Exhibit 10.2

Execution Version

GUARANTY

dated as of October 15, 2015 among

THE HANOVER INSURANCE GROUP, INC.

and

LLOYDS BANK PLC,

as Facility Agent and Security Agent

 

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TABLE OF CONTENTS*

 

         Page  

ARTICLE I DEFINITIONS

     1    Section 1.01  

Definitions

     1    Section 1.02  

Accounting Terms; GAAP

     13    ARTICLE II GUARANTY      13    Section 2.01  

The Guaranty

     13    Section 2.03  

Payments

     16    Section 2.04  

Discharge; Reinstatement in Certain Circumstances

     17    Section 2.05  

Waiver by the Guarantor

     18    Section 2.06  

Agreement to Pay; Subordination of Subrogation Claims

     20    Section 2.07  

Stay of Acceleration

     20    Section 2.08  

No Set-Off

     20    ARTICLE III INDEMNIFICATION, SUBROGATION AND CONTRIBUTION      21   
Section 3.01  

Indemnity and Subrogation

     21    Section 3.02  

Contribution and Subrogation

     21    ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS      21   
Section 4.01  

Representations and Warranties

     21    Section 4.02  

Affirmative Covenants

     24    Section 4.03  

Financial Covenants

     27    Section 4.04  

Negative Covenants

     27    Section 4.05  

Relation to Facility Agreement

     31    Section 4.06  

Certain Agreements

     32    Section 4.07  

Information

     32    Section 4.08  

Subordination by Guarantor

     33    ARTICLE V SET-OFF      33    Section 5.01  

Right of Set-Off

     33    ARTICLE VI TAX GROSS UP AND INDEMNITIES      33    Section 6.01  

Tax Gross-Up

     33    Section 6.02  

Currency Indemnity

     35    Section 6.03  

Other Indemnities

     36    Section 6.04  

Indemnity to the Facility Agent and the Security Agent

     36    ARTICLE VII MISCELLANEOUS      36    Section 7.01  

Notices

     36   

 

 

* The Table of Contents is not part of the Guaranty.

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Table of Contents (Cont.)

 

         Page   Section 7.02  

Know Your Customer

     36    Section 7.03  

Benefit of Agreement

     37    Section 7.04  

No Waivers; Non-Exclusive Remedies

     37    Section 7.05  

Amendments and Waivers

     37    Section 7.06  

Governing Law; Submission to Jurisdiction

     37    Section 7.07  

Limitation of Law; Severability

     38    Section 7.08  

Counterparts; Integration; Effectiveness

     38    Section 7.09  

WAIVER OF JURY TRIAL

     38    Section 7.10  

Termination

     38   

 

Schedules:       Schedule 1.01   –   Permitted Liens   Schedule 4.01   –  
Subsidiaries   Schedule 4.04(a)   –   Financial Debt   Schedule 4.04(g)   –  
Burdensome Agreements Exhibits:       Exhibit A   –   Compliance Certificate

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This Guaranty Agreement (this “Agreement”) dated as of October 15, 2015 by THE
HANOVER INSURANCE GROUP, INC., a Delaware Corporation (the “Guarantor”), LLOYDS
BANK PLC, as Facility Agent for itself and on behalf of the Finance Parties (the
“Facility Agent”) and LLOYDS BANK PLC, as Security Agent on behalf of the
Overdraft Provider (the “Security Agent”).

RECITALS

Chaucer Holdings Limited, a company incorporated in England and Wales (the
“Borrower”), and Chaucer Corporate Capital (No. 3) Limited, a company
incorporated in England and Wales (the “Account Party”), each of them
subsidiaries of the Guarantor, are party to a Standby Letter of Credit Facility
dated as of October 15, 2015 (as amended, restated, supplemented, extended
(including, without limitation, as extended pursuant to Clause 8 (Termination of
Letters of Credit) thereof), or otherwise modified in writing from time to time,
the “Facility Agreement”) with, inter alia, certain Lenders from time to time
party thereto, and Lloyds Bank plc, as Facility Agent and Security Agent. The
Guarantor will derive substantial direct and indirect benefits from the
transactions contemplated by the Facility Agreement. It is a condition precedent
to the issuance of Letters of Credit by the Lenders under the Facility Agreement
that the Guarantor shall have executed and delivered this Guaranty. Capitalized
terms used herein but undefined shall have the meanings ascribed to such terms
in the Facility Agreement.

NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to issue Letters of Credit under the Facility Agreement, the Guarantor
hereby agrees as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:

“Account Party” has the meaning set forth in the Recitals hereof.

“Acquisition” means any transaction, or any series of related transactions, by
which the Guarantor and/or any of its Subsidiaries directly or indirectly
(i) acquires any ongoing business or all or substantially all of the assets of
any Person or division thereof, whether through purchase of assets, merger or
otherwise, (ii) acquires (in one transaction or as the most recent transaction
in a series of transactions) Control of at least a majority in ordinary voting
power of the securities of a Person which have ordinary voting power for the
election of directors or (iii) otherwise acquires Control of a more than 50%
ownership interest in any such Person.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
Administrative Agent, together with its successors and assigns appointed under
the Hanover Credit Agreement.

“Affiliate” means, with respect to a specified Person, another Person that,
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified. For the
avoidance of doubt, any Lloyd’s syndicate which is not a legal entity and has no
power to enter into contracts or other binding obligations shall not be deemed
to be an Affiliate of the Guarantor.

“Agreement” has the meaning set forth in the preamble hereof.

“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to the Guarantor or its Subsidiaries from time to time
concerning or relating to bribery or corruption.

“Bankruptcy Code” means 11 U.S.C. §§ 101 et seq., as amended from time to time,
and any successor statute, and all regulations from time to time promulgated
thereunder.

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“Borrower” has the meaning set forth in the Recitals hereof.

“CIC” means Citizens Insurance Company of America, a property and casualty
insurance company organized under the laws of Michigan as a corporation.

“CitySquare Project” means the CitySquare development in Worcester,
Massachusetts as described in Form 10-K of The Hanover Insurance Group, Inc. for
the fiscal year ended December 31, 2010.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Consolidated” refers to the consolidation of accounts of the Guarantor and its
Subsidiaries in accordance with GAAP.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms “Controlling” and “Controlled” have meanings correlative thereto.

“Controlled Investment Affiliate” means, as to any future, present, or former
employee, director, officer or consultant of the Guarantor and its Subsidiaries,
any other Person, which directly or indirectly is in Control of, is Controlled
by, or is under common Control with such Person and is organized by such Person
(or any Person Controlling such Person) primarily for making direct or indirect
equity investments in the Guarantor or its Subsidiaries.

“CSL” means Chaucer Syndicates Limited.

“Debt” of any Person means, without duplication, (a) indebtedness of such Person
for borrowed money, (b) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) obligations of such Person
to pay the deferred purchase price of Property or services (other than trade
payables and accrued expenses incurred in the ordinary course of business and
not overdue by more than 90 days), (d) obligations of such Person as lessee
under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (e) Debt of others secured by a Lien on the Property
of such Person, whether or not the Debt so secured has been assumed by such
Person, (f) obligations of such Person under Guaranties in respect of Debt of
others (including any obligations constituting Limited Originator Recourse in
respect of Debt of a Securitization Subsidiary), (g) without duplication,
(A) obligations of such Person in respect of Hybrid Securities (disregarding
clause (ii) of the definition thereof) and (B) in each case, Disqualified Equity
Interests (disregarding clause (ii) of the definition thereof) and Preferred
Securities (disregarding clause (ii) of the definition thereof) requiring
repayments, prepayments, mandatory redemptions or repurchases prior to 91 days
after Final Maturity Date, with the amount of Debt represented by such
Disqualified Equity Interest or Preferred Security being equal to the greater of
its voluntary or involuntary liquidation amount and its maximum fixed repurchase
price or redemption amount, (h) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such Person, (i) the net termination obligations of such Person
under any Hedge Agreements, calculated as of any date as if such agreement or
arrangement were terminated as of such date and (j) the principal balance
outstanding and owing by such Person under any synthetic lease, tax retention
operating lease or similar off-balance sheet financing product.

“Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect.

“Default” means a “Default” under (and as defined in) the Facility Agreement.

 

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“Discharge of Finance Obligations” has the meaning specified in Section 2.04.

“Disqualified Equity Interest” means, with respect to any Person, any Equity
Interest of such Person that, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event or otherwise, (i) (a) matures or is mandatorily redeemable or
subject to any mandatory repurchase requirement, pursuant to a sinking fund
obligation or otherwise (except as a result of a change of control or asset sale
so long as the rights of holder thereof upon the occurrence of a change of
control or asset sale event shall be subject to the prior repayment in full of
the Guaranteed Obligations that are accrued and payable, (b) is redeemable or
subject to any mandatory repurchase requirement at the sole option of the holder
thereof, or (c) is convertible into or exchangeable for (whether at the option
of the issuer or the holder thereof) (y) debt securities or (z) any Equity
Interest referred to in (a) or (b) above, and (ii) requires no such repayments,
prepayments, mandatory redemptions or repurchases, in each case in the foregoing
clauses (a), (b) and (c), prior to 91 days after the Final Maturity Date;
provided that (1) if such Equity Interests are issued pursuant to a plan for the
benefit of employees of the Guarantor or any of its Subsidiaries or by any such
plan to such employees, such Equity Interests shall not constitute Disqualified
Equity Interests solely because they may be required to be repurchased by the
Guarantor or its Subsidiaries in order to satisfy applicable statutory or
regulatory obligations and (2) no such Equity Interests held by any future,
present or former employee, director, officer or individual consultant (or their
respective Controlled Investment Affiliates or Immediate Family Members) of the
Guarantor (or any of its Subsidiaries) shall be considered Disqualified Equity
Interests because such Equity Interests are redeemable or subject to repurchase
pursuant to any management equity subscription agreement, stock option, stock
appreciation right or other stock award agreement, stock ownership plan, put
agreement, stockholder agreement or similar agreement that may be in effect from
time to time.

“Effective Date” means the “Effective Date” under (and as defined in) the
Facility Agreement.

“Electronic System” means any electronic system, including e-mail, e-fax,
Intralinks®, ClearPar® and any other internet or extranet-based site, whether
such electronic system is owned, operated or hosted by the Facility Agent or any
other Person, providing for access to data protected by passcodes or other
security system.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any of the
foregoing.

“Equity Issuance” means any issuance or sale by the Guarantor or any of its
Subsidiaries after the date of this Agreement of Equity Interests, other than
(a) any such issuance or sale by a Subsidiary of the Guarantor to the Guarantor
or to a Wholly-Owned Subsidiary of the Guarantor, (b) any capital contribution
by the Guarantor or a Wholly-Owned Subsidiary of the Guarantor to any Subsidiary
of the Guarantor, (c) stocks, warrants, options or other rights to obtain Equity
Interests issued to directors, officers, consultants and other employees of the
Guarantor or any of its Subsidiaries or (d) any sale or disposition of a
non-Material Subsidiary.

“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Guarantor, is treated as a single employer under section
414(b) or (c) of the Code or, solely for purposes of section 302 of ERISA and
section 412 of the Code, is treated as a single employer under section 414 of
the Code.

“ERISA Event” means (a) any “reportable event”, as defined in section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice

 

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period is waived); (b) a determination that a Plan is, or is expected to be, in
“at risk” status (as defined in Section 303(i)(4) of ERISA); (c) the failure to
timely make a contribution required to be made with respect to any Plan or any
Multiemployer Plan; (d) a determination that a Multiemployer Plan is, or is
expected to be, in “endangered status” or “critical status” (each as defined or
Section 305(b) of ERISA); (e) the incurrence by the Guarantor or any of its
ERISA Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (f) the receipt by the Guarantor or any of its ERISA
Affiliates from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (g) the incurrence by the Guarantor or any of its ERISA Affiliates of
any liability with respect to the withdrawal or partial withdrawal from any Plan
or Multiemployer Plan; or (h) the receipt by the Guarantor or any of its ERISA
Affiliates of any notice, or the receipt by any Multiemployer Plan from the
Guarantor or any of its ERISA Affiliates of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; or (i) the occurrence of a non-exempt prohibited transaction
under section 406 of ERISA or section 4975 of the Code which could reasonably be
expected to result in liability to the Guarantor or any of its ERISA Affiliates.

“Event of Default” means an “Event of Default” under (and as defined in) the
Facility Agreement.

“Facility Agent” has the meaning set forth in the preamble hereof.

“Facility Agreement” has the meaning set forth in the Recitals hereof.

“FATCA” means “FATCA” under (and as defined in) the Facility Agreement.

“FATCA Deduction” means “FATCA Deduction” under (and as defined in) the Facility
Agreement.

“Financial Debt” means, without duplication, Debt of the kinds set forth in
clauses (a), (b), (d) or (g) of the definition of Debt, or of the kinds set
forth in clauses (e) or (f) thereof to the extent relating to Debt of the type
referred to in (a), (b), (d) and (g) of the definition thereof.

“Final Maturity Date” means, (i) so long as the Hanover Credit Agreement is in
full force and effect, the Hanover Commitment Termination Date or
(ii) otherwise, the date of the Discharge of Finance Obligations.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time.

“Governmental Authority” means any federal, state, municipal, national or other
government, governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity, officer or
examiner exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government (including any supra-national bodies
such as the European Union or the European Central Bank).

“Guaranteed Documents” means the “Guaranteed Documents” under (and as defined
in) the Facility Agreement.

“Guaranteed Obligations” has the meaning specified in Section 2.01.

“Guarantor” has the meaning set forth in the preamble hereof.

 

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“Guaranty” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Debt of any other Person (the “primary obligor”) in
any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or to advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease Property or services for the purpose of assuring the owner of
such Debt or other obligation of the payment thereof, or (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such Debt or
other obligation or as an account party in respect of any letter of credit or
letter of guarantee issued to support such Debt; provided that the term
“Guaranty” shall not include (i) endorsements for collection or deposit in the
ordinary course of business or (ii) credit insurance or payment obligations
under insurance policies or surety bonds issued by the Guarantor and its
Subsidiaries in the ordinary course of business.

“Hanover Business Day” means a day on which banks are not required or authorized
to close in New York City and Charlotte, North Carolina.

“Hanover Commitment Termination Date” means November 12, 2018, as the same may
be extended (in the case of each lender consenting thereto) pursuant to
Section 2.22 of the Hanover Credit Agreement; provided that if such date is not
a Hanover Business Day, the Hanover Commitment Termination Date shall be the
immediately preceding Hanover Business Day.

“Hanover Credit Agreement” means that certain $200,000,000 Credit Agreement, as
of November 12, 2013 among the Guarantor, as Borrower, the Lenders named therein
and JPMorgan Chase Bank, N.A., as Administrative Agent, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.

“Hedge Agreement” means any interest or foreign currency rate swap, cap, collar,
option, hedge, forward rate or other similar agreement or arrangement designed
to protect against fluctuations in interest rates or currency exchange rates.

“HIC” means The Hanover Insurance Company, a property and casualty insurance
company organized under the laws of New Hampshire as a corporation.

“Hybrid Securities” means securities (i) that afford equity benefit to the
issuer thereof (under the procedures and guidelines of S&P) by having ongoing
payment requirements that are more flexible than interest payments associated
with conventional indebtedness for borrowed money and by being contractually
subordinated to such indebtedness and (ii) that require no repayments or
prepayments and no mandatory redemptions or repurchases, in each case, prior to
91 days after the Final Maturity Date.

“Immediate Family Member” means with respect to any individual, such
individual’s child, stepchild, grandchild or more remote descendant, parent,
stepparent, grandparent, spouse, former spouse, qualified domestic partner,
sibling, mother-in-law, father-in-law, son-in-law and daughter-in-law (including
adoptive relationships) and any trust, partnership or other bona fide
estate-planning vehicle the only beneficiaries of which are any of the foregoing
individuals or any private foundation or fund that is controlled by any of the
foregoing individuals or any donor-advised fund of which any such individual is
the donor.

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money
of the Guarantor that is not guaranteed by any other person or entity or subject
to any other credit enhancement.

“Insurance Regulatory Authority” means, for any Insurance Subsidiary, the
insurance department or similar administrative authority or agency located in
the state or other jurisdiction in which such Insurance Subsidiary is domiciled
(including “commercially domiciled” as that term is defined under relevant state
law), including, for the avoidance of doubt, the Society and Corporation of
Lloyd’s.

 

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“Insurance Subsidiary” means a Subsidiary of the Guarantor that is licensed to
do an insurance or reinsurance business.

“Leverage Ratio” means, at any time, the ratio of (i) Modified Total Debt to
(ii) Total Capitalization.

“Lien” means any lien, security interest or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor.

“Limited Originator Recourse” means a letter of credit, revolving loan
commitment, cash collateral account or other such credit enhancement issued in
connection with the incurrence of Financial Debt by a Securitization Subsidiary
in connection with a Securitization Transaction; provided that, the aggregate
amount of such letter of credit reimbursement obligations and the aggregate
available amount of such revolving loan commitments, cash collateral accounts or
other such credit enhancements of the Guarantor and any of its Subsidiaries
(other than any other Securitization Subsidiary) shall not exceed 10% of the
principal amount of such Financial Debt at any time.

“Margin Stock” means margin stock within the meaning of Regulation U.

“Material Adverse Change” or “Material Adverse Effect” means a material adverse
change in or effect on (i) the business, financial condition or results of
operations of the Guarantor and its Subsidiaries, taken as a whole, or (ii) the
ability of the Guarantor to perform its obligations under this Agreement, or
(iii) the legality, validity or enforceability of this Agreement.

“Material Insurance Subsidiary” means any of CIC, HIC and CSL and any other
Insurance Subsidiary that constitutes a Material Subsidiary.

“Material Subsidiary” means any Subsidiary of the Guarantor, other than any
Subsidiary the book value of whose assets do not constitute more than 5% of the
book value (determined on a Consolidated basis) of the total assets of the
Guarantor and its Subsidiaries.

“Modified Total Debt” means, at any time, the sum of the following:

(a) Total Debt plus

(b) without duplication, the amount (if any) by which (i) the aggregate
outstanding amount of all Hybrid Securities that is attributed to Net Worth
pursuant to clause (b) of the definition of “Net Worth” plus (ii) the portion of
all Preferred Securities issued by the Guarantor or any Subsidiary (other than
any Securitization Subsidiary) that is deemed to constitute equity, as
determined in accordance with S&P’s methodology at such time plus (iii) the
portion of all Disqualified Equity Interests issued by the Guarantor or any
Subsidiary (other than any Securitization Subsidiary) that is deemed to
constitute equity, as determined in accordance with S&P’s methodology at such
time plus (iv) the portion of all Specified Convertible Debt Securities issued
by the Guarantor or any Subsidiary (other than any Securitization Subsidiary)
that is deemed to constitute equity, as determined in accordance with S&P’s
methodology at such time, exceeds 15% of Total Capitalization.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Multiemployer Plan” means a multiemployer plan as defined in section 4001(a)(3)
of ERISA.

 

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“NAIC” means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing substantially similar advisory, coordination or other
like functions among insurance departments, insurance commissions and similar
governmental authorities of the various states of the United States of America
toward the promotion of uniformity in the practices of such governmental
authorities.

“Net Equity Proceeds” means, with respect to any Equity Issuance, the aggregate
amount of all cash received by the Guarantor and its Subsidiaries (other than
any Securitization Subsidiaries) in respect of such Equity Issuance net of all
reasonable fees and expenses incurred by the Guarantor and its Subsidiaries in
connection therewith.

“Net Worth” means, at any time, the sum of the following for the Guarantor and
its Subsidiaries (other than any Securitization Subsidiaries) (determined on a
Consolidated basis without duplication in accordance with GAAP):

(a) total shareholders’ equity of the Guarantor determined in accordance with
GAAP; provided that the net unrealized appreciation and depreciation of
securities that are classified as available for sale and are subject to ASC 320
shall be excluded, plus

(b) without duplication of clauses (c) and (d) hereof, solely for purposes of
determining “Total Capitalization” the portion of all outstanding Hybrid
Securities that is deemed to constitute equity, as determined in accordance with
S&P’s methodology at such time, minus

(c) without duplication of clauses (b) and (d) hereof, solely for purposes of
determining “Total Capitalization” the portion of all outstanding Preferred
Securities that is deemed to constitute indebtedness, as determined in
accordance with S&P’s methodology at such time, minus

(d) without duplication of clauses (b) and (c) hereof, solely for purposes of
determining “Total Capitalization” the portion of all outstanding Disqualified
Equity Interests that is deemed to constitute indebtedness, as determined in
accordance with S&P’s methodology at such time.

“Non-Public Information” means information which has not been disseminated in a
manner making it available to investors generally, within the meaning of
Regulation FD.

“PATRIOT Act” means USA PATRIOT Act (Title III of Pub. L. No. 107-56 (signed
into law October 26, 2001)).

“PBGC” means the United States Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.

“Permitted Liens” means any of the following Liens:

(a) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by appropriate
proceedings;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
construction contractors’ or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 60 days or that are
being contested in good faith and by appropriate proceedings and Liens securing
judgments or orders for the payment of money but only to the extent not
resulting in an Event of Default under Clause 26.7 (Events of Default, Failure
to Comply with Final Judgment) of the Facility Agreement;

(c) pledges or deposits made (i) in connection with, or to secure payment of,
worker’s compensation, unemployment insurance, old age pensions, other social
security legislation and other statutory obligations and in each case in
compliance therewith, (ii) to secure in the ordinary course of

 

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business the performance of bids, tenders, contracts or leases, (iii) to secure
statutory obligations, surety and customs bonds, performance bonds and other
obligations of a like nature (including those to secure health, safety and
environmental obligations) in the ordinary course of business, (iv) to secure
stay and appeal bonds, (v) to secure indemnity, performance or other similar
bonds in the ordinary course of business, or (v) in connection with contested
amounts in the ordinary course of business;

(d) encumbrances in the nature of (i) easements, (ii) rights-of-way,
(iii) zoning restrictions or similar laws or rights reserved to or vested in any
Governmental Authority to control or regulate the use of any real property,
(iv) leases and subleases (other than any capital leases or synthetic leases),
and licenses and sublicenses, (v) encroachments, protrusions and other similar
encumbrances and restrictions on the use of real property or minor imperfections
in title thereto, (vi) landlords’ and lessors’ Liens on rented premises, and
(vii) restrictions on transfers or assignment of leases, which in each case do
not secure monetary obligations and do not in any case materially detract from
the value of the property subject thereto or interfere with the ordinary conduct
of the business of the Guarantor or any of its Subsidiaries;

(e) Liens arising under escrows, trusts, custodianships, separate accounts,
funds withheld procedures, and similar deposits, arrangements, or agreements
established with respect to insurance or reinsurance policies, annuities,
guaranteed investment contracts and similar products underwritten by, or
Reinsurance Agreements entered into by, the Guarantor or any Insurance
Subsidiary in the ordinary course of business;

(f) deposits with Insurance Regulatory Authorities;

(g) Liens securing obligations under letters of credit issued for the benefit of
Insurance Regulatory Authorities and letters of credit issued in support of
funds at the Society and Corporation of Lloyd’s requirements, including as
permitted under Section 4.04(a)(xiv);

(h) Liens granted by Securitization Subsidiaries in connection with
Securitization Transactions;

(i) Liens on Property of any Person that becomes a Subsidiary of the Guarantor
after the date hereof, provided that such Liens are in existence at the time
such Person becomes a Subsidiary of the Guarantor and were not created in
anticipation thereof;

(j) Liens upon real and/or tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise) by the Guarantor or any of its
Subsidiaries, each of which Liens either (A) existed on such Property before the
time of its acquisition and was not created in anticipation thereof or (B) was
created solely for the purpose of securing Debt representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
such Property, provided that no such Lien shall extend to or cover any Property
of the Guarantor or such Subsidiary other than the Property so acquired and
improvements thereon;

(k) Liens on securities or financial instruments arising out of (i) repurchase
(and reverse repurchase) agreements for liquidity or yield enhancement purposes
and in no event outstanding for a period exceeding ninety (90) days in each case
and (ii) other investment strategies with respect to securities and financial
instruments in each case entered into in the ordinary course of business and on
ordinary business terms;

(l) the sale of delinquent accounts receivable for collection in the ordinary
course of business;

(m) Liens in existence on the date hereof and set forth in Schedule 1.01 (and
any extension, renewal or replacement thereof permitted under
Section 4.04(a)(xvi);

 

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(n) Liens in favor of a Federal Home Loan Bank to secure borrowings from such
Federal Home Loan Bank in the ordinary course of business and on ordinary
business terms pursuant to a membership in such Federal Home Loan Bank;

(o) Liens on deposits made in connection with the discharge, defeasance or
redemption of Debt;

(p) Liens securing Debt permitted under Section 4.04(a)(v);

(q) Liens (i) of a collection bank arising under Section 4-208 of the Uniform
Commercial Code on the items in the course of collection and (ii) in favor of a
banking or other financial institution arising as a matter of law or under
customary contractual provisions encumbering deposits or other funds maintained
with such banking or other financial institution (including the right of set off
and grants of security interests in deposits and/or securities held by such
banking or other financial institution) and that are within the general
parameters customary in the banking industry;

(r) Liens deemed to exist in connection with reasonable customary initial
deposits, margin deposits and similar Liens attaching to brokerage accounts
maintained in the ordinary course of business and not for speculative purposes;

(s) Liens arising from Uniform Commercial Code financing statements or similar
filings that have not been authorized by the Guarantor or a Subsidiary of the
Guarantor;

(t) Liens solely on any cash earnest money deposits made by the Guarantor or any
of its Subsidiaries in connection with any letter of intent or purchase
agreement, provided that any such Lien is in existence for a period of no longer
than one year;

(u) Liens on insurance policies and the proceeds thereof securing the financing
of the premiums with respect thereto;

(v) Customary rights of first refusal and tag, drag and similar rights relating
to the sale of equity in joint venture agreements and franchise agreements
entered into in the ordinary course of business;

(w) Liens on cash or securities to secure Hedge Agreements and obligations under
other derivatives transactions entered into in the ordinary course of business
and not for speculative purposes; provided that the amount of Debt secured by
such Liens shall not exceed $150,000,000 at any time outstanding;

(x) Liens arising from the deposit of cash, securities or other property into
collateral or reinsurance trusts for the benefit of ceding companies or
Insurance Regulatory Authorities;

(y) Liens arising in connection with securities lending transactions entered
into in the ordinary course of business, for liquidity or yield enhancement
purposes and in no event outstanding for a period exceeding two hundred and
seventy (270) days in each case; and

(z) Liens securing Debt in an aggregate principal amount at any time outstanding
not to exceed $25,000,000.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Government Authority or
other entity.

“Plan” means an employee benefit or other plan established or maintained by the
Guarantor or any ERISA Affiliate and that is covered by Title IV of ERISA,
including a Multiemployer Plan.

 

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“Preferred Securities” of any Person shall mean any preferred Equity Interests
(or capital stock) of such Person that (i) have preferential rights with respect
to dividends or redemptions or upon liquidation or dissolution of such Person
over shares of common Equity Interests (or capital stock) of any other class of
such Person and (ii) that require no repayments or prepayments and no mandatory
redemptions or repurchases, in each case, prior to 91 days after the Final
Maturity Date.

“Property” of any Person means any property or assets, or interest therein, of
such Person.

“Public Lenders” means the Lenders that do not wish to receive material
non-public information with respect to the Guarantor, its Subsidiaries or their
securities.

“RBC Ratio” of any Person means, at any time, the ratio of (i) “Total Adjusted
Capital” of such Person to (ii) the amount equal to (x) “Authorized Control
Level Risk-Based Capital” of such Person multiplied by (y) 2, as such terms are
defined by the Insurance Regulatory Authority of the State in which such Person
is incorporated, as amended from time to time. Using the annual SAP Financial
Statements form prescribed by the NAIC Risk-Based Capital (RBC) for Insurers
Model Act for the year ended December 31, 2012 (the “Convention Blank”), the RBC
Ratio as of December 31, 2012 is equal to the quotient of (a) the amount that
appears on line 28 on page 17 of the Convention Blank divided by (b) the amount
equal to (x) the amount that appears on line 29 on page 17 of the Convention
Blank multiplied by (y) 2.

“Regulation FD” means Regulation FD as promulgated by the SEC under the
Securities Act of 1933 and the Securities and Exchange Act of 1934 as in effect
from time to time.

“Regulations T, U and X” means Regulations T, U and X issued by the Board of
Governors of the Federal Reserve System, as from time to time amended.

“Reinsurance Agreement” means any agreement, contract, treaty or other
arrangement whereby other insurers assume insurance from the Guarantor or any
Insurance Subsidiary.

“Responsible Officer” of the Guarantor means the President, the Chief Executive
Officer, the Chief Financial Officer, the Treasurer, any Executive Vice
President, any Senior Vice President, or any Vice President of the Guarantor.

“Restricted Payments” means (a) any cash dividend or other distribution in cash
with respect to any Equity Interests in any Person, or any cash payment,
including any sinking fund or similar cash deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in such Person or any option, warrant or other right to acquire
any such Equity Interests in such Person and (b) any prepayment, redemption,
purchase, defeasance or other satisfaction prior to the scheduled maturity
thereof in any manner of any Subordinated Indebtedness of any Person (it being
understood that payments of regularly scheduled principal and interest payments
shall not constitute a Restricted Payment).

“Restricted Payment Event of Default” means (i) while the Hanover Credit
Agreement is in full force and effect, any “Event of Default” (as such term is
defined in the Hanover Credit Agreement) under Section 7.01(a), Section 7.01(c)
(only if such Event of Default arises due to the Guarantor’s failure to perform
or observe any term, covenant or agreement contained in Section 5.01(a),
Section 5.01(b) or Section 6.01 of the Hanover Credit Agreement),
Section 7.01(d), Section 7.01(e), Section 7.01(f), or Section 7.01(j) of the
Hanover Credit Agreement or (ii) otherwise, any Event of Default under Clause
26.1 (Events of Default, Non-Payment), Clause 26.2 (Events of Default, Financial
Condition and Other Specific Covenants), Clause 26.3 (Events of Default, Other
Obligations) (only if such Event of Default arises due to the Guarantor’s
failure to perform or observe any term, covenant or agreement contained in
Section 4.02(a)(i), Section 4.02(a)(ii) or Section 4.03), Clause 26.6 (Events of
Default, Cross Default), Clause 26.8 (Events of Default, Insolvency), Clause
26.9 (Events of Default, Insolvency Proceedings), Clause 26.13 (Events of
Default, Repudiation) or Clause 26.25 (Events of Default, US Bankruptcy
Proceeding) of the Facility Agreement.

 

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“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business.

“SAP” means the accounting procedures and practices prescribed or permitted by
the applicable Insurance Regulatory Authority.

“SEC” means the United States Securities and Exchange Commission.

“Sanctions” means, economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by (a) the U.S. government, including
those administered by OFAC or the U.S. Department of State or (b) the European
Union or Her Majesty’s Treasury of the United Kingdom.

“Sanctioned Country” means, at any time, a country or territory which is the
subject or target of any Sanctions and with respect to which such Sanctions
apply to all Persons in such country or territory (for example, as of the date
of this Agreement, Cuba), as opposed to any country or territory with respect to
which Sanctions are applicable only to Persons listed in any Sanctions-related
list.

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC, the U.S.
Department of State, the European Union or Her Majesty’s Treasury of the United
Kingdom, (b) any Person operating, organized or resident in a Sanctioned
Country, or (c) any Person controlled by any such Person.

“Securitization Subsidiary” shall mean a Subsidiary which engages in no
activities other than in connection with the financing of accounts receivable or
portfolio investments of the Guarantor or any other Subsidiary (a) no portion of
the Debt or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Guarantor or any other Subsidiary (other than another
Securitization Subsidiary) (excluding guarantees of obligations (other than the
principal of, and interest on, Debt) pursuant to Standard Securitization
Undertakings or Limited Originator Recourse), (ii) is recourse to or obligates
the Guarantor or any other Subsidiary (other than another Securitization
Subsidiary) in any way (other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse) or (iii) subjects any property or
asset of the Guarantor or any other Subsidiary (other than another
Securitization Subsidiary), directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse, (b) with which neither the
Guarantor nor any of its Subsidiaries (other than another Securitization
Subsidiary) has any contract, agreement, arrangement or understanding (other
than pursuant to the documentation entered into in connection with any
Securitization Transaction (including with respect to fees payable in the
ordinary course of business in connection with the servicing of accounts
receivable and related assets)) on terms less favorable to the Guarantor or such
Subsidiary than those that might be obtained at the time from persons that are
not Affiliates of the Guarantor, and (c) to which neither the Guarantor nor any
other Subsidiary of the Guarantor (other than another Securitization Subsidiary)
has any obligation to maintain or preserve such entity’s financial condition or
cause such entity to achieve certain levels of operating results (other than
pursuant to Standard Securitization Undertakings or Limited Originator
Recourse).

“Securitization Transaction” means any transaction or series of transactions
that may be entered into by the Guarantor or any of its Subsidiaries pursuant to
which the Guarantor or such Subsidiary, as the case may be, may sell, convey or
otherwise transfer assets to any special purpose, bankruptcy-remote Subsidiary
in a true sale transaction and such special purpose Subsidiary incurs Financial
Debt to finance the purchase of such assets, provided that there shall be no
recourse under any such securitization to the Guarantor or any of its other
Subsidiaries other than pursuant to Standard Securitization Undertakings or
Limited Originator Recourse.

“Security Agent” has the meaning set forth in the preamble hereof.

 

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“Solvent” means, with respect to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the total amount of liabilities
(including without limitation contingent liabilities) of such Person, (b) the
present fair saleable value of the Property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature, and (d) such
Person is not engaged in a business and is not about to engage in a business for
which such Person’s Property would constitute an unreasonably small capital.

“Specified Convertible Debt Securities” means any debt securities the terms of
which provide for the conversion thereof into Equity Interests, cash or a
combination of Equity Interests and cash and (i) that afford equity benefit to
the issuer thereof (under the procedures and guidelines of S&P) by having
ongoing payment requirements that are more flexible than interest payments
associated with conventional indebtedness for borrowed money and by being
contractually subordinated to such indebtedness and (ii) that require no
repayments or prepayments and no mandatory redemptions or repurchases of
principal payable in cash, in each case, prior to 91 days after the Final
Maturity Date.

“Standard Securitization Undertakings” means representations, warranties,
covenants and indemnities entered into by the Guarantor or any Subsidiary in
connection with any Securitization Transaction that are customary in comparable
non-recourse securitization transactions.

“Statutory Statement” means, as to any Material Insurance Subsidiary, a
statement of the condition and affairs of such Material Insurance Subsidiary,
prepared in accordance with SAP, and filed with the applicable Insurance
Regulatory Authority.

“Subordinated Indebtedness” means any Debt of the Guarantor or any Subsidiary
the payment of which is contractually subordinated in right of payment to the
obligations under this Agreement.

“Subsidiary” means, with respect to any Person, any other Person of which at
least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such other Person
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such other Person shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or Controlled by such Person or one or more
Subsidiaries of such first Person or by such first Person and one or more
Subsidiaries of such first Person. For the avoidance of doubt, any Lloyd’s
syndicate which is not a legal entity and has no power to enter into contracts
or other binding obligations shall not be deemed to be a Subsidiary of the
Guarantor.

“Total Capitalization” means, at any time, the sum of (a) Total Debt plus
(b) Net Worth.

“Total Debt” means, at any time, an amount equal to the aggregate outstanding
principal amount of Debt of the Guarantor and its Subsidiaries (other than any
Securitization Subsidiary) of the kinds set forth in clauses (a) through (g) of
the definition of Debt determined on a Consolidated basis without duplication in
accordance with GAAP, but without giving effect to any election under the
Statement of Financial Accounting Standards No. 159 (ASC 825) (or any similar
accounting principle) permitting a Person to value its financial liabilities or
indebtedness at the fair value thereof; provided, that solely for purposes of
determining “Total Debt,” (i) without duplication of clauses (ii), (iii) and
(iv) hereof, the outstanding principal amount of Debt attributed to any Hybrid
Security shall be deemed equal to the portion of such Hybrid Security that is
deemed to constitute indebtedness, as determined in accordance with S&P’s
methodology at such time, (ii) without duplication of clauses (i), (iii) and
(iv) hereof, the outstanding principal amount of Debt attributed to any
Disqualified Equity Interest shall be deemed equal to the portion of such
Disqualified Equity Interest that is deemed to constitute indebtedness, as
determined in accordance with S&P’s methodology at such time, (iii) without
duplication of clauses (i), (ii) and (iv) hereof, the outstanding principal
amount of Debt attributed to any Preferred Security shall be deemed equal to the
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to constitute indebtedness, as determined in accordance with S&P’s methodology
at such time and (iv) without duplication of clauses (i), (ii) and (iii) hereof,
the outstanding principal amount of Debt attributed to any Specified Convertible
Debt Securities shall be deemed equal to the portion of such Specified
Convertible Debt Securities that is deemed to constitute indebtedness, as
determined in accordance with S&P’s methodology at such time.

“UKGAAP” means generally accepted accounting principles in the United Kingdom as
in effect from time to time.

“Wholly-Owned Subsidiary” means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which all of the
equity securities or other ownership interests (other than, in the case of a
corporation, directors’ qualifying shares) are directly or indirectly owned or
Controlled by such Person or one or more Wholly-Owned Subsidiaries of such
Person or by such Person and one or more Wholly-Owned Subsidiaries of such
Person.

“Withdrawal Liability” has the meaning specified in Part 1 of Subtitle E of
Title IV of ERISA.

Section 1.02 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided, that if the
Guarantor notifies the Facility Agent that it requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Facility Agent notifies the Guarantor that the Lenders, in accordance
with the Facility Agreement, request an amendment to any provision hereof for
such purpose), regardless of whether any such notice is given before or after
such change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith. To enable the ready
and consistent determination of compliance with the covenants set forth in
Section 4.03, the Guarantor will cause the last day of its fiscal year to be
December 31.

ARTICLE II

GUARANTY

Section 2.01 The Guaranty. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety the due and punctual payment of any
amounts due under or in connection with any Guaranteed Document, together with
all renewals, modifications, consolidations or extensions thereof and whether
now or hereafter due, owing or incurred in any manner, whether actual or
contingent, whether incurred solely or jointly with any other Person and whether
as principal or surety (and including all liabilities in connection with any
notes, bills or other instruments accepted by any Guaranteed Finance Party in
connection therewith), together in each case with all renewals, modifications,
consolidations or extensions thereof (all such obligations being herein
collectively referred to as the “Guaranteed Obligations”).

Anything contained in this Agreement to the contrary notwithstanding, the
obligations of the Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render the Guarantor’s
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state Law (collectively, the “Fraudulent Transfer
Laws”), in each case after giving effect to all other liabilities of the
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of the Guarantor
(i) in respect of intercompany indebtedness to any other Group Obligor or any of
its Affiliates to the extent that such indebtedness (A) would be discharged or
would be subject to a right of set-off in an amount equal to the amount paid by
the Guarantor hereunder or (B) has been pledged to, and is enforceable by, the
Security Agent on behalf of the Guaranteed Finance Parties and (ii) under any
guaranty of Debt subordinated in right of payment to the Guaranteed Obligations
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limitation as to a maximum amount similar to that set forth in this paragraph
pursuant to which the liability of the Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets of the Guarantor to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights of the
Guarantor pursuant to (i) applicable Law or (ii) any agreement providing for an
equitable allocation among the Guarantor and any other Group Obligor and its
Affiliates of obligations arising under guaranties by such parties (including
the agreements in Article II of this Agreement). If the Guarantor’s liability
hereunder is limited pursuant to this paragraph to an amount that is less than
the total amount of the Guaranteed Obligations, then it is understood and agreed
that the portion of the Guaranteed Obligations for which the Guarantor is liable
hereunder shall be the last portion of the Guaranteed Obligations to be repaid.

Section 2.02 Guaranty Absolute. The Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Guaranteed
Documents, regardless of any Law now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Guaranteed Finance Parties with
respect thereto. The obligations of the Guarantor under this Agreement are
independent of the Guaranteed Obligations, and a separate action or actions may
be brought and prosecuted against the Guarantor to enforce this Agreement,
irrespective of whether any action is brought against the Borrower or any other
Group Obligor or whether the Borrower or any other Group Obligor is joined in
any such action or actions. This Agreement is an absolute and unconditional
guaranty of payment when due, and not of collection, by the Guarantor of the
Guaranteed Obligations in each and every particular. The obligations of the
Guarantor hereunder are several from those of the other Group Obligors and are
primary obligations concerning which the Guarantor is the principal obligor. The
Guaranteed Finance Parties shall not be required to mitigate damages or take any
action to reduce, collect or enforce the Guaranteed Obligations.

The obligations of the Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including the
existence of any claim, set-off or other right which the Guarantor may have at
any time against any other Group Obligor or any Guaranteed Finance Party or any
other Person, whether in connection herewith or any unrelated transactions.
Without limiting the generality of the foregoing, the Guarantor’s liability
shall extend to all amounts that constitute part of the Guaranteed Obligations
and would be owed by any Group Obligor to any Guaranteed Finance Party under the
Guaranteed Documents but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Borrower or such Group Obligor.

Without limiting the generality of the foregoing, the obligations of the
Guarantor hereunder shall not be released, discharged or otherwise affected or
impaired by:

(i) any extension, renewal, settlement, compromise, acceleration, waiver or
release in respect of any obligation of any Group Obligor or any Guaranteed
Document or any other agreement or instrument evidencing or securing any
Guaranteed Obligation, by operation of Law or otherwise;

(ii) any change in the manner, place, time or terms of payment of any Guaranteed
Obligation or any other amendment, supplement or modification to the Facility
Agreement or any other Guaranteed Document or any other agreement or instrument
evidencing or securing any Guaranteed Obligation;

(iii) any release, non-perfection or invalidity of any direct or indirect
security for any Guaranteed Obligation, any sale, exchange, surrender,
realization upon, offset against or other action in respect of any direct or
indirect security for any Guaranteed Obligation or any release of any other
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(iv) any change in the existence, structure or ownership of any Group Obligor or
any insolvency, bankruptcy, reorganization, arrangement, readjustment,
composition, liquidation or other similar proceeding affecting any Group Obligor
or its assets or any resulting disallowance, release or discharge of all or any
portion of any Guaranteed Obligation, other than in connection with the payment
in full of all obligations under and termination of the Guaranteed Documents;

(v) the existence of any claim, set-off or other right which the Guarantor may
have at any time against any other Group Obligor, any Guaranteed Finance Party
or any other Person, whether in connection herewith or any unrelated
transaction; provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;

(vi) any invalidity or unenforceability relating to or against any Group Obligor
for any reason of the Facility Agreement, any other Guaranteed Document or any
other agreement or instrument evidencing or securing any Guaranteed Obligation
or any provision of applicable Law purporting to prohibit the payment by any
Group Obligor of any Guaranteed Obligation;

(vii) any failure by any Guaranteed Finance Party: (A) to file or enforce a
claim against any Group Obligor or its estate (in a bankruptcy or other
proceeding); (B) to give notice of the existence, creation or incurrence by any
Group Obligor of any new or additional indebtedness or obligation under or with
respect to the Guaranteed Obligations; (C) to commence any action against any
Group Obligor; (D) to disclose to the Guarantor any facts which such Guaranteed
Finance Party may now or hereafter know with regard to any Group Obligor; or
(E) to proceed with due diligence in the collection, protection or realization
upon any collateral securing the Guaranteed Obligations;

(viii) any direction as to application of payment by any Group Obligor or any
other Person;

(ix) any subordination by any Guaranteed Finance Party of the payment of any
Guaranteed Obligation to the payment of any other liability (whether matured or
unmatured) of any Group Obligor to its creditors;

(x) any act or failure to act by any Guaranteed Finance Party under this
Agreement or otherwise which may deprive the Guarantor of any right to
subrogation, contribution or reimbursement against any other Group Obligor or
any right to recover full indemnity for any payments made by the Guarantor in
respect of the Guaranteed Obligations; or

(xi) any other act or omission to act or delay of any kind by any Group Obligor
or any Guaranteed Finance Party or any other Person or any other circumstance
whatsoever which might, but for the provisions of this clause, constitute a
legal or equitable discharge of the Guarantor’s obligations hereunder.

The Guarantor has irrevocably and unconditionally delivered this Agreement to
the Facility Agent and the Security Agent, for the benefit of the Guaranteed
Finance Parties, and the failure by any other Group Obligor or any other Person
to sign this Agreement or a guaranty similar to this Agreement or otherwise
shall not discharge the obligations of the Guarantor hereunder. The irrevocable
and unconditional liability of the Guarantor hereunder applies whether it is
jointly and severally liable for the entire amount of the Guaranteed
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without regard to any rights (or the impairment thereof) of subrogation,
contribution or reimbursement that the Guarantor may now or hereafter have
against any other Group Obligor or any other Person. This Agreement is and shall
remain fully enforceable against the Guarantor irrespective of any defenses that
any Group Obligor may have or assert in respect of the Guaranteed Obligations,
including, without limitation, failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and
usury, except that the Guarantor may assert the defense of final payment in full
of the Guaranteed Obligations.

Section 2.03 Payments.

(a) Payments to be Made When Due. The Guarantor shall, forthwith on demand of
the Facility Agent or (as applicable) the Security Agent following the failure
of any Group Obligor to make any payment under the Guaranteed Documents when
due, including following the acceleration of the maturity of any Guaranteed
Obligations pursuant to Clause 26.26 (Events of Default, Acceleration and
Cancellation) of the Facility Agreement, pay the aggregate amount of all
Guaranteed Obligations to the Facility Agent or (as applicable) the Security
Agent.

(b) General Provisions as to Payments. Each payment hereunder shall be made
without set-off, counterclaim or other deduction, in immediately available
funds, to the Facility Agent or (as applicable) the Security Agent at the
address(es) referred to in Section 7.01.

(c) Application of Payments. All amounts from time to time received or recovered
by the Facility Agent or (as applicable) the Security Agent in connection with
this Agreement (the “Guaranty Payments”) shall be applied by the Facility Agent,
to the extent permitted by applicable law (and subject to the provisions of this
Section 2.03), in the following order of priority:

(i) in discharging any sums owing to the Facility Agent or Security Agent under
the Guaranteed Documents;

(ii) in payment to the Facility Agent, on behalf of the Finance Parties (or, in
the case of the Overdraft Facility, directly to Security Agent on behalf of the
Overdraft Provider), for application on a pro rata basis towards the discharge
of all sums due and payable by any Group Obligor under any of the Guaranteed
Documents (to be applied) in accordance with Clause 33.5 (Payment Mechanics,
Partial Payments) of the Facility Agreement and the Overdraft Facility Letter to
the extent that it constitutes Permitted Financial Indebtedness.

(d) Investment of Proceeds. Prior to the application of the proceeds of the
Guaranty Payments in accordance with subsection (c) above, the Facility Agent or
(as applicable) the Security Agent may, in its discretion, hold all or part of
those proceeds in an interest-bearing suspense or impersonal account(s) in the
name of the Facility Agent or (as applicable) the Security Agent with such
financial institution (including itself) and for so long as the Facility Agent
shall think fit (the interest being credited to the relevant account) pending
the application from time to time of those monies in the Facility Agent’s or (as
applicable) the Security Agent’s discretion in accordance with the provisions of
this Section 2.03.

(e) Currency Conversion.

(i) For the purpose of, or pending the discharge of, any of the Guaranteed
Obligations, the Facility Agent or (as applicable) the Security Agent may
convert any moneys received or recovered by the Facility Agent from one currency
to another, at the Facility Agent’s spot rate of exchange.

(ii) The obligations of the Guarantor to pay in the due currency shall only be
satisfied to the extent of the amount of the due currency purchased after
deducting the costs of conversion.

 

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(f) Permitted Deductions. The Facility Agent or (as applicable) the Security
Agent shall be entitled, in its discretion, (i) to set aside by way of reserve
amounts required to meet and (ii) to make and pay, any deductions and
withholdings (on account of taxes or otherwise) which it is or may be required
by any applicable law to make from any distribution or payment made by it under
this Agreement, or as a consequence of performing its duties, or by virtue of
its capacity as Facility Agent or (as applicable) the Security Agent under any
of the Guaranteed Documents or otherwise (other than in connection with its
remuneration for performing its duties under the Guaranteed Documents).

Section 2.04 Discharge; Reinstatement in Certain Circumstances. The Guarantor’s
obligations hereunder shall remain in full force and effect until the latest to
occur of:

(i) payment in full in cash of all Debt outstanding, together with all interest
(including interest accruing on or after the commencement of any proceeding
under any Debtor Relief Law, whether or not a claim for such interest is, or
would be, allowed in such proceeding under any Debtor Relief Law) and premium
thereon, under the Guaranteed Documents and the termination of all Commitments;

(ii) payment in full in cash of all other Guaranteed Obligations that are due
and payable or otherwise accrued and owing under the Guaranteed Documents
(including legal fees and other expenses, costs or charges in each case payable
thereunder and accruing on or after the commencement of any proceeding under any
Debtor Relief Law, whether or not a claim for such fees, expenses, costs or
charges is, or would be, allowed in such proceeding under any Debtor Relief
Law); and

(iii) termination, cancellation or cash collateralization (in an amount
reasonably satisfactory to the Facility Agent) of, all Letters of Credit issued
or deemed issued under the Guaranteed Documents.

(the occurrence of all of the foregoing being referred to herein as “Discharge
of Finance Obligations”).

No payment or payments made by any other Group Obligor or any other Person or
received or collected by any Guaranteed Finance Party from any other Group
Obligor or any other Person by virtue of any action or proceeding or any set-off
or appropriation or application at any time or from time to time in reduction of
or in payment of the Guaranteed Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder, it being
understood that the Guarantor shall, notwithstanding any such payment or
payments, remain liable for the Guaranteed Obligations until the Discharge of
Finance Obligations. If at any time any payment by any other Group Obligor or
any other Person of any Guaranteed Obligation is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of any other Group Obligor or other Person or upon or as a
result of the appointment of a receiver, intervener or conservator of, or
trustee or similar officer for, such other Group Obligor or other Person or any
substantial part of its respective property or otherwise, the Guarantor’s
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time. The Guarantor party hereto
agrees that payment or performance of any of the Guaranteed Obligations or other
acts which toll any statute of limitations applicable to the Guaranteed
Obligations shall also toll the statute of limitations applicable to the
Guarantor’s liability hereunder.

 

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Section 2.05 Waiver by the Guarantor. The Guarantor hereby waives presentment
to, demand of payment from and protest to the Group Obligors of any of the
Guaranteed Obligations, and also waives promptness, diligence, notice of
acceptance of its guarantee, any other notice with respect to any of the
Guaranteed Obligations and this Agreement and any requirement that any
Guaranteed Finance Party protect, secure, perfect or insure any Lien or any
property subject thereto. The Guarantor further waives any right to require that
resort be had by any Guaranteed Finance Party to any security held for payment
of the Guaranteed Obligations or to any balance of any deposit, account or
credit on the books of the Guaranteed Finance Party in favor of any Group
Obligor or any other Person. The Guarantor hereby consents and agrees to each of
the following to the fullest extent permitted by Law, and agrees that the
Guarantor’s obligations under this Agreement shall not be released, diminished,
impaired, reduced or adversely affected by any of the following (other than, in
each case, in connection with the full and final payment and satisfaction of the
Guaranteed Obligations, in cash), and waives any rights (including rights to
notice) which the Guarantor might otherwise have as a result of or in connection
with any of the following:

(i) any renewal, extension, modification, increase, decrease, alteration or
rearrangement of all or any part of the Guaranteed Obligations or any instrument
executed in connection therewith, or any contract or understanding with any
Group Obligor, any Guaranteed Finance Party, or any of them, or any other
Person, pertaining to the Guaranteed Obligations;

(ii) any adjustment, indulgence, forbearance or compromise that might be granted
or given by any Guaranteed Finance Party to any Group Obligor or any other
Person liable on the Guaranteed Obligations; or the failure of any Guaranteed
Finance Party to assert any claim or demand or to exercise any right or remedy
against any Group Obligor under the provisions of any Guaranteed Document or
otherwise; or any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Guaranteed Document or any
other agreement, including with respect to any Group Obligor under this
Agreement;

(iii) the insolvency, bankruptcy, arrangement, adjustment, composition,
liquidation, disability, dissolution or lack of power of any Group Obligor or
any other Person at any time liable for the payment of all or part of the
Guaranteed Obligations; or any dissolution of any Group Obligor, or any change,
restructuring or termination of the corporate structure or existence of any
Group Obligor, or any sale, lease or transfer of any or all of the assets of any
Group Obligor, or any change in the shareholders, partners, or members of any
Group Obligor; or any default, failure or delay, willful or otherwise, in the
performance of the Guaranteed Obligations;

(iv) the invalidity, illegality or unenforceability of all or any part of the
Guaranteed Obligations, or any document or agreement executed in connection with
the Guaranteed Obligations, for any reason whatsoever, including the fact that
the Guaranteed Obligations, or any part thereof, exceed the amount permitted by
Law, the act of creating the Guaranteed Obligations or any part thereof is
ultravires, the officers or representatives executing the documents or otherwise
creating the Guaranteed Obligations acted in excess of their authority, the
Guaranteed Obligations violate applicable usury laws, any Group Obligor has
valid defenses, claims or offsets (whether at Law, in equity or by agreement)
which render the Guaranteed Obligations wholly or partially uncollectible from
such Group Obligor (other than Discharge of Finance Obligations), the creation,
performance or repayment of the Guaranteed Obligations (or the execution,
delivery and performance of any document or instrument representing part of the
Guaranteed Obligations or executed in connection with the Guaranteed Obligations
or given to secure the repayment of the Guaranteed Obligations) is illegal,
uncollectible, legally impossible or unenforceable, or the documents or
instruments pertaining to the Guaranteed Obligations have been forged or
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(v) any full or partial release of the liability of any other Group Obligor or
of any other Person now or hereafter liable, whether directly or indirectly,
jointly, severally, or jointly and severally, to pay, perform, guarantee or
assure the payment of the Guaranteed Obligations or any part thereof, it being
recognized, acknowledged and agreed by the Guarantor that it may be required to
pay the Guaranteed Obligations in full without assistance or support of any
other Person, and the Guarantor has not been induced to enter into this
Agreement on the basis of a contemplation, belief, understanding or agreement
that any party other than the Borrower will be liable to perform the Guaranteed
Obligations, or that the Guaranteed Finance Parties will look to any other party
to perform the Guaranteed Obligations;

(vi) the taking or accepting of any other security, collateral or guarantee, or
other assurance of payment, for all or any part of the Guaranteed Obligations;

(vii) any release, surrender, exchange, subordination, deterioration, waste,
loss or impairment (including negligent impairment) of any Letter of Credit,
collateral, property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations;

(viii) [reserved];

(ix) the failure of the Guaranteed Finance Party or any other Person to exercise
diligence or reasonable care in the preservation, protection, enforcement, sale
or other handling or treatment of all or any part of such collateral, property
or security;

(x) the fact that any collateral, security, security interest or lien
contemplated or intended to be given, created or granted as security for the
repayment of the Guaranteed Obligations shall not be properly perfected or
created, or shall prove to be unenforceable or subordinate to any other security
interest or lien, it being recognized and agreed by the Guarantor that the
Guarantor is not entering into this Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any collateral;

(xi) [reserved];

(xii) any other action taken or omitted to be taken with respect to the
Guaranteed Obligations, or the security and collateral therefor, whether or not
such action or omission prejudices the Guarantor or increases the likelihood
that the Guarantor will be required to pay the Guaranteed Obligations pursuant
to the terms hereof, it being the unambiguous and unequivocal intention of the
Guarantor that the Guarantor shall be obligated to pay the Guaranteed
Obligations when due, notwithstanding any occurrence, circumstance, event,
action or omission whatsoever, whether or not contemplated, and whether or not
otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Guaranteed Obligations in cash;

(xiii) [reserved];

(xiv) the existence of any claim, set-off or other right which the Guarantor may
have at any time against any other Group Obligor, any Guaranteed Finance Party
or any

 

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other Person, whether in connection herewith or any unrelated transactions;
provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim; or

(xv) any other circumstance that might in any manner or to any extent otherwise
constitute a defense available to, vary the risk of, or operate as a discharge
of, the Guarantor as a matter of Law or equity.

All waivers herein contained shall be without prejudice to the right of the
Facility Agent or (as applicable) the Security Agent at its option to proceed
against any Group Obligor or any other Person, whether by separate action or by
joinder.

Section 2.06 Agreement to Pay; Subordination of Subrogation Claims. In
furtherance of the foregoing and not in limitation of any other right that any
Guaranteed Finance Party has at Law or in equity against the Guarantor by virtue
hereof, upon the failure of any Group Obligor to pay any Guaranteed Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, the Guarantor hereby promises to and
will forthwith pay, or cause to be paid, or such Guaranteed Finance Party as
designated thereby in cash the amount of such unpaid Guaranteed Obligations.
Upon payment by the Guarantor of any sums to the Facility Agent or any
Guaranteed Finance Party as provided above, all rights of the Guarantor against
any other Group Obligor arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full in cash of all the Guaranteed Obligations and Discharge of
Finance Obligations. No failure on the part of any other Group Obligor or any
other Person to make any payments in respect of any subrogation, contribution,
reimbursement, indemnity or similar right (or any other payments required under
applicable Law or otherwise) shall in any respect limit the obligations and
liabilities of the Guarantor with respect to its obligations hereunder. If any
amount shall erroneously be paid to the Guarantor on account of such
subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Guaranteed Finance Parties
and shall forthwith be turned over to the Facility Agent in the exact form
received by the Guarantor (duly endorsed by the Guarantor to the Facility Agent,
if required) to be credited against the payment of the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Guaranteed
Documents.

Section 2.07 Stay of Acceleration. If acceleration of the time for payment of
any amount payable by any other Group Obligor under or with respect to the
Guaranteed Obligations is stayed upon the insolvency or bankruptcy of such other
Group Obligor, all such amounts otherwise subject to acceleration under the
terms of the Facility any Guaranteed Document or any other agreement or
instrument evidencing or securing the Guaranteed Obligations shall nonetheless
be payable by the Guarantor hereunder forthwith on demand by the Facility Agent
or (as applicable) the Security Agent or, following payment in full of the
Guaranteed Obligations, the applicable Guaranteed Finance Parties under the
applicable Guaranteed Documents, in the manner provided in Section 2.01.

Section 2.08 No Set-Off. No act or omission of any kind or at any time on the
part of any Guaranteed Finance Party in respect of any matter whatsoever shall
in any way affect or impair the rights of any Guaranteed Finance Party to
enforce any right, power or benefit under this Agreement, and no set-off, claim,
reduction or diminution of any Guaranteed Obligation or any defense of any kind
or nature which the Guarantor has or may have against any other Group Obligor or
any Guaranteed Finance Party shall be available against any Guaranteed Finance
Party in any suit or action brought by any Guaranteed Finance Party to enforce
any right, power or benefit provided for by this Agreement; provided that
nothing herein shall prevent the assertion by the Guarantor of any such claim by
separate suit or compulsory counterclaim. Nothing in this Agreement shall be
construed as a waiver by the Guarantor of any rights or claims which it may have
against any Guaranteed Finance Party hereunder or otherwise, but any recovery
upon such rights and claims shall be had from such Guaranteed Finance Party
separately, it being the intent of this Agreement that the Guarantor shall be
unconditionally, absolutely and jointly and severally obligated to perform fully
all its obligations, covenants and agreements hereunder for the benefit of each
Guaranteed Finance Party.

 

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ARTICLE III

INDEMNIFICATION, SUBROGATION AND CONTRIBUTION

Section 3.01 Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantor may have under applicable Law (but
subject to Section 2.06 above), the Borrower agrees that if a payment shall be
made by the Guarantor under this Agreement, the Borrower shall indemnify the
Guarantor for the full amount of such payment and the Guarantor shall be
subrogated to the rights of the Person to whom such payment shall have been made
to the extent of such payment.

Section 3.02 Contribution and Subrogation. The Guarantor agrees (subject to
Section 2.06 above) that, if a payment shall be made by any other Group Obligor
(other than the Borrower) under the Guaranteed Documents or assets of any other
Group Obligor (other than the Borrower) shall be sold pursuant to any Security
Document to satisfy a claim of any Guaranteed Finance Party and such other Group
Obligor (the “Claiming Guarantor”) shall not have been fully indemnified by the
Borrower, the Guarantor shall indemnify the Claiming Guarantor in an amount
equal to the amount of such payment or the greater of the book value or the fair
market value of such assets, as the case may be, in each case multiplied by a
fraction the numerator of which shall be the net worth of the Guarantor on the
date that the obligation(s) supporting such claim were incurred under the
Guaranteed Documents and the denominator of which shall be the aggregate net
worth of all the Group Obligors (other than the Borrower) on such date. Any such
payment by the Guarantor pursuant to this Section 3.02 shall be subrogated to
the rights of such Claiming Guarantor under Section 3.01 to the extent of such
payment, in each case subject to the provisions of Section 2.06.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 4.01 Representations and Warranties.

(a) On the date of this Agreement, the Guarantor represents and warrants as
follows:

(i) The Guarantor has heretofore furnished to each of the Lenders (including by
furnishing the Form 10-K of the Guarantor filed with the SEC) its audited
Consolidated balance sheet and Consolidated statements of income and cash flows
as at and for the fiscal year ended December 31, 2014, and such financial
statements fairly present, in all material respects, the Consolidated financial
condition and results of operations of the Guarantor and its Subsidiaries as at
the date thereof and for such fiscal year, all in accordance with GAAP;

(ii) The Guarantor has heretofore furnished (including by furnishing the Form
10-Q of the Guarantor filed with the SEC) to each of the Lenders its unaudited
Consolidated balance sheet and Consolidated statements of income and cash flows
as at and for the six-month period ended June 30, 2015, and such financial
statements fairly present, in all material respects, the Consolidated financial
position and results of operations of the Guarantor and its Subsidiaries as at
the date thereof and for such six-month period, all in accordance with GAAP
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(iii) The Guarantor has heretofore furnished to each of the Lenders the annual
Statutory Statement of each Material Insurance Subsidiary and an equivalent
financial statement for each Lloyd’s syndicate in which a Subsidiary of the
Guarantor has a membership interest, in each case for the fiscal year ended
December 31, 2014, as filed with the applicable Insurance Regulatory Authority,
and each such annual Statutory Statement (or, with respect to any Lloyd’s
syndicate in which a Subsidiary of the Guarantor has membership interest, such
equivalent financial statement filing) presents fairly, in all material
respects, the financial position and the results of operations of such Material
Insurance Subsidiary or Lloyd’s syndicate, as applicable, as at and for the
fiscal year ended December 31, 2014, in accordance with SAP;

(iv) Since December 31, 2014, there has been no Material Adverse Change;

(v) There is no action, proceeding or investigation pending, or to the knowledge
of the Guarantor, overtly threatened in writing against the Guarantor or any of
its Subsidiaries before any court, governmental agency or arbitrator which
(A) is reasonably likely to have a Material Adverse Effect or (B) purports to
affect the Guaranteed Documents or the transactions contemplated thereby;

(vi) The Guarantor and each of its Subsidiaries (A) is duly organized, validly
existing and (to the extent applicable in respect of the relevant jurisdiction)
in good standing under the laws of its jurisdiction of organization, (B) is duly
qualified and (to the extent applicable in respect of the relevant jurisdiction)
in good standing as a foreign corporation in each other jurisdiction in which it
owns or leases Property or in which the conduct of its business requires it to
so qualify or be licensed and where, in each case, failure so to qualify and be
in good standing would reasonably be expected to have a Material Adverse Effect
and (C) has all requisite corporate power and authority to own or lease and
operate its Properties and to carry on its business as now conducted and as
proposed to be conducted except as could not reasonably be expected to have a
Material Adverse Effect;

(vii) The Guarantor and each of its Subsidiaries is in compliance with all
federal, state and local laws and regulations (including, without limitation,
all applicable environmental laws and ERISA) applicable to the Guarantor, its
Subsidiaries and their respective Properties, except to the extent failure to so
comply would not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect;

(viii) All material consents, licenses, permits and governmental and third-party
consents and approvals required for the due making and performance by the
Guarantor of each of the Guaranteed Documents to which the Guarantor is a party
have been obtained and remain in full force and effect;

(ix) Each of the Guaranteed Documents to which the Guarantor is a party is a
legal, valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting enforcement of creditors’ rights generally or general principles
of equity;

(x) The making and performance by the Guarantor of each of the Guaranteed
Documents to which it is a party are within the Guarantor’s corporate powers,
have been duly authorized by all necessary corporate action, and (A) do not
contravene the Guarantor’s certificate of incorporation or by-laws or
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material contractual restriction binding on the Guarantor or its Subsidiaries or
any material law, rule or regulation (including Regulations T, U or X), or any
material order, writ, judgment, injunction, decree, determination or award,
except for any such contravention, violation or breach referred to in clause
(B) which could not reasonably be expected to have a Material Adverse Effect;

(xi) Each of the Guarantor and its Subsidiaries has good and marketable title
to, valid leasehold interests in, or valid licenses to use, all Properties
material to its business, and all such Properties are in good working order and
condition, ordinary wear and tear excepted, in each case except as would not
reasonably be expected to have a Material Adverse Effect;

(xii) The Guarantor and each of its Subsidiaries have paid and discharged all
taxes, assessments, claims and governmental charges or levies imposed upon it or
upon its Property, except (A) any such tax, assessment, claim or charge that is
being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained in accordance with Section 4.02(b) or
(B) to the extent that any failure to do so could not reasonably be expected to
have a Material Adverse Effect;

(xiii) The Guarantor is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock;

(xiv) No ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, has resulted or would
reasonably be expected to result in a liability to the Guarantor or its ERISA
Affiliates in excess of $10,000,000;

(xv) The Guarantor is not an “investment company” as defined in the Investment
Company Act of 1940, as amended;

(xvi) (A) Schedule 4.01 hereto is a complete list of the Subsidiaries of the
Guarantor, (B) each such Subsidiary is duly organized and validly existing under
the jurisdiction of its organization shown in said Schedule 4.01, and (C) the
percentage ownership by the Guarantor of each such Subsidiary is as shown in
said Schedule 4.01;

(xvii) (A) The Guarantor is Solvent and (B) the Guarantor and its Subsidiaries,
on a consolidated basis are Solvent;

(xviii) All written information (other than information of a general economic or
industry specific nature) that has been made available by the Guarantor or any
of its representatives to any Guaranteed Finance Party in connection with the
negotiation of the Guaranteed Documents (including, for the avoidance of doubt,
any such information in any confidential information memorandum or related
materials provided in connection with the syndication of the Commitments), when
taken as a whole, on or as of the dates on which such information was made
available, did not contain any untrue statement of a material fact or omit to
state a fact necessary to make the statements contained therein not misleading
in light of the time and circumstances under which such statements were made
(after giving effect to all supplements and updates thereto); and

(xix) The Guarantor has implemented and maintains in effect policies and
procedures designed to ensure compliance in all material respects by the
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Subsidiaries and, when acting on its or their behalf, their respective
directors, officers, employees and agents with Anti-Corruption Laws and
applicable Sanctions, and the Guarantor, its Subsidiaries and their respective
officers and employees and, to the knowledge of the Guarantor, its directors,
are in compliance with Anti-Corruption Laws and applicable Sanctions in all
material respects. None of the Guarantor, any Subsidiary or to the knowledge of
the Guarantor or such Subsidiary any of their respective directors, officers or
employees is a Sanctioned Person.

(b) The representations set out in Section 4.01(a)(i), (ii), (iii), (iv), (v),
(vi), (ix) and (x) are also deemed to be made by the Guarantor by reference to
the facts and circumstances then existing on:

(i) the date of each Utilisation Request; and

(ii) the Commencement Date of each Letter of Credit and every six months after
that date until the Expiry Date of that Letter of Credit.

Section 4.02 Affirmative Covenants So long as any amount is outstanding under
the Guaranteed Documents or any Commitment is in force, the Guarantor covenants
and agrees that:

(a) Reporting Requirements. The Guarantor will furnish to the Facility Agent on
behalf of the Lenders:

(i) as soon as available and in any event within 60 days after the end of each
of the first three quarters of each fiscal year of the Guarantor, the
Consolidated balance sheet of the Guarantor and its Subsidiaries as of the last
day of such quarter and the related Consolidated statements of income and cash
flows for such quarter, in each case setting forth in comparative form the
corresponding figures from the corresponding quarter in the previous fiscal
year, all prepared in conformity with GAAP and accompanied by a certificate of a
Responsible Officer of the Guarantor, which certificate shall state that such
financial statements present fairly, in all material respects, the Consolidated
financial position of the Guarantor and its Subsidiaries as of the date thereof
and the Consolidated results of their operations for the period covered thereby
in conformity with GAAP, consistently applied (subject to normal year-end audit
adjustments and the absence of footnotes);

(ii) as soon as available and in any event within 90 days after the end of each
fiscal year of the Guarantor, the Consolidated balance sheet of the Guarantor
and its Subsidiaries as of the last day of such fiscal year and the related
Consolidated statements of income and cash flows for such fiscal year, setting
forth in comparative form the corresponding figures from the previous fiscal
year, all prepared in conformity with GAAP and accompanied by an unqualified
report and opinion of independent certified public accountants of national
standing and reputation, which shall state that such financial statements, in
the opinion of such accountants, present fairly, in all material respects, the
Consolidated financial position of the Guarantor and its Subsidiaries as of the
date thereof and the Consolidated results of their operations for such year in
conformity with GAAP, consistently applied;

(iii) as soon as possible and in any event within five Business Days after the
Guarantor obtains knowledge of the occurrence of (i) a “Default” or an “Event of
Default” (as such terms are defined in the Hanover Credit Agreement) continuing
on the date of such statement or (ii) any Event of Default or Default continuing
on the date of such statement, a statement of a Responsible Officer setting
forth details of such event and the action which the Guarantor has taken and
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(iv) within a reasonable time after filing thereof, copies of all registration
statements (without exhibits) and all annual, quarterly and monthly reports (if
any) filed by the Guarantor with the SEC and promptly upon the mailing thereof
to the shareholders of the Guarantor generally, copies of all financial
statements, reports and proxy statements so mailed;

(v) promptly after the Guarantor or any ERISA Affiliate knows or should
reasonably know that any ERISA Event has occurred with respect to which the
liability or potential liability of the Guarantor or any of its ERISA Affiliates
has had or would reasonably be expected to have a Material Adverse Effect, a
statement of a Responsible Officer describing such ERISA Event and the action,
if any, which the Guarantor or such ERISA Affiliate proposes to take with
respect thereto;

(vi) promptly after receipt thereof by the Guarantor or any ERISA Affiliate,
copies of each notice from the PBGC stating its intention to terminate any Plan
or to have a trustee appointed to administer any Plan where such action would
have a Material Adverse Effect;

(vii) promptly after filing with the applicable Insurance Regulatory Authority
and in any event within 60 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of each Material Insurance
Subsidiary and each Lloyd’s syndicate in which a Subsidiary of the Guarantor has
a membership interest, the quarterly Statutory Statement of such Material
Insurance Subsidiary for such quarterly fiscal period (or, with respect to each
Lloyd’s syndicate in which the Guarantor has a membership interest, an
equivalent financial statement of such Lloyd’s syndicate for such quarterly
fiscal period);

(viii) promptly after filing with the applicable Insurance Regulatory Authority
and in any event within 90 days after the end of each fiscal year of each
Material Insurance Subsidiary and each Lloyd’s syndicate in which a Subsidiary
of the Guarantor has a membership interest, the annual Statutory Statement of
such Material Insurance Subsidiary, including, without limitation, management’s
discussion and analysis for such year (or, with respect to any Lloyd’s syndicate
in which the Guarantor has a membership interest, an equivalent financial
statement of such Lloyd’s syndicate for such year);

(ix) promptly upon the occurrence of any change in the Moody’s Rating or the
S&P’s Rating of the Index Debt, or any change in the A.M. Best Financial
Strength Rating with respect to any Insurance Subsidiary, notice thereof (for
the avoidance of doubt, a change in outlook shall not constitute a change in
rating);

(x) promptly upon the commencement of, or any material adverse development in,
any litigation, investigation or proceeding against the Guarantor or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect, notice thereof with a description thereof in reasonable detail; and

(xi) promptly after request therefor, such other business and financial
information respecting the condition or operations, financial or otherwise, of
the Guarantor or any of its Material Insurance Subsidiaries as the Facility
Agent or any Lender may from time to time reasonably request.

Notwithstanding the foregoing, the obligations in paragraphs (i), (ii) and
(iv) of this Section 4.02(a) shall be deemed satisfied with respect to financial
information of the Guarantor and its Subsidiaries by the furnishing the Form
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with the SEC, as applicable, on the date (i) on which the Guarantor posts such
documents, or provides a link thereto on the Guarantor’s website on the Internet
at the website address provided to the Lenders; or (ii) on which such documents
are posted on the Guarantor’s behalf on an Internet or intranet website, if any,
to which each Lender and the Facility Agent have access (whether a commercial,
third-party website or whether sponsored by the Facility Agent); provided that
(A) the Guarantor shall deliver paper copies of such documents to the Facility
Agent or any Lender that requests in writing (including by electronic mail) the
Guarantor to deliver such paper copies and (B) the Guarantor shall notify the
Facility Agent (by telecopier or electronic mail) of the posting of any such
documents satisfying the obligations in paragraphs (i), (ii) and (iv) of this
Section 4.02(a).

The Guarantor will furnish to the Lenders at the time it furnishes its financial
statements pursuant to paragraphs (i) and (ii) above, a certificate of a
Responsible Officer, in the form of Exhibit A, setting forth reasonably detailed
calculations demonstrating that the Guarantor is in compliance with the
covenants in Section 4.03. The Guarantor and each Lender acknowledge that
certain of the Lenders may be Public Lenders and, if documents or notices
required to be delivered pursuant to this Section 4.02(a) or otherwise are being
distributed on an Electronic System, any document or notice that the Guarantor
has indicated contains Non-Public Information shall not be posted on that
portion of the Electronic System designated for such Public Lenders. The
Guarantor agrees to clearly designate all information provided to the Facility
Agent by or on behalf the Guarantor which is suitable to make available to
Public Lenders. If the Guarantor has not indicated whether a document or notice
delivered pursuant to this Section 4.02(a) contains Non-Public Information, the
Facility Agent reserves the right to post such document or notice solely on that
portion of the Electronic System designated for Lenders who wish to receive
material nonpublic information with respect to the Guarantor, its Subsidiaries
and their securities.

(b) Payment of Taxes, Etc. The Guarantor will pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, all taxes, assessments, claims and governmental charges or levies
imposed upon it or upon its Property, except to the extent that any failure to
do so would not reasonably be expected to have a Material Adverse Effect;
provided that neither the Guarantor nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, claim or charge that is
being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained.

(c) Corporate Existence, Compliance with Laws, Etc. The Guarantor will, and will
cause each of its Material Subsidiaries to, (i) preserve and maintain all of its
material rights, privileges, licenses and franchises, including all tradenames,
patents and other intellectual property necessary for its business, except to
the extent the failure to preserve and maintain the same would not reasonably be
expected to have a Material Adverse Effect, and (ii) preserve and maintain its
legal existence, provided that nothing in this sentence shall prohibit any
transaction not otherwise prohibited under Section 4.04(c). The Guarantor will
comply, and will cause each of its Subsidiaries to comply, with all applicable
laws, statutes, rules, regulations and orders, including, without limitation,
ERISA, the PATRIOT Act, Anti-Corruption Laws and applicable Sanctions and all
applicable environmental laws, except for any non-compliance which would not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect. The Guarantor will maintain in effect and enforce
policies and procedures designed to ensure compliance in all material respects
by the Guarantor, its Subsidiaries and, when acting on its or their behalf,
their respective directors, officers, employees and agents with Anti-Corruption
Laws and applicable Sanctions.

(d) Maintenance of Properties, Etc. The Guarantor will maintain and preserve,
and will cause each of its Subsidiaries to maintain and preserve, all of its
Properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted, except where
failure to do so would not reasonably be expected to have a Material Adverse
Effect. The Guarantor will maintain, and cause each of its Subsidiaries to
maintain, appropriate and adequate insurance with responsible and reputable
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programs to the extent consistent with prudent practices of the Guarantor and
its Subsidiaries or otherwise customary in their respective industries in such
amounts and covering such risks as is customary in the industries in which the
Guarantor or such Subsidiary operates.

(e) Keeping of Books. The Guarantor will, and will cause each of its
Subsidiaries to, keep proper books of record and account as are necessary to
prepare Consolidated financial statements in accordance with GAAP, UKGAAP or
SAP, as applicable, in which full and correct entries in all material respects
shall be made of all financial transactions and the assets and business of the
Guarantor and each such Subsidiary in accordance with GAAP, UKGAAP or SAP, as
applicable.

(f) Visitation Rights. The Guarantor will, at any reasonable time during normal
business hours and upon reasonable prior notice and from time to time, permit
the Facility Agent or any of the Lenders or any agents or representatives
thereof (in each case at their own expense (except as described below) and
subject to Clause 41 (Confidentiality) of the Facility Agreement) to examine and
make copies of and abstracts from the records and books of account of, and visit
the Properties of, the Guarantor and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Guarantor and any of its Subsidiaries with
any of their officers or directors; provided that, excluding any such
examination or visit during the continuance of an Event of Default, the Facility
Agent and the Lenders shall not, collectively, exercise such rights more than
once during any calendar year. In addition, subject to customary access
agreements, at any time when an Event of Default has occurred and is continuing,
the Guarantor will, and will cause its Subsidiaries to, permit the Facility
Agent or any of the Lenders or any agents or representatives thereof to discuss
the affairs, finances and accounts of the Guarantor and its Subsidiaries with
their independent certified public accountants, and the Guarantor will be
responsible for the reasonable costs and expenses of the Facility Agent and the
Lenders and the agents and representatives thereof incurred in connection with
this clause (f).

Section 4.03 Financial Covenants. So long as any amount is outstanding under the
Guaranteed Documents or any Commitment is in force, the Guarantor covenants and
agrees that:

(a) Minimum Net Worth. The Guarantor will not permit Net Worth as of the last
day of any fiscal quarter of the Guarantor to be less than the sum of
(i) $1,696, 800,000 plus (ii) an amount equal to 50% of the Guarantor’s
Consolidated net income (if positive) for such fiscal quarter and for each prior
fiscal quarter of the Guarantor ending after November 12, 2013 plus (iii) an
amount equal to 50% of the aggregate Net Equity Proceeds of any Equity Issuances
made after November 12, 2013.

(b) RBC Ratio. The Guarantor will not permit the RBC Ratio of either HIC or CIC
as of the last day of any fiscal quarter of the Guarantor to be less than 175%.

(c) Leverage Ratio. The Guarantor will not permit the Leverage Ratio as of the
last day of any fiscal quarter of the Guarantor to be greater than 35%.

Section 4.04 Negative Covenants. So long as any amount is outstanding under the
Guaranteed Documents or any Commitment is in force, the Guarantor covenants and
agrees that:

(a) Financial Debt. The Guarantor will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Financial Debt, except:

(i) Financial Debt created under the Guaranteed Documents;

 

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(ii) Financial Debt and commitments to provide Financial Debt existing on the
date hereof and set forth on Schedule 4.04(a);

(iii) Financial Debt of the Guarantor to any Subsidiary and of any Subsidiary to
the Guarantor or any other Subsidiary;

(iv) Financial Debt incurred by Securitization Subsidiaries pursuant to
Securitization Transactions;

(v) Financial Debt in respect of capitalized lease obligations, synthetic lease
obligations or secured by purchase money security interests, provided that the
aggregate principal amount of Financial Debt permitted by this clause (v) shall
not exceed $100,000,000 at any time outstanding;

(vi) Guaranties by the Guarantor of Financial Debt incurred by its Subsidiaries
otherwise permitted under this Section 4.04(a);

(vii) Financial Debt in respect of Hybrid Securities, Disqualified Equity
Interests and Preferred Securities issued by the Guarantor or any trust or other
special purpose entity formed by the Guarantor as to which no Subsidiary (other
than any such trust or other special purpose entity) of the Guarantor has any
obligation;

(viii) Financial Debt in respect of subordinated securities of the Guarantor so
long as (a) the obligations of the Guarantor thereunder are unsecured and fully
subordinated as to payment and performance in all respects to all of the
Obligations of the Guarantor under the Guaranteed Documents, (b) no Subsidiary
of the Guarantor has any obligations thereunder and (c) such subordinated
securities do not have any required amortization, maturity, mandatory put,
redemption, repayment, or other similar provision or requirement, or any cash
interest thereon, and in any event is not payable, falling due or capable of
falling due, prior to at least 91 days after the Final Maturity Date, provided
that the Guarantor shall be permitted to make cash interest payments pursuant to
the terms of such other subordinated securities so long as (x) no payment
Default or Event of Default under the Hanover Credit Agreement so long as the
Hanover Credit Agreement is in full force and effect and, otherwise, under the
Facility Agreement has occurred and is continuing and (y) the interest rate in
respect thereof shall be based on prevailing market rates at the time of
issuance of such other subordinated securities;

(ix) Financial Debt in respect of borrowings from a Federal Home Loan Bank in
the ordinary course of business and on ordinary business terms pursuant to a
membership in such Federal Home Loan Bank;

(x) [Reserved];

(xi) Financial Debt assumed in connection with any Acquisition, provided that
such Financial Debt is not incurred in contemplation of such Acquisition and no
other Subsidiary (other than the Subsidiary being acquired, if applicable) has
any liability or obligations in respect of such Financial Debt;

(xii) Financial Debt incurred by the Guarantor in addition to the foregoing;

 

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(xiii) Financial Debt incurred by the Subsidiaries of the Guarantor, provided
that the aggregate principal amount of Financial Debt permitted by this clause
shall not exceed $75,000,000 at any time outstanding;

(xiv) Financial Debt in respect of letters of credit issued for the benefit of
Insurance Regulatory Authorities and letters of credit issued in support of
funds at the Society and Corporation of Lloyd’s requirements (including any such
Financial Debt set forth on Schedule 4.04(a));

(xv) Financial Debt incurred in connection with the Hanover Credit Agreement;
provided, that the aggregate principal amount of Financial Debt permitted by
this clause shall not exceed $300,000,000; and

(xvi) any extension, renewal or replacement of any of the foregoing Financial
Debt that (A) does not include Financial Debt of an obligor that was not an
obligor with respect to the Financial Debt being extended, renewed or replaced,
(B) does not increase the outstanding principal amount of the Financial Debt
being extended, renewed or replaced except by an amount equal to unpaid accrued
interest thereon, prepayment premiums not exceeding 5% of the outstanding
principal amount of such Financial Debt, and fees and expenses incurred in
connection with such extension, renewal or replacement, and by an amount equal
to any existing commitments unutilized thereunder and (C) in the case of
Financial Debt that is subordinated in right of payment under the Facility, is
subordinated to at least the same extent as, and has a maturity not earlier
than, and weighted average life to maturity not shorter than, the Financial Debt
being renewed or replaced.

For purposes of determining compliance with this Section 4.04(a), the Guarantor
will be entitled to divide an item of Financial Debt that meets the criteria of
one of the categories of Financial Debt described in clauses (i) through
(xv) above between such applicable clause and any other applicable clause.

(b) Liens. The Guarantor will not, nor will it permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien upon any of its Property,
whether now owned or hereafter acquired, except Permitted Liens.

(c) Mergers, Etc. The Guarantor will not, and will not permit any of its
Material Subsidiaries to, merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of, whether in one transaction or in a
series of transactions, all or substantially all of the Property (whether now
owned or hereafter acquired) of the Guarantor or such Material Subsidiary to,
any Person, or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default under the Hanover Credit
Agreement so long as the Hanover Credit Agreement is in full force and effect
and, otherwise, under the Facility Agreement, shall have occurred and be
continuing, (i) any Material Subsidiary may merge into (1) the Guarantor in a
transaction in which the Guarantor is the surviving corporation or (2) any other
Subsidiary, (ii) any Material Subsidiary may sell, transfer, lease or otherwise
dispose of its assets to the Guarantor or to another Subsidiary, (iii) any
Material Subsidiary may liquidate or dissolve if the Guarantor determines in
good faith that such liquidation or dissolution is in the best interests of the
Guarantor and is not materially disadvantageous to the Lenders, (d) any
Subsidiary may merge into the Guarantor in a transaction in which the Guarantor
is the surviving corporation and (iv) the Guarantor and any Material Subsidiary
may engage in a disposition permitted by Section 4.04(d).

(d) Disposition of Assets. The Guarantor will not, and will not permit any of
its Material Subsidiaries to, sell, lease, transfer or otherwise dispose of any
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Property, or grant any option or other right to purchase, lease or otherwise
acquire any such Property, except (i) sales of inventory and investments in the
ordinary course of its business, (ii) sales of assets which are not material to
the operation of the Guarantor or such Material Subsidiaries or are no longer
used or useful in connection with the operation of the Guarantor or such
Material Subsidiaries, (iii) transfers of Property by the Guarantor or any
Material Subsidiary to the Guarantor or any other Subsidiary (but to the extent
that the Guarantor transfers a substantial portion of its property to any
Subsidiaries, such Subsidiaries must enter into a guaranty substantially similar
to this Agreement or as otherwise acceptable to the Facility Agent and Security
Agent), (iv) dispositions pursuant to Securitization Transactions,
(v) dispositions in connection with the CitySquare Project, (vi) dispositions
for fair market value of assets acquired after November 12, 2013 in connection
with Acquisitions, to the extent that, at the time that the relevant Acquisition
was consummated, the Guarantor or such Material Subsidiary planned to sell,
lease, transfer or otherwise dispose of such assets and (vii) other
dispositions, the net cash proceeds of which, when aggregated with the net cash
proceeds of any other such dispositions consummated after November 12, 2013
pursuant to this clause (vii) shall not exceed in the aggregate 5% of the total
assets of the Guarantor and its Subsidiaries (determined on a Consolidated basis
as of the end of the most recent fiscal quarter for which financial statements
are available).

(e) Transactions with Affiliates. The Guarantor will not, and will not permit
any of its Subsidiaries to, sell, lease or otherwise transfer any Property to,
or purchase, lease or otherwise acquire any assets from, or otherwise engage in
any transactions with, any of its Affiliates, except (a) at prices and on terms
and conditions not less favorable to the Guarantor or such Subsidiary than could
be obtained on an arm’s-length basis from unrelated third parties and
(b) transactions between or among the Guarantor and its Subsidiaries not
involving any other Affiliate.

(f) Line of Business. The Guarantor will not, and will not permit any of its
Material Subsidiaries to, make any material change in the nature or conduct of
the business of the Guarantor or such Material Subsidiary as conducted on the
date hereof.

(g) Anti-dividend-block. Except to the extent required by applicable law,
statute, rule, regulation, order or agreement with regulators, the Guarantor
will not permit any of its Subsidiaries to agree to or have in effect any
contractual restriction on the payment of dividends or the making of other
distributions to the Guarantor (each, a “Burdensome Agreement”) other than:

(i) Burdensome Agreements (A) in existence on the date hereof (to the extent not
otherwise permitted by this Section 4.04(g)) that are listed on Schedule 4.04(g)
hereto and (B) to the extent Burdensome Agreements permitted by clause (A) are
contained in an agreement evidencing Financial Debt, any agreement evidencing
any permitted modification, replacement, renewal, extension or refinancing of
such Financial Debt so long as such modification, replacement, renewal,
extension or refinancing does not expand the scope of such Burdensome Agreement
or include any other Subsidiaries as parties thereto;

(ii) Burdensome Agreements that are binding on a Subsidiary of the Guarantor at
the time such Person first becomes a Subsidiary of the Guarantor, so long as
such Burdensome Agreements were not entered into in contemplation of such Person
becoming a Subsidiary of the Guarantor;

(iii) Burdensome Agreements that are customary restrictions on leases,
subleases, licenses or asset sale agreements otherwise permitted hereby so long
as such restrictions relate to the assets subject thereto;

 

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(iv) Burdensome Agreements that are customary provisions restricting subletting
or assignment of any lease governing a leasehold interest of any Subsidiary of
the Guarantor;

(v) Burdensome Agreements that are customary provisions restricting assignment
of any agreement entered into in the ordinary course of business;

(vi) Burdensome Agreements that are restrictions on cash or other deposits
imposed by customers under contracts entered into in the ordinary course of
business; and

(vii) Burdensome Agreements to the extent set forth in an agreement evidencing
Financial Debt of the Guarantor permitted under Section 4.04(a).

(viii) Burdensome Agreements entered into by a Securitization Subsidiary in
respect of assets financed by such Securitization Subsidiary, or Burdensome
Agreements restricting a Securitization Subsidiary in connection with the
incurrence of Financial Debt by such Securitization Subsidiary, in each case
pursuant to a Securitization Transaction.

(h) Restricted Payments. At any time after the occurrence and during the
continuance of any Restricted Payment Event of Default, the Guarantor shall not,
directly or indirectly declare or make, or agree to make, directly or
indirectly, any Restricted Payment other than Restricted Payments for the
repurchase, retirement or other acquisition or retirement for value of Equity
Interests of the Guarantor by any future, present or former employee, director,
officer, manager or consultant (or any Immediate Family Member thereof) of the
Guarantor or any of its Subsidiaries upon the death, disability, retirement or
termination of employment of any such Person or otherwise pursuant to any
employee or director equity plan, employee or director stock option plan or any
other employee or director benefit plan or any agreement (including any stock
subscription or shareholder agreement) with any future, present or former
employee, director, officer, manager or consultant of the Guarantor or any of
its Subsidiaries (including, for the avoidance of doubt, any principal and
interest payable on any notes issued by the Guarantor (or of any direct or
indirect parent of the Guarantor) in connection with any such repurchase,
retirement or other acquisition or retirement). Notwithstanding the foregoing,
the restrictions contained in this Section 4.04(h) shall not prohibit the
Guarantor from directly or indirectly declaring or making, or agreeing to make,
directly or indirectly, and Restricted Payment at any time when (A) (i) there
are no Loans outstanding under the Hanover Credit Agreement and (ii) the
Guarantor has delivered to the Administrative Agent (and the Administrative
Agent is in possession of) cash collateral in an amount equal to 103% of the
aggregate Stated Amount (as defined under the Hanover Credit Agreement) of all
Letters of Credit Outstanding thereunder as contemplated by Section 2.06(i) of
the Hanover Credit Agreement and (B) the Borrower has delivered to the Facility
Agent (and the Facility Agent is in possession of) cash collateral in an amount
equal to 100% of any Outstandings under the Facility Agreement.

(i) Amendment to Hanover Credit Agreement. The Guarantor shall not consent to
any amendment of the Hanover Credit Agreement that could reasonably be expected
to adversely affect the interest of any Guaranteed Finance Party, without the
consent of the Facility Agent and the Security Agent.

Section 4.05 Relation to Facility Agreement. For the avoidance of doubt, none of
the provisions of this Agreement (including, but not limited to, Section 4.04)
shall be deemed to alter or modify in any way the representations, covenants or
obligations of the Obligors under the Facility Agreement (including, but not
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Section 4.06 Certain Agreements. The Guarantor hereby additionally represents,
warrants and covenants as follows:

(a) (i) The Guarantor agrees to comply with each of the covenants contained in
the Facility Agreement that impose or purport to impose, through agreements with
the Borrower, restrictions or obligations on the Guarantor and (ii) the
Guarantor hereby agrees that Clause 33.11 of the Facility Agreement shall be
applicable to this Agreement, and references therein to “Obligor” shall be
deemed to be references to the Guarantor for the purposes of this
Section 4.06(a);

(b) The Guarantor acknowledges that any default in the due observance or
performance by the Guarantor of any covenant, condition or agreement contained
herein may constitute an Event of Default under Clause 26 (Events of Default) of
the Facility Agreement;

(c) The Guarantor has, independently and without reliance upon any Guaranteed
Finance Party and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. The Guarantor has investigated fully the benefits and advantages
which will be derived by it from execution of this Agreement, and the Board of
Directors (or persons performing similar functions in case of the Guarantor
which is not a corporation) of the Guarantor has decided that a direct or an
indirect benefit will accrue to the Guarantor by reason of the execution of this
Agreement;

(d) (i) This Agreement is not given with actual intent to hinder, delay or
defraud any Person to which the Guarantor is or will become, on or after the
date hereof, indebted; and (ii) the Guarantor has received at least a reasonably
equivalent value in exchange for the giving of this Agreement;

(e) The Guarantor agrees and acknowledges that the Facility Agent is acting as
an agent on behalf of itself and the other Guaranteed Finance Parties pursuant
to Clause 29 (Role of the Facility Agent, the Arrangers and the Reference Banks)
of the Facility Agreement, and the Security Agent is acting as an agent on
behalf of the Overdraft Provider pursuant to Clause 30 (Role of the Security
Agent) of the Facility Agreement; and

(f) If the Guarantor agrees after the date hereof to any covenants in the
Hanover Credit Agreement that are more stringent or restrictive as to the
Guarantor than such limitations or covenants in this Agreement, then this
Agreement will be deemed amended automatically, without any further action by
the Guarantor, the Facility Agent or any other Person, to benefit from such
covenants that are more stringent or restrictive, as the case may be, such that
a breach thereof shall constitute a breach of this Agreement, regardless of any
waiver or forbearance granted by the creditors under the Hanover Credit
Agreement; provided that such limitations and financial covenants shall be
deemed included in this Agreement for only so long as the same shall be in
effect in the Hanover Credit Agreement. The Guarantor agrees to inform the
Facility Agent promptly of any such amendments to the Hanover Credit Agreement
and to furnish a copy of the documentation containing such covenants. The
Guarantor and the Facility Agent further agree to enter into such amendments to
this Agreement as reasonably requested by the Facility Agent or the Guarantor so
as to conform this Agreement to the changes contemplated by the first sentence
of this Section 4.06(f) (including its proviso), it being understood that the
failure to effect any such amendment shall not limit the effectiveness of the
first sentence of this Section 4.06(f) (including its proviso).

Section 4.07 Information. The Guarantor assumes all responsibility for being and
keeping itself informed of the financial condition and assets of the other Group
Obligors and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs hereunder, and agrees that no Guaranteed
Finance Party will have any duty to advise the Guarantor of information known to
it or any of them regarding such circumstances or risks.

 

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Section 4.08 Subordination by Guarantor. In addition to the terms of
subordination provided for under Section 2.07, the Guarantor hereby subordinates
in right of payment all indebtedness of the other Group Obligors owing to it,
whether originally contracted with the Guarantor or acquired by the Guarantor by
assignment, transfer or otherwise, whether now owed or hereafter arising,
whether for principal, interest, fees, expenses or otherwise, together with all
renewals, extensions, increases or rearrangements thereof, to the prior
indefeasible payment in full in cash of the Guaranteed Obligations, whether now
owed or hereafter arising, whether for principal, interest (including interest
accruing during the pendency of any proceeding under any Debtor Relief Law,
regardless of whether allowed or allowable in such proceeding), fees, expenses
or otherwise, together with all renewals, extensions, increases or
rearrangements thereof.

ARTICLE V

SET-OFF

Section 5.01 Right of Set-Off. In addition to any rights now or hereafter
granted under applicable Law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of any Event of Default under the Facility
Agreement, each Guaranteed Finance Party (and each of its Affiliates) is
authorized at any time and from time to time, without presentment, demand,
protest or other notice of any kind (all of such rights being hereby expressly
waived), to set off and to appropriate and apply any and all deposits (general
or special, time or demand, provisional or final) and any other indebtedness at
any time held or owing by such Guaranteed Finance Party (including, without
limitation, branches, agencies or Affiliates of such Guaranteed Finance Party
wherever located) to or for the credit or account of the Guarantor against
obligations and liabilities of the Guarantor then due to the Guaranteed Finance
Parties hereunder, under the other Guaranteed Documents or otherwise, and any
such set-off shall be deemed to have been made immediately upon the occurrence
of an Event of Default even though such charge is made or entered on the books
of such Guaranteed Finance Party subsequent thereto. The Guarantor hereby agrees
that to the extent permitted by Law any Person purchasing a participation in the
Facility, whether or not acquired pursuant to the arrangements provided for in
Clause 27 (Changes to the Lenders) of the Facility Agreement, may exercise all
rights of set-off with respect to its participation interest as fully as if such
Person were a Guaranteed Finance Party.

ARTICLE VI

TAX GROSS-UP AND INDEMNITIES

Section 6.01 Tax Gross-Up.

(a) The Guarantor shall make all payments to be made by it without any Tax
Deduction, unless a Tax Deduction is required by law.

(b) If a Tax Deduction is required by law to be made by the Guarantor, the
amount of the payment due from the Guarantor shall be increased to an amount
which (after making any Tax Deduction) leaves an amount equal to the payment
which would have been due if no Tax Deduction had been required; provided,
however, in no event shall a Guaranteed Finance Party be entitled to receive a
payment from the Guarantor under this Section 6.01(b) in respect of amounts that
would not have been entitled to be increased by an Obligor under Clause 13.2
(Tax Gross-Up) of the Facility Agreement.

 

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(c) A payment shall not be increased under paragraph (b) above by reason of a
Tax Deduction on account of Tax imposed by the United Kingdom if on the date on
which the payment falls due:

(i) the payment could have been made to the relevant Lender without a Tax
Deduction if the Lender had been a Qualifying Lender, but on that date that
Lender is not or has ceased to be a Qualifying Lender other than as a result of
any change after the date it became a Lender under the Facility Agreement in (or
in the interpretation, administration, or application of) any law or Treaty, or
any published practice or published concession of any relevant taxing authority
provided, however, this clause (i) shall not apply to the extent (x) the
relevant Lender is a New Lender that would have been a Qualifying Lender on the
date of the Facility Agreement and (y) the corresponding Existing Lender would
have received, in respect of a payment, at the time of transfer or assignment to
that New Lender, additional amounts with respect to such Tax Deduction pursuant
to paragraph (b) above; or

(ii) the relevant Lender is a Treaty Lender and the Guarantor is able to
demonstrate that the payment could have been made to the Lender without the Tax
Deduction had that Lender complied with its obligations under Clause 13.2(g)
(Tax Gross-Up) of the Facility Agreement.

(d) A payment shall not be increased under paragraph (b) above by reason of a
Tax Deduction on account of Tax imposed by the United States if it relates to:

(i) any Tax that is in effect at such time that a payment is first required to
be made by the Guarantor under this Agreement and would apply (even if the
proper certificates and documentation were given to the Guarantor) to amounts
payable hereunder at such time a Lender becomes a party to the Facility
Agreement, or designates a new Facility Office, except to the extent such Lender
(or its assignor, if any) was entitled at the time of designation of a new
Facility Office (or assignment) to receive additional amounts with respect to
such withholding tax pursuant to Section 6.01(b); and

(ii) Taxes imposed as a result of Section 6.01(e)(iii).

(e) In order to establish the amount of Tax Deductions, if any, required by law
to be made by the Guarantor on account of Tax imposed by the United States:

(i) Each Lender that is not a “U.S. person” as defined in section 7701(a)(30) of
the Code, from time to time as requested in writing by the Guarantor, shall (but
only so long as such Lender remains lawfully able to do so) provide the
Guarantor with an applicable Internal Revenue Service (“IRS”) Form W-8, as
appropriate, or any successor form prescribed by the IRS, (x) certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding Tax on payments
of interest certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States or certifying that Lender is entitled to the “portfolio interest
exemption” (together with supporting documentation establishing the entitlement
to this exemption), or (y) if a Lender is not the beneficial owner of any
obligation of the Guarantor (for example, where the Lender is a partnership or
participating Lender granting a typical participation), duly completed copies of
IRS Form W-8IMY and the applicable IRS Form W-8 or W-9 from each beneficial
owner.

(ii) Each Lender that is a “U.S. person” under section 7701(a)(30) of the Code,
from time to time as requested in writing by the Guarantor (but only so long as
such Lender remains lawfully able to do so), shall provide the Guarantor with an
IRS Form W-9 or any successor form certifying that such Lender is exempt from
U.S. federal backup withholding Tax.

(iii) For any period with respect to which a Lender has failed to provide the
Guarantor with the appropriate form described in Section 6.01(e)(i) or
(ii) (other than if such failure is due to a change in law occurring subsequent
to the date on which a form originally was required to be provided, or if such
form otherwise is not required under the first sentence of Section 6.01(e)(i) or
(ii) above), such Lender shall not be entitled to increase under Section 6.01(b)
with respect to Tax Deductions imposed by the United States.

 

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(f) If the Guarantor is required to make a Tax Deduction, it shall make that Tax
Deduction and any payment required in connection with that Tax Deduction within
the time allowed and in the minimum amount required by law.

(g) Within 30 days of making either a Tax Deduction or any payment required in
connection with that Tax Deduction, the Guarantor shall deliver to the Facility
Agent for the Finance Party entitled to the payment a statement under section
975 of the ITA or other evidence reasonably satisfactory to that Finance Party
that the Tax Deduction has been made or (as applicable) any appropriate payment
paid to the relevant taxing authority.

(h) Each Party may make any FATCA Deduction it is required to make by FATCA, and
any payment required in connection with that FATCA Deduction, and no Party shall
be required to increase any payment in respect of which it makes such a FATCA
Deduction or otherwise compensate the recipient of the payment for that FATCA
Deduction. Each Party shall promptly, upon becoming aware that it must make a
FATCA Deduction (or that there is any change in the rate or the basis of such
FATCA Deduction) notify the Party to whom it is making the payment and, in
addition, shall notify the Borrower, the Facility Agent and the other Finance
Parties.

(i) Each party to this Agreement shall, at the time or times prescribed by law
and within ten Business Days of a reasonable request by another party supply to
that other party such forms, documentation and other information relating to its
status under FATCA as that other party reasonably requests for the purposes of
that other party’s compliance with FATCA and for that other party to determine
that the party has complied with such party’s obligations under FATCA, including
in respect of any related withholding obligations thereunder.

Section 6.02 Currency Indemnity.

(a) If any sum due from the Guarantor under the Guaranteed Documents (a “Sum”),
or any order, judgment or award given or made in relation to a Sum, has to be
converted from the currency (the “First Currency”) in which that Sum is payable
into another currency (the “Second Currency”) for the purpose of:

(i) making or filing a claim or proof against the Guarantor;

(ii) obtaining or enforcing an order, judgment or award in relation to any
litigation or arbitration proceedings,

the Guarantor shall as an independent obligation, within three Business Days of
demand, indemnify each Finance Party to whom that Sum is due against any cost,
loss or liability arising out of or as a result of the conversion including any
discrepancy between (A) the rate of exchange used to convert that Sum from the
First Currency into the Second Currency and (B) the rate or rates of exchange
available to that person at the time of its receipt of that Sum.

(b) The Guarantor waives any right it may have in any jurisdiction to pay any
amount under the Guaranteed Documents in a currency or currency unit other than
that in which it is expressed to be payable.

 

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Section 6.03 Other Indemnities. The Guarantor shall, within three Business Days
of demand, indemnify each Finance Party against any cost, loss or liability
incurred by that Finance Party as a result of:

(a) the occurrence of any Event of Default;

(b) a failure by any Group Obligor to pay any amount due under a Guaranteed
Document on its due date, including without limitation, any cost, loss or
liability arising as a result of Clause 32 (Sharing Among the Finance Parties)
of the Facility Agreement;

(c) issuing or making arrangements to issue a Letter of Credit requested by the
Borrower in a Utilisation Request but not issued by reason of the operation of
any one or more of the provisions of the Facility Agreement (other than by
reason of default or negligence by that Finance Party alone).

Section 6.04 Indemnity to the Facility Agent and the Security Agent. The
Guarantor shall promptly indemnify the Facility Agent and Security Agent against
any cost, loss or liability incurred by any of them:

(a) as a result of enforcement of this Agreement;

(b) (acting reasonably at any time other than when a Default is continuing) as a
result of the exercise of any of the rights, powers, discretions and remedies
vested in the Facility Agent and the Security Agent by the Guaranteed Documents
(as applicable) or by law; or

(c) any default by any Group Obligor in the performance of any of the
obligations expressed to be assumed by it in the Guaranteed Documents.

ARTICLE VII

MISCELLANEOUS

Section 7.01 Notices. Unless otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be provided in the manner
specified in Clause 36 (Notices) of the Facility Agreement, except that in the
case of the Guarantor, such notices and communications shall be mailed faxed or
delivered to the address or facsimile number as set forth on the signature pages
hereto.

Section 7.02 Know Your Customer.

If:

(a) the introduction of or any change in (or in the interpretation,
administration or application of) any law or regulation made after the date of
the Facility Agreement;

(b) any change in the status of the Guarantor or the composition of the
shareholders of a Guarantor after the date of this Agreement; or

(c) a proposed assignment or transfer by a Lender of any of its rights and
obligations under the Facility Agreement to a party that is not a Lender prior
to such assignment or transfer,

 

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obliges the Facility Agent or any Lender (or, in the case of paragraph
(c) above, any prospective new Lender) to comply with “know your customer” or
similar identification procedures in circumstances where the necessary
information is not already available to it, the Guarantor shall promptly upon
the request of the Facility Agent or any Lender supply, or procure the supply
of, such documentation and other evidence as is reasonably requested by the
Facility Agent (for itself or on behalf of any Lender) or any Lender (for itself
or, in the case of the event described in paragraph (c) above, on behalf of any
prospective new Lender) in order for the Facility Agent, such Lender or, in the
case of the event described in paragraph (c) above, any prospective new Lender
to carry out and be satisfied it has complied with all necessary “know your
customer” or other similar checks under all applicable laws and regulations
pursuant to the transactions contemplated in the Guaranteed Documents.

Section 7.03 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided the Guarantor may not assign or transfer
any of its interests and obligations without prior written consent of the
Facility Agent and Security Agent (and any such purported assignment or transfer
without such consent shall be void); provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth in Clause 27 (Changes to the
Lenders) of the Facility Agreement. Upon the assignment by any Finance Party of
all or any portion of its rights and obligations under the Facility Agreement
(including all or any portion of its Commitments) or any other Guaranteed
Document to any other Person or by any other Guaranteed Finance Party of all or
any portion of its rights and obligations under the applicable Guaranteed
Document to any other Person, such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such transferor or assignor
herein or otherwise.

Section 7.04 No Waivers; Non-Exclusive Remedies. No failure or delay on the part
of any Guaranteed Finance Party to exercise, no course of dealing with respect
to, and no delay in exercising any right, power or privilege under this
Agreement or any other Guaranteed Document, or other document or agreement
contemplated hereby or thereby shall operate as a waiver thereof nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein and in the other Guaranteed
Documents are cumulative and are not exclusive of any other rights or remedies
provided by Law.

Section 7.05 Amendments and Waivers. Any provision of this Agreement may be
amended or waived if, but only if such amendment or waiver is in writing and is
signed by the Guarantor, the Facility Agent and the Security Agent (acting in
accordance with the requirements of the Facility Agreement).

Section 7.06 Governing Law; Submission to Jurisdiction. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Any legal action or proceeding with respect to this Agreement may be brought in
the courts of the State of New York in New York County, or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each party hereto hereby irrevocably accepts for itself and in
respect of its property, generally and unconditional, the nonexclusive
jurisdiction of such courts. Each party hereto irrevocably waives, to the
fullest extent permitted by Law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such court and
any claim that any such proceeding brought in any such court has been brought in
an inconvenient forum. Each party hereto hereby irrevocably consents to process
being served in any such suit, action or proceeding by the mailing of a copy
thereof by registered or certified mail, postage

 

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prepaid, return receipt requested, to such party’s address referred to in
Section 7.01. Each party hereto agrees that such service (i) shall be deemed in
every respect effective service of process upon it in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by Law, be taken and
held to be valid personal service upon and personal delivery to it. Nothing in
this Section 7.06 shall affect the right of any party to serve process in any
manner permitted by Law or limit the right of any party to bring proceedings
against any other party in the courts of any jurisdiction in connection with the
enforcement of and judgment.

Section 7.07 Limitation of Law; Severability.

(a) All rights, remedies and powers provided in this may be exercised only to
the extent that the exercise thereof does not violate any applicable provision
of Law, and all of the provisions of this Agreement are intended to be subject
to all applicable mandatory provisions of Law which may be controlling and be
limited to the extent necessary so that they will not render this Agreement
invalid, unenforceable in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable Law.

(b) If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by Law: (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Facility Agent, the Security Agent and the
other Guaranteed Finance Parties in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provisions in any other jurisdiction.

Section 7.08 Counterparts; Integration; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof and
thereof. This Agreement shall become effective with respect to the Guarantor
when the Facility Agent shall have received counterparts hereof signed by itself
and the Guarantor.

Section 7.09 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 7.10 Termination. Upon the Discharge of Finance Obligations, this
Agreement shall terminate and have no further force or effect.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the Guarantor has executed this Agreement as of the day and
year first above written.

 

GUARANTOR:     HANOVER INSURANCE GROUP, INC.     By:  

/s/ David B. Greenfield

      Name:   David B. Greenfield       Title:   Executive Vice President, Chief
Financial Officer and Principal Accounting Officer     The Hanover Insurance
Group, Inc.,     Attention: David Greenfield     Telecopy No. 508-926-4587    
with a copy to     The Hanover Insurance Group, Inc.     Attention J. Kendall
Huber     Telecopy No. 508-926-1926

 

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Acknowledged and Agreed with Respect to Section 3.01: CHAUCER HOLDINGS LIMITED
By:  

/s/ Johan Slabbert

  Name:   Johan Slabbert   Title:   Chief Financial Officer Agreed to and
Accepted: LLOYDS BANK PLC, as Facility Agent By:  

/s/Andrew Moore

  Name:   Andrew Moore   Title:   Associate Director Agreed to and Accepted:
LLOYDS BANK PLC, as Security Agent By:  

/s/Andrew Moore

  Name:   Andrew Moore   Title:   Associate Director

 

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Schedule 1.01

Liens

Liens on computer hardware (mainframe) equipment incurred in connection with the
capital leases set forth on Schedule 4.04(a).

 

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Schedule 4.01

Subsidiaries

Each of the subsidiaries of The Hanover Insurance Group, Inc. is 100%-owned by
its parent company unless otherwise noted.

 

1. The Hanover Insurance Group, Inc. (Delaware)

 

  a. Opus Investment Management, Inc. (Massachusetts)

 

  i. The Hanover Insurance Company (New Hampshire)

 

  1. Citizens Insurance Company of America (Michigan)

 

  2. Allmerica Financial Benefit Insurance Company (Michigan)

 

  3. Allmerica Plus Insurance Agency, Inc. (Massachusetts)

 

  4. The Hanover American Insurance Company (New Hampshire)

 

  5. Hanover Texas Insurance Management Company, Inc. (Texas)

 

  6. Citizens Insurance Company of Ohio (Ohio)

 

  7. Citizens Insurance Company of the Midwest (Indiana)

 

  8. The Hanover New Jersey Insurance Company (New Hampshire)

 

  9. Massachusetts Bay Insurance Company (New Hampshire)

 

  10. Allmerica Financial Alliance Insurance Company (New Hampshire)

 

  11. Professionals Direct Insurance Company (Michigan)

 

  12. Professionals Direct, Inc. (Michigan)

 

  (i) Professionals Direct Insurance Services, Inc. (Michigan)

 

  13. Verlan Fire Insurance Company (New Hampshire)

 

  14. The Hanover National Insurance Company (New Hampshire)

 

  15. AIX Holdings, Inc. (Delaware)

 

  (i) Nova American Group, Inc. (New York)

 

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  (1) Nova Casualty Company (New York)

 

  a. AIX Specialty Insurance Company (Delaware)

 

  (ii) AIX, Inc. (Delaware)

 

  (1) AIX Insurance Services of California, Inc. (California)

 

  16. 440 Lincoln Street Holding Company LLC (Massachusetts)

 

  17. Campmed Casualty & Indemnity Company, Inc. of Maryland (New Hampshire)

 

  18. CitySquare II Investment Company LLC (Massachusetts) (i) One Mercantile
Place LLC (Massachusetts)

 

  ii. Citizens Insurance Company of Illinois (Illinois)

 

  iii. CitySquare II Development Co. LLC. (Massachusetts)

 

  b. VeraVest Investments, Inc. (Massachusetts)

 

  c. Verlan Holdings, Inc. (Maryland)

 

  i. Hanover Specialty Insurance Brokers, Inc. (Virginia)

 

  d. Campania Holding Company, Inc. (Virginia)

 

  i. Campania Management Company, Inc. (Virginia)

 

  e. Educators Insurance Agency, Inc. (Massachusetts)

 

  f. The Hanover Insurance International Holdings Limited (f/k/a 440 Tessera
Limited) (United Kingdom)

 

  i. Chaucer Holdings Limited (United Kingdom)

 

  1. ALIT Insurance Holdings Limited (United Kingdom)

 

  (i) Aberdeen Underwriting Advisers Limited (United Kingdom)

 

  (ii) ALIT Underwriting Limited (United Kingdom)

 

  (1) ALIT (No. 1) Limited (United Kingdom)

 

  (2) ALIT (No. 2) Limited (United Kingdom)

 

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  (3) ALIT (No. 3) Limited (United Kingdom)

 

  (4) ALIT (No. 4) Limited (United Kingdom)

 

  (5) ALIT (No. 5) Limited (United Kingdom)

 

  2. Chaucer Corporate Capital (No 3) Limited (United Kingdom)

 

  3. Chaucer Corporate Capital (No. 2) Limited (United Kingdom)

 

  4. Chaucer Corporate Capital Limited (United Kingdom)

 

  5. Chaucer Insurance Group PLC (United Kingdom)

 

  6. Hayward Brick Stuchbery Holdings Limited (United Kingdom)

 

  (i) CH 1997 Limited (United Kingdom)

 

  (1) Chaucer Consortium Underwriting Limited (United Kingdom)

 

  (2) Chaucer Dedicated Limited (United Kingdom)

 

  (3) Chaucer Underwriting A/S (Denmark)

 

  (4) INSURANCE4CARGOSERVICES LIMITED (United Kingdom)

 

  (5) Chaucer Syndicates Limited (United Kingdom)

 

  a. Chaucer GmbH (Germany)

 

  b. Chaucer Latin America SA (Argentina)

 

  c. Chaucer Singapore Pte. Limited (Singapore)

 

  d. Chaucer Syndicate Services Limited (United Kingdom)

 

  e. Chaucer Oslo AS (Norway)

 

  f. Chaucer Labuan Limited (Malaysia)

 

  g. Hanover Insurance Company Limited (United Kingdom) (dormant since
formation)

 

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  h. Hanover Lloyd’s Insurance Company (Texas)1

 

  i. Allmerica Securities Trust (Massachusetts)2

 

1  Hanover Lloyd’s Insurance Company is an affiliated Lloyd’s plan company
100%-owned by underwriters for the benefit of The Hanover Insurance Company. The
controlling underwriters are all employees of The Hanover Insurance Company.

2  Affiliated investment trust, the trustees of which are officers of The
Hanover Insurance Group, Inc.

 

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Schedule 4.04(a)

Financial Debt

 

   

Type

  

Company

   Maturity Date    Outstanding   1.  

6.375% Senior Notes

   The Hanover Insurance Group, Inc.    6/15/2021    $ 300,000,000    2.  

7.500% Senior Debt

   The Hanover Insurance Group, Inc.    3/1/2020    $ 79,995,000    3.  

7.625% Senior Debt

   The Hanover Insurance Group, Inc.    10/15/2025    $ 74,647,000    4.  

Subordinated Debt

   The Hanover Insurance Group, Inc.    2/3/2027    $ 59,713,000    5.  

Subordinated Debt

   The Hanover Insurance Group, Inc..    12/15/2053    $ 175,000,000    7.  

Secured Debt – FHLB Borrowings

   The Hanover Insurance Company    9/25/2029    $ 125,000,000    8.  

Unsecured Notes

   The Hanover Insurance International Holdings Limited    12/31/2016     

 

GB£2,391,449 (£20,000,000

aggregate commitment amount)

  

  

9.  

Capitalized Lease*

   The Hanover Insurance Company    August 2018    $ 858,378    10.  

Capitalized Lease*

   The Hanover Insurance Company    September 2016    $ 678,232    11.  

Capitalized Lease*

   The Hanover Insurance Company    February 2019    $ 638,135   

 

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12.

 

Capitalized Lease*

   The Hanover Insurance Company    November 2019    $ 203,640   

11.

 

Standby Letter of Credit

   Chaucer Holdings Limited    12/31/2020     

 

 

 

 
 

[Issued: £●]

 

Drawn: [●]

 

£170,000,000 (aggregate
commitment amount)

  

 

  

 

  
  

 

* Each capitalized lease obligation noted above relates to computer hardware
(mainframe) equipment. The lessor is ComSource, Inc.

 

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Schedule 4.04(g)

Existing Burdensome Agreements

 

1. The Standby Letter of Credit Facility, dated as of [            ], 2015,
among Chaucer Holdings Limited, ING Bank N.V., London Branch and Lloyds Bank
plc, as mandated lead arrangers, as it may be amended from time to time.

 

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EXHIBIT A

COMPLIANCE CERTIFICATE

THIS CERTIFICATE is delivered pursuant to the Guaranty Agreement, dated as of
[            ], 2015 (the “Agreement”), among The Hanover Insurance Group, Inc.,
a Delaware corporation (the “Guarantor”) and Lloyds Bank plc, as Facility Agent
and Security Agent. Capitalized terms used herein without definition shall have
the meanings given to such terms in the Agreement.

The undersigned hereby certifies that:

1. The undersigned is a Responsible Officer of the Guarantor.

1. Enclosed with this Certificate are copies of the financial statements of the
Guarantor and its Subsidiaries as of                     , and for the
[            -month period] [year] then ended, required to be delivered under
Section [4.02(a)(i)][4.02(a)(ii)] of the Agreement. Such financial statements
have been prepared in accordance with GAAP [(subject to normal year-end audit
adjustments and the absence of footnotes)]3 and present fairly, in all material
respects, the Consolidated financial position of the Guarantor and its
Subsidiaries as of the date indicated and the Consolidated results of operations
of the Guarantor and its Subsidiaries for the period covered thereby.

2. The undersigned has no knowledge of the existence of (i) any Default or Event
of Default (as such terms are defined in the Hanover Credit Agreement)
continuing as of the date of this Certificate or (ii) any Default or Event of
Default continuing as of the date of this Certificate. [, except as set forth
below.

Describe here or in a separate attachment any exceptions to paragraph 3 above by
listing, in reasonable detail, the nature of the Default or Event of Default and
the action that the Guarantor has taken or proposes to take with respect
thereto.]

3. Attached to this Certificate as Attachment A is a covenant compliance
worksheet reflecting the computation of the financial covenants set forth in
Section 4.03 of the Agreement as of the last day of and for the period covered
by the financial statements enclosed herewith.

IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate
as of the      day of             ,         .

 

THE HANOVER INSURANCE GROUP, INC. By:  

 

Name:  

 

Title:  

 

 

 

3  Insert in the case of quarterly financial statements.

 

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ATTACHMENT A

COVENANT COMPLIANCE WORKSHEET

A. Minimum Net Worth4 (Section 4.03(a) of the Agreement)

 

(1)

  Base for calculating Minimum Net Worth:       $ 1,696,800,000   

(2)

  (a)   Consolidated net income for each fiscal quarter (if positive) ending
after November 12, 2013:    $                      (b)  

Net income adjustment:

Multiply Line 2(a) by 50%

      $                

(3)

  (a)   Net Equity Proceeds of any Equity Issuances made after November 12,
2013:    $                      (b)  

Net Equity Proceeds adjustment:

Multiply Line 3(a) by 50%

      $                

(4)

 

Required Net Worth:

Add Lines 1, 2(b) and 3(b)

      $                

(5)

  Actual Net Worth (total shareholders’ equity of the Guarantor determined in
accordance with GAAP; provided that the net unrealized appreciation and
depreciation of securities that are classified as available for sale and are
subject to ASC 320 shall be excluded) as of measurement date:       $
               

 

4  The calculation of Net Worth shall exclude the financial results of any
Securitization Subsidiaries of the Guarantor.

 

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B. RBC Ratio (Section 4.03(b) of the Agreement)

CIC

 

(1)

  “Total Adjusted Capital” (as defined by the Insurance Regulatory Authority of
Michigan) of CIC:    $                

(2)

  “Authorized Control Level Risk-Based Capital” (as defined by the Insurance
Regulatory Authority of Michigan) of CIC:    $     

(3)

 

Adjustment to “Authorized Control Level Risk-Based Capital”:

Multiply Line 2 by 2.0

   $     

(4)

 

RBC Ratio of CIC:

Divide Line 1 by Line 3

  

(5)

  Minimum RBC Ratio permitted under the Agreement as of the date of
determination:      175 % 

HIC

 

(1)

  “Total Adjusted Capital” (as defined by the Insurance Regulatory Authority of
New Hampshire) of HIC:    $                

(2)

  “Authorized Control Level Risk-Based Capital” (as defined by the Insurance
Regulatory Authority of New Hampshire) of HIC:    $                

(3)

 

Adjustment to “Authorized Control Level Risk-Based Capital”:

Multiply Line 2 by 2.0

   $                

(4)

 

RBC Ratio of HIC:

Divide Line 1 by Line 3

  

(5)

  Minimum RBC Ratio permitted under the Agreement as of the date of
determination:      175 % 

 

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C. Leverage Ratio (Section 4.03(c) of the Agreement)

 

(1)

 

Modified Total Debt as of the date of determination:

    

(a)

   Aggregate outstanding principal amount of Debt of the Guarantor and its
Subsidiaries (other than any Securitization Subsidiaries) of the following
types, in each case determined on a Consolidated basis without duplication in
accordance with GAAP (but without giving effect to any election under the
Statement of Financial Accounting Standards No. 159 (ASC 825) or any similar
accounting principle permitting a Person to value its financial liabilities or
indebtedness at the fair value thereof):5    $
            
  
     (i) indebtedness of each such Person for borrowed money    $             
        (ii) obligations of each such Person evidenced by bonds, debentures,
notes or other similar instruments    $                      (iii) obligations
of each such Person to pay the deferred purchase price of Property or services
(other than trade payables and accrued expenses incurred in the ordinary course
of business and not overdue by more than 90 days)    $                      (iv)
obligations of each such Person as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases    $             
        (v) Debt of others secured by a Lien on the Property of any such Person,
whether or not the Debt so secured has been assumed by such Person    $
                     (vi) obligations of any such Person under Guaranties in
respect of Debt of others (including any obligations constituting Limited
Originator Recourse in respect of Debt of a Securitization Subsidiary)        
(vii) without duplication, obligations of any such Person in respect of Hybrid
Securities (disregarding clause (ii) of the definition of Hybrid Securities in
the Agreement), Disqualified Equity Interests (disregarding clause (ii) of the
   $                

 

5  Not including Hybrid Securities, Disqualified Equity Interests, Preferred
Securities and Specified Convertible Debt Securities included in clauses 1(b),
1(c), 1(d) and 1(e) below.

 

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     definition of Disqualified Equity Interests in the Credit Agreement) and
Preferred Securities (disregarding clause (ii) of the definition of Preferred
Securities in the Credit Agreement), in each case requiring repayments,
prepayments, mandatory redemptions or repurchases prior to 91 days after the
Maturity Date, with the amount of Debt represented by any such Disqualified
Equity Interest or Preferred Security being equal to the greater of its
voluntary or involuntary liquidation amount and its maximum fixed repurchase
price or redemption amount      (b)    Without duplication of clauses 1(c), 1(d)
and 1(e), the portion of all outstanding Hybrid Securities that is deemed to
constitute indebtedness, as determined in accordance with S&P’s methodology:   
$                   (c)    Without duplication of clauses 1(b), 1(d) and 1(e),
the portion of all outstanding Disqualified Equity Interests that is deemed to
constitute indebtedness, as determined in accordance with S&P’s methodology:   
$                   (d)    Without duplication of clauses 1(b), 1(c) and 1(e),
the portion of all outstanding Preferred Securities that is deemed to constitute
indebtedness, as determined in accordance with S&P’s methodology:    $
                  (e)    Without duplication of clauses 1(b), 1(c) and 1(d), the
portion of all outstanding Specified Convertible Debt Securities that is deemed
to constitute indebtedness, as determined in accordance with S&P’s methodology:
     (f)    The amount (if any) by which Line 2(b) below plus the portion of all
Preferred Securities issued by the Guarantor or any Subsidiary (other than any
Securitization Subsidiary) that is deemed to constitute equity, as determined in
accordance with S&P’s methodology plus the portion of all Disqualified Equity
Interests issued by the Guarantor or any Subsidiary (other than any
Securitization Subsidiary) that is deemed to constitute equity, as determined in
accordance with S&P’s methodology, plus the portion of all Specified Convertible
Debt Securities issued by the Guarantor or any Subsidiary (other than any
Securitization Subsidiary) that is deemed to constitute equity, as determined in
accordance with S&P’s methodology, exceeds 15% of Line 3 below:    $
                  (g)   

Modified Total Debt:

Add Lines 1(a)(i) through 1(a)(vii), Line 1(b), Line 1(c), Line 1(d), Line 1(e)
and Line 1(f)

   $                

 

Parent Guaranty

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(2)

  Net Worth:      (a)    Total shareholders’ equity of the Guarantor determined
in accordance with GAAP6; provided that the net unrealized appreciation and
depreciation of securities that are classified as available for sale and are
subject to ASC 320 shall be excluded:    $                   (b)    Without
duplication of clauses 2(c) and 2(d), the portion of all outstanding Hybrid
Securities issued by the Guarantor or any Subsidiary (other than a
Securitization Subsidiary) that is deemed to constitute equity, as determined in
accordance with S&P’s methodology:    $                   (c)    Without
duplication of clauses 2(b) and 2(d), the portion of all outstanding Preferred
Securities issued by the Guarantor or any Subsidiary (other than a
Securitization Subsidiary) that is deemed to constitute indebtedness, as
determined in accordance with S&P’s methodology:    $                   (d)   
Without duplication of clauses 2(b) and 2(c), the portion of all outstanding
Disqualified Equity Interests issued by the Guarantor or any Subsidiary (other
than a Securitization Subsidiary) that is deemed to constitute indebtedness, as
determined in accordance with S&P’s methodology:    $                   (e)   

Net Worth:

Add Lines 2(a) and 2(b) and subtract Lines 2(c), and 2(d)

   $                 (3)  

Total Capitalization:

Add Lines 1(a)(i) through 1(a)(vii), Line 1(b), Line 1(c), Line 1(d) and Line
2(e)

   $                

(4)

 

Leverage Ratio:

Divide Line 1(f) by Line 3

  

(5)

  Maximum Leverage Ratio permitted under the Agreement as of the date of
determination:      35 % 

 

6  Excluding the financial results of any Securitization Subsidiary of the
Guarantor.

 

Parent Guaranty