EX-10.38



 Exhibit 10.38 

 
  
 THE HANOVER INSURANCE GROUP, INC. 
 2006 LONG-TERM INCENTIVE PLAN

 NON-QUALIFIED STOCK OPTION AGREEMENT 

 
 This Non-Qualified Stock Option
Agreement (the “Agreement”) is effective as of <GRANT DATE> (the “Grant Date”), by and between The Hanover Insurance Group, Inc., a Delaware corporation (the “Company”), and <PARTICIPANT
NAME> (the “Participant” or “you”). Capitalized terms used without definition herein shall have the meanings set forth in The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan (the
“Plan”). 
 PREAMBLE 
 WHEREAS, the Company considers it desirable and in the best interests of the Company that the Participant be given an opportunity to acquire a proprietary interest in the Company in the form of options to
purchase shares of Stock. 
 NOW, THEREFORE, for and in consideration of the foregoing and the mutual covenants and promises
hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  


	1.	Grant of Option. The Administrator hereby grants to the Participant a non-statutory stock option (the “Stock Option”) to purchase <NUMBER OF
OPTIONS> shares of Stock (the “Shares”), for a price of <GRANT PRICE> per share (the “Option Price”), which is not less than the per-Share fair market value on the Grant Date. The Stock Option is intended
to be, and is hereby designated, a non-statutory option that does not qualify as an incentive stock option as defined in Section 422 of the Internal Revenue Code. 


 

	2.	Expiration of Option. The Stock Option shall automatically terminate and cease being exercisable on the tenth anniversary of the Grant Date (the
“Expiration Date”). 

  

	3.	Vesting. Subject to the terms of this Agreement and the Plan, and provided Participant remains continuously an Employee of the Company or one of its subsidiaries
or affiliates (the Company and its subsidiaries and affiliates hereinafter referred to as “THG”) through the applicable vesting date, the Stock Option shall vest and become exercisable in the following cumulative installments:


  

	 	•	 	 As to one third (33.33%) of the total number of Shares, on the first anniversary of the Grant Date; 



	 	•	 	 As to an additional one third (33.33%) of the total number of Shares, on the second anniversary of the Grant Date; and




	 	•	 	 As to the remaining Shares, on the third anniversary of the Grant Date. 



On the first two vesting dates set forth above, to the extent the Stock Option would otherwise become exercisable with respect to a
fractional Share, such Share shall be rounded down so that the Stock Option is only exercisable with respect to a whole number of Shares. 
  

	4.	Termination of Employment and Other Events. 

 (a) Termination for Cause. If Participant’s Employment with THG is terminated for Cause, effective immediately prior to such termination, the Stock Option, whether or not vested, shall be
automatically cancelled and forfeited and be returned to the Company for no consideration. 
 (b) Voluntary Termination.
If Participant voluntarily terminates his/her Employment with THG, effective immediately prior to such termination, any portion of the Stock Option not then vested shall be automatically cancelled and forfeited and be returned to the Company for no
consideration, and such portion of the Stock Option that is then vested shall remain exercisable until the earlier of (i) 90 days following the date of termination, or (ii) the Expiration Date. 







 (c) Disability. Subject to the remainder of this Section 4(c), if Participant
is placed in a long term disability status (as such term is defined in the Company’s Long-Term Disability Program, as in effect at such time) (“LTD Status”), for so long as Participant remains in LTD Status, the Stock Option
shall continue to vest in accordance with this Agreement, and to the extent vested shall remain exercisable, until the earlier of (i) the first anniversary of the date the Participant was placed in LTD Status, or (ii) the Expiration Date
(the “LTD Extension Period”). At the expiration of the LTD Extension Period, the Stock Option, whether or not vested, shall be automatically cancelled and forfeited and be returned to the Company for no consideration. 

If, prior to the first anniversary of the date Participant was placed in LTD Status, Participant is removed from LTD Status and
immediately thereafter returns to active Employment with THG, Participant shall be treated (for the purposes of this Agreement) as if he/she were never placed in LTD Status and remained an active Employee of THG, shall be given credit toward vesting
pursuant to Section 3 for the period Participant was in LTD Status, and this Agreement shall remain in full force and effect in accordance with its terms. 
 (d) Death. If Participant dies, effective immediately prior to death, any portion of the Stock Option not then vested shall be automatically cancelled and forfeited and be returned to the Company
for no consideration, and such portion of the Stock Option that is then vested shall remain exercisable until the earlier of (i) one (1) year following the date of death, or (ii) the Expiration Date. 

(e) Covered Transaction/Change in Control. In the event of a Covered Transaction (other than a Change in Control, whether or not
it is a Covered Transaction), the Stock Options shall be fully governed by the applicable provisions of Section 7(a) of the Plan. Notwithstanding the terms of the Plan, in the event of a Change in Control (whether or not it is a Covered
Transaction), the following rules shall apply: 
 (i) Except as provided below in Section 4(e)(ii), in the event of a
Change in Control the Participant shall automatically vest in 100% of the Stock Options. 
 (ii) Notwithstanding
Section 4(e)(i), no acceleration of vesting shall occur with respect to the Stock Options if the Administrator reasonably determines in good faith prior to the occurrence of a Change in Control that this Award shall be honored or assumed, or
new rights substituted therefor (such honored, assumed or substituted award hereinafter called an “Alternative Award”), by Participant’s employer (or the parent or a subsidiary of such employer) immediately following the Change
in Control, provided that any such Alternative Award must: 
 (A) be based on stock which is traded, or will be traded upon
consummation of the Change in Control, on an established securities market; 
 (B) provide such Participant (or each Participant
in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under this Award, including, but not limited to, an identical or better vesting schedule; 

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

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

  
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 For this purpose, “Good Reason” shall mean the occurrence of one or more of the
events listed below following a Change in Control: 
 (X) to the extent you are a “Participant” (as
that term is defined in the CIC Plan) in the Company’s Amended and Restated Employment Continuity Plan or its successor plan (the “CIC Plan”), the occurrence of any of the events enumerated under the definition of “Good
Reason” applicable to Participant’s “Tier” Level as set forth in CIC Plan; or 
 (Y) to the
extent you are not a “Participant” in the CIC Plan, the occurrence of any of the following (A) a reduction in your rate of annual base salary as in effect immediately prior to such Change in Control; (B) a reduction in your
annual short-term incentive compensation plan target award (but excluding the conversion of any cash incentive arrangement into an equity incentive arrangement of commensurate value or vice versa) from that which was in effect immediately prior to
such Change in Control; or (C) any requirement that you relocate to an office more than 35 miles from the facility where you were located immediately prior to the Change in Control. 

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

(iv) Notwithstanding Sections 4(e)(i) and 4(e)(ii) above, the Administrator may elect, in its sole discretion, exercised prior to the
effective date of the Change in Control, to accelerate all, or a greater percentage of the Stock Options, than is otherwise required pursuant to the terms of this Section 4. 

(f) Retirement. If Participant Retires, effective immediately prior to the effective date of Participant’s Retirement, any
portion of the Stock Option not then vested shall be automatically cancelled and forfeited and be returned to the Company for no consideration, and such portion of the Stock Option that is then vested shall remain exercisable until the earlier of
(i) three (3) years following the effective date of the Participant’s Retirement, or (ii) the Expiration Date. 
 For the purpose of this Agreement, a Participant shall be deemed to “Retire” if (i) his/her Employment with THG terminates (other than for Cause), (ii) he or she is 65 years of
age or older, as of such termination date, and (iii) immediately prior to such termination, Participant has been continuously Employed by THG for 10 or more years. 
 (g) Involuntary Termination. If Participant’s Employment with THG is terminated (other than as a result of the events set forth above in this Section 4), effective immediately prior to
such termination, any portion of the Stock Option not then vested shall be automatically cancelled and forfeited and be returned to the Company for no consideration, and such portion of the Stock Option that is then vested shall remain exercisable
until the earlier of (i) 90 days following the date of termination, or (ii) the Expiration Date. 
  

	5.	Notice of Exercise and Payment for Shares. This Stock Option may be exercised by the Participant or, if appropriate, the Participant’s legal representative,
by giving written notice to the Administrator stating the number of Shares to be purchased. Such notice must be accompanied by payment in full of the Option Price for the Shares to be purchased. 


  
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 Notices hereunder shall be in writing and, if to the Company, shall be delivered personally
to the Human Resources Department or such other party as designated by the Company or mailed to its principal office and, if to the Participant, shall be delivered personally or mailed to the Participant at his or her address on the records of the
Company. 
 Payment may be made in (i) shares of Stock (including through a “net exercise” (as set forth in
subsection (ii)), (ii) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock that would otherwise be issued upon exercise of the Stock Option by a number of whole shares having a fair
market value equal to the aggregate Option Price of the Stock Option, (iii) cash or a combination of shares of Stock and cash for the number of Shares specified, or (iv) through a broker-assisted exercise program acceptable to the
Administrator. 
 To the extent that the Option Price of this Stock Option is less than the fair market value of a share of Stock
by $0.50 or more on the date described below (determined by using the closing price of a share of Stock on such date, or if the Stock is not traded on such date, the most recent date on which such common stock was traded), this Stock Option, to the
extent then outstanding and vested, will be automatically exercised, without any action required on behalf of Participant, by a “net exercise” as described in clause (ii) of the paragraph above, on (x) the Expiration Date, if
Participant has remained continuously Employed by THG from the Grant Date through the Expiration Date, or (y) on the last day of the post-termination exercise period of this Stock Option as set forth in Section 4 above, in the case the
Employment of the Participant (i) was involuntarily terminated by the Company for reasons other than for Cause; (ii) was terminated by reason of death, Disability or Retirement, or (iii) voluntarily terminated by the Participant.

  

	6.	Delivery of Shares. Upon receipt of notice and payment, the Company shall make delivery of such Shares within a reasonable period, but in no event later than 30
days. 

  

	7.	Non-Hire/Solicitation/Confidentiality. As a condition of Participant’s eligibility to receive this Stock Option and regardless of whether such Stock
Options vest or are exercised, Participant agrees that he or she will (i) not, directly or indirectly, during the term of Participant’s employment with THG, and for a period of one year thereafter, hire, solicit, entice away or in any way
interfere with THG’s relationship with, any of its officers or employees, or in any way attempt to do so or participate with, assist or encourage a third party to do so, and (ii) neither disclose any of THG’s confidential and
proprietary information to any third party, nor use such information for any purpose other than for the benefit of THG and in accordance with THG policy. The terms of this Section 7 shall survive the expiration or earlier termination of this
Agreement. 

  

	8.	Specific Performance/Damages. 

 (a) The Participant hereby acknowledges and agrees that in the event of any breach of Section 7 of this Agreement, the Company would be irreparably harmed and could not be made whole by monetary
damages. The Participant accordingly agrees to waive the defense in any action for injunctive relief or specific performance that a remedy at law would be adequate and that the Company, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to an injunction or to compel specific performance of Section 7. 
 (b) In addition to
any other remedy to which the Company may be entitled at law or in equity (including the remedy provided in the preceding paragraph), the Participant hereby acknowledges and agrees that in the event of any breach of Section 7 of this Agreement,
Participant shall be required to refund to the Company the value received by Participant upon exercise of the Stock Options measured by the amount that the “Stock Value” exceeds the Option Price; provided, however, that the Company makes
any such claim, in writing, against Participant alleging a violation of Section 7 not later than two years following your termination of employment with the Company. The Stock Value shall be the sale price of the Shares issued upon exercise of
the Stock Option, if and to the extent such Shares were sold on the date of such exercise; otherwise, the Stock Value shall be the closing price of Shares as reported on the New York Stock Exchange (or such other exchange or facility as is
determined by the Administrator if the Shares are not then traded on the New York Stock Exchange) on the date of the exercise of the Stock Option. 

  
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	9.	Successors. The provisions of this Agreement will benefit and will be binding upon the permitted assigns, successors in interest, personal representatives,
estates, heirs and legatees of each of the parties hereto. However, the Stock Option is non-assignable, except as may be permitted by the Plan. 

  

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


  

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

  

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


 

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

  

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

  

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

  

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


 

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


 

	18.	Taxes. If at the time Participant elects to exercise this Stock Option, the Company determines that under applicable law and regulations it could be liable for
the withholding of any federal, state or local tax, Participant shall remit to the Company any amounts determined by the Company to be required to be withheld or the Company may, at its option, withhold a sufficient number of Shares to satisfy the
minimum federal, state and local tax withholding due, if any, and remit the balance of the Shares to the Participant. If this Stock Option is automatically exercised as provided in the last paragraph of Section 5 above or if the Participant
pays the Option Price through a “net exercise” of this Stock Option as provided by Section 5 above, the minimum federal, state and local tax withholding due in connection with the exercise of this Stock Option shall be satisfied by
the Company withholding a sufficient number of Shares to satisfy with minimum federal, state and local tax withholding due. 


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

 

	19.	Waiver of Jury Trial. By accepting this Award under the Plan, Participant waives any right to a trial by jury in any action, proceeding or counterclaim
concerning any rights under (i) the Plan, (ii) the Prior Plan, (iii) any Award, (iv) any award under the Prior Plan, or (v) any amendment, waiver, consent, instrument, document or other agreement delivered or which in the
future may be delivered in connection with any of the foregoing, and agrees that any such action, proceedings or counterclaim shall be tried before a court and not before a jury. 


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

 

			
	THE HANOVER INSURANCE GROUP, INC.
		
	By:	 	  

	Name:	 	Maribeth Bearfield
	Title:	 	Executive Vice President & Chief Human Resources Officer
	
	  

	<PARTICIPANT NAME>



  
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