, current or future general or limited partners, shareholders, members, managers, directors, officers, employees, agents, Representatives or assignees (collectively, the “SAM/STFC Related Parties”) for any and all losses and damages suffered as a result of the failure of the transactions contemplated by this Agreement to be consummated or for a breach or failure to perform hereunder or otherwise, and upon payment of such amounts when so payable, none of the SAM/STFC Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement, except that SAM and STFC shall also be obligated with respect to any amounts owing for enforcement costs and expenses pursuant to the prior sentences of this Section 9.02(e)).

Section 9.03     Effect of Termination.  In the event of termination of this Agreement by LMHC, SAM or STFC as provided in Section 9.01, this Agreement shall forthwith become void and have no effect, without any Liability or obligation on the part of LMHC, Merger Sub I, Merger Sub II, SAM or STFC, except that (a) the provisions of Section 7.02(b), Section 9.02, this Section 9.03 and Article X shall survive termination and (b) nothing herein shall relieve any party from Liability for any willful and material breach of any provision of this Agreement prior to such termination or for actual, common law fraud with respect to the representations and warranties contained in this Agreement, in which case the aggrieved party shall be entitled to all rights and remedies available at law or in equity, including liability for damages determined taking into account all relevant factors, including the loss of benefit of the Transactions to the party, any lost shareholder premium in the case of STFC, the time value of money, and any benefit to the breaching party or its shareholders or members, as applicable, arising from such willful and material breach or actual, common law fraud (such rights and remedies enforceable only by the aggrieved party, in its sole and absolute discretion, on behalf of itself or its shareholders or members, as applicable); provided, further, that the amount of any damages recovered pursuant to this Section 9.03 by LMHC shall be reduced by the amount of any Termination Fee or Modified Fee, as applicable, previously paid to LMHC.

ARTICLE X

GENERAL PROVISIONS

Section 10.01     Nonsurvival of Representations, Warranties, Covenants and Agreements.  None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants and agreements, shall survive the Closing, except for (a) those covenants or agreements set forth herein that by their terms apply to or are to be performed in whole or in part following the Closing and (b) this Article X.

Section 10.02     Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in writing (and made orally if so required pursuant to any Section of this Agreement) and shall be deemed given (a) when delivered personally by hand, (b) when sent by email or (c) two (2) Business Days following the day sent by an internationally recognized overnight courier (with written confirmation of receipt), in each case, at the following addresses and email addresses (or to such other address or email address as a party may have specified by notice given to the other party pursuant to this provision):

Section 10.03     Entire Agreement.  This Agreement, the Voting Agreement (if and when fully executed) and the Confidentiality Agreement constitute the entire agreement among the parties with respect to the subject matter hereof, and supersede all other prior and contemporaneous agreements, negotiations, understandings, representations and warranties, whether oral or written, with respect to such matters.

Section 10.04     Third-Party Beneficiaries.  This Agreement is not intended to and does not confer upon any Person other than the parties hereto any rights or remedies hereunder, other than, from and after the Closing, each Indemnified Party and their respective successors, heirs and representatives, each of whom shall have the right to enforce the provisions of Section 7.12 directly, and, from and after the Effective Time, the right of the STFC Shareholders to receive the Merger Consideration payable in accordance with Article III and the rights of the holders of STFC Equity Awards as set forth in Section 3.02(a) and Section 3.02(d).  The representations, warranties, covenants and agreements in this Agreement are the product of negotiations among the parties and are for the sole benefit of the parties and may, in certain instances, be qualified, limited or changed by confidential disclosure letters.  Any inaccuracies in such representations or warranties or failure to perform or breach of such covenants or agreements are subject to waiver by the parties in accordance with Section 10.05 without notice or Liability to any other Person.  In some instances, the representations, warranties, covenants and agreements in this Agreement may represent an allocation among the parties of risk associated with particular matters regardless of the knowledge of any of the parties.  Consequently, Persons other than the parties may not rely upon the representations, warranties, covenants and agreements in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

Section 10.05     Amendment; Waiver.

(a)          This Agreement may be amended, modified or supplemented by the parties in writing by action of their respective Boards of Directors at any time before or after the SAM Member Approval and the STFC Shareholder Approval has been obtained and prior to the Closing; provided, however, that, (i) after the SAM Member Approval shall have been obtained, no such amendment, modification or supplement shall be made that pursuant to applicable Law requires further approval by the SAM Members without such further approval and (ii) after the STFC Shareholder Approval shall have been obtained, no such amendment, modification or supplement shall be made that pursuant to applicable Law requires further approval by the STFC Shareholders without such further approval.  This Agreement may not be amended, modified or supplemented except by an instrument in writing signed on behalf of all of the parties.

(b)          At any time prior to the Closing, each of LMHC, Merger Sub I, Merger Sub II, SAM and STFC may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracies in the representations and warranties of the other parties set forth in this Agreement or in any document delivered pursuant to this Agreement or (iii) subject to the provisions of Section 10.05(a), waive compliance with any of the covenants, agreements or conditions of the other parties set forth in this Agreement.  Any such extension or waiver by a party shall be valid only if set forth in an instrument in writing signed on behalf of such party.  The failure or delay of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.  Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at Law or in equity.

Section 10.06     Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned or delegated, in whole or in part, by operation of Law or otherwise by any of the parties without the prior written consent of the other parties.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns.  Any attempted or purported assignment or delegation in violation of this Section 10.06 shall be null and void.

Section 10.07     Governing Law.  This Agreement, and all disputes, claims, controversies or causes of action (whether in contract, tort or otherwise) that may be based upon, arising out of or relating to this Agreement, including the negotiation, validity, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement) shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to its applicable principles of conflicts of laws, rules or principles thereof (or any jurisdiction); provided that (a) the Laws of the State of Ohio shall apply with respect to the fiduciary duties of the SAM Board and STFC Board and (b) the Laws of the State of Ohio or the Commonwealth of Massachusetts, as applicable, shall apply where such Laws are mandatorily applicable to the Transactions or other transactions contemplated hereby and the rights of holders of Shares or Equity Rights.

Section 10.08    Consent to Jurisdiction.  Each of the parties hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction and venue of the Delaware Court of Chancery (or, only if the Delaware Court of Chancery does not have jurisdiction over a particular matter, the Superior Court of the State of Delaware (and the Complex Commercial Litigation Division thereof if such division has jurisdiction over the particular matter), or only if the Delaware Court of Chancery and the Superior Court of the State of Delaware do not have jurisdiction, any federal court of the United States of America sitting in the State of Delaware) (“Chosen Courts”), and any appellate court from any decision thereof, in any Action based upon, arising out of or relating to this Agreement, including the negotiation, validity, execution or performance of this Agreement and agrees that all claims in respect of any such Action shall be heard and determined in the Chosen Courts and agrees not to bring any such Action in any other court, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any Action based upon, arising out of or relating to this Agreement, including the negotiation, validity execution or performance of this Agreement, in the Chosen Courts, including any objection based on its place of incorporation or domicile, (c) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Action in any such court or claim that it or its property is exempt or immune from the Chosen Courts or from any Action commenced in the Chosen Courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), (d) agrees that a final judgment in any such Action shall be conclusive and binding upon each of the parties and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law and (e) agrees that it shall not assert as a defense any matter or claim waived by the foregoing clauses (a) through (d).  Each of the parties consents and agrees that service of process, summons, notice or document for any action permitted hereunder may be delivered by registered mail addressed to it at the applicable address set forth in Section 10.02 or in any other manner permitted by applicable Law.

Section 10.09     Waiver of Jury Trial.  EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY BE BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING THE NEGOTIATION, VALIDITY, EXECUTION OR PERFORMANCE OF THIS AGREEMENT, IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY FOR ANY DISPUTE BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY INSTRUMENT OR OTHER DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE BREACH, TERMINATION OR VALIDITY HEREOF OR ANY TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES CERTIFIES AND ACKNOWLEDGES THAT (A) NEITHER THE OTHER PARTIES NOR THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS HAVE REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH OF THE PARTIES UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH OF THE PARTIES MAKES THIS WAIVER VOLUNTARILY AND (D) EACH OF THE PARTIES HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS OF THIS SECTION 10.09.  ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

Section 10.10    Specific Performance.  Each of the parties acknowledges and agrees that irreparable harm would occur and that the parties would not have any adequate remedy at law in the event that any provision of this Agreement were not performed in accordance with its specific terms or are otherwise breached or threatened to be breached and that money damages or other legal remedies would not be an adequate remedy for any such failure to perform or breach.  Accordingly, each party hereto agrees that, without posting a bond or other undertaking, the parties shall be entitled to injunctive or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Chosen Courts, this being in addition to any other remedy to which they are entitled at law or in equity.  In the event that any such action is brought in equity to enforce the provisions of this Agreement, no party will allege, and each party hereby waives the defense or counterclaim, that there is an adequate remedy at law.  The parties further agree that (a) by seeking any remedy provided for in this Section 10.10, a party shall not in any respect waive its right to seek any other form of relief that may be available to such party under this Agreement and (b) nothing contained in this Section 10.10 shall require any party to institute any action for (or limit such party’s right to institute any action for) specific performance under this Section 10.10 before exercising any other right under this Agreement.

Section 10.11     Counterparts; Effectiveness.  This Agreement may be executed in one or more counterparts, each of which will be deemed to constitute an original, but all of which shall constitute one and the same agreement, and may be delivered by email, facsimile or other means of electronic transmission intended to preserve the original graphic or pictorial appearance of a document.  This Agreement shall become effective when each party shall have received one or more counterparts hereof signed by each of the other parties and unless and until such receipt, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 10.12     Severability.  The provisions of this Agreement shall be deemed severable and if any term, provision, covenant or restriction of this Agreement is held by the Chosen Courts or other Governmental Authority to be illegal, invalid or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

[Signature Page to Agreement and Plan of Merger and Combination]

---

(i)

Either (A) you remain continuously employed by the Employer from the date of this letter agreement through the date of the closing of the Transaction, as determined by the Employer (the “Closing Date”) or (B) your employment terminates due to an Involuntary Termination (as defined below) prior to the Closing Date such that, as a result of such termination, you are no longer employed by the Employer or any of its affiliates;

(ii)

You execute, within the time provided by the Employer to do so (and do not exercise any applicable revocation rights), a release of all claims in a form acceptable to the Company (the “Release”), which Release shall release the Company, the Employer, each of their respective affiliates, and each of the foregoing entities’ respective predecessors, successors, affiliates, shareholders, members, managers, partners, officers, directors, employees, representatives, agents and benefit plans (and fiduciaries of such plans) (collectively, the “Released Parties”) from any and all claims, including any and all causes of action arising out of your employment with the Employer and any other Released Party and, if applicable, the termination of such employment; and

(iii)

The Merger Agreement is executed by the parties thereto.

	Sincerely,
	STATE AUTO FINANCIAL CORPORATION
	By:
		Name:
		Title:
	Date:	July 12, 2021

	STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
	By:
		Name:
		Title:
	Date:	July 12, 2021

ACKNOWLEDGED AND AGREED:
[EMPLOYEE]
Date:	July 12, 2021