Document:

exv10w13

Exhibit 10.13

STOCK PURCHASE AGREEMENT

      This Stock Purchase Agreement (the “Agreement”) is made as of this __ day of
____________, 2010, by and between LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts stock
insurance company (the “Seller”), LIBERTY INSURANCE HOLDINGS, INC., a Delaware corporation
(the “Contributor”) and LIBERTY MUTUAL AGENCY CORPORATION, a Delaware corporation (the
“Buyer”).

     WHEREAS the Seller owns 920 of the 1,000 issued and outstanding shares of the common stock
(the “Common Stock”) of Ohio Casualty Corporation, an Ohio corporation (the
“Company”);

     WHEREAS Peerless Insurance Company, a New Hampshire insurance company and direct, wholly-owned
subsidiary of the Buyer, owns the remaining 80 shares of Common Stock;

     WHEREAS the Seller wishes, in connection with the initial public offering of the Buyer’s Class
A common stock, par value $0.01 per share (“Class A Shares”) pursuant to Registration
Statement No. 333-166671 (the “IPO”), to transfer to Buyer, and the Buyer wishes to
acquire, all 920 shares of Common Stock owned by the Seller (the “Shares”) on the terms and
conditions set forth in this Agreement (the “Transfer”);

     WHEREAS the Transfer will be accomplished through a combination of (i) a sale of shares of the
Common Stock from the Seller to the Buyer for the fair and reasonable per share price of not less
than the June 30, 2010 statutory book value of $2,417,692.48 per share and (ii) a contribution of
shares of the Common Stock from the Seller to the Contributor and then from the Contributor to the
Buyer, each on the terms and conditions set forth in this Agreement; and

     WHEREAS, unless otherwise noted, capitalized terms shall have the meanings set forth or
referenced in Appendix 1 to this Agreement.

NOW, THEREFORE, for good and valuable consideration, the legal sufficiency and receipt of which is
hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. CONTRIBUTION, PURCHASE AND SALE OF SHARES. At the consummation of the transactions
referred to in this Agreement (the “Closing”), upon the terms and subject to the conditions
set forth in this Agreement:

     1.1 The Seller shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase from the Seller, the Sale Shares (“Share Sale”).

     1.2 The Seller and the Contributor shall execute the contribution agreement by and between the
Seller and the Contributor in the form attached as Exhibit A hereto, pursuant to which the
Seller shall contribute, assign, transfer and deliver to the Contributor, and the Contributor
shall accept from Seller, the Contributed Shares (“Contribution No. 1”).

 

 

     1.3 Immediately following Contribution No. 1, the Contributor and the Buyer shall execute the
contribution agreement by and between the Contributor and the Buyer in the form attached as
Exhibit B hereto, pursuant to which the Contributor shall contribute, assign, transfer and
deliver to the Buyer, and the Buyer shall accept from the Contributor, the Contributed Shares
(“Contribution No. 2”).

     1.4 The purchase price to be paid by the Buyer to the Seller for the Sale Shares shall be
equal to the sum of (a) the IPO Proceeds and (b) the Debt Increase Amount (together, the
“Consideration”). No consideration will be paid to any party in connection with the
contribution of the Contributed Shares from (i) the Seller to the Contributor or (ii) the
Contributor to the Buyer.

     1.5 At the Closing, the Buyer shall deliver to the Seller a duly executed promissory note in
the form attached as Exhibit C hereto with a principal amount equal to the Consideration.

     1.6. The Closing shall occur as soon as practicable, but in any event not later than
twenty-four (24) hours, following the authorization of the Offering Price by either the Board of
Directors of the Buyer or a duly appointed pricing committee thereof.

     1.7 Following the consummation of Contribution No. 1, Contribution No. 2 and the Share Sale,
Buyer will have legal and marketable title to the Shares.

2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to,
and agrees with, the Contributor and the Buyer as follows:

     2.1 Corporate Existence, Power and Qualification of the Company. The Company is a
corporation duly incorporated, validly existing and in good standing under the laws of the State of
Ohio and has full power and authority to own, lease and operate its properties and to carry on its
business as presently conducted.

     2.2 Corporate Existence, Power and Qualification of the Seller. The Seller is a stock
insurance company duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.

     2.3 Capital Stock of the Company. The Seller owns 920 of the issued and outstanding
shares of Common Stock free and clear of any and all mortgages, pledges, liens, encumbrances,
restrictions (including restrictions on the transfer thereof), and other interests of third parties
or other claims.

     2.5 Title to Shares. Immediately prior to the Closing, the Seller owned the Shares
and at the Closing the Seller will convey or cause to be conveyed to the Buyer good and marketable
title to the Shares to be acquired by or contributed to the Buyer free and clear of any and all
mortgages, pledges, liens, encumbrances, restrictions (including restrictions on the transfer
thereof), and other interests of third parties or other claims.

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     2.6 Power and Authority Regarding Sale and Contributions of Shares.

          (a) The Seller has full power and authority to execute and deliver this Agreement and to
perform all of its obligations contained herein (including the assignment, transfer and conveyance
to (i) the Buyer of the Sale Shares and (ii) the Contributor of the Contributed Shares, as
contemplated hereby).

          (b) The execution and delivery by the Seller of this Agreement and the consummation of the
transactions contemplated on the part of the Seller hereby have been duly authorized and no other
proceedings on the part of the Seller are necessary to authorize the execution and delivery of this
Agreement by the Seller or the consummation of the transactions contemplated on its part hereby.

          (c) The execution, delivery and performance of this Agreement by the Seller and the
consummation of the transactions contemplated hereby will not violate or be prevented by, with or
without the giving of notice or the lapse of time, or both, or result in the creation of any lien,
claim, charge or encumbrance upon any of the assets, properties or business of the Company pursuant
to any charter or by-law provisions of the Seller or the Company.

          (d) The execution, delivery and performance of this Agreement by the Seller and the
consummation of the transactions contemplated hereby will not violate or be prevented by, with or
without the giving of notice or the lapse of time, or both, any partnership agreement, indenture,
mortgage, deed of trust, lease, contract, instrument, agreement, order, judgment, decree, law,
statute, ordinance or regulation or any other restriction of any kind or character applicable to
the Seller or the Company, except, as to the Seller, as would not have a material adverse effect on
the ability of the Seller to consummate the transactions contemplated hereby, and except, as to the
Company, as would not have a material adverse effect on the Company.

          (e) The execution, delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with, or require any consent or approval under,
or constitute a default under, or result in the termination under, or result in the breach under,
or constitute an assignment for which consent is required by any other party under, or result in
the acceleration of the performance of the obligations of the Company under, or result in the
creation of any claim, lien, charge or encumbrance upon any of the properties, assets or business
of the Company pursuant to, (i) its charter or by-laws or (ii) any indenture, mortgage, deed of
trust, lease, contract, instrument, agreement, judgment or decree to which the Company is a party
or by which the Company or any of their respective assets or properties is bound, except as would
not have a material adverse effect on the Company.

     2.7 Valid and Binding Obligation. This Agreement constitutes the valid and legally
binding obligation of the Seller enforceable against the Seller in accordance with its terms,
subject to the usual exceptions as to bankruptcy and the availability of equitable remedies.

3. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR. The Contributor represents and
warrants to, and agrees with the Buyer and Seller, as follows:

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     3.1 Corporate Existence, Power and Qualification of the Contributor. The Contributor
is a corporation duly organized, validly existing and in good standing under the laws of Delaware,
with full power and authority to engage in the business in which it is engaged, and is duly
authorized and lawfully entitled to carry on its business where now carried on.

     3.2 Power and Authority Regarding Receipt and Contribution of Shares. The Contributor
has full power and authority to execute and deliver this Agreement and to perform all of its
obligations contained herein (including the assignment, transfer and conveyance to the Seller of
the Contributed Shares as contemplated hereby). The execution and delivery by the Contributor of
this Agreement and the consummation of the transactions contemplated on the part of the Contributor
hereby have been duly authorized and no other proceedings on the part of the Contributor are
necessary to authorize the execution and delivery of this Agreement by the Contributor or the
consummation of the transactions contemplated on its part hereby. The execution, delivery and
performance of this Agreement by the Contributor and the consummation of the transactions
contemplated hereby will not violate or be prevented by, conflict with or require any approval or
consent under, with or without the giving of notice or the lapse of time, or both, the charter or
by-laws of the Contributor or any partnership agreement, indenture, mortgage, deed of trust, lease,
contract or other instrument or agreement, order, judgment, decree, law, statute, ordinance or
regulation or any other restriction of any kind or character applicable to the Contributor, except
as would not have a material adverse effect on the ability of the Contributor to consummate the
transactions contemplated hereby.

     3.3 Valid and Binding Obligation. This Agreement constitutes the valid and legally
binding obligation of the Contributor enforceable against the Contributor in accordance with its
terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies.

4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to, and
agrees with the Seller and Contributor, as follows:

     4.1 Corporate Existence, Power and Qualification of The Buyer. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws of Delaware, with
full power and authority to engage in the business in which it is engaged, and is duly authorized
and lawfully entitled to carry on its business where now carried on.

     4.2 Power and Authority Regarding Purchase of Shares. The Buyer has full power and
authority to execute and deliver this Agreement and to perform all of its obligations contained
herein. The execution and delivery by the Buyer of this Agreement and the consummation of the
transactions contemplated on the part of the Buyer hereby have been duly authorized and no other
proceedings on the part of the Buyer are necessary to authorize the execution and delivery of this
Agreement by the Buyer or the consummation of the transactions contemplated on its part hereby.
The execution, delivery and performance of this Agreement by the Buyer and the consummation of the
transactions contemplated hereby will not violate or be prevented by, conflict with or require any
approval or consent under, with or without the giving of notice or the lapse of time, or both, the
charter or by-laws of the Buyer or any partnership agreement, indenture, mortgage, deed of trust,
lease, contract or other instrument or agreement, order, judgment, decree, law, statute, ordinance
or regulation or any other restriction of any kind

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or character applicable to the Buyer, except as would not have a material adverse effect on the
ability of the Buyer to consummate the transactions contemplated hereby.

     4.3 Valid and Binding Obligation. This Agreement constitutes the valid and legally
binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, subject
to the usual exceptions as to bankruptcy and the availability of equitable remedies.

5. ENTIRE AGREEMENT. This Agreement, including any appendices or exhibits, contains
the entire understanding of the parties hereto with respect to the subject matter contained herein.
The section and paragraph headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its conflict of laws principles.

7. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors of the parties hereto; provided, however,
that this Agreement may not be assigned by any party without the prior written consent of the other
party hereto. If this Agreement is assigned with such consent, the terms and conditions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and their respective
assigns.

8. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which
shall be deemed an original but all of which counterparts collectively shall constitute one
instrument representing the Agreement between the Seller, the Contributor and the Buyer.

[Remainder of this page intentionally left blank]

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     IN WITNESS WHEREOF, the undersigned parties have duly executed and delivered this Stock
Purchase Agreement the date first above written.

	 	 	 	 	 
	 	LIBERTY MUTUAL INSURANCE COMPANY

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	LIBERTY INSURANCE HOLDINGS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	LIBERTY MUTUAL AGENCY CORPORATION

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

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APPENDIX
1

DEFINITIONS

     In addition to the terms defined elsewhere in this Agreement, the following terms shall have
the following meanings:

“Agreement” shall have the meaning set forth in the introductory paragraph.

“Buyer” shall have the meaning set forth in the preamble.

“Class A Shares” shall have the meaning set forth in the preamble.

“Closing” shall have the meaning set forth in Section 1.

“Common Stock” shall have the meaning set forth in the preamble.

“Consideration” shall have the meaning set forth in Section 1.4.

“Contributed Shares” shall mean a number of shares equal to the difference between 920 and
the Sale Shares.

“Contribution No. 1” shall have the meaning set forth Section 1.2.

“Contribution No. 2” shall have the meaning set forth Section 1.3.

“Contributor” shall have the meaning set forth in the preamble.

“Debt Increase Amount” shall mean an amount equal to $310,757,890.

“IPO” shall have the meaning set forth in the preamble.

“IPO Share Number” shall mean the aggregate number of Class A Shares offered in the IPO
(excluding any Class A Shares offered pursuant to any over-allotment option).

“IPO Proceeds” shall mean an amount equal the product of (i) the IPO Share Number
multiplied by (ii) the Offering Price multiplied by (iii) 95.75%, rounded to the nearest whole
cent.

“Offering Price” shall mean the per share price of the Class A Shares to be issued in
connection with the IPO, authorized by either the Board of Directors of the Buyer or a duly
appointed pricing committee thereof.

“Sale Shares” shall mean a number of shares of Common Stock equal to the quotient of (i)
the Consideration divided by (ii) $2,417,692.48 per share, the per share statutory book value of
the Common Stock as of June 30, 2010, rounded down to the nearest whole share.

“Share Sale” shall have the meaning set forth in Section 1.1.

“Seller” shall have the meaning set forth in the preamble.

 

 

“Shares” shall have the meaning set forth in the preamble.

“Transfer” shall have the meaning set forth in the preamble.

* * *

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EXHIBIT A

CONTRIBUTION AGREEMENT

     This Contribution Agreement (this “Agreement”), by and between Liberty Mutual
Insurance Company, a Massachusetts stock insurance company (“LMIC”) and Liberty Insurance
Holdings, Inc., a Delaware corporation (“LIHI “), is dated and effective as of ____ day of
____, 2010.

RECITALS

     WHEREAS, LMIC owns of record and beneficially 920 shares of the issued and outstanding common
stock, par value $0.125 per share (the “Common Stock”), of Ohio Casualty Corporation, an
Ohio corporation (“OCAS”);

     WHEREAS, LMIC and LIHI desire that OCAS become a wholly owned subsidiary of Liberty Mutual
Agency Corporation, a Delaware corporation and a direct, wholly owned subsidiary of LIHI and an
indirect, wholly owned subsidiary of LMIC (“LMAC”);

     WHEREAS, LMIC intends to contribute ____ shares of Common Stock (the “Contributed
Shares”) to LMAC via an initial contribution of the Contributed Shares to LIHI, which will
subsequently contribute the Contributed Shares to LMAC;

     WHEREAS, subject to the terms and conditions set forth herein, LMIC desires to contribute to
LIHI, and LIHI desires to receive from LMIC, the Contributed Shares; and

     WHEREAS, LMIC and LIHI intend for the contribution of the Contributed Shares from LMIC to LIHI
pursuant to this Agreement to qualify as a transfer within the meaning of Section 351(a) of the
Internal Revenue Code of 1986, as amended.

     NOW THEREFORE BE IT RESOLVED, that, in consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:

     1. Contribution of the Contributed Shares. LMIC hereby contributes to LIHI, and LIHI
hereby accepts from LMIC, the Contributed Shares.

     2. Title to Common Stock. LMIC is the record and beneficial owner of, and has, and
will convey to LIHI legal and marketable title to, the Contributed Shares.

     3. Expenses. All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.

     4. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of
laws.

     5. Entire Agreement. This Agreement contains the entire agreement and understanding
of the parties hereto with respect to the subject matter contained herein and, except as otherwise
set forth herein, all prior agreements or understandings whether written or

 

 

oral of the parties hereto with respect to such subject matter are revoked and of no further
force and effect.

     6. Headings. The headings used in this Agreement are inserted for convenience of
reference only and are not to be used in construing or interpreting any of the provisions of this
Agreement.

     7. Counterparts. This Agreement may be executed in any number of counterparts, which
may be by facsimile, all of which counterparts taken together shall constitute one and the same
agreement.

     8. Invalidity or Unenforceability. If any provision of this Agreement or the
application thereof to any circumstance shall, for any reason and to any extent, be invalid or
unenforceable under applicable law or governing contractual provisions of either party, the
remainder of this Agreement shall not be affected thereby and the application of such provision to
other circumstances shall not be affected thereby, but rather shall be enforced to the fullest
extent permitted by applicable law.

[Remainder of this page intentionally left blank]

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     IN WITNESS WHEREOF, a duly authorized representative of each of LMIC and LIHI has duly
executed this Agreement on behalf of such party.

	 	 	 	 	 
	 	LIBERTY MUTUAL INSURANCE COMPANY

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	LIBERTY INSURANCE HOLDINGS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

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EXHIBIT B

CONTRIBUTION AGREEMENT

     This Contribution Agreement (this “Agreement”), by and between Liberty Insurance
Holdings, Inc., a Delaware corporation (“LIHI”), and Liberty Mutual Agency Corporation, a
Delaware corporation (“LMAC”) is dated and effective as of ____ day of ____, 2010.

RECITALS

     WHEREAS, immediately prior to Contribution No. 1 (as defined below) Liberty Mutual Insurance
Company, a Massachusetts stock insurance company (“LMIC”) owned of record and beneficially 920 of
the issued and outstanding common stock, par value $0.125 per share (the “Common Stock”),
of Ohio Casualty Corporation, an Ohio corporation (“OCAS”);

     WHEREAS, LMIC and LIHI desire that OCAS become a wholly owned subsidiary of LMAC;

     WHEREAS, LMIC intends to contribute [•] shares of Common Stock (the “Contributed
Shares”) to LIHI (“Contribution No. 1”);

     WHEREAS, subject to the terms and conditions set forth herein, LIHI desires to contribute to
LMAC, and LMAC desires to receive from LIHI, the Contributed Shares immediately following
Contribution No. 1; and

     WHEREAS, LIHI and LMAC intend for the contribution of the Contributed Shares from LIHI to LMAC
pursuant to this Agreement to qualify as a transfer within the meaning of Section 351(a) of the
Internal Revenue Code of 1986, as amended.

     NOW THEREFORE BE IT RESOLVED, that, in consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:

     1. Contribution of the Contributed Shares. LIHI hereby contributes to LMAC, and LMAC
hereby accepts from LIHI, the Contributed Shares.

     2. Title to Common Stock. Immediately following Contribution No. 1, LIHI will be the
record and beneficial owner of, and has, and will convey to LMAC legal and marketable title to, the
Contributed Shares.

     3. Expenses. All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.

     4. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of
laws.

     5. Entire Agreement. This Agreement contains the entire agreement and understanding
of the parties hereto with respect to the subject matter contained herein and,

 

 

except as otherwise set forth herein, all prior agreements or understandings whether written
or oral of the parties hereto with respect to such subject matter are revoked and of no further
force and effect.

     6. Headings. The headings used in this Agreement are inserted for convenience of
reference only and are not to be used in construing or interpreting any of the provisions of this
Agreement.

     7. Counterparts. This Agreement may be executed in any number of counterparts, which
may be by facsimile, all of which counterparts taken together shall constitute one and the same
agreement.

     8. Invalidity or Unenforceability. If any provision of this Agreement or the
application thereof to any circumstance shall, for any reason and to any extent, be invalid or
unenforceable under applicable law or governing contractual provisions of either party, the
remainder of this Agreement shall not be affected thereby and the application of such provision to
other circumstances shall not be affected thereby, but rather shall be enforced to the fullest
extent permitted by applicable law.

[Remainder of this page intentionally left blank]

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     IN WITNESS WHEREOF, a duly authorized representative of each of LIHI and LMAC has duly
executed this Agreement on behalf of such party.

	 	 	 	 	 
	 	LIBERTY INSURANCE HOLDINGS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	LIBERTY MUTUAL AGENCY CORPORATION

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

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Exhibit C

     See
Exhibit 10.8 to Liberty Mutual Agency Corporation’s Registration
Statement No. 333-166671exv10w193

Exhibit 10.
193

LIBERTY MUTUAL AGENCY CORPORATION

2010 EXECUTIVE LONG-TERM INCENTIVE PLAN

     1. Purpose. The purpose of the Liberty Mutual Agency Corporation (the “Company”) 2010
Executive Long-Term Incentive Plan is to attract and retain employees and directors for the
Company and its Affiliated Employers and to provide such persons with incentives and rewards for
superior performance.

     2. Definitions. As used in this Plan, the following terms shall be defined as set forth
below:

     2.1 “Affiliated Employer” means any corporation, partnership, limited liability
company or other entity that is required to be considered, together with the Company, as
a single employer under Section 414(b) of the Code (employees of controlled group of
corporations) or Section 414(c) of the Code (employees of partnerships or limited
liability companies under common control). For purposes of determining a controlled
group of corporations under Section 414(b), the language
“at least 50 percent” shall be
used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2),
and (3) of the Code. For purposes of determining trades or businesses that are under
common control for purposes of Section 414(c) of the Code, “at least 50 percent” shall be
used instead of “at least 80 percent” each place it appears in Treas. Reg. Sect.
1.414(c)-2. An entity shall not be considered an “Affiliated Employer” for any period of
time prior to satisfying the controlled group or common control tests described above.

     2.2 “Award” means any Options, Stock Appreciation Rights, Restricted Shares,
Restricted Stock Units, Deferred Stock Units, Performance Awards or other equity-based
awards granted under this Plan.

     2.3 “Award Agreement” means an agreement, certificate, resolution or other form of
writing or other evidence approved by the Committee which sets forth the terms and
conditions of an Award. An Award Agreement may be in an electronic medium, may be
limited to a notation on the Company’s books and records and, if approved by the
Committee, need not be signed by a representative of the Company or a Participant.

     2.4 “Base Price” means the price to be used as the basis for determining the Spread
upon the exercise of a Freestanding Stock Appreciation Right.

     2.5 “Board” means the Board of Directors of the Company.

     2.6 “Change in Control” shall mean the earliest to occur of the following events:

     (a) The purchase or other acquisition by any person, entity or group of
persons, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities

 

 

Exchange Act of 1934, as amended (the “Exchange Act”), or any comparable successor
provisions (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of any portion of the Company’s then outstanding
 shares of common stock or other voting securities (or securities convertible into voting
securities) entitled to vote generally in the election of the Board after which Liberty
Mutual Holding Company Inc., (together with any employee benefit plan or arrangement (or
any trust forming a part thereof) maintained by Liberty Mutual Holding Company Inc.,
Liberty Mutual Group Inc., Liberty Mutual Insurance Company, affiliates controlled by
Liberty Mutual Insurance Company, the Company or Affiliated Employers) does not,
immediately thereafter, own directly or indirectly through one or more subsidiaries at
least fifty-one percent (51%) (on a fully distributed and diluted basis) of the combined
voting power of the Company’s then outstanding securities entitled to vote (and securities
convertible into securities entitled to vote) generally in the election of the Board; or

     (b) The consummation of a merger (including, without limitation, a share exchange,
consolidation, reorganization or similar business combination under applicable law) of the
Company with any other business entity unless the Persons who were holders of the Company’s
Class B common stock immediately prior to the merger beneficially own immediately
thereafter, directly or indirectly, more than fifty percent (50%) of the combined voting
power of the issued and outstanding securities entitled to vote in the election of the
board of directors of the successor or survivor entity; or

     (c) The consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets in one or more transactions to an unrelated entity.

Notwithstanding the foregoing, a Change in Control shall not be considered to have occurred
because fifty percent (50%) or more of the combined voting power of the Company’s then
outstanding securities entitled to vote (and securities convertible into securities
entitled to vote) are beneficially owned by a trustee or other fiduciary holding securities
under one or more employee benefit plans or arrangements (or any trust forming a part
thereof) maintained by Liberty Mutual Holding Company Inc., Liberty Mutual Group Inc.,
Liberty Mutual Insurance Company, affiliates controlled by Liberty Mutual Insurance
Company, the Company or the Affiliated Employers.

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

     2.8 “Committee” means the committee of the Board described in Section 4.

     2.9 “Company” means Liberty Mutual Agency Corporation or its successor.

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     2.10 “Consultant” means any natural person, including an advisor, engaged by the Company or
an Affiliated Employer to render bona fide services to such entity (other than in connection
with the offer or sale of securities in a capital-raising transaction or to promote or maintain
a market for the Company’s securities).

     2.11 “Deferred Stock Unit” means an Award that is vested on the Grant Date that entitles
the recipient to receive Shares after a designated period of time. Deferred Stock Units shall be
subject to such restrictions and conditions as set forth in the Award Agreement, which shall be
consistent with the provisions for Restricted Stock Units set forth in Section 8 below except
for the requirement to have a Restricted Period or a Performance Period.

     2.12 “Employee” means any person, including an officer, employed by the Company or an
Affiliated Employer.

     2.13 “Fair Market Value” means, as of any date, the value of a Share as determined by the
Committee, in its discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

	 	(a)	 	Except as otherwise determined by the Committee, if, on such date, Shares are
listed or quoted on a national or regional securities exchange or quotation system,
the Fair Market Value of a Share shall be the closing price of a Share as quoted on
the national or regional securities exchange or quotation system constituting the
primary market for the Shares, as reported in The Wall Street Journal or such other
source as the Company deems reliable. If the relevant date does not fall on a day on
which Shares have traded on such securities exchange or quotation system, the date on
which the Fair Market Value shall be established shall be the last day on which the
Shares were so traded or quoted prior to the relevant date, or such other appropriate
day as shall be determined by the Committee, in its discretion.
	 
	 	(b)	 	Notwithstanding the foregoing, the Committee may, in its discretion, determine the
Fair Market Value of a Share on the basis of the opening, closing, or average of the
high and low sale prices of a share of Stock on such date or the preceding trading day,
the actual sale price of a Share, any other reasonable basis using actual transactions
involving Shares as reported on a national or regional securities exchange or quotation
system, or on any other basis consistent with the requirements of Section 409A. The
Committee or the Company, in the case of Options granted in connection with the
Registration Date, may also determine the Fair Market Value upon the average closing
price for Shares during a specified period that is within thirty (30) days before or
thirty (30) days after such date, provided that, with respect to the grant of an Option
or Stock Appreciation Right, the commitment to grant such Award based on such valuation
method must be irrevocable

3

 

	 	 	 	before the beginning of the specified period. The Committee may vary its
method of determining Fair Market Value as provided in this Section for
different purposes under the Plan to the extent consistent with the
requirements of Section 409A.

     2.14 “Freestanding Stock Appreciation Right” means a Stock Appreciation Right granted
pursuant to Section 6 that is not granted in tandem with an Option or similar right.

     2.15 “Grant Date” means the date specified by the Committee on which a grant of an Award
shall become effective, which shall not be earlier than the date on which the Committee takes
action with respect thereto.

     2.16 “Incentive Stock Option” means any Option that is intended to qualify as an “incentive
stock option” under Section 422 of the Code or any successor provision.

     2.17 “LMGI” means Liberty Mutual Group Inc. or its successor.

     2.18 “Non-employee Director” means a member of the Board who is not an Employee.

     2.19 “Nonqualified Stock Option” means an Option that is not intended to qualify as an
Incentive Stock Option.

     2.20 “Option” means any option to purchase Shares granted under Section 5.

     2.21 “Option Price” means the purchase price payable upon the exercise of an Option.

     2.22 “Participant” means an Employee, Non-employee Director or a Consultant who is
selected by the Committee to receive benefits under this Plan, provided that only Employees
shall be eligible to receive grants of Incentive Stock Options.

     2.23 “Performance Award” means an Award denominated in either shares, share units or cash
granted pursuant to Section 9.

     2.24 “Performance Objectives” means the performance objectives established pursuant to this
Plan for Participants who have received Awards. Performance Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of the individual
Participant or an Affiliated Employer, division, department or function within the Company or an
Affiliated Employer in which the Participant is employed. Performance Objectives may be measured
on an absolute or relative basis. Relative performance may be measured by a group of peer
companies or by a financial market index. Any Performance Objectives applicable to a Qualified
Performance-Based Award shall be earnings per share, income before interest and taxes, net
income, operating income,

4

 

operating cash flow, net written premiums, revenue or market share, return on equity, assets or
capital, expense, loss or combined ratios, book value or surplus per share, stock price or total
shareholder return, budget achievement, expense reduction or cost savings, operating margins,
and productivity improvements.

     2.25 “Performance Period” means a period of time established under Section 9 within which
the Performance Objectives relating to Performance Awards, Restricted Stock Units or Restricted
Shares are to be achieved.

     2.26 “Qualified Performance-Based Award” means an Award or portion of an Award that is
intended to satisfy the requirements for “qualified performance-based compensation” under
Section 162(m) of the Code. The Committee shall designate any
Qualified Performance-Based Award
as such at the time of grant.

     2.27 “Registration Date” shall mean the date on which the Company sells its Shares in a
bona fide, firm commitment underwriting pursuant to a registration statement under the
Securities Act of 1933, as amended.

     2.28 “Restricted Period” means a period of time established under Section 8 with respect
to Restricted Stock Units.

     2.29 “Restricted Shares” means Shares granted under Section 7 subject to a substantial risk
of forfeiture.

     2.30 “Restricted Stock Units” means an Award pursuant to Section 8 of the right to receive
Shares at the end of a specified period.

     2.31 “Shares” means shares of Class A Common Stock of the Company or any security into
which Shares may be converted by reason of any transaction or event of the type referred to in
Section 12.

     2.32 “Spread” means, in the case of a Freestanding Stock Appreciation Right, the amount by
which the Fair Market Value on the date when any such right is exercised exceeds the Base Price
specified in such right or, in the case of a Tandem Stock Appreciation Right, the amount by
which the Fair Market Value on the date when any such right is exercised exceeds the Option
Price specified in the related Option.

     2.33 “Stock Appreciation Right” means a right granted under Section 6, including a
Freestanding Stock Appreciation Right or a Tandem Stock Appreciation Right.

     2.34 “Substitute Award” means any Award granted or issued to a Participant in assumption
of, or in substitution for (i) outstanding awards previously granted by LMGI or any of its
predecessors, subsidiaries or affiliates, or (ii) outstanding awards, or the right or obligation
to make future awards by a company acquired by the Company or with which the Company combines.

5

 

     2.35 “Tandem Stock Appreciation Right” means a Stock Appreciation Right granted pursuant to
Section 6 that is granted in tandem with an Option or any similar right granted under any other
plan of the Company.

     2.36 “Transition Period” shall mean the period beginning with the Registration Date and
ending as of the earlier of (i) the date of the first annual meeting of stockholders of the
Company at which directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which the Registration Date occurs, and (ii) the expiration
of the “reliance period” under Treasury Regulation Section 1.162-27(f)(2).

     2.37 “Unrestricted Shares” means a grant of Shares free of any Restricted Period,
Performance Period, or a substantial risk of forfeiture. Unrestricted Shares may be granted in
respect of past services or other valid consideration, or in lieu of cash compensation due to an
Employee.

3.  Shares Available Under the Plan.

     3.1 Reserved Shares. Subject to adjustments as provided in Section 12, the total number of
Shares reserved and available for delivery in connection with Awards under the Plan shall be
10,000,000 Shares. Such Shares may be Shares of original issuance, Shares held in Treasury, or
Shares that have been reacquired by the Company.

     3.2 Accounting for Shares. For purposes of Section 3.1, the following rules will apply
for counting Shares issued or transferred under the Plan:

     (a) If an Award is denominated and payable in Shares, the number of Shares covered by
such Award, or to which such Award relates, shall be counted on the date of grant of such
Award against the aggregate number of Shares available for granting Awards under the
Plan.

     (b) With respect to Performance Awards which are payable in Shares, the maximum
number of Performance Shares shall be counted on the date of grant of such Award against
the aggregate number of Shares available for granting Awards under the Plan. If less than
the maximum number of Performance Shares is issued in satisfaction of such Award, the difference will be added back
to the number of Shares available for granting Awards under the Plan at the time when the
Award is settled in Shares.

     (c) Awards not denominated, but potentially payable, in Shares shall be counted
against the aggregate number of Shares available for granting Awards under the Plan in such
amount and at such time as the Awards are settled in Shares; provided, however, that Awards
that operate in tandem with (whether granted simultaneously with or at a different time
from), or that are substituted for, other Awards may only be counted once against the
aggregate number of Shares available, and the Committee shall adopt procedures, as it deems
appropriate, in order to avoid double counting.

6

 

     (d) Substitute Awards shall not be counted against the Shares available for granting
Awards under this Plan. Shares available under a shareholder approved equity plan acquired
in a corporate acquisition or merger (each, a “pre-existing plan”) may used for
post-transaction Awards under this Plan without counting against the Reserved Shares in
Section 3.1 provided that (i) the number of Shares available for grant is appropriately
adjusted to reflect the relative value of the Shares and the shares subject to the acquired
entity’s equity plan, (ii) any such Award is not made beyond the period when it could have
been granted under the pre-existing plan absent such transaction, and (iii) any such Award
is not granted to individuals who were employed by the Company or its Affiliated Employers
immediately before the closing of such transaction. The provisions of this Section 3.2(d)
shall be interpreted consistent with the applicable listing requirements.

     (e) Shares related to Awards which terminate in whole or in part by expiration,
forfeiture, cancellation, or otherwise without the issuance of such Shares, or are settled
in cash in lieu of Shares shall be available again for grant under this Plan.

     (f)
(i) Shares not issued upon the net settlement or net exercise of an Option or
Stock Appreciation Right, (ii) Shares delivered to the Company to pay the Option Price upon
exercise of an Option, and (iii) Shares delivered to or withheld by the Company to satisfy
withholding taxes shall be available for grant under this Plan.

     3.3 ISO Maximum. In no event shall the number of Shares issued upon the exercise of
Incentive Stock Options exceed 10,000,000 Shares, subject to adjustment as provided in Section
12.

     3.4 Maximum Awards. The number of Shares that may be granted in the form of any type of
Award under this Plan in a single fiscal year to a Participant may not exceed 5 million Shares,
subject to adjustment as provided in Section 12, and excluding any Substitute Awards or other
Awards described in Section 3.2(d) above. For avoidance of doubt, the maximum limit described in
the immediately preceding sentence shall separately apply to Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares and Other Equity Awards under
Section 10 below. In addition, the maximum Performance Award opportunity that may be granted in
any fiscal year and payable in cash to a Participant is $5 million, excluding any Substitute
Awards or other Awards described in Section 3.2(d) above.

4.  Plan Administration.

     4.1 Board Committee Administration. This Plan shall be administered by Compensation
Committee appointed by the Board from among its members, provided that the full Board may at any
time act as the Committee. The interpretation and construction by the Committee of any provision
of this Plan or of any Award Agreement and any determination by the Committee pursuant to any
provision of this Plan or any such agreement, notification or document shall be final and
conclusive.

7

 

No member of the Committee shall be liable to any person for any such action taken or
determination made in good faith.

     4.2 Terms and Conditions of Awards. The Committee shall have final discretion,
responsibility, and authority to:

     (a) Grant Awards;

     (b) Determine the Participants to whom and the times at which Awards shall be
granted;

     (c) Determine the type and number of Awards to be granted, the number of
 shares of Stock to which an Award may relate, and the applicable terms, conditions,
and restrictions, including the length of time for which any restriction shall
remain in effect;

     (d) Establish and administer Performance Goals relating to any Award;

     (e) Determine the rights of Participants with respect to an Award upon
termination of employment or service as a Director;

     (f) Determine whether, to what extent, and under what circumstances an Award
may be settled, cancelled, forfeited, exchanged, or surrendered;

     (g) Accelerate the vesting of an Award;

     (h) Interpret the terms and provisions of Agreements;

     (i) Provide for forfeiture of outstanding Awards and recapture of realized
gains and other realized value in such events as determined by the Committee, which
include, but are not limited to, a breach of restrictive covenants or an
intentional or negligent misstatement of financial records; and

     (j) Make all other determinations deemed necessary or advisable for the
administration of the Plan.

The Committee may solicit recommendations from LMGI and the Company’s chief executive officer with
respect to the grant of Awards under this Plan. The Committee shall determine the terms and
conditions of each Award at the time of grant. No Participant or any other person shall have any
claim to be granted an Award under the Plan at any time, and the Company is not obligated to extend
uniform treatment to Participants under the Plan. The terms and conditions of Awards need not be
the same with respect to each Participant. Notwithstanding anything in the contrary in this Plan,
no Award shall be granted to an Employee who is employed by an Affiliated Employer of the Company
unless either (x) the Affiliated Employer employing the Employee is a direct or indirect subsidiary
of the Company, or (y) the Employee is an “executive officer” (as defined under SEC Rule 3b-7) of
the Company.

8

 

     4.3 Committee Delegation. The Committee may delegate to one or more officers of
the Company the authority to grant Awards to Participants who are not directors or
executive officers of the Company. Any such delegation shall be subject to the
limitations of Section 157(c) of the Delaware General Corporation Law.

     4.4 Awards to Non-employee Directors. Notwithstanding any other provision of this
Plan to the contrary, all Awards to Non-employee Directors must be authorized by the
Board.

     5. Options. The Committee may authorize grants to Participants of Options to purchase Shares
upon such terms and conditions as the Committee may determine in accordance with the following
provisions:

     5.1 Number of Shares. Each grant shall specify the number of Shares to which it
pertains.

     5.2 Option Price. Each grant shall specify an Option Price per Share, which shall
be equal to or greater than the Fair Market Value per Share on the Grant Date, except in
the case of Substitute Awards or as provided in Section 12.

     5.3 Consideration. Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such consideration, which
may include (i) cash in the form of currency or check or other cash equivalent
acceptable to the Company, (ii) nonforfeitable, unrestricted Shares owned by the
Participant which have a value at the time of exercise that is equal to the Option
Price, (iii)a reduction in Shares issuable upon exercise which have a value at the time
of exercise that is equal to the Option Price (a “net exercise”), (iv) to the extent
permitted by applicable law, the proceeds of sale from a
broker-assisted cashless exercise, (v) any other legal consideration that the Committee may deem appropriate on
such basis as the Committee may determine in accordance with this Plan, or (vi) any
combination of the foregoing. For the avoidance of doubt, Participants that receive Options to purchase Shares shall have no legal right to own or receive Shares withheld from
delivery upon exercise pursuant to Section 5.3(iii),and otherwise shall have no rights
in respect of such Shares whether as a shareholder or otherwise.

     5.4
Vesting. Any grant may specify (i) a waiting period or periods before Options
shall become exercisable, and (ii) permissible dates or periods on or during which Options shall be exercisable, and any grant may provide for the earlier exercise of such
rights in the event of a termination of employment. Vesting may be further conditioned
upon the attainment of Performance Objectives established by the Committee.

     5.5 ISO Dollar Limitation. Options granted under this Plan may be Incentive Stock
Options, Nonqualified Stock Options or a combination of the foregoing, provided that
only Nonqualified Stock Options may be granted to Non-employee Directors. Each grant
shall specify whether (or the extent to which) the Option is an Incentive Stock Option
or a Nonqualified Stock Option. Notwithstanding any such designation, to the extent that
the aggregate Fair Market Value of the Shares

9

 

with respect to which Options designated as Incentive Stock Options are exercisable for
the first time by an Participant during any calendar year (under all plans of the
Company) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options.

     5.6 Exercise Period. No Option granted under this Plan may be exercised more than
ten years from the Grant Date. If the Fair Market Value exceeds the Option Price on the
last day that an Option may be exercised under an Award Agreement, the affected
Participant shall be deemed to have exercised such Option in a net exercise under
Section 5.3(iii) above without the requirement of any further action.

     5.7 Award Agreement. Each grant shall be evidenced by an Award Agreement containing
such terms and provisions as the Committee may determine consistent with this Plan.

     6. Stock Appreciation Rights. The Committee may authorize grants to Participants of
Freestanding or Tandem Stock Appreciation Rights. A Stock Appreciation Right is the right of the
Participant to receive from the Company an amount, which shall be determined by the Committee and
shall be expressed as a percentage (not exceeding 100 percent) of the Spread at the time of the
exercise of such right. Any grant of Stock Appreciation Rights under this Plan shall be upon such
terms and conditions as the Committee may determine in accordance with the following provisions:

     6.1 Payment in Cash or Shares. Any grant may specify that the amount payable upon
the exercise of a Stock Appreciation Right will be paid by the Company in cash, Shares
or any combination thereof or may grant to the Participant or reserve to the Committee
the right to elect among those alternatives.

     6.2
Vesting. Any grant may specify (i) a waiting period or periods before Stock
Appreciation Rights shall become exercisable, and (ii) permissible dates or periods on
or during which Stock Appreciation Rights shall be exercisable, and any grant may
provide for the earlier exercise of such rights in the event of a termination of
employment. Vesting may be further conditioned upon the attainment of Performance
Objectives established by the Committee.

     6.3 Tandem Stock Appreciation Rights. Each grant of a Tandem Stock Appreciation
Right shall provide that such Tandem Stock Appreciation Right may be
exercised only (i)
at a time when the related Option (or any similar right granted under any other plan of
the Company) is also exercisable and the Spread is positive, and (ii) by surrender of
the related Option (or such other right) for cancellation.

     6.4 Exercise Period. No Stock Appreciation Right granted under this Plan may be
exercised more than ten years from the Grant Date. If a Spread exists on the last day
that a Stock Appreciation Right may be exercised under an Award Agreement, the affected
Participant shall be deemed to have exercised such Stock Appreciation Right without the
requirement of any further action.

10

 

     6.5 Award Agreement. Each grant shall be evidenced by an Award Agreement containing
such terms and provisions as the Committee may determine consistent with this Plan.

     7. Restricted Shares. The Committee may authorize grants to Participants of Restricted Shares
upon such terms and conditions as the Committee may determine in accordance with the following
provisions:

     7.1 Transfer of Shares. Each grant shall constitute an immediate transfer of the
ownership of Shares to the Participant in consideration of the performance of services,
subject to the substantial risk of forfeiture and restrictions on transfer hereinafter
referred to.

     7.2 Consideration. To the extent permitted by Delaware law, each grant may be made
without additional consideration from the Participant or in consideration of a payment
by the Participant that is less than the Fair Market Value on the Grant Date.

     7.3 Substantial Risk of Forfeiture. Each grant shall provide that the Restricted
Shares covered thereby shall be subject to a “substantial risk of forfeiture” within the
meaning of Section 83 of the Code for a period to be determined by the Committee on the
Grant Date, and any grant or sale may provide for the earlier termination of such risk
of forfeiture in the event of a termination of employment.

     7.4 Dividend, Voting and Other Ownership Rights. Unless otherwise determined by the
Committee, an award of Restricted Shares shall entitle the Participant to dividend,
voting and other ownership rights (except for any rights to a liquidating distribution)
during the period for which such substantial risk of forfeiture is to continue. Any
grant may require that any or all dividends or other distributions paid on the
Restricted Shares during the period of such restrictions be accumulated or reinvested in
additional Shares, which may be subject to the same restrictions as the underlying Award
or such other restrictions as the Committee may determine; provided that any dividends
paid in stock shall be subject to the same restrictions as the underlying Award.

     7.5 Restrictions on Transfer. Each grant shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to the extent
prescribed by the Committee on the Grant Date. Such restrictions may include, without
limitation, rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee.

     7.6 Performance-Based Restricted Shares. Any grant or the vesting thereof may be
further conditioned upon the attainment of Performance Objectives established by the
Committee in accordance with the applicable provisions of Section 9 regarding
Performance Awards.

11

 

     7.7 Award Agreement; Certificates. Each grant shall be evidenced by an Award
Agreement containing such terms and provisions as the Committee may determine consistent
with this Plan. Unless otherwise directed by the Committee, all certificates
representing Restricted Shares, together with a stock power that shall be endorsed in
blank by the Participant with respect to such Shares, shall be held in custody by the
Company until all restrictions thereon lapse.

     8. Restricted Stock Units. The Committee may authorize grants of Restricted Stock Units to
Participants upon such terms and conditions as the Committee may determine in accordance with the
following provisions:

     8.1 Restricted Period. Each grant shall provide that the Restricted Stock Units
covered thereby shall be subject to a Restricted Period, which shall be fixed by the
Committee on the Grant Date, and any grant or sale may provide for the earlier
termination of such period in the event of a termination of employment.

     8.2 Dividend Equivalents and Other Ownership Rights. During the Restricted Period,
the Participant shall not have any right to transfer any rights under the subject Award
and shall not have any rights of ownership in the Shares underlying the Restricted Stock
Units, including the right to vote such Shares, but the Committee may on or after the
Grant Date authorize the payment of dividend equivalents on such shares in cash or
additional Shares on a current, deferred or contingent basis with respect to any or all
dividends or other distributions paid by the Company. Notwithstanding the foregoing, any
dividend equivalents with respect to dividends paid in stock shall be subject to the
same restrictions as the underlying Award.

     8.3 Performance-Based Restricted Share Units. Any grant or the vesting thereof may
be further conditioned upon the attainment of Performance Objectives established by the
Committee in accordance with the applicable provisions of Section 9 regarding
Performance Awards.

     8.4 Award Agreement. Each grant shall be evidenced by an Award Agreement containing
such terms and provisions as the Committee may determine consistent with this Plan.

     9. Performance Awards. The Committee may authorize grants of Awards, which shall become
payable to the Participant upon the achievement of specified Performance Objectives, upon such
terms and conditions as the Committee may determine in accordance with the following provisions:

     9.1 Number of Performance Awards. Each grant shall specify the number of Shares or
share units or cash amount to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors.

     9.2 Performance Period. The Performance Period with respect to each Performance
Award shall be determined by the Committee and set forth in the Award Agreement and may
be subject to earlier termination in the event of a termination of employment.

12

 

     9.3 Performance Objectives. Each grant shall specify the Performance Objectives that are to
be achieved by the Participant and a formula for determining the amount of any payment to be made
if the Objectives are achieved. The Committee may establish a pool that will be funded based on
the achievement of Performance Objectives or a percentage of any of the underlying business
criteria. In such case, the maximum amount payable to any Participant shall be a stated
percentage of the pool; provided the sum of such percentages shall not exceed 100% and the
payment does not exceed the applicable per-person award limit set forth in Section 3.4.

     9.4 Payment of Performance Awards. Each grant shall specify the time and manner of payment
of Performance Awards that shall have been earned, and any grant may specify that any such
amount will be paid by the Company in cash, Shares or any combination thereof or may grant to
the Participant or reserve to the Committee the right to elect among those alternatives.

     9.5 Dividend Equivalents. At the discretion of the Committee, any grant of Performance
Awards payable in Shares may provide for the payment to the Participant of dividend equivalents
thereon in cash or additional Shares on a current, deferred or contingent basis with respect to
any or all dividends or other distributions paid by the Company. Notwithstanding the foregoing,
any dividend equivalents with respect to dividends paid in stock shall be subject to the same
restrictions as the underlying Award.

     9.6
Measuring Financial Performance Against Performance Objectives. Financial performance
shall be measured against Performance Objectives by (a) excluding any of the following items if
doing so would increase financial performance for the then current
Performance Period – (i)
extraordinary items (as determined by the Company’s independent auditors in accordance with
Generally Accepted Accounting Principles), (ii)restructuring and/or other nonrecurring charges (as
reported in the Company’s financial statements for the Performance Period), (iii) losses from
catastrophes (as designated by the Insurance Service Office’s Property Claims Service Group, the
Lloyd’s Claim Office or comparable report or organization generally recognized by the insurance
industry) in the Company’s “ongoing” businesses (to the extent reported in the Company financial
statements for the Performance Period), (iv) exchange rate effects, as applicable, for non-U.S.
dollar denominated operating earnings, (v) the effects to any statutory adjustments to corporate
tax rates, and (vi) the impact of discontinued operations, and (b) not adjusting for changes in
accounting if doing so would increase financial performance for the then current Performance
Period. In addition, if the Committee determines after the Performance Goals have been established
that a change in the business, operations, corporate structure or capital structure of the Company,
or the manner in which it conducts its business, or other events or circumstances render the
Performance Objectives unsuitable, the Committee may modify such Performance Objectives, in whole
or in part, as the Committee deems appropriate and equitable. In the case of a Qualified
Performance-Based Award, any such modifications may not increase the amount payable under such
Award. The Committee shall also have the right in its sole discretion to increase (except in the
case of a Qualified Performance-Based Award) or decrease the amount

13

 

payable at a given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate performance for the
Performance Period.

     9.7 Award Agreement. Each grant shall be evidenced by an Award Agreement containing such
terms and provisions as the Committee may determine consistent with this Plan.

     9.8 Awards under the Liberty Mutual Long-Term Incentive Plan. Awards granted to the
Company’s “executive officers” (as defined under Rule 3b-7 of the Securities Exchange Act of
1934, as amended) under the Liberty Mutual Long-term Incentive Plan as in effect on August __,
2010 shall be replaced with Substitute Awards under this Plan prior to the Registration Date.

10. Other Equity Awards.

     10.1 Other Types of Awards. The Committee shall have the right to grant other Awards based
upon or payable in Shares having such terms and conditions as the Committee may determine,
including but not limited to Deferred Stock Units, Unrestricted Shares and the grant of
securities convertible into Shares. The Committee shall determine the terms and conditions of
such Awards, including the number of Shares and any vesting or performance restrictions. Shares
delivered pursuant to an Award in the nature of a purchase right granted under this Section 10.1
shall be purchased for such consideration, paid for at such times, by such methods, and in such
forms, including, without limitation, cash, Shares, other Awards, notes, or other property, as
the Committee shall determine.

11. Transferability.

     11.1 Transfer Restrictions. Except as provided in Sections 11.2 and 11.4, no Award granted
under this Plan shall be transferable by a Participant other than upon death by will or the laws
of descent and distribution or designation of a beneficiary in a form acceptable to the
Committee, and Options and Stock Appreciation Rights shall be exercisable during a Participant’s
lifetime only by the Participant or, in the event of the Participant’s legal incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the Participant
under state law. Any attempt to transfer an Award in violation of this Plan shall render such
Award null and void.

     11.2 Limited Transfer Rights. The Committee may expressly provide in an Award Agreement that
a Participant may transfer such Award (other than an Incentive Stock Option), in whole or in
part, to a spouse or lineal descendant (a “Family Member”), a trust for the exclusive benefit of
Family Members, a partnership or other entity in which all the beneficial owners are Family
Members, or any other entity affiliated with the Participant that may be approved by the
Committee. Subsequent transfers of Awards shall be prohibited except in accordance with this
Section 11.2. All terms and conditions of the Award, including provisions relating to the
termination of the Participant’s employment or service with the Company or a Subsidiary, shall
continue to apply following a transfer made in accordance with this Section 11.2.

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     11.3 Additional Restrictions on Transfer. Any Award made under this Plan may
provide that all or any part of the Shares that are to be issued or transferred by the
Company upon exercise, vesting or settlement shall be subject to further restrictions
upon transfer.

     11.4 Domestic Relations Orders. Notwithstanding the foregoing provisions of this
Section 11, any Award made under this Plan may be transferred as necessary to fulfill
any domestic relations order as defined in Section 414(p)(1)(B) of the Code.

     12. Adjustments. The Committee shall make or provide for such adjustments in the (a) aggregate
and per-person limitations specified in Section 3, (b) number of Shares covered by outstanding
Awards, (c) Option Price or Base Price applicable to outstanding Options and Stock Appreciation
Rights, and (d) kind of shares available for grant and covered by outstanding awards (including
shares of another issuer), as the Committee in its sole discretion may in good faith determine to
be equitably required in order to prevent dilution or enlargement of the rights of Participants
that otherwise would result from (x) any stock dividend, stock split, combination or exchange of
Shares, recapitalization, extraordinary cash dividend, or other change in the capital structure of
the Company, (y) any merger, consolidation, spin-off, spin-out,
split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets (other than a
normal cash dividend), issuance of rights or warrants to purchase securities, or (z) any other
corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the
event of any such transaction or event, the Committee may provide in substitution for any or all
outstanding Awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection therewith the
cancellation or surrender of all Awards so replaced. In the case of Substitute Awards, the
Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of
Awards as it shall deem appropriate in order to achieve reasonable comparability or other equitable
relationship between the assumed awards and the Awards granted under the Plan as so adjusted.

     13. Change in Control. Except as otherwise provided in an Award Agreement, in the event of a
Change in Control, the Committee may, but shall not be obligated to (a) accelerate, vest or cause
the restrictions to lapse with respect to, all or any portion of an Award, (b) cancel Awards for a
cash payment equal to their fair value (as determined in the sole discretion of the Committee) which,
in the case of Options and Stock Appreciation Rights, shall be deemed to be equal to the excess, if
any, of value of the consideration to be paid in the Change in Control transaction to holders of
the same number of Shares subject to such Options or Stock Appreciation Rights (or, if no
consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such
Options or Stock Appreciation Rights) over the aggregate Option Price (in the case of Options) or
Base Price (in the case of Stock Appreciation Rights), or (c) provide for the issuance of
substitute Awards that will substantially preserve the otherwise applicable terms of any affected
Awards previously granted hereunder as determined by the Committee in its sole discretion. For
avoidance of doubt, the treatment of Awards upon a Change in Control may vary among Participants in
the Committee’s sole discretion.

     14. Fractional Shares. The Company shall not be required to issue any fractional Shares
pursuant to this Plan. The Committee may provide for the elimination of fractions or for the
settlement thereof in cash.

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     15. Withholding Taxes.  To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with any payment made or benefit realized by a
Participant or other person under this Plan, it shall be a condition to the receipt of such payment
or the realization of such benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of all such taxes required to be withheld. At the
discretion of the Committee, such arrangements may include relinquishment of a portion of such
benefit. The Fair Market Value of any Shares withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable minimum statutory
tax withholding rates. For the avoidance of doubt, the Participants shall have no legal right to
own or receive any Shares withheld from delivery, and otherwise shall have no rights in respect of
such Shares whether as a shareholder or otherwise.

     16. Certain Terminations of Employment, Hardship and Approved Leaves of Absence.  Notwithstanding any other provision of this Plan to the contrary, in the event of a Participant’s
termination of employment (including by reason of death, Disability, Retirement), or leave of
absence approved by the Company, or in the event of hardship or other special circumstances, the
Committee may in its sole discretion take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including, without limitation, waiving or
modifying any limitation or requirement with respect to any Award under this Plan. However, any
such actions taken by the Committee must comply with the requirements of Section 409A and with
Section 162(m) for Qualified Performance-Based Awards.

     17. Foreign Participants. In order to facilitate the making of any grant or combination of
grants under this Plan, the Committee may provide for such special terms for Awards to
Participants who are foreign nationals, or who are employed by or perform services for the Company
or any Subsidiary outside of the United States of America, as the Committee may consider necessary
or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements or alternative versions of,
this Plan as it may consider necessary or appropriate for such purposes without thereby affecting
the terms of this Plan as in effect for any other purpose, provided that no such supplements,
amendments, restatements or alternative versions shall include any provisions that are inconsistent
with the terms of this Plan, as then in effect, unless this Plan could have been amended to
eliminate such inconsistency without further approval by the stockholders of the Company.

     18. Amendments and Other Matters.

     18.1 Plan Amendments. The Board may amend, suspend or terminate this Plan or the
Committee’s authority to grant Awards under this Plan at any time. Notwithstanding the
foregoing, no amendments shall be effective without approval of the Company’s
stockholders if (a) stockholder approval of the amendment is then required pursuant to
the Code, the rules of the primary stock exchange or stock market on which the Stock is
then traded, applicable U.S. state corporate laws or regulations, applicable U.S. federal
laws or regulations, and the applicable laws of any foreign country or jurisdiction where
Awards are, or shall be, granted under this Plan, or (b)
such amendment would (i) modify Section 18.4, (ii) materially increase benefits
accruing to Participants, (iii) increase the aggregate number of Shares issued or

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issuable under this Plan, (iv) increase any limitation set forth on the number of shares of Stock
which may be issued or the aggregate value of Awards or the per-person limits under Section 3
except as provided in Section 12, (v) modify the eligibility requirements for Participants in
this Plan, or (vi) reduce the minimum Option Price and Base Price as set forth in Sections 5 and
6, respectively. Notwithstanding any other provision of this Plan to the contrary, except as
provided in Section 18.8, no termination, suspension or amendment of this Plan may adversely
affect any outstanding Award without the consent of the affected Participant.

     18.2 Award Deferrals. The Committee may permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash under the Plan pursuant to such rules,
procedures or programs as it may establish for purposes of this Plan. However, any Award
deferrals which the Committee permits must comply with the provisions of Section 23 and the
requirements of Section 409A of the Code.

     18.3 Conditional Awards. The Committee may condition the grant of any award or
combination of Awards under the Plan on the surrender or deferral by the Participant of his or
her right to receive a cash bonus or other compensation otherwise payable by the Company or any
Affiliated Employer to the Participant, provided that any such grant must comply with the
provisions of Section 23 and the requirements of Section 409A of the Code.

     18.4 Repricing Prohibited. The terms of outstanding Awards may not be amended to reduce
the Option Price of outstanding Options or Base Price of outstanding Stock Appreciation Rights
or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards
or Options or Stock Appreciation Rights with an Option Price or Base Price that is less than
the Option Price or Base Price of the original Options or Stock Appreciation Rights without
stockholder approval, provided that nothing herein shall prevent the Committee from taking any
action provided for in Section 12 above.

     18.5 No Employment Right. This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any Subsidiary and
shall not interfere in any way with any right that the Company or any Subsidiary would otherwise
have to terminate any Participant’s employment or other service at any time.

     18.6 Tax Qualification. To the extent that any provision of this Plan would prevent any
Option that was intended to qualify under particular provisions of the Code from so qualifying,
such provision of this Plan shall be null and void with respect to such Option, provided that such
provision shall remain in effect with respect to other Options, and there shall be no further
effect on any provision of this Plan.

     18.7 Leave of Absence or Transfer. A transfer between the Company and any Affiliated
Employer or between Affiliated Employers, or a leave of absence duly authorized by the Company,
shall not be deemed to be a termination of employment. Periods of time while on a duly authorized
leave of absence shall be disregarded for

17

 

purposes of determining whether a Participant has satisfied a Restricted Period or
Performance Period under an Award.

     18.8 Amendments to Comply with Laws, Regulations or Rules.
Notwithstanding any other provision of the Plan or any Award Agreement to the contrary,
in its sole and absolute discretion and without the consent of any Participant, the Board
may amend the Plan, and the Committee may amend any Award Agreement, to take effect
retroactively or otherwise as it deems necessary or advisable for the purpose of
conforming the Plan or such Award Agreement to any present or future law, regulation or
rule applicable to the Plan, including, but not limited to, Section 409A of the Code.

     18.9 Compensation Recovery Policy. Awards granted under this Plan shall be subject
to any compensation recovery policy adopted by the Company as it exists from time to
time.

     18.10 Issuance of Shares.  Shares may be issued on an uncertificated basis.

     19. Effective Date. This Plan shall be effective on August __, 2010.

     20. Termination. This Plan shall terminate on the tenth anniversary of the date upon which it
is approved by the stockholders of the Company, and no Award shall be granted after that date.

     21. Limitations Period. Any person who believes he or she is being denied any benefit or
right under the Plan may file a written claim with the Committee. Any claim must be delivered to
the Committee within forty-five (45) days of the specific event giving rise to the claim. Untimely
claims will not be processed and shall be deemed denied. The Committee, or its designated agent,
will notify the Participant of its decision in writing as soon as administratively practicable.
Claims not responded to by the Committee in writing within ninety (90) days of the date the written
claim is delivered to the Committee shall be deemed denied. The Committee’s decision shall be
final, conclusive and binding on all persons. No lawsuit relating to the Plan may be filed before
a written claim is filed with the Committee and is denied or deemed denied, and any lawsuit must
be filed within one year of such denial or deemed denial or be forever barred. The venue for any
lawsuit shall be Boston, Massachusetts.

     22. Governing Law. The validity, construction and effect of this Plan and any Award hereunder
will be determined in accordance with the Commonwealth of Massachusetts except to the extent
governed by applicable federal law.

     23.  Compliance with Section 409A.

     23.1 Awards Subject to Section 409A. The provisions of this Section 23 shall apply
to any Award or portion thereof that is or becomes subject to Section 409A of the Code
(“Section 409A”), notwithstanding any provision to the contrary contained in the Plan or
the Award Agreement applicable to such Award. Awards subject to Section 409A include,
without limitation:

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          (a) Any Nonqualified Stock Option or Stock Appreciation Right that permits the
deferral of compensation other than the deferral of recognition of income until the
exercise of the Award.

          (b) Any other Award that either (i) provides by its terms for settlement of all or any
portion of the Award on one or more dates following the Short-Term Deferral Period (as
defined below), or (ii) permits or requires the Participant to elect one or more dates on
which the Award will be settled.

Subject to any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the
later of (i) the date that is two and one-half months from the end of the Company’s fiscal year
in which the applicable portion of the Award is no longer subject to a substantial risk of
forfeiture, or (ii) the date that is two and one-half months from the end of the Participant’s
taxable year in which the applicable portion of the Award is no longer subject to a substantial
risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the
meaning set forth in any applicable U.S. Treasury Regulations promulgated pursuant to Section
409A or other applicable guidance.

     23.2 Deferral and/or Distribution Elections.  Except as otherwise permitted or required by
Section 409A or any applicable Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance, the following rules shall apply to any deferral and/or distribution
elections (each, an “Election”) that may be permitted or required by the Committee pursuant
to an Award subject to Section 409A:

     (a) All Elections must be in writing and specify the amount of the distribution in
settlement of an Award being deferred, as well as the time and form of distribution as
permitted by this Plan.

     (b) All Elections shall be made by the end of the Participant’s taxable year prior to
the year in which services commence for which an Award may be granted to such Participant;
provided, however, that if the Award qualifies as “performance-based compensation” for
purposes of Section 409A and is based on services performed over a period of at least twelve
(12) months, then the Election may be made no later than six (6) months prior to the end of
such period.

     (c) Elections shall continue in effect until a written election to revoke or change
such Election is received by the Company, except that a written election to revoke or
change such Election must be made prior to the last day for making an Election determined
in accordance with paragraph (b) above or as permitted by Section 23.3.

     23.3 Subsequent Elections. Any Award subject to Section 409A which permits a subsequent
Election to delay the distribution or change the form of distribution in settlement of such
Award shall comply with the following requirements:

19

 

     (a) No subsequent Election may take effect until at least twelve (12) months after the
date on which the subsequent Election is made;

     (b) Each subsequent Election related to a distribution in settlement of an Award not
described in Section 23.4(b), 23.4(c) or 23.4(f) must result in a delay of the distribution
for a period of not less than five (5) years from the date such distribution would
otherwise have been made; and

     (c) No subsequent Election related to a distribution pursuant to Section 23.4(d) shall
be made less than twelve (12) months prior to the date of the first scheduled payment under
such distribution.

          23.4 Distributions Pursuant to Deferral Elections. No distribution in settlement of an
Award subject to Section 409A may commence earlier than:

     (a) Separation from service (as determined pursuant to Treasury Regulations or other
applicable guidance);

     (b) The date the Participant becomes Disabled (as defined below);

     (c) Death;

     (d) A specified time (or pursuant to a fixed schedule) that is either (i) specified by
the Committee upon the grant of an Award and set forth in the Award Agreement evidencing
such Award, or (ii) specified by the Participant in an Election complying with the
requirements of Section 23.2 and/or 23.3, as applicable;

     (e) To the extent provided by Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance, a change in the ownership or effective control or the Company
or in the ownership of a substantial portion of the assets of the Company; or

     (f) The occurrence of an Unforeseeable Emergency (as defined below in Section 23.5).

Notwithstanding anything else herein to the contrary, to the extent that a Participant is a
“Specified Employee” (as defined under Company policy consistent with the requirements of Section
409A), no distribution pursuant to Section 23.4(a) in settlement of an Award subject to Section
409A may be made before the date which is six (6) months after such Participant’s date of
separation from service, or, if earlier, the date of the Participant’s death.

          23.5
Unforeseeable Emergency. The Committee shall have the authority to provide in the
Award Agreement evidencing any Award subject to Section 409A for distribution in settlement of
all or a portion of such Award in the event that a Participant establishes, to the satisfaction
of the Committee, the occurrence of an Unforeseeable Emergency (as defined in Section 409A). In
such event, the amount(s) distributed with respect to such Unforeseeable Emergency cannot exceed
the amounts

20

 

necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of such distribution(s), after taking into account the extent to which
such hardship is or may be relieved through reimbursement or compensation by insurance or
otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship). All distributions with respect to an
Unforeseeable Emergency shall be made in a lump sum as soon as practicable following the
Committee’s determination that an Unforeseeable Emergency has occurred. The occurrence of an
Unforeseeable Emergency shall be judged and determined by the Committee. The Committee’s decision
with respect to whether an Unforeseeable Emergency has occurred and the manner in which, if at
all, the distribution in settlement of an Award shall be altered or modified, shall be final,
conclusive, and not subject to approval or appeal.

     23.6 Disabled. The Committee shall have the authority to provide in the Award Agreement
evidencing any Award subject to Section 409A for distribution in settlement of such Award in the
event that the Participant becomes Disabled. A Participant shall be considered “Disabled” if
either:

     (a) The Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be expected to result
in death or can be expected to last for a continuous period of not less than twelve (12)
months, or

     (b) The Participant is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than three (3) months under an accident and health plan
covering employees of the Participant’s employer.

All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump
sum or in periodic installments as established by the Participant’s Election, commencing as soon
as practicable following the date the Participant becomes Disabled. If the Participant has made
no Election with respect to distributions upon becoming Disabled, all such distributions shall
be paid in a lump sum as soon as practicable following the date the Participant becomes
Disabled.

     23.7 Death. If a Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed
to his or her beneficiary under the distribution method for death established by the
Participant’s Election as soon as administratively possible following receipt by the Committee
of satisfactory notice and confirmation of the Participant’s death. If the Participant has made
no Election with respect to distributions upon death, all such distributions shall be paid in a
lump sum as soon as practicable following the date of the Participant’s death.

     23.8 No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this
Plan does not permit the acceleration of the time or schedule of

21

 

any distribution under this Plan in settlement of an Award subject to Section 409A, except as
provided by Section 409A and/or Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance.

     24. Compliance with Section 162(m).

     24.1 Transition. Notwithstanding any other provision of this Plan to the contrary, prior to
the Registration Date and during the Transition Period, the provisions of this Plan requiring
compliance with Section 162(m) of the Code for Awards intended to qualify as “performance-based
compensation” shall only apply to the extent required by Section 162(m) of the Code. This Plan
is intended to be subject to the relief set forth in Treasury Regulation Section 1.162-27(f)(1)
and shall be interpreted accordingly during the Transition Period.

     24.2 Shareholder Approval. Awards that are intended to be issued as Qualified Performance-Based Awards after the end of the Transition Period shall be subject to majority stockholder
approval under Section 162(m) of the Code and the Treasury Regulations promulgated thereunder.
All Qualified Performance-Based Awards and the provisions hereunder applicable to such Awards
shall be interpreted consistent with the requirements of Section 162(m).

22

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