Replacement Capital Covenants

On March 7, 2007, in connection with the closing of the offering of $700,000,000 aggregate principal amount of the Company's Series A Junior Subordinated Notes (the "Series A Notes") and $300,000,000 aggregate principal amount of the Company's Series B Junior Subordinated Notes (the " Series B Notes"), the Company entered into a Replacement Capital Covenant (the "2007 Covenant") and on May 29, 2008, in connection with the closing of the offering of $1,250,000,000 aggregate principal amount of the Company's Series C Junior Subordinated Notes (the "Series C Notes," and together with the Series A Notes and the Series B Notes, the "Notes"), the Company entered into a Replacement Capital Covenant (the "2008 Covenant," and together with the 2007 Covenant, the "Covenants"), whereby the Company agreed for the benefit of persons that buy, hold or sell a specified series of the Company's long-term indebtedness ranking senior to the Notes (referred to herein as "covered debtholders"), initially the holders of the Company's 7.50% Senior Notes, issued pursuant to the Fiscal Agency Agreement, dated as of August 15, 2006, among Liberty Mutual Holding Company Inc. and LMHC Massachusetts Holdings Inc., as guarantors (the "Guarantors"), the Company, and JPMorgan Chase Bank, National Association, as Fiscal Agent, that neither the Company nor any of its subsidiaries will repay, redeem, defease or purchase the Notes before, with respect to the Series A Notes, March 1, 2067, with respect to the Series B Notes, March 1, 2047 and, with respect to the Series C Notes, June 15, 2068, or such earlier time as provided for in the Covenants, unless, subject to certain limitations set forth in the Covenants, the principal amount repaid, redeemed or defeased or the applicable redemption or purchase price does not exceed a maximum the Company and its affiliates (as defined in the Covenants) have received from the sale of common stock, warrants, mandatorily convertible preferred stock, debt exchangeable for common equity, debt exchangeable for preferred equity (in the case of the 2007 Covenant only) and certain other qualifying capital securities during the relevant measurement period specified in the Covenants; provided that any net cash proceeds raised by either of the Guarantors will only be counted for purposes of the foregoing if the proceeds so received have been contributed to the Company within the relevant measurement period. For the avoidance of doubt, the foregoing limitation will not restrict the repayment or redemption of any Notes that the Company has previously defeased in accordance with the Covenants. For a complete copy of the Replacement Capital Covenants, please click here.