311 Main Street, P.O. Box 15156
Worcester, MA 01615-0156
Telephone: (508) 926-3400
Facsimile: (508) 798-3537
mangelini@bowditch.com
Bowditch & Dewey, LLP
August 14, 2003
VIA ELECTRONIC MAIL
hartfordepps@comcast.net
Mr. Frederick Eppinger
Dear Fred:
On behalf of the Board of Directors of Allmerica, I am pleased to confirm
our offer that you become Allmerica's President and Chief Executive Officer. We
believe that the Company has great promise and that you are ideally suited to
take full advantage of that promise and we are delighted to welcome you back to
Central Massachusetts.
I have been authorized to propose a compensation package which we expect
you will find to be both fair and attractive. This has been developed in
consideration not only of your needs and expectations, but also in consideration
of compensation paid to other chief executive officers of competitive and larger
companies.
We propose that you join the Company under the following arrangements:
1. Base Compensation. Seven Hundred Fifty Thousand Dollars ($750,000) per
year, subject to adjustment effective April 1, 2004.
2. Performance Bonus. Targeted at one hundred twenty percent (120%) of
Base Compensation, based on meeting all performance goals, and up to
two hundred forty percent (240%) of Base Compensation based on meeting
all stretch goals, subject in each case to the terms of the Company's
Incentive Compensation Plan.
With respect to the 2003 calendar year, you will be guaranteed an
incentive compensation bonus of Four Hundred Thousand Dollars
($400,000), provided you are employed with Allmerica on the date in
March 2004 when incentive compensation bonuses are regularly paid.
While we have not refined target bonus considerations, they would be
based on factors such as profitability, combined ratios, ratings,
development of a strategic business plan, plan execution, stock price,
constituency relationships, management team building, community
relations, and the like.
3. Long-term Incentive. We would grant Three Hundred Thousand (300,000)
Allmerica non-qualified stock options in accordance with our Stock
Incentive Plan, with a strike price to be determined on the day of
your first day of employment. Our options vest at a rate of 25% on
each of the first two anniversaries of your employment date with the
balance vesting on the third anniversary thereof. You will be eligible
for consideration of an additional grant at or about the time of your
first anniversary of employment.
4. Clubs. We would pay for your annual membership fee in the Worcester
Club.
5. Severance. In the event of a Change in Control of the Company causing
termination of your employment, the Company would make a severance
payment to you in the amount of two times the sum of your then Base
Compensation and target bonus. In the event of the termination of your
employment by the Company without Cause, independent of a Change in
Control, the Company would pay severance equal to (a) if such
termination occurs within the first eighteen (18) months of your
employment date, two times the sum of your then Base Compensation and
target bonus, and (b) if such termination occurs at any time
thereafter, one times the sum of your then Base Compensation and
target bonus. In each event, these payments would be subject to you
providing a general release and confidentiality, non-solicitation and
non-competition arrangements as described on the Attached.
6. Relocation. The Company would pay for reasonable costs of relocation
for you and your family, including temporary accommodations for you,
pending your family's relocation. We encourage this relocation within
six months, and encourage you to relocate to the City of Worcester.
7. Sign-on Bonus and Stock Purchase Match. The Company would pay you
Three Hundred Thousand Dollars ($300,000) on the first day of your
employment as a sign-on bonus; provided, however, if you are not
actively employed by the Company for any reason on January 2, 2004,
that you pay back one-half of such sum within five (5) days of your
termination date.
In addition, to the extent you purchase shares of stock in the Company
at any time beginning on your employment date and ending thirty (30)
days thereafter, we will match such shares, on a one-to-one basis, up
to an additional expenditure on our part of Two Hundred Thousand
Dollars ($200,000).
8. Other. Our current plan is to announce your appointment on August 19,
2003, effective September 8, 2003, which would be your actual
employment date. This offer and your election as President and Chief
Executive Officer is subject to approval by the Board of Directors,
which I would solicit prior to the announcement date. We would also
plan to elect you as a director of the Company, effective with your
becoming President and Chief Executive Officer. We understand that
there are no impediments such as non-solicitation or non-competition
arrangements which would impede your ability to carry out your
contemplated responsibilities at Allmerica.
I look forward to working with you.
My best wishes.
Very truly yours,
/s/Michael P. Angelini
----------------------
Michael P. Angelini
MPA/sim
/s/ Frederick H. Eppinger, Jr.
- --------------------------------
Accepted and Agreed
August 17, 2003
ATTACHMENT
The terms "Cause" and "Change in Control" shall have the meanings assigned to
them in the Amended Stock Incentive Plan.
As a condition to employment, as well as for eligibility for severance as
described in paragraph 5 of the Offer Letter, you agree to the following
additional terms and conditions:
Confidentiality. Except in performance of services for the Company, you shall
not, either during the period of your employment with the Company or at any time
thereafter in any manner whatsoever, use for your own benefit or disclose to or
use for the benefit of any person outside the Company, any information
concerning any intellectual property, or other confidential or proprietary
information of the Company, whether you have such information in your memory or
embodied in writing or other tangible form. All originals and copies of any of
the foregoing, however and whenever produced, shall be the sole property of the
Company. Upon the termination of your employment in any manner or for any reason
whatsoever, you shall promptly surrender to the Company all copies of any of the
foregoing, together with any documents, materials, data, information and
equipment belonging to or relating to the Company's business and in your
possession, custody or control, and you shall not thereafter retain or deliver
to any other person any of the foregoing or any summary or memorandum thereof.
Non-Hire/Solicitation Agreement. You agree and covenant that you will not,
unless acting with the Company's express written consent, directly or
indirectly, during the term of your employment and for a period of two (2) years
thereafter, in any way, hire, solicit, entice away or interfere with the
Company's contractual relationships with; any customer, vendor or supplier,
client, agent, officer or employee of the Company, or in any way assist or
facilitate any person or entity in such action.
Non-Competition. For as long as you are employed by the Company, you may not in
any way, directly or indirectly, (a) render services of any kind to or be
otherwise employed by or associated with, or (except as a holder of a stock
interest not to exceed 1 percent in the securities of publicly held and traded
companies) interested in any person or entity which sells services or products
competitive with those offered by the Company; or (b) except on behalf of and
for the benefit of the Company, directly or indirectly and on behalf of any
other person or entity, engage in negotiations with, offer to sell products
through, or have financial dealings or relations or transactions with, any agent
or agency which sells property-casualty products of Allmerica Financial
Corporation, The Hanover Insurance Company, Citizens Insurance Company of
America (or any of their respective direct or indirect subsidiaries) or provide
assistance to any person to do any of the foregoing.
In addition, in the event you either are terminated with Cause, or you receive
and accept severance payments as provided in paragraph 5 of the Offer Letter,
you agree to be bound to the
"non-competition" provisions set forth above for a period of one (1) year from
the date of your termination.
If you violate any of the covenants or agreements under this Attachment, the
Company shall be entitled to (a) any remedies available from a court of law or
equity, including injunctive relief, and (b) an accounting and repayment of all
profits, compensation, remuneration, or other benefits that you directly or
indirectly realized and/or may realize as a result of, growing out of, or in
connection with, any such violation, as well as to recover any and all severance
payments previously made. These remedies shall be in addition to, and not in
limitation of, any other rights or remedies to which Company is or may be
entitled. If any part of any term or provision of this Attachment or Offer
Letter shall be held or deemed to be invalid, inoperative or unenforceable to
any extent by a court of competent jurisdiction, such circumstance shall in no
way affect any other term or provision of this Attachment or the Offer Letter,
the application of such term or provision in any other circumstances, or the
validity or enforceability of this Attachment or the Offer Letter; provided,
however, where practicable to bring effect to the provisions hereof, such court
shall modify the terms and provisions of this Offer Letter and Attachment to
make them effective to the maximum extent permitted by law. The validity,
constructions and effect of the Offer Letter (including this Attachment) and any
actions taken under or relating thereto shall be determined in accordance with
the laws of the Commonwealth of Massachusetts (without regard to conflicts of
law provisions). You and the Company each agree that in the event of any legal
actions relating to this Offer, your employment or the Offer Letter (including
this Attachment), venue shall be exclusively had in state or federal court
located in Worcester, Massachusetts.