Exhibit 10.69

 

THE ALLMERICA FINANCIAL CORPORATION

 

EMPLOYMENT CONTINUITY PLAN

--------------------------------------------------------------------------------

THE ALLMERICA FINANCIAL CORPORATION

 

EMPLOYMENT CONTINUITY PLAN

 

ARTICLE 1

 

Purpose

 

1.1 The purpose of the Plan is

 

  (a) to keep top management employees focused on the interests of the Company’s
shareholders and to secure their continued services in addition to their
undivided dedication and objectivity in the event of any threat or occurrence
of, or negotiation or other action that could lead to the possibility of, a
Change in Control; and

 

  (b) to ensure that Participants do not (i) solicit or assist in the
solicitation of employees, agents and/or policyholders of the Company or any
affiliate for a specified period, or (ii) disclose any confidential or
proprietary information of the Company or any affiliate prior to or after a
Change in Control.

 

ARTICLE 2

 

Definitions

 

The following capitalized terms used in the Plan have the respective meanings
set forth in this Article:

 

2.1

Anticipatory Change in Control: (i) Any “person” including a “group” (as such
terms are used in Sections 13(d) and 14(d)(2) of the 1934 Act, but excluding the
Company, its affiliates, any employee benefit plan of the Company or any
affiliate, and an underwriter temporarily holding securities pursuant to an
offering of such securities) commences a tender offer for securities, which if
consummated, would result in such person owning 20% or more of the combined
voting power of the Company’s then outstanding securities, (ii) the Company
enters into an agreement the consummation of which would constitute a Change in
Control, (iii) the submission of a nominee or nominees for the position of
director of the Company by a shareholder or group of shareholders in a proxy
solicitation or otherwise which, in its judgment, the Board or the Committee
determines might or is intended to result in a Change in Control of the Company,
(iv) any “person” including a “group” (as such terms are used in Sections 13(d)
and 14(d)(2) of the 1934 Act, but excluding the Company, its affiliates, any
employee benefit plan of the Company or any affiliate, and an underwriter
temporarily holding securities pursuant to an offering of such securities) (1)
becomes the beneficial owner, directly or indirectly, of capital stock of the
Company in an amount which requires the filing of Schedule 13D or its equivalent
form pursuant to the rules and regulations under the 1934 Act; and (2) such
Schedule 13D or its equivalent filing indicates that the purpose of such capital
stock

--------------------------------------------------------------------------------

 

acquisition is part of a plan or proposal that the Board or Committee determines
could lead to a Change in Control; or (v) any other event occurs which is deemed
to be an Anticipatory Change in Control by the Board or the Committee.

 

2.2 Board: The Board of Directors of Allmerica Financial Corporation or any
successor entity thereto.

 

2.3 Cause: (i) The continued willful failure of a Participant to perform
substantially his or her duties with the Company or any affiliate (other than
any such failure resulting from the Participant’s incapacity due to disability
within the meaning of the Company’s short term disability plan as in effect at
the time such determination is made) after ten (10) days prior written notice
from the Board; (ii) the Participant’s conviction of, or plea of guilty or nolo
contendere to, a misdemeanor involving theft or embezzlement, or a felony ;
(iii) the willful engaging by the Participant in illegal conduct or gross
misconduct which is demonstrably and materially injurious to the Company or any
affiliate; or (iv) the breach by the Participant of any nondisclosure or
nonsolicitation agreement with the Company or any affiliate, including but not
limited to the agreements provided under sections 5.2 and 6.5 hereof.

 

2.4

Change in Control: (i) The members of the Board at the beginning of any
consecutive twenty-four (24) calendar month period (the “Incumbent Directors”)
cease at any time during such period for any reason other than due to death,
Disability or Retirement (in the event of a member’s death, Disability or
Retirement, such member shall be deemed to continue as an Incumbent Director
until such member’s seat on the Board is filled) to constitute at least a
majority of the members of the Board, provided that any director whose election
or nomination for election by the Company’s stockholders was approved by a vote
of at least a majority of such Incumbent Directors shall be treated as an
Incumbent Director; (ii) any “person” including a “group” (as such terms are
used in Sections 13(d) and 14(d)(2) of the 1934 Act, but excluding the Company,
its affiliates, any employee benefit plan of the Company or any affiliate, and
an underwriter temporarily holding securities pursuant to an offering of such
securities) is or becomes the “beneficial owner” (as defined in Rule 13(d)(3)
under the 1934 Act), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company’s then
outstanding securities, except this provision shall not be applicable if the
Company, in connection with raising capital (including through the issuance of
debt or other securities which are convertible into securities with voting
power), voluntarily agrees to issue to a “person” or a “group” (as defined
above) in such a transaction, securities aggregating (when combined with
securities owned by such person or group immediately prior to such transaction)
35% or more, but less than a majority, of the combined voting power of the
Company’s then outstanding securities (but this exception shall not apply to any
subsequent transfer, except to the extent agreed to by the Company, in writing,
at the time such securities are issued); (iii) the consummation of a merger,
consolidation, share exchange or similar form of corporate transaction involving
the Company or any affiliate that requires the approval of the Company’s
stockholders (excluding a corporate transaction involving solely the Company and
its affiliates) (a “Business Combination”), unless the stockholders immediately
prior to such Business Combination own more than 50% of the total voting power
of the successor corporation resulting from such Business Combination or a
majority of the board of directors of the successor corporation were Incumbent
Directors immediately prior to

--------------------------------------------------------------------------------

 

such Business Combination; (iv) the stockholders of the Company approve a sale
of all or substantially all of the Company’s assets and such sale is
consummated; or (v) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company. Notwithstanding the foregoing, if any
payment or benefit payable hereunder upon or following a Change in Control would
be required to comply with the limitations of Section 409A(a)(2)(A)(v) of the
Code and the guidance thereunder to avoid an additional tax under Section 409A
of the Code, such payment or benefit shall be made only if such Change in
Control constitutes a change in ownership or control of the Company, or a change
in ownership of the Company’s assets, described in IRS Notice 2005-1 or any
successor guidance.

 

2.5 Code: The Internal Revenue Code of 1986, as amended from time to time.

 

2.6 Committee: The Compensation Committee of the Board or such other committee
or persons designated by the Board.

 

2.7 Company: Allmerica Financial Corporation or any successor entity thereto,
including without limitation, the transferee of all or substantially all of the
stock or assets of the Company.

 

2.8 Coverage Period: The three-year period commencing on the date of termination
of employment with the Company and its affiliates for Category 1 Participants;
the two-year period commencing on the date of termination of employment with the
Company and its affiliates for Category 2 Participants; and the one-year period
commencing on the date of termination of employment with the Company and its
affiliates for Category 3 Participants.

 

2.9 Disability: With respect to members of the Board, the inability to engage in
any substantial gainful activity by reason of a medically determinable physical
or mental impairment which can be expected to result in death or which can be
expected to last for a continuous period of not less than twelve (12) months.

 

2.10 Effective Date: The date on which the Plan becomes effective as set forth
in section 3.1 hereof.

 

2.11 Excess Plan: Any nonqualified plan which provides supplementary retirement
benefits for participants with compensation in excess of the section 401(a)(17)
and section 415 limits of the Code, as from time to time amended.

 

2.12

Good Reason: Upon or subsequent to a Change in Control, without the
Participant’s express written consent, (i) any change in the duties or
responsibilities of the Participant that are inconsistent in any material and
adverse respect with the Participant’s duties or responsibilities immediately
prior to the Change in Control; provided, that the mere fact that the Company is
no longer a public company or has become a subsidiary after the Change in
Control shall not in and of itself constitute Good Reason hereunder, (ii) a
reduction in the Participant’s rate of annual base salary as in effect
immediately prior to such Change in Control, or a failure to provide an annual
target bonus opportunity (including any adverse change in the formula for such
annual bonus target but excluding the conversion of any cash bonus arrangement
into an equity incentive arrangement of

--------------------------------------------------------------------------------

 

commensurate value) substantially similar to that which was in effect
immediately prior to such Change in Control; (iii) a failure to provide benefits
which are substantially similar in the aggregate to the benefits under any
employee benefit plan, compensation plan, welfare benefit plan or material
fringe benefit plan in which the Participant is participating immediately prior
to the Change in Control (excluding any across-the-board reduction in benefits
effected with respect to all executive employees of the Company after the Change
in Control); (iv) any requirement that the Participant relocate to an office
more than 35 miles from the facility where the Participant is located
immediately prior to the Change in Control; or (v) the failure of the Company to
cause any successor entity to the Company to assume all obligations under the
Plan as set forth in section 8.3 hereof.

 

2.13 Multiplier: Three (3) for Category 1 Participants; two (2) for Category 2
Participants; and one (1) for Category 3 Participants.

 

2.14 1934 Act: The Securities Exchange Act of 1934, as amended from time to
time.

 

2.15 Participant: Any individual specified on Appendix A attached hereto in
accordance with Article 4 hereof, and who has entered into a non-solicitation
agreement in form and substance satisfactory to the Company.

 

2.16 Plan: The Allmerica Financial Corporation Employment Continuity Plan, as
from time to time amended.

 

2.17 Protection Period: The period beginning with a Change in Control and ending
on the second anniversary thereof.

 

2.18 Retirement: With respect to employees, separation from service with the
Company and its affiliates in accordance with a retirement plan maintained by
the Company (as in existence immediately prior to the Change in Control) or in
accordance with any retirement arrangement established with respect to the
Participant with the Participant’s consent; with respect to members of the
Board, retirement pursuant to a retirement policy then in effect for members of
the Board.

 

2.19 Retirement Savings Plan: The Allmerica Financial Retirement Savings Plan,
as from time to time amended.

 

2.20 Stock Incentive Plans: Allmerica Financial Corporation Amended Long-Term
Stock Incentive Plan and any successor(s) to such plans or other stock option or
stock incentive plans approved by the Board.

 

ARTICLE 3

 

Plan Term

 

3.1 Effective Date: The Plan shall be effective as of December 17, 1996.

 

3.2 Expiration: Subject to the provisions of sections 3.4 and 3.5 hereof, the
Plan shall terminate on the date on which the notice requirement of section 3.6
hereof has been satisfied.

--------------------------------------------------------------------------------

3.3 [Reserved].

 

3.4 Anticipatory Change in Control: In the event the Plan would otherwise
terminate pursuant to section 3.2 hereof during any fifteen (15) month period
commencing three (3) months prior to an Anticipatory Change in Control, the Plan
shall terminate on the first anniversary of such Anticipatory Change in Control;
provided, however, in the event of a Change in Control during the one-year
period commencing upon such Anticipatory Change in Control, the Plan shall
terminate on the last day of the Protection Period.

 

3.5 Change in Control: In the event the Plan would otherwise terminate pursuant
to section 3.2 hereof during the Protection Period commencing upon a Change in
Control, the Plan shall terminate on the last day of the Protection Period.

 

3.6 Notice: The notice requirement of this section shall be satisfied upon the
expiration of a thirty-day written notice to all Participants from the Committee
of its desire to terminate the Plan.

 

ARTICLE 4

 

Eligibility

 

4.1 General: A Participant shall be eligible to receive benefits and payments
hereunder. Participants shall be designated as “Category 1” or “Category 2” or
“Category 3” on Appendix A and shall receive benefits and payments hereunder in
accordance with such designation.

 

4.2 Addition or Move: The Committee in its sole discretion may add the names of
additional employees of the Company or any affiliate to Appendix A or move the
name of a Participant from Category 3 or Category 2 to Category 1 or from
Category 3 to Category 2 (any such move is referred to herein as an “Upward
Redesignation”) at any time, or subject to the provisions of section 4.3 hereof,
move the name of a Participant from Category 1 to Category 2 or Category 3 or
from Category 2 to Category 3 (a “Downward Redesignation”). Each such employee
shall be eligible to receive benefits and payments hereunder in accordance with
the employee’s designation on Appendix A.

 

4.3

Removal or Downward Redesignation: Except as provided in sections 4.5 and 4.6
hereof, the Committee in its sole discretion may remove the name of any
individual specified on Appendix A or cause a Downward Redesignation, in each
case effective upon the expiration of the thirty day notice requirement of
section 4.7. However, a Participant who voluntarily terminates his/her
employment with the Company and/or one of its affiliates shall be removed from
Appendix A as of the date that his/her employment is terminated and in the case
of a Participant involuntarily terminated by the Company and/or its affiliates
at any time prior to a period commencing three (3) months prior to the
occurrence of an Anticipatory Change of Control, removal of such Participant’s
name from Appendix A shall occur upon the effective date of such involuntary
termination. An individual removed from Appendix A shall cease to be eligible to
receive benefits and payments hereunder and all rights thereto shall be without
further force or effect upon

--------------------------------------------------------------------------------

 

removal from Appendix A. An individual whose Downward Redesignation is effective
shall be eligible to receive benefits and payments hereunder in accordance with
such individual’s revised designation on Appendix A. Notwithstanding any
provision in the Plan to the contrary, the Committee may remove the name of any
individual specified on Appendix A or cause a Downward Redesignation at any time
with such individual’s written consent.

 

4.4 [Reserved].

 

4.5 Anticipatory Change in Control: In the event of an Anticipatory Change in
Control, any name to be removed from Appendix A or the subject of a Downward
Redesignation pursuant to the first sentence of section 4.3 hereof, which
removal or redesignation would otherwise be effective during the fifteen (15)
month period commencing three (3) months prior to such Anticipatory Change in
Control, shall not be so removed or redesignated until the first anniversary of
such Anticipatory Change in Control; provided, however, in the event of a Change
in Control during the one-year period commencing upon such Anticipatory Change
in Control, such name shall be removed from Appendix A or such redesignation
shall be effective on the first day following the end of the Protection Period.
Notwithstanding the foregoing, a Participant may be removed from Appendix A
during the three (3) month period prior to an Anticipatory Change in Control or
thereafter if such removal is due to (a) a termination for Cause, (b) the
Participant voluntarily terminates his employment, (c) the individual was
involuntarily terminated by the Company and the individual received severance
payments in connection therewith and provided a general release of claims to the
Company, or (d) the individual was involuntarily terminated by the Company
effective prior to a Change in Control and the termination was unrelated to an
Anticipatory Change in Control or a Change in Control.

 

4.6 Change in Control: In the event of a Change in Control, any name to be
removed from Appendix A or the subject of a Downward Redesignation pursuant to
the first sentence of section 4.3 hereof, which removal or redesignation would
otherwise be effective on or after the date of a Change in Control, shall not be
so removed or redesignated, as the case may be, until the first day following
the end of the Protection Period.

 

4.7 Notice: The notice requirement of this section shall be satisfied upon the
expiration of thirty (30) days after written notice has been received by the
Participant from the Committee of its desire to remove such individual’s name
from the list of Participants on Appendix A or to cause a Downward Redesignation
as the case may be. No notice under this Plan is required if a Participant
voluntarily terminates his employment with the Company and/or one of its
affiliates, or if a Participant is involuntarily terminated by the Company
and/or its affiliates.

 

ARTICLE 5

 

Change in Control Payments

 

5.1 General: In the event of a Change in Control, the Company shall pay to each
Participant within ten (10) days following such Change in Control, a lump-sum
cash amount equal to the sum of

 

  (a) the fair market value (determined in accordance with the applicable Stock
Incentive Plans as of the date of the Change in Control) of shares of common
stock awarded to the Participant under the Stock Incentive Plans which are
outstanding, but not vested, immediately after the Change in Control (unless
otherwise specifically provided in writing under the terms of the plan,
agreement or award pursuant to which such shares were issued); and

--------------------------------------------------------------------------------

  (b) the excess of

 

  (i) the fair market value (determined in accordance with the applicable Stock
Incentive Plans as of the date of the Change in Control) of the shares of common
stock designated to a stock option (or stock appreciation right) granted to the
Participant under the Stock Incentive Plans and with respect to which, such
stock option (or stock appreciation right) is outstanding but not exercisable
immediately after the Change in Control, over

 

  (ii) the exercise price (or base price) for such shares.

 

5.2 Release: Notwithstanding the foregoing, no amount shall be payable under
section 5.1 hereof unless the Participant executes a Waiver and Release in form
and substance approved by the Company, which shall be substantially in the form
provided in Appendix B attached hereto or as otherwise amended by the Company in
accordance with section 8.5 hereof, and such agreement becomes effective waiving
and extinguishing any further rights or benefits under the Stock Incentive Plans
with respect to shares of common stock, stock options or stock appreciation
rights “cashed out” pursuant to Section 5.1 above.

 

ARTICLE 6

 

Protected Termination Benefits and Payments

 

6.1 General: Except as provided in section 6.2(b) hereof, in the event of a
Change in Control, the Company shall pay the benefits and payments specified in
sections 6.3 and 6.4 hereof if,

 

  (a) the Company or any affiliate terminates a Participant’s employment with
the Company and its affiliates without Cause during the Protection Period,

 

  (b) the Participant terminates employment with the Company and its affiliates
with Good Reason during the Protection Period, or

 

  (c) with respect to a Category 1 Participant only, such Category 1 Participant
terminates employment with the Company and its affiliates for any reason at any
time during the thirteenth calendar month commencing after the Change in
Control.

--------------------------------------------------------------------------------

6.2 Retirement, Death or Disability:

 

  (a) For purposes of section 6.1(b) hereof, any termination of employment by
reason of Retirement without Good Reason shall be deemed to be a termination of
employment by the Participant without Good Reason.

 

  (b) Notwithstanding the foregoing, no benefits or payments shall be payable to
a Participant under this Article in the event the Participant’s employment is
terminated by reason of death or such Participant becomes eligible for
disability benefits under the Company’s long-term disability plan.

 

6.3 Lump-Sum Benefits: In the event of a termination of employment specified in
section 6.1 hereof, the Company shall pay to each Participant within thirty (30)
days following such termination, a lump-sum cash amount equal to the sum of

 

  (a) the Multiplier times the sum of

 

  (i) the greater of (A) the Participant’s annual base salary in effect on the
date of termination of employment or (B) the Participant’s annual base salary in
effect immediately prior to the date of the Change in Control; and

 

  (ii) the target bonus for the Participant under the Short Term Incentive Plan
as in effect immediately prior to the Change in Control (if the Short Term
Incentive Plan does not have a target bonus for the year in which the Change of
Control occurred, the most recent target bonus shall be used);

 

  (b) an amount equal to the target bonus under the Short Term Incentive Plan
for the plan year in which the Participant’s employment is terminated, times a
fraction (not more than one (1)) the numerator of which shall be the number of
days the Participant is employed by the Company or any affiliate during the plan
year in which the Participant’s employment is terminated and the denominator of
which shall be 365;

 

  (c) if not paid prior to the termination of employment, the Participant’s
Short Term Incentive Award for the year prior to the year in which the
Participant’s employment is terminated; and

 

  (d) the Multiplier times the amount which would be credited to the
Participant’s account balance(s) under the Retirement Savings Plan and the
Excess Plan, in the plan year in which the Participant’s employment is
terminated, assuming the account balance increase reflecting the employer
matching contribution is determined by using the same match rate as the
Participant had elected for the most recent plan year under the Retirement
Savings Plan and disregarding for purposes of the employer non-elective
contribution the requirement that the Participant be employed on the last day of
the calendar year and further assuming the Participant’s eligible compensation
(as defined in the respective plans) to be the greater of (A) the Participant’s
eligible annualized rate of compensation for the plan year in which the
Participant’s employment is terminated or (B) the Participant’s eligible
compensation for the plan year immediately preceding the year in which the
Change in Control occurred; and

--------------------------------------------------------------------------------

  (e) to the extent any payment hereunder shall be required to be delayed until
six months following separation from service to comply with the “specified
employee” rules of Section 409A of the Code, it shall be so delayed (but not
more than is required to comply with such rules).

 

6.4 Other Benefits: In the event of a termination of employment specified in
section 6.1 hereof, the Company shall

 

  (a) continue for the Coverage Period to cover the Participant under those
employee benefit plans (including but not limited to life and disability
insurance coverage but excluding dental and health plan coverage which is
otherwise provided for in sections 6.4(d) and 6.4(e) hereof) which were
applicable to the Participant immediately prior to the Change in Control at the
same benefit levels then in effect (or shall provide their approximate
equivalent);

 

  (b) provide outplacement services to the Participant through the Company’s
preferred service provider(s) which are substantially equivalent to outplacement
services provided by the Company to executive officers of a similar level on the
date immediately prior to the Change in Control, or, at the Participant’s
election, the Participant may obtain outplacement services from an outplacement
provider of his or her choice, provided that the expense to the Company shall
not exceed the amount that would have otherwise been paid to the Company’s
preferred service provider. The provider of choice will be directly reimbursed
by the Company.

 

  (c) [Reserved].

 

  (d) with respect to any Participant who is entitled to post-retirement medical
benefits under the post-retirement medical plan or arrangement in effect
immediately prior to the Change in Control or who would be entitled to such
benefits if such Participant were older or had more years of service than such
Participant actually has on the date of the Participant’s termination of
employment by a number of years equal to the Multiplier and such Participant
were credited with a number of additional years of service and age, in each case
equal to the Multiplier,

 

  (i) during the Coverage Period, provide coverage for the Participant and the
applicable dependents under the group health plan maintained by the Company or
any affiliate at substantially the same level of coverage in effect immediately
prior to the Change in Control or coverage in effect at the date of termination
provided such coverage provides a substantially equivalent level of coverage as
the coverage in effect immediately prior to the Change in Control, and

 

  (ii) upon expiration of such Coverage Period, provide the Participant and
applicable dependents with coverage under the post-retirement medical plan or
arrangement at a level substantially similar to the level in effect immediately
prior to termination of employment, subject to retiree contributions at a rate
no greater than that in effect immediately prior to termination of employment or
(as the same may be adjusted from time to time) for all similarly situated
retirees with comparable age, health background and coverage (or shall provide
their equivalent);

--------------------------------------------------------------------------------

  (e) provide dental and health plan coverage for the Coverage Period for the
Participant and the applicable dependents under the group dental and health
plans maintained by the Company or any affiliate for employees of a level
similar to that of such Participant immediately prior to such Change in Control;

 

  (f) discontinue one or more of the benefits provided under Sections 6.4(a) and
6.4(e) if a Participant obtains employment with another company pursuant to
which group health benefits are available; and

 

6.5 Release: Notwithstanding the foregoing, no amounts shall be payable under
sections 6.3 and 6.4 hereof unless the Participant executes a Waiver and General
Release, in form and substance approved by the Company, which shall be
substantially in the form provided in Appendix C attached hereto or as otherwise
amended by the Company in accordance with section 8.5 hereof, and such agreement
becomes effective.

 

6.6 Interim Period:

 

  (a) In the event the Company or any affiliate terminates a Participant’s
employment with the Company and its affiliates without Cause during the period
commencing three (3) months prior to an Anticipatory Change in Control and
ending upon a Change in Control (the “Interim Period”), and a Change of Control
occurs within the one-year period after the date of the Anticipatory Change of
Control, such Participant shall become entitled to the benefits he or she
otherwise would have received if such termination had occurred on the date of
the Change in Control (based on his or her annual salary and target bonus
immediately prior to the date of actual termination) and he or she was
terminated without Cause on the date of the Change in Control; provided however,

 

  (i) any benefits payable shall be reduced by any severance or similar payments
or benefits otherwise paid or payable by the Company or its affiliates in
connection with such termination;

 

  (ii) such Participant shall be subject to the same obligations and
responsibilities as any other Participant receiving similar benefits hereunder
(including, without limitation, the requirement to provide waivers and releases
under Sections 5.2 and 6.5); and

 

  (iii) no benefits shall be payable as a result of the application of this
Section 6.6 if (1) the removal of such Participant’s name from Appendix A had
become effective, (2) a Change in Control does not occur, (3) the Participant
previously provided a general release of claims to the Company in connection
with his or her prior termination, (4) the Participant otherwise agrees or
agreed in writing to waive the right to such payments or benefits, or (5) the
termination was unrelated to an Anticipatory Change in Control or a Change in
Control.

--------------------------------------------------------------------------------

  (b) If during the Interim Period,

 

  (i) any change is made to a Participant’s duties or responsibilities, or any
reduction is made to the Participant’s salary or annual target opportunity, or
any reduction is made with respect to other benefit, compensation, welfare
benefit or other material fringe benefit plan (excluding with respect to any
such plan any across-the-board reductions in benefits effected with respect to
all executive employees of the Company), or

 

  (ii) the Participant is required to relocate to an office more than 35 miles
from the facility where the Participant is located immediately prior thereto,

 

then for purposes of determining whether Good Reason exists, or determining
benefits payable pursuant to this Plan, such Participant’s duties and
responsibilities, salary and annual target opportunity, or other benefit
compensation, welfare benefit or other material fringe benefit plan, or
location, as applicable, shall be applied as of the date of the commencement of
the Interim Period.

 

ARTICLE 7

 

Taxation of Benefits and Payments

 

7.1 Withholding Taxes: The Company may withhold from the Participant’s benefits
and payments payable hereunder the amount which it determines is necessary to
satisfy its obligation to withhold federal, state and local income taxes or
other taxes or amounts required to be withheld.

 

7.2 Gross-Up Payment: In the event it shall be determined that any benefit or
payment payable hereunder to a Participant would be subject to the excise tax
imposed by section 4999 of the Code, the Company shall pay to the Participant
(or to the Internal Revenue Service on behalf of the Participant) in any taxable
year for which the excise tax is payable an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Participant of all taxes
(including but not limited to federal, state and local income taxes, excise
taxes, and FICA taxes including hospital insurance taxes) imposed on the
Gross-Up Payment, the Participant retains (or has had paid to the Internal
Revenue Service on his or her behalf) an amount of the Gross-Up Payment equal to
the sum of

 

  (a) the excise tax imposed by section 4999 of the Code, and

 

  (b) the product of (i) any income tax deductions of the Participant disallowed
because of the inclusion of the Gross-Up Payment in the Participant’s adjusted
gross income, times (ii) the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made.

 

For purposes of determining the amount of the Gross-Up Payment, the Participant
shall be deemed to (a) pay federal, state and local income taxes (for the
residence where the Participant most recently filed a return for such taxes) at
the highest marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made and (b) have otherwise allowable deductions for
federal income tax purposes at least equal to the Gross-Up Payment.

--------------------------------------------------------------------------------

To the extent any gross-up payment would be considered “deferred compensation”
for purposes of Section 409A of the Code, the manner and time of payment, and
the provisions of this Section 7.2, shall be adjusted to the extent necessary
(but only to the extent necessary) to comply with the requirements of Section
409A with respect to such payment so that the payment does not give rise to the
interest or additional tax amounts described at Section 409A(a)(1)(B) or Section
409A(b)(4) of the Code (the “Section 409A penalties”); and further provided,
that if, notwithstanding the immediately preceding proviso, the gross-up payment
cannot be made to conform to the requirements of Section 409A of the Code, the
amount of the gross-up payment shall be determined without regard to any
gross-up for the Section 409A penalties.

 

7.3 [Reserved]

 

7.4 Determination of Excise Tax: All determinations of gross-up payments that
are required to be made under section 7.2 hereof shall be made by
PricewaterhouseCoopers LLP or such other public accounting firm as may be
retained by the Company prior to the Change of Control. The determination by
such accounting firm shall be final and conclusive, absent manifest error.

 

7.5

Claim by Internal Revenue Service: As soon as practicable, a Participant shall
notify the Company in writing of any claim by the Internal Revenue Service that,
if successful, would result in the imposition of the excise tax under section
4999 of the Code. If the Company notifies the Participant in writing that it
desires to contest such claim, the Participant shall cooperate in all reasonable
ways with the Company in such contest and the Company shall be entitled to
participate in all proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Participant harmless, on an after-tax basis, for
any excise tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Participant to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Participant
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Participant to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Participant on an interest-free
basis, and shall indemnify and hold the Participant harmless, on an after-tax
basis, from any excise tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided, further, that if the
Participant is required to extend the statute of limitations to enable the
Company to contest such claim, the Participant may limit this extension solely
to such contested amount. The Company’s control of the contest shall be limited
to issues with respect to the imposition of the excise tax under section 4999 of
the Code and the Participant shall be entitled to settle or

--------------------------------------------------------------------------------

 

contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

ARTICLE 8

 

Miscellaneous

 

8.1 No Mitigation: No benefit or payment payable hereunder shall be subject to
offset including, but not limited to, amounts in respect of any claims which the
Company may have against the Participant, provided, however, the amount payable
hereunder to any Participant shall be reduced by any amounts payable to such
Participant from the Company or any affiliate pursuant to any other severance
plan or policy (including any employment agreement).

 

8.2 Legal Fees: The Company shall reimburse all costs and expenses, including
attorneys’ fees, of the Participant in connection with any legal proceedings
relating to the Plan, any plan listed on Appendix D, or any successor plans;
provided, however, the Company shall not reimburse such costs and expenses for
the Participant if (a) prior to the initiation of any proceedings by the
Participant, such Participant fails to specify in writing all claims relating to
the Plan, any plan listed on Appendix D, or any successor plans and to provide
the Committee with thirty (30) days to address such claims, or (b) the judge or
other individual presiding over the proceedings affirmatively finds that (i) the
Participant did not initiate such proceedings in good faith, or (ii) the
Participant violated the terms of the Waiver and Release required under section
5.2 hereof or the Waiver and General Release required under section 6.5 hereof.

 

8.3 Successors: If the Company shall be merged into or consolidated with another
entity, the provisions of this Plan shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and agree to perform the duties set forth hereunder in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place (including but not limited to section 8.7 hereof).

 

8.4 Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or the Committee, the members of the Board and
the Committee shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment based upon a finding
that such member was not acting in good faith on the reasonable belief that he
or she was acting in the best interests of the Company; provided that upon the
institution of any such action, suit or proceeding, a Committee or Board member
shall, in writing, give the Company notice thereof and an opportunity, at its
own expense, to handle and defend the same before such Committee or Board member
undertakes to handle and defend it on such member’s own behalf.

--------------------------------------------------------------------------------

8.5 Amendments: The Board or the Committee may at any time, or from time to
time, amend the Plan in whole or in part or amend it in such respects as the
Board or the Committee may deem appropriate; provided, however, that no
amendment to the Plan (including the waiver and release agreements provided in
sections 5.2 and 6.5 hereof) shall, without the affected Participant’s written
consent, impose any obligations on the Participant or impair any rights or
obligations hereunder except as provided in section 4.3 hereof.

 

8.6 Plan Expenses: Any expenses of administering the Plan shall be borne by the
Company.

 

8.7 Survival: Notwithstanding any provision in the Plan to the contrary, the
obligations hereunder to the Participants which arise due to an Anticipatory
Change in Control or a Change in Control shall survive any termination of the
Plan and shall be binding upon the Company.

 

8.8 Notice: All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given when actually
delivered, or five (5) days after deposit in the United States mail, certified
and return receipt requested, for delivery to

 

  (a) the Committee at Allmerica Financial, 440 Lincoln Street, Worcester, MA
01653; or

 

  (b) the Participant at the last known address specified in the Company’s
records.

 

Any notice required to come from the Committee shall be deemed to be satisfied
by a notice from an authorized officer of the Company following approval by the
Committee of the action described in such notice.

 

8.9 Governing Law: The validity, construction and effect to the Plan and any
actions taken under or relating to the Plan shall be determined in accordance
with the laws of the State of Delaware.

--------------------------------------------------------------------------------

APPENDIX A

--------------------------------------------------------------------------------

APPENDIX B

 

Waiver and Release

 

In exchange for the benefits and payments offered to me by Allmerica Financial
Corporation as set forth in section 5.1 of The Allmerica Financial Corporation
Employment Continuity Plan (the “Plan”), I hereby release Allmerica Financial
Corporation and all of its past and/or present divisions, affiliates,
subsidiaries, officers, directors, stockholders, trustees, employees, agents,
representatives, administrators, attorneys, insurers, fiduciaries, successors
and assigns, in their individual and/or representative capacities (the
“Company”) from any and all causes of action, suits, agreements, promises,
damages, disputes, controversies, contentions, differences, judgments, claims
and demands of any kind whatsoever which I or my heirs, executors,
administrators, successors and assigns ever had, now have or may have against
the Company, whether known or unknown to me, under the Allmerica Financial
Corporation Long-Term Stock Incentive Plan and any successor(s) to such plans,
but only with respect to shares of common stock, stock options or stock
appreciation rights “cashed out” pursuant to Section 5.1 of the Plan (“Stock
Rights”).

 

I represent that I have not filed, and will not hereafter file, any claim
against the Company relating to such Stock Rights.

 

I understand and agree that if

 

(i) I commence, continue, join in, or in any other manner attempt to assert any
claim released herein against the Company, or otherwise violate the terms of
this Waiver and Release;

 

(ii) without prior written consent from the Company, I disclose to any other
person or entity any non-public information concerning the Company’s financial
data, strategic business plans, product development (or other proprietary
product data), customer lists, marketing plans and other proprietary
information, except for specific items which have become publicly available
information other than through a breach by me of my fiduciary duties to the
Company or which cannot reasonably be expected to adversely affect the business
of the Company, unless required to do so by a court of competent jurisdiction or
other governmental authority with purported or apparent jurisdiction;

 

(iii) I, directly or indirectly, hire, recruit, solicit or induce, attempt to
hire, recruit, solicit or induce, or assist or encourage a third party to hire,
recruit, solicit or induce, any person who was employed by the Company
(including any of its affiliates, as determined at the time of such termination)
at the time of my termination of employment, to terminate his or her employment
with the Company (or any of such affiliates) during [for Category 1 and Category
2 Participants, “the two year period” and for Category 3 Participants, “the one
year period”] commencing on the date of my termination of employment, or, during
such [one][two] year period, I otherwise recommend for employment or interfere
in any way with the Company’s relationship with any such employee; or

 

(iv)

I violate the terms of any non-solicitation agreement between myself and the
Company, including, without limitation, the agreement referred to in the
definition of “Participant”,

--------------------------------------------------------------------------------

 

which agreement I hereby reaffirm as of the date hereof and represent and
warrant is fully enforceable and I waive any claim that such agreement is not
enforceable in any respect;

 

the Company shall have the right to the return of the benefits and payments paid
to me by the Company under section 5.1 of the Plan (together with interest
thereon at the rate of six (6) percent per annum from the date of receipt by me
to the date of payment by me). Notwithstanding the foregoing, in no event shall
this Waiver and Release be construed to waive or release any rights I may have
to be indemnified under the Company’s Charter, By-Laws, other agreements or
documents or statutory provisions providing such indemnification.

 

I understand and agree that I shall notify the Company in writing, as soon as
practicable, of any claim by the Internal Revenue Service that, if successful,
would result in the imposition of the excise tax under section 4999 of the Code.
I further understand and agree that if the Company notifies me in writing that
it desires to contest such claim, I shall cooperate in all reasonable ways with
the Company in accordance with the provisions of section 7.5 of the Plan.

 

IN WITNESS WHEREOF, the Company has caused this Waiver and Release to be
executed by a duly authorized officer of the Company and I have executed this
Waiver and Release as of the date set forth below.

 

 

Name of Participant

 

Signature

 

Date

 

Allmerica Financial Corporation By:      

Title

 

Date

--------------------------------------------------------------------------------

APPENDIX C

 

Waiver and General Release

 

In exchange for the benefits and payments offered to me by Allmerica Financial
Corporation as set forth in The Allmerica Financial Corporation Employment
Continuity Plan (the “Plan”), I hereby release Allmerica Financial Corporation
and all of its past and/or present divisions, affiliates, subsidiaries,
officers, directors, stockholders, trustees, employees, agents, representatives,
administrators, attorneys, insurers, fiduciaries, successors and assigns, in
their individual and/or representative capacities (the “Company”) from any and
all causes of action, suits, agreements, promises, damages, disputes,
controversies, contentions, differences, judgments, claims and demands of any
kind whatsoever which I or my heirs, executors, administrators, successors and
assigns ever had, now have or may have against the Company, whether known or
unknown to me, by reason of my employment and/or cessation of employment with
the Company or otherwise involving facts relating to such employment which
occurred on or prior to the date that I have signed this Release, including
without limitation all claims under Title VII of the Civil Rights Act of 1964,
the Age Discrimination in Employment Act of 1967, the Reconstruction Era Civil
Rights Act, the Civil Rights Act of 1991, the Fair Labor Standards Act, the
Employee Retirement Income Security Act, the Americans with Disabilities Act,
the Family and Medical Leave Act of 1993, and any and all other federal, state
and local laws, statutes, rules and regulations pertaining to employment, as
well as any and all claims under state contract or tort law.

 

I represent that I have not filed, and will not hereafter file, any claim
against the Company relating to my employment and/or cessation of employment
with the Company, or otherwise specified above involving facts which occurred on
or prior to the date that I have signed this Waiver and General Release.

 

I understand and agree that if

 

(i) I commence, continue, join in, or in any other manner attempt to assert any
claim released herein against the Company, or otherwise violate the terms of
this Waiver and General Release,

 

(ii) without prior written consent from the Company, I disclose to any other
person or entity any non-public information concerning the Company’s financial
data, strategic business plans, product development (or other proprietary
product data), customer lists, marketing plans and other proprietary
information, except for specific items which have become publicly available
information other than through a breach by me of my fiduciary duties to the
Company or which cannot reasonably be expected to adversely affect the business
of the Company, unless required to do so by a court of competent jurisdiction or
other governmental authority with purported or apparent jurisdiction;

 

(iii)

I, directly or indirectly, hire, recruit, solicit or induce, attempt to hire,
recruit, solicit or induce, or assist or encourage a third party to hire,
recruit, solicit or induce, any person who was employed by the Company
(including any of its affiliates, as determined at the time of such termination)
at the time of my termination of employment, to terminate his or her employment
with the Company (or any of such affiliates) during [for Category 1 and

--------------------------------------------------------------------------------

 

Category 2 Participants, “the two year period” and for Category 3 Participants,
“the one year period”] commencing on the date of my termination of employment,
or, during such [one][two] year period, I otherwise recommend for employment or
interfere in any way with the Company’s relationship with any such employee; or

 

(iv) I violate the terms of any non-solicitation agreement between myself and
the Company, including, without limitation, the agreement referred to in the
definition of “Participant”, which agreement I hereby reaffirm as of the date
hereof and represent and warrant is fully enforceable and I waive any claim that
such agreement is not enforceable in any respect;

 

the Company shall have the right to the return of the benefits and payments paid
to me by the Company under the Plan (together with interest thereon at the rate
of six (6) percent per annum from the date of receipt by me to the date of
payment by me).

 

Notwithstanding the foregoing, in no event shall this Waiver and Release be
construed to waive or release any rights I may have to be indemnified under the
Company’s Charter, By-Laws, other agreements or documents or statutory
provisions providing such indemnification.

 

I also agree to respond to questions and/or inquiries and provide other
information concerning matters that were within the ambit of my responsibilities
during my employment with the Company. It is anticipated that most matters will
be addressed through phone calls and/or e-mails.

 

I understand and agree that I shall notify the Company in writing, as soon as
practicable, of any claim by the Internal Revenue Service that, if successful,
would result in the imposition of the excise tax under section 4999 of the Code.
I further understand and agree that if the Company notifies me in writing that
it desires to contest such claim, I shall cooperate in all reasonable ways with
the Company in accordance with the provisions of section 7.5 of the Plan.

 

I have read this Waiver and General Release carefully, have been given at least
21 days to consider all of its terms, have been advised to consult with an
attorney and any other advisors of my choice, and fully understand that by
signing below I am, to the extent provided herein, giving up any right which I
may have to sue or bring any other claims against the Company. I have not been
forced or pressured in any manner whatsoever to sign this Waiver and General
Release, and I agree to all of its terms voluntarily.

 

I understand that I have seven days from the date I have signed this Waiver and
General Release below to revoke this Waiver and General Release, that this
Waiver and General Release will not become effective until the 8th day following
the date that I have signed this Waiver and General Release, and that the
Company will have no obligation to pay me the benefits and payments under the
Plan as agreed unless this Waiver and General Release becomes effective.

 

I further understand that this Waiver and General Release is the complete and
exclusive statement of its terms and any waiver prior to the date of my
signature below with respect to the Plan shall be without further force or
effect on the effective date of this Waiver and General Release.

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company has caused this Waiver and General Release to be
executed by a duly authorized officer of the Company and I have executed this
Waiver and General Release as of the date set forth below.

 

 

Name of Participant

 

Signature

 

Date

 

Allmerica Financial Corporation By:      

Title

 

Date

--------------------------------------------------------------------------------

APPENDIX D

 

First Allmerica Financial Life Insurance Company Non-Qualified Executive
Deferred Compensation Plan

 

Allmerica Financial Non-Qualified Savings Retirement Plan

 

First Allmerica Financial Life Insurance Company Excess Benefit Retirement Plan

 

First Allmerica Financial Life Insurance Company individual deferred
compensation agreements