Exhibit 10.40

 

 

THE HANOVER INSURANCE GROUP, INC.

2006 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “Agreement”) is made as of <GRANT DATE>
(the “Grant Date”) by and between The Hanover Insurance Group, Inc., a Delaware
corporation (the “Company”), and <PARTICIPANT NAME> (the “Participant” or
“you”). Capitalized terms used without definition herein shall have the meanings
set forth in The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan
(the “Plan”).

P R E A M B L E

WHEREAS, pursuant to the terms of the Plan and this Agreement, the Administrator
has agreed to grant to the Participant <NUMBER OF SHARES>shares of Stock (the
“Restricted Shares”).

WHEREAS, the Restricted Shares will be subject to forfeiture, restrictions on
sale and transfer and other terms and conditions as set forth in this Agreement.

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:

1. Transfer of Restricted Shares.

(a) The Company will transfer to an account or accounts designated by it in the
name of the Participant, the Restricted Shares, provided the Participant has
delivered to the Company a fully executed copy of this Agreement.

(b) Except as otherwise specifically provided in this Agreement, Participant
shall not sell, assign, transfer or otherwise dispose of, and shall not pledge
or hypothecate, any of the Restricted Shares.

2. Vesting and Company’s Right to a Return of the Restricted Shares.

(a) Vesting. The Restricted Shares shall be one hundred percent (100%) vested
and shall no longer be subject to forfeiture and the restrictions set forth in
Section 1(b) on the second anniversary of the Grant Date, provided that the
Participant remains an Employee with the Company or one of its subsidiaries or
affiliates (the Company and its subsidiaries and affiliates hereinafter referred
to as “THG”) through such date (the “Vesting Period”).

(b) Involuntary Termination/Voluntary Termination. If, prior to the expiration
of the Vesting Period, the Participant’s Employment with THG is terminated, with
or without Cause (other than under the circumstances described below in this
Section 2), or the Participant voluntarily terminates his/her Employment with
THG, any non-vested Restricted Shares shall be automatically cancelled and
forfeited and shall be returned to the Company for no consideration.

(c) Disability. Subject to the remainder of this Section 2(c), if the
Participant is placed in a long term disability status (as such term is defined
in the Company’s Long-Term Disability Program, as in effect at such time)(“LTD
Status”), and provided Participant remains in LTD Status through such date, the
Restricted Shares shall continue to vest in accordance with this Agreement until
the first anniversary of the date Participant was placed in LTD Status (the “LTD
Extension Period”). At the expiration of the LTD Extension Period (i) a
pro-rated portion of the Restricted Shares shall automatically vest, and
(ii) the remaining unvested Restricted Shares shall be automatically cancelled
and forfeited and be returned to the Company for no consideration. For purposes
of this subsection, the pro-ration of the Restricted Shares that vest on the
expiration of the LTD Extension Period, shall be determined by dividing the
number of days since the Grant Date by 731 and applying this percentage to the
Restricted Shares. Any fractional share shall be rounded up such that only whole
shares are issued.

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If, prior to the expiration of the LTD Extension Period, Participant is removed
from LTD Status and immediately thereafter returns to active Employment with
THG, Participant shall be treated (for the purposes of this Agreement) as if
he/she were never placed in LTD Status and remained an active Employee of THG,
shall be given credit toward vesting for the period Participant was in LTD
Status and this Agreement shall remain in full force and effect in accordance
with its terms.

(d) Death. If Participant dies (i) a pro-rated portion of the Restricted Shares
shall automatically vest, and (ii) the remaining unvested Restricted Shares
shall be automatically cancelled and forfeited and be returned to the Company
for no consideration. For purposes of this subsection, the pro-ration of the
Restricted Shares that vest upon Participant’s death shall be determined by
dividing the number of days that the Participant was an active Employee since
the Grant Date by 731 and applying this percentage to the Restricted Shares. Any
fractional share shall be rounded up such that only whole shares are issued.

(e) Covered Transaction/Change in Control. In the event of a Covered Transaction
(other than a Change in Control, whether or not it is a Covered Transaction),
the Restricted Shares shall be fully governed by the applicable provisions of
Section 7(a) of the Plan. Notwithstanding the terms of the Plan, in the event of
a Change in Control (whether or not it is a Covered Transaction), the following
rules shall apply:

(i) Except as provided below in Section 2(e)(ii), in the event of a Change in
Control the Participant shall automatically vest in 100% of the Restricted
Shares.

(ii) Notwithstanding Section 2(e)(i), no acceleration of vesting shall occur
with respect to the Restricted Shares if the Administrator reasonably determines
in good faith prior to the occurrence of a Change in Control that this Award of
Restricted Shares shall be honored or assumed, or new rights substituted
therefor (such honored, assumed or substituted award hereinafter called an
“Alternative Award”), by Participant’s employer (or the parent or a subsidiary
of such employer) immediately following the Change in Control, provided that any
such Alternative Award must:

(1) be based on stock which is traded, or will be traded upon consummation of
the Change in Control, on an established securities market;

(2) provide such 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;

(3) have substantially equivalent economic value to this Award (determined at
the time of the Change in Control); and

(4) have terms and conditions which provide that in the event that the
Participant’s employment is involuntarily terminated (other than for Cause) or
Participant terminates employment for “Good Reason” (as defined below) prior to
the second anniversary of the Change in Control, the Participant shall
automatically vest in 100% of the Alternative Award and any conditions on a
Participant’s rights under, or any restrictions on transfer or exercisability
applicable to, the vested portion of such Alternative Award shall be waived or
shall lapse.

For this purpose, “Good Reason” shall mean the occurrence of one or more of the
events listed below following a Change in Control:

(x) to the extent you are “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 the CIC Plan; or

 

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(y) if you are 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 (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.

(iii) In the event a Participant believes that a “Good Reason” event has been
triggered, the Participant must give the Company written notice within 30 days
of the occurrence of such triggering event and a proposed termination date which
shall be not sooner than 60 days nor later than 90 days after the date of such
notice. Such notice shall specify the Participant’s basis for determining that
“Good Reason” has been triggered. The Company shall have the right to cure a
purported “Good Reason” within 30 days of receipt of said notice

(iv) Notwithstanding Sections 2(e)(i) and 2(e)(ii) above, the Administrator may
elect, in its sole discretion, exercised prior to the effective date of the
Change in Control, to accelerate all, or a greater percentage of the Restricted
Shares, than is otherwise required pursuant to the terms of this Section 2.

(v) Upon vesting under Section 2(e) or upon a termination as provided herein,
any remaining unvested Restricted Shares, if any, shall be automatically
cancelled and forfeited and returned to the Company for no consideration.

(f) Violation of the Agreement. In the event Participant violates the terms of
this Agreement, including, without limitation Section 1(b) and 5, the Restricted
Shares shall be cancelled and forfeited and be returned to the Company for no
consideration.

3. Stock Power. The Company may require Participant to execute and deliver to
the Company a stock power in blank with respect to non-vested Restricted Shares.
The Company shall have the right, in its sole discretion, to exercise such stock
power in the event that the Company becomes entitled to the non-vested
Restricted Shares pursuant to the terms of this Agreement. Notwithstanding the
foregoing, the Participant shall have dividend and voting rights with respect to
the non-vested Restricted Shares.

4. Notices. Notices hereunder shall 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 the
Participant, shall be delivered personally or mailed to the Participant at his
or her address on the records of the Company.

5. Non-Hire/Solicitation/Confidentiality. As a condition of Participant’s
eligibility to receive the Restricted Shares and regardless of whether such
Restricted Shares vest, Participant agrees that he or she will (i) not, directly
or indirectly, during the term of your employment with THG, and for a period of
one year thereafter, hire, solicit, entice away or in any way interfere with
THG’s relationship with, any of its officers or employees, or in any way attempt
to do so or participate with, assist or encourage a third party to do so, and
(ii) neither disclose any of THG’s confidential and proprietary information to
any third party, nor use such information for any purpose other than for the
benefit of THG and in accordance with THG policy. The terms of this Section 5
shall survive the expiration or earlier termination of this Agreement.

6. Damages/Specific Performance.

(a) The Participant hereby acknowledges and agrees that in the event of any
breach of Section 5 of this Agreement, the Company would be irreparably harmed
and could not be made whole by monetary damages. The Participant accordingly
agrees to waive the defense in any action for

 

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injunctive relief or specific performance that a remedy at law would be adequate
and that the Company, in addition to any other remedy to which it may be
entitled at law or in equity, shall be entitled to an injunction or to compel
specific performance of Section 5.

(b) In addition to any other remedy to which the Company may be entitled at law
or in equity (including the remedy provided in the preceding paragraph), the
Participant hereby acknowledges and agrees that in the event of any breach of
Section 5 of this Agreement, Participant shall be required to refund to the
Company the value received by Participant upon vesting of the Restricted Shares;
provided, however, that the Company makes any such claim, in writing, against
Participant alleging a violation of Section 5 not later than two years following
your termination of employment with the Company.

7. Successors. The provisions of this Agreement will benefit and will be binding
upon the permitted assigns, successors in interest, personal representatives,
estates, heirs and legatees of each of the parties hereto.

8. Interpretation. The terms of the Restricted Shares are as set forth in this
Agreement and in the Plan. The Plan is incorporated into this Agreement by
reference, which means that this Agreement is limited by and subject to the
express terms and provisions of the Plan. In the event of a conflict between the
terms of this Agreement and the terms of the Plan, the terms of the Plan shall
control.

9. Governing Law. This Agreement shall be construed and applied (except as to
matters governed by the Delaware General Corporation Law, as to which Delaware
law shall apply) in accordance with the laws of the Commonwealth of
Massachusetts.

10. Facsimile or Electronic Signature. The parties may execute this Agreement by
means of a facsimile or electronic signature.

11. Entire Agreement; Counterparts. This Agreement and the Plan contains the
entire understanding between the parties concerning the subject contained in
this Agreement. Except for the Agreement and the Plan, there are no
representations, agreements, arrangements, or understandings, oral or written,
between or among the parties hereto, relating to the subject matter of this
Agreement, that are not fully expressed herein. This Agreement may be signed in
one or more counterparts, all of which shall be considered one and the same
agreement.

12. Further Assurances. Each party to this Agreement agrees to perform all
further acts and to execute and deliver all further documents as may be
reasonably necessary to carry out the intent of this Agreement.

13. Severability. In the event that any of the provisions, or portions thereof,
of this Agreement are held to be unenforceable or invalid by any court of
competent jurisdiction, the validity and enforceability of the remaining
provisions, or portions thereof, will not be affected, and such unenforceable
provisions shall be automatically replaced by a provision as similar in terms as
may be valid and enforceable.

14. Construction. Whenever used in this Agreement, the singular number will
include the plural, and the plural number will include the singular, and the
masculine or neuter gender shall include the masculine, feminine, or neuter
gender. The headings of the Sections of this Agreement have been inserted for
purposes of convenience and shall not be used for interpretive purposes. The
Administrator shall have full discretion to interpret and administer this
Agreement. Any actions or decisions by the Administrator in connection with this
Agreement shall be conclusive and binding upon the Participant.

15. No Effect on Employment. Nothing contained in this Agreement shall be
construed to limit or restrict the right of THG to terminate the Participant’s
employment at any time, with or without cause, or to increase or decrease the
Participant’s compensation from the rate of compensation in existence at the
time this Agreement is executed.

16. Taxes. If at the time the Restricted Shares vests, the Company determines
that under applicable law and regulations it could be liable for the withholding
of any federal, state or local tax, Participant shall remit to the

 

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Company any amounts determined by the Company to be required to be withheld or
the Company may, at its option, withhold from such Restricted Shares a
sufficient number of shares to satisfy the minimum federal, state and local tax
withholding due, if any, and remit the balance of the Shares to the Participant.

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 of the
Internal Revenue Code (“Section 409A”), in no event shall the Company 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), the Participant shall
bear the entire risk of any such taxes, penalties and or interest.

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the Grant Date.

 

THE HANOVER INSURANCE GROUP, INC. By:  

 

Name: Bryan D. Allen
Title: Senior Vice President & Chief Human Resources Officer

 

<PARTICIPANT NAME>

 

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