THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 34 Plan provides benefits, including cash payments and continuation of health and other benefits, in the event of a termination of employment following a change in control. These benefits are intended to reinforce and encourage the continued attention and commitment of executives under potentially disruptive business circumstances. The Committee determines eligibility for, and level of participation in, the CIC Plan based on the roles, responsibilities and individual circumstances of each executive officer. In assessing participation, the Committee considers, among other things, the critical nature of the individual’s role to the business and the importance of retention of the individual. The determination of participation and level of participation in the CIC Plan is made independent of other compensation considerations. The CIC Plan requires a double-trigger (a change in control and a termination without cause or resignation for good reason) before benefits are payable, and none of our NEOs (other than Mr. Huber whose terms of participation in the plan have not changed since its adoption in 2008) are eligible for tax gross-ups related to the special excise tax that may be imposed on such payments. In February 2018, Mr. Roche’s “Multiplier” under the CIC Plan was increased from 1x to 2x, and the “Multipliers” for Mr. Lavey and Mr. Salvatore were increased from 1x to 1.5x. These adjustments were made in light of the importance of these individuals to the organization, and taking into consideration competitive data provided by F.W. Cook from the Comparative Proxy Data Companies. Severance Agreements Farber Offer Letter Pursuant to the terms of Mr. Farber’s offer letter, in the event (i) his employment is involuntarily terminated, other than in connection with his death, disability, a “change in control,” or for “cause,” or (ii) he voluntarily terminates his employment for “good reason” (defined generally to mean a decrease in his base salary or target short-term incentive compensation opportunity, a material and adverse change to his role and responsibility, or a requirement that he relocate), he will be entitled to a lump sum cash severance payment equal to 2x his then current base salary and one year’s continued vesting of his then-outstanding equity awards. As a condition to receiving such severance, Mr. Farber would be required to enter into a separation agreement upon terms and conditions acceptable to the Company, including a full release and non-disparagement provision. Leadership Severance Arrangements In February 2018, the existing severance arrangements with respect to our CEO and each of our other NEOs (except Mr. Farber, who already has a similar severance arrangement in his offer letter – see above), all of which were scheduled to expire in 2018, were amended and restated to extend the term of each such arrangement indefinitely. The other material terms and conditions of the arrangements, as summarized below, remain in all material respects unchanged. • In the event the (i) the executive’s employment is involuntarily terminated, other than in connection with his or her death, disability, a “change in control,” or for “cause,” or (ii) the executive voluntarily terminates his or her employment for “good reason” (defined generally to mean a decrease in the executive’s base salary or target short-term incentive compensation opportunity, a material and adverse change to the executive’s role and responsibility, or, in certain cases a requirement that the executive relocate), the executive will be entitled to a lump sum cash severance payment designed to approximate one year’s cash compensation (base salary and target bonus opportunity). • As a condition to receiving such severance, the executive would be required to enter into a separation agreement upon terms and conditions acceptable to the Company, including a full release and non-disparagement provision. The Committee elected to extend the terms of these arrangements indefinitely after considering competitive trends in severance-related benefits. For additional information about our CIC Plan and the various benefits available to our NEOs in the event of termination or a change in control, please see the section entitled “Potential Payments upon Termination or Change in Control” beginning on page 48. Chaucer Board Fee Mr. Farber received $26,800 (£20,000) from Chaucer as compensation for service on Chaucer’s board of directors. These payments compensated Mr. Farber for the increased responsibilities associated with service on Chaucer’s board. Following the Chaucer Sale, Mr. Farber resigned from Chaucer’s board of directors. Compensation for Chaucer CEO As discussed above in the “Special Note Regarding Chaucer Sale and John Fowle,” during 2018, the Company was actively pursuing strategic alternatives for Chaucer, including the sale to China Re that was ultimately consummated. Chaucer’s senior management, including its President and Chief Executive Officer, John Fowle, were integral to this process. Accordingly, the Committee’s primary objective for Mr. Fowle’s 2018 compensation was to reinforce and encourage his continued attention and commitment to Chaucer during this potentially disruptive period, encourage his assistance and support in pursuing a transaction,