Exhibit 10.1
THE HANOVER INSURANCE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the “Agreement”) is effective as of <GRANT DATE> (the “Grant Date”), by and between The Hanover Insurance Group, Inc., a Delaware corporation (the “Company”), and <PARTICIPANT NAME> (“Participant” or “you”). Capitalized terms used without definition herein shall have the meanings set forth in The Hanover Insurance Group 2022 Long-Term Incentive Plan (as it may be amended from time to time, the “Plan”).
PREAMBLE
WHEREAS, the Company considers it desirable and in the best interests of the Company that Participant be given an opportunity to acquire a proprietary interest in the Company in the form of an option to purchase shares of Stock.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual covenants and promises hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
On the first two vesting dates set forth above, to the extent the Stock Option would otherwise become vested and exercisable with respect to a fractional Share, such fractional Share shall not vest and the number of Shares becoming vested and exercisable on such vesting date shall be rounded down so that the Stock Option is only exercisable with respect to a whole number of Shares. In the event the vesting date falls on a day that is not a business day (i.e., a weekend day or holiday on which banks are not generally open in the Commonwealth of Massachusetts), the vesting date shall be the next following day that is a business day.
2
If Participant ceases to receive benefits under the Company’s Long-Term Disability Program prior to becoming Disabled and immediately thereafter returns to active Employment, the Stock Option will continue to vest in accordance with Section 3 of this Agreement.
1 Pursuant to Mr. Farber’s Offer Letter dated September 21, 2016, in the event he is involuntarily terminated by the company without cause, or terminates employment for “good reason,” he is entitled to one year’s additional vesting credit.
3
(A) be based on stock which is traded, or will be traded upon consummation of the Change in Control, on an established securities market;
(B) provide Participant (or each Participant in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under this Award, including, but not limited to, an identical or better vesting schedule and accelerated vesting provisions;
(C) have substantially equivalent economic value to this Award (determined at the time of the Change in Control); and
(D) have terms and conditions which provide that in the event that Participant's employment is involuntarily terminated (other than for Cause) or Participant terminates employment for “Good Reason” (as defined below), in either case, prior to the third anniversary of the Grant Date, Participant shall automatically vest in 100% of the Alternative Award and any conditions on Participant’s rights under, or any restrictions on transfer or exercisability applicable to, such Alternative Award shall be waived or shall lapse in full.
For this purpose, “Good Reason” shall mean the occurrence of one or more of the events listed below following a Change in Control:
(X) if Participant is a “Participant” (as that term is defined in the CIC Plan) in the Company’s Amended and Restated Employment Continuity Plan or its successor plan (the “CIC Plan”), the occurrence of any of the events enumerated under the definition of “Good Reason” applicable to Participant’s “Tier” Level as set forth in CIC Plan; or
(Y) if Participant is not a “Participant” in the CIC Plan, the occurrence of any of the following (A) a reduction in your rate of annual base salary as in effect immediately prior to such Change in Control; (B) a reduction in your annual short-term incentive compensation plan target award opportunity (but excluding the conversion of any cash incentive arrangement into an equity incentive arrangement of commensurate value or vice versa) from that which was in effect immediately prior to such Change in Control; or (C) any requirement that you relocate to an office more than 35 miles from the facility where you were located immediately prior to the Change in Control.
4
For the purpose of this Agreement, a termination of Employment shall be deemed to be a “Retirement” if all of the following conditions are satisfied: (i) Participant’s Employment terminates (other than for Cause), (ii) he or she is either (x) 65 years of age or older, as of the date of such termination, or (y) 60 years of age or older, as of the date of such termination and, immediately prior to such termination, Participant has been in continuous Employment for five or more years, and (iii)(1) Participant provides the Company not less than six months’ advanced written notice of Participant’s intent to retire (the “Notice Period”), and (2) Participant remains in continuous Employment and in good standing during such Notice Period and terminates Employment at the end of such Notice Period. The Company may, in its sole discretion waive, in whole or in part, the requirements of clause (iii) of the preceding sentence. In the event that Participant’s Employment is terminated for Cause during the Notice Period the Stock Option will be automatically cancelled and forfeited and shall be returned to the Company for no consideration.
5
Exercise notices hereunder shall be in such form as is acceptable to the Administrator, including by electronic notice with electronic signature. If notice is provided by a person other than Participant, this Stock Option will not be deemed to have been exercised until the Administrator has received such evidence as it may require that the person exercising the Stock Option has the right to do so. Unless otherwise determined by the Administrator, such notices, and any other notices hereunder, must be in writing and, if to the Company, shall be delivered personally to the Human Resources Department or such other party as designated by the Company or mailed to its principal office and, if to Participant, shall be delivered personally or mailed to Participant at his or her address on the records of the Company.
Payment of the Option Price may be made in (a) shares of Stock (including through a “net exercise” (as set forth in subsection (b)), (b) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock that would otherwise be issued upon exercise of the Stock Option by a number of whole shares having a fair market value equal to the aggregate Option Price of the Stock Option, (c) cash or a combination of shares of Stock and cash, or (d) through a broker-assisted exercise program acceptable to the Administrator.
To the extent that the Option Price of this Stock Option is less than the fair market value of a share of Stock by $0.50 or more on the date described below (determined by using the closing price of a share of Stock on such date, or if the Stock is not traded on such date, the most recent date on which the Stock was traded), this Stock Option, to the extent then outstanding and vested, will be automatically exercised, without any action required on behalf of Participant, by a “net exercise” as described in clause (b) of the paragraph above, on (x) the Expiration Date, if Participant has remained continuously Employed from the Grant Date through the Expiration Date, or (y) the last day of the applicable post-termination of Employment exercise period of this Stock Option as set forth in Section 4 above, if the Employment of Participant was involuntarily terminated by the Company for reasons other than for Cause, was terminated by reason of death, being Disabled or Retirement, or was voluntarily terminated by Participant.
6
7
The Company makes no representations to Participant with respect to the tax treatment of any amount paid or payable pursuant to this Award. While this Award is intended to be interpreted and operated to the extent possible so that any such amounts shall be exempt from the requirements of Section 409A, in no event shall THG be liable to Participant for or with respect to any taxes, penalties and/or interest which may be imposed upon any such amounts pursuant to Section 409A or any other federal or state tax law. To the extent that any such amount should be subject to Section 409A (or any other federal or state tax law), Participant shall bear the entire risk of any such taxes, penalties and or interest.
8
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the Grant Date.
THE HANOVER INSURANCE GROUP, INC. |
|
By:_______________________________________ |
Name: Denise Lowsley Title: Executive Vice President and CHRO
|
__________________________________________ |
<PARTICIPANT NAME> |