Exhibit 10.26

THE HANOVER INSURANCE GROUP

AMENDED AND RESTATED

NON-QUALIFIED RETIREMENT SAVINGS PLAN

ARTICLE I

NAME, PURPOSE AND EFFECTIVE DATE OF PLAN

 

1.01 Name and Purpose of Plan. This Plan shall be known as The Hanover Insurance
Group Amended and Restated Non-Qualified Retirement Savings Plan (the “Plan”).

 

     This Plan was initially adopted by First Allmerica Financial Life Insurance
Company (“First Allmerica”). First Allmerica, formerly known as State Mutual
Life Assurance Company of America, had adopted this deferred compensation plan
for the benefit of certain highly compensated employees to help ensure that
First Allmerica’s compensation and benefits programs for top management attract,
retain and motivate qualified personnel.

 

     As of January 1, 2008, The Hanover Insurance Company (“Hanover”) agreed to
assume (i) the sponsorship, and (ii) all liabilities and obligations, of the
Plan.

 

     This Plan is intended to be a non-qualified and unfunded plan, maintained
solely for the purpose of providing deferred compensation benefits to a select
group of management or highly compensated employees.

 

1.02 Plan Effective Date. The effective date of this Plan is January 1, 2005.
The effective date of this restatement is January 1, 2008. The Plan has been
amended and restated to reflect all amendments indicated on Schedule A.

 

1.03 Section 409A Compliance. Compensation deferrals under this Plan as in
effect prior to January 1, 2008 were made and administered in good faith in
accordance with the requirements of Code Section 409A. Such deferred
compensation and earnings thereon have been credited to the appropriate
Participant Accounts in accordance with Article IV and are subject to the terms
of this Plan.

 

     The provisions of this Plan and the payments provided hereunder are
intended to comply with the requirements of Code Section 409A and the Treasury
regulations and other applicable guidance issued by the Treasury Department and
or the Internal Revenue Service thereunder, and shall be interpreted and
administered consistent with such intent.

 

     The Company makes no representations to any Participant (or Beneficiary)
with respect to the tax treatment of any amount paid or payable pursuant to the
Plan. While the Plan is intended to be interpreted and operated to the extent
possible so that any such amounts shall either be exempt from the requirements
of Code Section 409A or shall comply with such requirements, in no event shall
the Company be liable to any Participant (or Beneficiary) for or with respect to
any taxes, penalties and/or interest which may be imposed upon any such amounts
pursuant to Code Section 409A or any other federal or state tax law. To the
extent that any such amount should be subject to Code Section 409A (or any other
federal or state tax law), the Participant (or Beneficiary) to which the amount
is paid or payable shall bear the entire risk of any such taxes, penalties and
or interest.

 

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ARTICLE II

DEFINITIONS

As used in this Plan, the following words and phrases shall have the meanings
set forth herein unless a different meaning is clearly required by the context.

 

2.01 “401(a)(17) Limit” means the compensation limit in effect for the Defined
Contribution Plan established pursuant to Code Section 401(a)(17) ($230,000 for
2008).

 

2.02 “Accrued Benefit” means the sum of the balances in a Participant’s Employee
Contribution Account, Employer Contribution Account and Additional Employer
Contribution Account.

 

2.03 “Affiliate” means any corporation which is included in a controlled group
of corporations (within the meaning of Code Section 414(b)) which includes the
Company and any trade or business (whether or not incorporated) which is under
common control with the Company (within the meaning of Code Section 414(c)).

 

2.04 “Annualized Base Salary” means the total Base Salary anticipated to be paid
by the Company to an Employee during a twelve-month period, excluding, without
limitation, any anticipated compensation increases and any anticipated bonuses
and non-cash compensation; provided, however, that Annualized Base Salary shall
be determined without reduction for (i) any anticipated Code Section 401(k)
salary reduction contributions to be contributed on the Employee’s behalf for
the Plan Year to the Defined Contribution Plan, (ii) the amount of any
anticipated salary reduction contributions to be contributed on the Employee’s
behalf for the Plan Year to any Code Section 125 plan sponsored by the Company,
(iii) the amount of any anticipated Base Salary to be deferred pursuant to the
terms of this Plan, and (iv) at the Plan Administrator’s discretion, any
anticipated amount of such other compensation deferrals by an Employee during a
given Plan Year pursuant to any other Company-sponsored deferral plan.

 

     For an Employee employed by the Company on a December 1, the Employee’s
Annualized Base Salary shall be determined by the Plan Administrator for the
immediately succeeding Plan Year. For an Employee who first completes an Hour of
Service after a December 1, the Employee’s initial Annualized Base Salary shall
be determined by the Plan Administrator as of the date the Employee first
completes an Hour of Service, with subsequent Annualized Base Salary amounts
being determined by the Plan Administrator for each such Employee employed by
the Company on a December 1 as of such date for the immediately succeeding Plan
Year.

 

2.05 “Base Salary” means the total base salary paid to an Employee by the
Company during a Plan Year, excluding, without limitation, bonuses and non-cash
compensation; provided, however, that Base Salary shall be determined without
reduction for (i) any Code Section 401(k) salary reduction contributions
contributed on the Employee’s behalf for the Plan Year to the Defined
Contribution Plan, (ii) the amount of any salary reduction contributions
contributed on the Employee’s behalf for the Plan Year to any Code Section 125
plan sponsored by the Company, (iii) the amount of any Base Salary deferred
pursuant to the terms of this Plan, and (iv) at the Plan Administrator’s
discretion, the amount of such other compensation as may be deferred by an
Employee during a given Plan Year pursuant to any other Company-sponsored
deferral plan.

 

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2.06 “Base Salary Deferrals” means deferrals of Base Salary made by an Eligible
Employee in accordance with a timely filed Election Form pursuant to
Section 3.02.

 

2.07 “Beneficiary” means one or more persons, trust, organization or estate
designated by the Participant to receive Plan benefits payable on or after the
death of a Participant pursuant to Section 5.08.

 

2.08 “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

 

2.09 “Company” means The Hanover Insurance Company (herein sometimes referred to
as the “Employer” or “Hanover”). Any reference to the Company or the Employer
prior to January 1, 2008 means First Allmerica, subject, however, to the fact
that as of January 1, 2008 Hanover assumed all obligations and liabilities (both
pre and post-January 1, 2008) of the Plan.

 

2.10 “Defined Contribution Plan” means The Hanover Insurance Group Retirement
Savings Plan, a qualified retirement plan, as in effect from time to time.

 

2.11 “Elected Payment Date” means the date specified on a Participant’s Election
Form indicating when a Base Salary Deferral and earnings thereon will be paid or
commence to be paid to the Participant. Notwithstanding the foregoing or any
language to the contrary set forth on any Participant’s Election Form filed on
or before December 31, 2006, to the extent an Election Form indicates a payment
is to be made or commence upon “retirement”, the term “retirement” shall mean
Termination of Employment by the Participant on or after reaching Normal
Retirement Age, as defined herein.

 

2.12 Election Form means the written form approved by the Plan Administrator for
the purposes of making a Base Salary Deferral.

 

2.13 “Eligible Compensation”

 

  (a) For Plan Years prior to January 1, 2008, “Eligible Compensation” shall
equal (subject to Subsections 2.13(d) and 2.13(e)): the total salary, bonuses
and other taxable remuneration paid to an Employee by the Company during a Plan
Year (as reported on the Employee’s W-2 for the Plan Year) minus the 401(a)(17)
Limit; provided, however, with respect to the President and Chief Executive
Officer of The Hanover Insurance Group, Inc., commencing on and after January 1,
2007, in no event shall Eligible Compensation (subject to Subsections 2.13(d)
and 2.13(e)) exceed, in the aggregate, the Eligible Compensation Cap.

 

  (b) For Plan Years commencing on or after January 1, 2008, “Eligible
Compensation” shall equal (subject to Subsections 2.13(d) and 2.13(e) below):
Base Salary plus Incentive Compensation (not to exceed target), if any, minus
the 401(a)(17) Limit, but in no event to exceed the Eligible Compensation Cap.

 

  (c) “Eligible Compensation” shall also include any such other compensation
earned or paid during a Plan Year as determined, from time to time, by the Plan
Administrator.

 

  (d)

Notwithstanding the foregoing, Eligible Compensation shall be determined without
reduction for (i) any Code Section 401(k) salary reduction contributions
contributed on the Employee’s behalf for the Plan Year to the Defined
Contribution Plan, (ii) the amount of any salary reduction contributions
contributed on the Employee’s behalf for the Plan Year to any Code Section 125
plan sponsored by the Company, (iii) the amount of any Base Salary deferred
pursuant to the terms of this Plan, (iv) Incentive Compensation deferred and
converted

 

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pursuant to The Hanover Insurance Group, Inc. IC Deferral and Conversion
Program, and (v) at the Plan Administrator’s discretion, the amount of such
other compensation as may be deferred by an Employee during a given Plan Year
pursuant to any other Company-sponsored deferral plan.

 

  (e) Notwithstanding the above, Eligible Compensation shall not include:

 

  (i) unless otherwise determined by the Plan Administrator, compensation paid
to Employees pursuant to The Hanover Insurance Group, Inc. Amended Long-Term
Stock Incentive Plan and/or The Hanover Insurance Group, Inc. 2006 Long-Term
Incentive Plan or pursuant to any similar or successor executive incentive
compensation plan;

 

  (ii) Employer contributions to a deferred compensation plan or arrangement
(other than salary reduction contributions to a Section 401(k) or 125 plan or
Base Salary Deferrals pursuant to the terms of this Plan, or otherwise, as
described above) either for the Plan Year of deferral or for the Year included
in the Employee’s gross income;

 

  (iii) unless otherwise determined by the Plan Administrator, any income which
is received by or on behalf of an Employee in connection with the grant,
receipt, settlement, exercise, lapse of risk of forfeiture or restriction on
transferability, or disposition of any stock option, stock award, stock grant,
stock appreciation right or similar right or award granted under any plan, now
or hereafter in effect, of the Company or any successor to the Company, its
parent, any such successor’s parent, its subsidiaries or affiliates, or any
stock or securities underlying any such option, award, grant or right;

 

  (iv) severance payments paid in a lump sum;

 

  (v) Code Section 79 imputed income, long term disability payments and workers’
compensation payments;

 

  (vi) taxable moving expense allowances or taxable tuition or other educational
reimbursements;

 

  (vii) non-cash taxable benefits provided to executives, including the taxable
value of Company-paid club memberships, chauffeur services, Company-provided
automobiles and financial planning benefits; and

 

  (viii) other taxable amounts received other than cash compensation for
services rendered, as determined by the Plan Administrator.

 

2.14 “Eligible Compensation Cap” means $1,000,000.00 minus the 401(a)(17) Limit.

 

2.15 “Employee” means a full-time salaried employee of the Company.

 

2.16 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

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2.17 “Hour of Service” means:

 

  (a) Each hour for which an Employee is paid, or entitled to payment, for the
performance of duties for the Company. For purposes of the Plan an Employee
shall be credited with 45 Hours of Service for each complete or partial week he
or she would be credited with at least one Hour of Service under this Section.

 

  (b) Each hour for which an Employee is paid, or entitled to payment, by the
Company on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military duty or leave of absence. Notwithstanding the preceding sentence:

 

  (i) No more than 1000 hours shall be credited to an Employee under this
Subsection (b) on account of any single continuous period during which the
Employee performs no duties (whether or not such period occurs in a single
computation period);

 

  (ii) No hours shall be credited under this Subsection (b) for any payments
made or due under a plan maintained solely for the purpose of complying with any
applicable worker’s compensation, unemployment compensation or disability
insurance laws; and

 

  (iii) No hours shall be credited under this Subsection (b) for a payment which
solely reimburses an Employee for medical or medically related expenses incurred
by the Employee.

For purposes of this Subsection (b) a payment shall be deemed to be made by or
due from the Company regardless of whether such payment is made by or due from
the Company directly, or indirectly, through, among others, a trust fund or
insurer, to which the Company contributes or pays premiums.

 

  (c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Company. The same Hours of Service shall not
be both credited under Subsections (a) or (b), as the case may be, and under
this Subsection. No more than 501 Hours of Service shall be credited under this
Subsection for a period of time during which an Employee did not or would not
have performed duties.

 

  (d) Special rules for determining Hours of Service under Subsection (b) or
(c) for reasons other than the performance of duties.

In the case of a payment which is made or due which results in the crediting of
Hours of Service under Subsection (b) or in the case of an award or agreement
for back pay under Subsection (c), to the extent that such an award or agreement
is made with respect to a period during which an Employee performs no duties,
the number of Hours of Service to be credited shall be determined as follows:

 

  (i) In the case of a payment made or due which is calculated on the basis of
units of time (such as days or weeks), the number of Hours of Service to be
credited to Employees shall be determined as provided in Subsection (a).

 

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  (ii) Except as provided in Subsection (d)(iii), in the case of a payment made
or due which is not calculated on the basis of units of time, the number of
Hours of Service to be credited shall be equal to the amount of the payment
divided by the Employee’s most recent hourly rate of compensation (as determined
below) before the period during which no duties are performed.

 

  A. In the case of Employees whose compensation is determined on the basis of a
fixed rate for specified periods of time (other than hours) such as days or
weeks, the hourly rate of compensation shall be the Employee’s most recent rate
of compensation for a specified period of time (other than an hour), divided by
the number of hours regularly scheduled for the performance of duties during
such period of time.

 

  B. In the case of Employees whose compensation is not determined on the basis
of a fixed rate for specified periods of time, the Employee’s hourly rate of
compensation shall be the lowest hourly rate of compensation paid to Employees
in the same job classification as that of the Employee or, if no Employees in
the same job classification have an hourly rate, the minimum wage as established
from time to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938,
as amended.

 

  (iii) Rule against double credit. An Employee shall not be credited on account
of a period during which no duties are performed with more hours than such
Employee would have been credited but for such absence.

 

  (e) Crediting of Hours of Service to computation periods.

 

  (i) Hours of Service described in Subsection (a) shall be credited to the
Employee for the computation period or periods in which the duties are
performed.

 

  (ii) Hours of Service described in Subsection (b) shall be credited as
follows:

 

  A. Hours of Service credited to an Employee on account of a payment which is
calculated on the basis of units of time (such as days or weeks) shall be
credited to the computation period or periods in which the period during which
no duties are performed occurs, beginning with the first unit of time to which
the payment relates.

 

  B. Hours of Service credited to an Employee by reason of a payment which is
not calculated on the basis of units of time shall be credited to the
computation period in which the period during which no duties are performed
occurs, or if the period during which no duties are performed extends beyond one
computation period, such Hours of Service shall be allocated between not more
than the first two computation periods in accordance with reasonable rules
established by the Company, which rules shall be consistently applied with
respect to all Employees within the same job classification, reasonably defined.

 

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  (iii) Hours of Service described in Subsection (c) shall be credited to the
computation period or periods to which the award or agreement for back pay
pertains, rather than to the computation period in which the award, agreement or
payment is made.

 

  (f) Rules for Non-Paid Leaves of Absence. For purposes of the Plan, an
Employee will also be credited with Hours of Service during any non-paid leave
of absence granted by the Company. The number of Hours of Service to be credited
under this Subsection (f) shall be determined as provided in Subsection (a);
provided, however, that no more than the number of Hours of Service in one
regularly scheduled work year of the Company will be credited for each non-paid
leave of absence. Hours of Service described in this Subsection (f) shall be
credited to the Employee for the computation period or periods during which the
leave of absence occurs.

 

2.18 “Incentive Compensation” means the compensation paid to an Employee (not to
exceed target) by the Company during a Plan Year pursuant to the Company’s
annual non-equity short-term incentive compensation program which is established
pursuant to the Company’s shareholder approved Short-Term Incentive Compensation
Plan or pursuant to any similar or successor non-equity short-term incentive
compensation plan. A Participant’s “target” Incentive Compensation means the
percentage of annual salary that the program establishes for each Participant as
a bonus target.

 

2.19 “Normal Retirement Age” means age 65.

 

2.20 “Participant” means an Employee who satisfies the conditions for
participation set forth in Subsections 3.01(a), 3.01(b) or 3.01(c).

 

2.21 “Plan Administrator” means one or more persons appointed from time to time
by the Company’s President to be responsible for the general operation and
administration of the Plan and for carrying out its provisions as set forth in
Subsection 6.01.

 

2.22 “Plan Year” means a calendar year.

 

2.23 “Termination of Employment” means, with respect to a Participant, the date
on which the Participant ceases to be employed by the Company, provided,
however, that such cessation constitutes a separation from service from the
Company and its Affiliates that meets the requirements of Treasury Regulation
Section 1.409A-1(h).

 

     A Participant’s employment by the Company or an Affiliate shall be treated
as continuing while the participant is on military leave, sick leave, or other
bona fide leave of absence, if the period of such leave does not exceed six
months, or if longer, so long as the Participant retains a right to reemployment
with the Company under an applicable statute or by contract. If the period of
leave exceeds six months and the Participant does not retain a right to
reemployment under an applicable statute or by contract, employment is deemed to
terminate on the first date immediately following such six-month period. With
respect to leave for disability, employment will be treated as continuing for a
period of up to 29 months, unless otherwise terminated by the employer or the
employee, regardless of whether the employee retains a contractual right to
reemployment. For this purpose, disability leave refers to leave due to the
employee’s inability to perform the duties of his or her position of employment
or any substantially similar position of employment by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than six
months.

 

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2.24 “Year of Service” means each computation period during which an Employee
completes at least 1,000 Hours of Service with the Company, commencing on the
date an Employee first completes an Hour of Service and each twelve-month period
commencing on the anniversary of such date.

ARTICLE III

ELIGIBILITY, PARTICIPATION AND SALARY DEFERRALS

 

3.01    (a) Eligibility to Make Base Salary Deferrals. Except as provided in
this Section, an Employee shall be eligible to make Base Salary Deferrals for a
Plan Year, if the Employee:

 

 

(i)

is not on a leave of absence from the Company (paid or unpaid) on the
December 1st date immediately preceding the Plan Year for which the Base Salary
Deferral Election as set forth in Section 3.02 is to be given effect and is
otherwise employed on the December 31st date immediately preceding such Plan
Year;

 

  (ii) has an Annualized Base Salary for the Plan Year (calculated as described
in Section 2.04 of the Plan) equal to or in excess of the 401(a)(17) Limit; and

 

  (iii) timely submits an executed Election Form as defined in Section 3.02 to
the Plan Administrator.

Notwithstanding (iii) above, for the 2005 Plan Year only, an otherwise eligible
Employee employed by the Company on December 1, 2004, may submit an executed
Election Form to the Plan Administrator on or prior to January 31, 2005 in order
to be eligible to make deferrals of Base Salary paid on or after the effective
date of the election.

Notwithstanding the above, if an Employee is not employed by the Company on the
December 31 st date immediately preceding the Plan Year for which the Base
Salary Deferral Election as set forth in Section 3.02 is to be given effect, the
Employee shall be eligible to make Base Salary Deferrals for a Plan Year, if the
Employee:

 

  (x) has an Annualized Base Salary for the Plan Year (calculated as described
in Section 2.04 of the Plan) equal to or in excess of the 401(a)(17) Limit; and

 

  (y) timely submits an executed Election Form defined in Section 3.02 to the
Plan Administrator.

A separate Election Form must be submitted for each Plan Year the eligible
Employee intends to make Base Salary Deferrals hereunder.

 

  (b) Eligibility for Company-Paid Contribution. To be eligible to receive a
Company-paid contribution on Eligible Compensation for a Plan Year to be
credited to an Employer Contribution Account to be established for each such
eligible Employee, an employee must meet the following requirements:

 

  (i) be an Employee;

 

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  (ii) have Eligible Compensation for the Plan Year (as described in
Section 2.13 of the Plan); and

 

  (iii) be employed by the Company on the last day of the Plan Year or have
retired from the Company during the Plan Year or died during the Plan Year while
actively employed by the Company.

 

  (c) Eligibility for Company-Paid Additional Employer Contribution. To be
eligible to receive a Company-paid additional employer contribution on Eligible
Compensation for a Plan Year, to be credited to an Additional Employer
Contribution Account to be established for each such eligible Employee, an
employee must meet the following requirements:

 

  (i) be an Employee;

 

  (ii) have Eligible Compensation for the Plan Year (as described in
Section 2.13 of the Plan);

 

  (iii) have contributed to the Defined Contribution Plan for the Plan Year the
maximum amount permitted to be deferred as a non-catch up salary reduction
contribution for such Plan Year; and

 

  (iv) for Plan Years commencing on and after January 1, 2008, be employed by
the Company on the last day of the Plan Year or have retired from the Company
during the Plan Year or died during the Plan Year while actively employed by the
Company.

Notwithstanding (iii) above, otherwise eligible Employees who first complete an
Hour of Service during a Plan Year who have contributed during the Plan Year to
a qualified 401(k) plan sponsored by their former employer(s) may furnish
evidence satisfactory to the Plan Administrator of their contributions to such
prior plan(s). So long as the amount contributed by the Employee to such prior
plan(s) plus the amount contributed by the Company as a salary reduction
contribution on behalf of the Employee to the Defined Contribution Plan equals
the maximum amount permitted to be deferred as a non-catchup salary reduction
contribution for such Plan Year, as described in Code Section 402(g), such
Employee shall be deemed to have satisfied requirement (iii) above for such
initial Plan Year.

 

  (d) An otherwise eligible Employee shall be eligible to make Base Salary
Deferrals provided the Employee satisfies the requirements of Subsections
3.01(a) and Section 3.02 for the applicable Plan Year. An otherwise eligible
Employee shall automatically be eligible to receive a Company-paid employer
contribution and/or a Company-paid additional employer contribution for a Plan
Year provided the Employee satisfies, as applicable, the requirements of
Subsections 3.01(b) and/or (c) for the applicable Plan Year.

 

3.02 Base Salary Deferral Elections.

For Plan Years commencing on or after January 1, 2008, Base Salary Deferrals may
only be made for a Plan Year if and to the extent expressly permitted by the
Company. If permitted

 

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by the Company, an eligible Employee as described in Subsection 3.01(a) (an
“Eligible Employee”) may make Base Salary Deferrals for a Plan Year by
submitting a written form approved by the Plan Administrator for this purpose
(an “Election Form”). The Election Form shall indicate: (x) what percentage
(subject to the limitations set forth in Section 4.01(a)) shall be withheld from
his or her Base Salary for the Plan Year (in substantially equal amounts per pay
period, or on such other basis as shall be agreed to by the Plan Administrator)
and credited to his or her Employee Contribution Account; (y) the Elected
Payment Date, and (z) the form of the distribution (a lump-sum or annual
installments over a period of up to ten (10) years as stated in Section 5.05).
If an Eligible Employee fails to specify an Elected Payment Date and/or one of
the payment forms specified in Section 5.05, or elects the annual installment
payment option, but does not specify the period over which such annual
installments will be paid, any amount credited to his or her Employee
Contribution Account with respect to such Election Form shall be paid in such
form and at such time as provided for in Section 5.04 hereof.

Each Base Salary Deferral Election for the Plan Year to which the election
applies shall be made by the submission of a written election as follows:

 

 

(i)

By not later than the December 31st date immediately preceding the Plan Year for
which the Base Salary Deferral Election is to be given effect, each Eligible
Employee employed by the Company on such date shall submit a properly completed
and executed Election Form which will be given effect with respect to Base
Salary earned by such Employee for the subsequent Plan Year.

 

 

(ii)

Each Eligible Employee who is employed by the Company after such December 31st
date may submit an Election Form no later than thirty (30) days after the date
the Eligible Employee first commences employment with the Company or an
Affiliate (the “Initial Election Period”), which Election Form will be given
effect during such Plan Year with respect to Base Salary earned by the Eligible
Employee after the submission of the Election Form.

 

  (iii) Any Base Salary Deferral election made pursuant to subparagraph
(i) and/or (ii) above shall be irrevocable (x) on the last day of the calendar
year immediately preceding the Plan Year as to which the election applies, or
(y) on the last day of the Initial Election Period, as applicable, and shall
remain in effect throughout the Plan Year to which the election applies.
Notwithstanding the foregoing, any such deferral election shall not apply to any
Base Salary earned by the Participant after the date on which the Participant
ceases to be an Eligible Employee for the purposes of Section 3.04.

 

3.03 Participation. Subject to Section 3.04, once an eligible Employee becomes a
Participant in the Plan, he or she shall remain a Participant until all benefits
to which he or she is entitled under the Plan have been paid.

 

3.04

Loss of Employee’s Select Status. Notwithstanding any other provision of this
Plan, if at any time the Plan Administrator determines that any Participant may
not be considered by the Department of Labor or a court of competent
jurisdiction to be a member of a select group of the Company’s management or
highly compensated employees (as those terms are used in Section 201(2) of ERISA
and related provisions), or that a Participant or Beneficiary will recognize
income for state or federal

 

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income tax purposes with respect to Plan benefits not then payable, the Plan
Administrator shall communicate such belief to the Company and shall follow the
Company’s direction regarding any ongoing participation or future benefit
eligibility of that individual. The Company shall then consider what measures
are appropriate to preserve the exempt status of the Plan under ERISA as its
principal objective in rectifying the situation.

ARTICLE IV

PARTICIPANT ACCOUNTS AND

PLAN BENEFITS

 

4.01 Establishment of Accounts. The Plan Administrator shall establish and
maintain a memorandum Employee Contribution Account, an Employer Contribution
Account and an Additional Employer Contribution Account, when appropriate, to
account for each Participant’s Accrued Benefit. Amounts shall be credited to
Participant Accounts in accordance with this Section 4.01 for each Plan Year.
Additionally, investment earnings shall be credited to Participant Accounts
pursuant to Section 4.02. The following amounts shall be credited to a
Participant’s Accounts for each Plan Year:

 

  (a) Employee Contribution Account. If permitted by the Company, that amount,
if any, which an Eligible Employee elects to defer for a Plan Year from his or
her Base Salary as an eligible salary reduction deferral pursuant to Subsection
3.01(a) of the Plan; provided, however, that:

 

 

(i)

Base Salary Deferrals for a Plan Year must be equal to a percentage of Base
Salary otherwise payable to a Participant (e.g., 1%, 2% or 12 1/2% of Base
Salary otherwise payable);

 

 

(ii)

An eligible Employee may not elect to defer more than 12 1/2% of Base Salary
otherwise payable to the Employee during the Plan Year, or such larger
percentage as may be approved by the Commissioner of Insurance for the
Commonwealth of Massachusetts pursuant to Section 35 of Chapter 175 of the
Massachusetts General Laws; and

 

  (iii) Base Salary Deferrals shall be credited to a Participant’s Employee
Contribution Account within 31 days of the date such amounts would have been
paid to the Participant in the absence of the Participant’s Salary Reduction
Deferral election.

 

  (b) Employer Contribution Account. That amount, if any, which an eligible
Employee is entitled to receive for each Plan Year pursuant to Subsection
3.01(b) of the Plan.

Until otherwise voted by the Company’s Board of Directors, for Plan Years
commencing on or after January 1, 2008, eligible Employees employed on the last
day of a Plan Year shall be entitled to receive a Company-paid contribution
equal to 2% of Eligible Compensation for the Plan Year (as described in
Section 2.13 of the Plan).

For Plan Years beginning before January 1, 2008, eligible Employees employed on
the last day of a Plan Year shall be entitled to receive a Company-paid
contribution equal to 3% of Eligible Compensation for the Plan Year (as
described in Section 2.13 of the Plan).

 

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Contributions shall be credited to a Participant’s Employer Contribution Account
on or before March 15 of the calendar year following the Plan Year for which the
contribution is to be credited.

 

  (c) Additional Employer Contribution Account. That amount, if any, which an
eligible Employee is eligible to receive for each Plan Year pursuant to
Subsection 3.01(c) of the Plan.

Until otherwise voted by the Company’s Board of Directors, for Plan Years
commencing on or after January 1, 2009, eligible Employees employed on the last
day of a Plan Year shall be entitled to receive a Company-paid contribution
equal to 6% of Eligible Compensation for the Plan Year (as described in
Section 2.13 of the Plan).

For Plan Years beginning before January 1, 2009, eligible Employees employed on
the last day of a Plan Year shall be entitled to receive a Company-paid
contribution equal to 5% of Eligible Compensation for the Plan Year (as
described in Section 2.13 of the Plan).

Contributions shall be credited to a Participant’s Additional Employer
Contribution Account on or before March 15 of the calendar year following the
Plan Year for which the contribution is to be credited.

 

4.02 Investment of Participant Accounts. The Company may from time to time
designate one or more investments in which each Participant’s Accounts shall be
deemed to be invested. Initially, and until changed by the Company, Participant
Accounts established under this Plan shall be credited with interest at the Plan
GATT Interest Rate in effect for each Plan Year. For purposes, of this Plan, the
Plan GATT Interest Rate for a Plan Year means the annual rate of interest in
effect under Code Section 417(e)(3) for the second month immediately preceding
the first day of the Plan Year (e.g., November 2004 for the 2005 Plan Year). The
deemed investment return shall be credited to a Participant’s Accounts no later
than the close of each calendar month, until his or her entire vested Accrued
Benefit has been distributed. Any amount(s) withdrawn from a Participant’s
Accounts before the close of a given calendar month shall be credited with the
deemed investment return for the amount of time during the calendar month that
said amounts were credited to the Participant’s Accounts. Nothing in this
Section shall be construed to require the Company to acquire or provide any of
the investments selected by the Company. Any investments made by the Company
shall be made solely in the name of the Company and shall remain the property of
the Company.

ARTICLE V

VESTING AND TIME AND FORM OF PAYMENT

 

5.01 Vesting of Accrued Benefit. Each Participant’s Employee Contribution
Account shall be 100% vested and nonforfeitable at all times.

 

     Each Participant who first completed an Hour of Service prior to January 1,
2005 shall also have a 100% vested and nonforfeitable interest in his or her
Employer Contribution and Additional Employer Contribution Accounts.

 

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     Each Participant who first completes an Hour of Service on or after
January 1, 2005 shall have a vested and nonforfeitable interest in his or her
Employer Contribution and Additional Employer Contribution Accounts, to be
determined from the following vesting schedule:

 

Completed Years of Service

  

Vesting Percentage

Less than 1        0%                 1      50%                 2    100%

 

     Notwithstanding the foregoing, a Participant’s Accrued Benefit shall become
100% vested and nonforfeitable if a Participant dies while actively employed by
the Company or, if earlier, upon attainment of a Participant’s Normal Retirement
Age while actively employed by the Company.

 

5.02 Eligibility for Plan Benefits. Any Participant (or the Beneficiary of any
deceased Participant) who terminates employment with the Company or who retires
or dies while actively employed by the Company shall be entitled to receive a
benefit from this Plan according and subject to the provisions of this Article.

 

5.03 Benefit Amount. The benefit payable to any Participant or his Beneficiary
who becomes entitled to a benefit from this Plan shall constitute the balance of
the vested portion of the Participant’s Accrued Benefit, determined as of the
close of the last calendar month before his or her benefit is due to commence,
subject to adjustment for contributions and investment experience credited
thereafter until all Plan benefits have been paid.

 

5.04 Distribution of a Participant’s Vested Accrued Benefit.

 

  (a) Except as provided in Subsection 5.04(b) below and in Section 5.05 and
5.07, a Participant’s vested Accrued Benefit shall be paid to the Participant
(or, in the case of the Participant’s death, to his or her Beneficiary) in a
single lump sum cash payment upon the date that is not later than (30) days
following the date that is six months after the date of such Participant’s
Termination of Employment (or, if earlier than the end of such 6-month period,
the date of the Participant’s death).

 

  (b) If, pursuant to Subsection 5.04(a) above, all or a portion of the
Participant’s vested Accrued Benefit is payable to the Participant’s Beneficiary
due to the Participant’s death, then such payment shall be made to the
Participant’s Beneficiary by not later than 60 days after the date of the
Participant’s date of death in a single lump sum cash payment.

 

5.05 Distribution of Base Salary Deferrals.

 

  (a) Except as provided for in Subsections 5.05(b) below and in Section 5.07,
the portion of a Participant’s vested Accrued Benefit that is attributable each
Base Salary Deferral plus earnings thereon through the Elected Payment Date
shall be paid or commence to be paid to the Participant on the applicable
Elected Payment Date in one of the following payment forms as specified by the
Participant on the Election Form related to such Base Salary Deferral:

 

  (i) in a single lump sum cash payment; or

 

 

(ii)

in substantially equal annual cash installments over a period of not more than
10 years with the first such installment payable by not later than the 30th day
following the Elected Payment Date and annually thereafter for the selected
number of years;

 

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provided that, if the Participant fails to specify the Elected Payment Date, the
payment form or elects the installment payment form, but does not specify the
frequency with which such payments will be made or the period over which such
installments will be paid, then such portion of the Participant’s vested Accrued
Benefit shall be paid as provided for in Section 5.04 hereof. Each such cash
installment payment specified in subparagraph (ii) above shall consist of the
portion of a Participant’s vested Accrued Benefit that is attributable to the
Base Salary Deferral plus earnings thereon with respect to the Participant’s
written deferral election accrued through the Elected Payment Date and the
applicable anniversaries thereof, divided by the remaining number of years
during which the amounts are to be distributed.

Notwithstanding the foregoing, if any payments are to be made or are to commence
upon a Participant’s Termination of Employment and if immediately prior to such
termination the Participant is a “Specified Employee” within the meaning of Code
Section 409A(a)(2)(B), then no such payments shall be made or commence before
the date that is six months after the date of such termination (or, if earlier
than the end of such six month period, the date of Participant’s death). The
accumulated postponed amount shall be paid to the Participant in a lump sum cash
payment by not later than the 10th day after the end of the six month period (or
in a lump sum cash payment to the Participant’s Beneficiary by not later than 60
days after the date of the Participant’s date of death or on the next business
day if such date is a non-business day), provided however, that the Participant
or Beneficiary may not, directly or indirectly, designate the year of payment.

 

  (b) In the event of the Participant’s death, either before any distribution
has commenced with respect to the portion of a Participant’s vested Accrued
Benefit that is attributable a Base Salary Deferral or thereafter when
distributions with respect to a Base Salary Deferral have commenced, but have
not been fully disbursed, the portion of a Participant’s vested Accrued Benefit
that is attributable such Base Salary Deferral plus earnings thereon (through
the payment date amount) shall be distributed to the Participant’s Beneficiary
upon the Participant’s death in a single lump sum cash payment by not later than
60 days after the date of the Participant’s date of death or on the next
business day if such date is a non-business day. If the Participant has not
designated a Beneficiary as provided for in Subsection 5.08 or the Participant’s
designated Beneficiary(ies) do not survive the Participant, then any portion of
a Participant’s vested Accrued Benefit that is otherwise distributable under
Subsection 5.05(a) above shall be paid in a single lump sum cash payment to the
Participant’s estate by not later than 60 days after the date of the
Participant’s date of death or on the next business day if such date is a
non-business day.

 

5.06

When A Payment Is Treated As Made. In accordance with Section 1.409A-3(d) of the
Treasury Regulations, all distributions under this Plan will be treated as made
on the designated payment date if the payment is made at such date or a later
date within the same calendar year, or if later, by the 15th day of the third
month following the date designated in the Plan provided, however, that the
Participant or Beneficiary may not, directly or indirectly, designate the year
of payment.

 

5.07

Acceleration Permitted Only In Specified Circumstances. The timing of a
distribution of a Participant’s Accrued Benefit shall not be accelerated, except
in accordance with Treasury Regulation Section 1.409A-3(j)(4)(ii) (domestic
relations order); Treasury Regulation Section 1.409A-3(j)(4)(iii) (conflicts of
interest); Treasury Regulation Section 1.409A-3(j)(4)(v) (limited

 

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cashouts); Treasury Regulation Section 1.409A-3(j)(4)(vi) (payment of employment
taxes); Treasury Regulation Section 1.409A-3(j)(4)(vii) (payment upon income
inclusion under Section 409A); Treasury Regulation Section 1.409A-3(j)(4)(ix)
(plan terminations and liquidation); Treasury Regulation
Section 1.409A-3(j)(4)(xi) (payment of state, local or foreign taxes); Treasury
Regulation Section (j)(4)(xiii) (certain offsets); Treasury Regulation
Section 1.409A-3(i)(4)(xiv) (bona fide disputes).

 

5.08 Designation of Beneficiary. Each Participant may, at any time, designate
one or more Beneficiaries to receive amounts credited to the Participant’s
Accounts in the event of the Participant’s death. A Participant may make an
initial Beneficiary designation, or change an existing Beneficiary designation
without the consent of the previously designated Beneficiary, by completing and
signing a Beneficiary Designation Form and submitting it to the Plan
Administrator before the Participant’s death. Upon receipt by the Plan
Administrator of a Participant’s Beneficiary Designation Form, all Beneficiary
designations previously filed by that Participant shall automatically be
canceled. If a Participant does not designate a Beneficiary or if his or her
Beneficiary or any contingent Beneficiaries do not survive the Participant, the
estate of the Participant shall be deemed to be his or her designated
Beneficiary.

ARTICLE VI

PLAN ADMINISTRATION

 

6.01 Plan Administrator. The Plan Administrator shall be responsible for the
general operation and administration of the Plan and for carrying out its
provisions. The Plan Administrator shall consist of one or more persons
appointed from time to time by the Company’s President, provided, however, that
no person who is a Plan Participant may be appointed or remain as a Plan
Administrator. Each such person who is appointed shall serve at the pleasure of
the Company’s President.

 

     In the administration of this Plan, the Plan Administrator may, from time
to time, employ agents and delegate to them such administrative duties
he/she/they deem(s) fit and from time to time consult with counsel who may be
counsel to the Company.

 

6.02 Powers of Administration. In addition to duties and powers conferred on
him, her or they elsewhere in the Plan, the Plan Administrator shall have full
authority to interpret the Plan, to decide all questions of eligibility to
participate and to receive benefits under the Plan, to direct the Company to pay
benefits and Plan administration expenses, to retain clerical, legal, actuarial
and other professional assistance as needed, to adopt rules for operating the
Plan, to notify eligible individuals of their rights under the Plan, to keep
records of each Participant’s interest under the Plan, and to adopt a benefit
claim and review procedure consistent with that required by ERISA. The Plan
Administrator shall be entitled to rely conclusively upon all calculations,
opinions, reports and data furnished with respect to the Plan by the Company or
by any actuary, accountant, counsel or other person employed or engaged by the
Company. The Plan Administrator’s actions and decisions shall be final and
binding, unless arbitrary or capricious.

 

     Notwithstanding any provision of the Plan to the contrary, the Plan
Administrator shall have total discretion to fulfill his, her or their duties
and responsibilities as he, she or they see(s) fit on a uniform and consistent
basis and as he/she/they believe(s) a prudent person acting in a like capacity
and familiar with such matters would do.

 

6.03 Books and Records. The Plan Administrator shall keep such books of account,
records and other data as may be necessary for the proper administration of the
Plan.

 

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6.04 Costs and Expenses of Administration. All expenses and costs of
administering the Plan shall be paid by the Company.

ARTICLE VII

AMENDMENT AND TERMINATION

 

7.01 Amendment and Termination. The Company reserves the right to amend the Plan
in any respect, retroactively or prospectively, at any time and from time to
time by a written instrument stating such intent and adopted by the Company’s
Board of Directors. The Company also reserves the right to terminate the Plan at
any time pursuant to a resolution of the Company’s Board of Directors.

 

7.02 Effect of Amendment or Termination. No amendment or termination of the Plan
shall deprive any Participant or Beneficiary of any portion of a Plan benefit to
which he or she was entitled when payment of such benefit commenced, if payment
commenced prior to the effective date of such Plan amendment or termination, nor
shall any Participant or Beneficiary be deprived of his or her right to receive
any benefit to which he or she would be entitled if the Participant had
terminated employment on the day before the effective date of such amendment or
termination, subject to the conditions of Section 3.04.

ARTICLE VIII

MISCELLANEOUS

 

8.01 Protection of Employee Interest. To the extent permitted by law, the rights
of any Participant or Beneficiary to any benefit or payment under this Plan
shall not be subject to attachment or other legal process for the debts of such
Participant or Beneficiary; and any such benefit or payment shall not be subject
to anticipation, alienation, sale, transfer, assignment or encumbrance.

 

8.02 Unfunded Plan; No Fiduciary Relationship Created. This Plan is intended to
be an unfunded plan. Nothing contained in this Plan, and no action taken
pursuant to the provisions of this Plan, shall create or be construed to create
a fiduciary relationship between the Company and any Plan Participant,
Beneficiary or any other person. Plan benefits shall be paid from the general
assets of the Company. The Company may establish a grantor trust to provide a
source for benefit payments under this Plan. Any such grantor trust shall
conform to the terms of the Internal Revenue Service model Rabbi Trust set forth
in Revenue Procedure 92-64 (and as modified or superseded in the future), or
shall otherwise be designed so as to preserve the Plan’s exempt status as an
unfunded plan for the purposes of Sections 201(2), 301(a)(3), and 401(a)(1) of
ERISA. Any funds which may be invested by the Company to make provision for its
obligations hereunder shall continue for all purposes to be a part of the
general funds of the Company and no person other than the Company shall by
virtue of the provisions of this Plan have any interest in such funds. To the
extent that any person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the rights of any unsecured
general creditor of the Company.

 

8.03 No Enlargement of Employee Rights. No Participant shall have any right to
receive a distribution of any amounts credited or earned under the Plan except
in accordance with the terms of the Plan. Establishment or maintenance of the
Plan shall not be construed to give any Participant the right to be retained in
the service of the Company for any period of time.

 

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8.04 Incapacity of Recipient. If any person entitled to a distribution under the
Plan is deemed by the Plan Administrator to be incapable of personally receiving
and giving a valid receipt for such payment, then, unless and until claim
therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Plan Administrator may provide for such
payment or any part thereof to be made to any other person or institution then
contributing toward or providing for the care and maintenance of such person.
Any such payment shall be a payment for the account of such person and a
complete discharge of any liability of the Company and the Plan therefor.

 

8.05 Corporate Successors. The Plan shall not be automatically terminated by a
transfer or sale of assets of the Company or by the merger or consolidation of
the Company into or with any other corporation or other entity, but the Plan
shall be continued after such sale, merger or consolidation only if and to the
extent that the transferee, purchaser or successor entity agrees to continue the
Plan. In the event that the Plan is not continued by the transferee, purchaser
or successor entity, then the Plan shall terminate, subject to the provisions of
Section 7.02.

 

8.06 Unclaimed Benefit. Each Participant shall keep the Company informed of his
or her current address and the current address of his or her designated
Beneficiary. The Company shall not be obligated to search for the whereabouts of
any person. If the location of a Participant is not made known to the Company
within three years after the date on which payment of the Participant’s benefit
may first be made, payment may be made as though the Participant had died at the
end of the three-year period. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual death of
a Participant, the Company is unable to locate any designated Beneficiary of the
Participant, then the Company shall have no further obligation to pay any
benefit hereunder to such Participant or designated Beneficiary and such benefit
shall be irrevocably forfeited.

 

8.07 Governing Law. All rights under this Plan shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts, to
the extent they are not pre-empted by the laws of the United States of America.

 

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Schedule A

Register of Approvals/Amendments

 

Adopted by FAFLIC Board:    December 22, 2004 (effective January 1, 2005)
Amended by FAFLIC Board:    December 16, 2005 Amended by FAFLIC Board:   
December 21, 2006 (effective January 1, 2006) Amended by FAFLIC Board:    June
27, 2007; (certain amendments effective January 1, 2007; other amendments
effective January 1, 2008) Amended by FAFLIC and Hanover Boards:    December 19,
2007 (effective January 1, 2008) Amended by Hanover Board:    November 18, 2008
(effective January 1, 2008) Amended by authorized representative pursuant to
Hanover Board delegation on November 18, 2008 (409A):    December 8, 2008
(effective January 1, 2008)

 

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