Exhibit 10.1
TERMINATION AND RELEASE AGREEMENT
This Termination and Release Agreement (this "Agreement") is entered into
as of August 27, 2003 by and among W. Xxxx Xxxxxx (the "Executive"), FleetBoston
Financial Corporation, a Rhode Island corporation ("FleetBoston"), Fleet
National Bank, a wholly owned subsidiary of FleetBoston ("Fleet National Bank"),
Progress Financial Corporation, a Delaware corporation ("Progress"), and
Progress Bank, a wholly owned subsidiary of Progress ("Progress Bank").
RECITALS
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WHEREAS, FleetBoston and Progress have entered into an Agreement and Plan
of Merger, dated as of August 27, 2003 (the "Merger Agreement"); and
WHEREAS, Section 6.6(e) of the Merger Agreement provides that FleetBoston,
Fleet National Bank, Progress, Progress Bank and the Executive shall enter into
this Agreement which shall terminate (1) the Employment Agreement between the
Executive and Progress dated June 30, 2003 (the "Progress Employment
Agreement"), and (2) the Employment Agreement between the Executive and Progress
Bank dated June 30, 2003 (the "Progress Bank Employment Agreement"), as of the
Effective Time of the Merger, and in lieu of any rights and payments under the
Progress Employment Agreement and the Progress Bank Employment Agreement, the
Executive shall be entitled to the rights and payments set forth herein.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Executive, FleetBoston, Fleet National Bank, Progress and
Progress Bank agree as follows:
1. Certain Actions to Be Taken in 2003.
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(a) The Executive hereby agrees to take the following actions between the
date hereof and December 31, 2003, it being the intention of the parties hereto
that all of such actions shall be fully effective and consummated no later than
December 31, 2003:
(i) exercise all vested non-qualified stock options granted to the
Executive under Progress's 1993 Stock Incentive Plan and 2000 Incentive Stock
Option Plan (the "Option Plans"), including non-qualified stock options
scheduled to vest prior to December 31, 2003 (i.e., all vested non-qualified
options under either plan to be exercised);
(ii) both (A) exercise all vested incentive stock options granted to the
Executive under the Option Plans (including incentive stock options scheduled to
vest prior to December 31, 2003) and (B) effect a sale of the shares of Progress
common stock acquired upon such exercise in a manner that will constitute a
"disqualifying disposition" of such shares for purposes of Section 421(b) of the
Code (i.e., all vested incentive options under either plan to be exercised, with
the underlying shares sold); and
(iii) accept payment on December 31, 2003 of any cash bonus to which the
Executive may be entitled to receive pursuant to Progress's Bonus Plan for
services rendered in 2003 and
which otherwise would be payable in the ordinary course by Progress or Progress
Bank to the Executive in 2004.
(b) Progress and Progress Bank agree to take such actions as may be
necessary or advisable by them in order to permit the Executive to take the
actions set forth in Section 1(a) above and have them be fully effective and
consummated no later than December 31, 2003, including without limitation (i)
promptly processing all exercises of stock options by the Executive under the
Option Plans, and (ii) accelerating to December 31, 2003 the payment of any cash
bonus to which the Executive may be entitled to receive pursuant to Progress's
Bonus Plan for services rendered in 2003.
2. Acknowledgement of Payment; Termination of Employment Agreements.
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(a) At the Effective Time of the Merger, provided the Executive is still
employed by Progress and Progress Bank immediately prior to such date and makes
the representations referenced in Section 2(c) hereto, Progress and/or Progress
Bank shall pay to the Executive an amount equal to (i) Five Million Two Hundred
Seventy Thousand Four Hundred Twenty-Seven Dollars ($5,270,427.00), subject to
adjustment as set forth in Section 2(b) below (the "Maximum Amount"), minus (ii)
the parachute amounts associated with (A) the accelerated vesting of the
Executive's unvested stock options under the Option Plans and (B) the
accelerated payment of the bonus for services rendered in 2003, as calculated in
accordance with Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), with applicable withholding taxes to be subtracted from the amount
payable to the Executive. In consideration of such payment and the other
provisions of this Agreement, the Executive, Progress, Progress Bank,
FleetBoston and Fleet National Bank hereby agree that, except as provided in
Section 3 below, the Progress Employment Agreement and the Progress Bank
Employment Agreement shall be terminated without any further action of any
parties hereto, effective immediately prior to the Effective Time of the Merger.
(b) If the payment pursuant to Section 2(a) hereof, either alone or
together with other payments and benefits which the Executive has received or
has the right to receive from Progress, Progress Bank, FleetBoston or Fleet
National Bank (but excluding amounts payable pursuant to the Employment
Agreement of even date being entered into between Fleet National Bank and the
Executive for services to be rendered after the Effective Time), would
constitute a "parachute payment" under Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), including but not limited to the parachute
payments associated with the accelerated vesting of stock options, then the
amount payable by Progress and/or Progress Bank pursuant to Section 2(a) hereof
shall be reduced by the amount which is the minimum necessary to result in no
portion of the payment payable by Progress and/or Progress Bank under Section
2(a) being non-deductible to Progress and/or Progress Bank (or any successors
thereto) pursuant to Section 280G of the Code and subject to the excise tax
imposed under Section 4999 of the Code. The parties hereto agree that the
present value of the payments and benefits payable pursuant to this Agreement to
the Executive upon termination of the Executive's employment pursuant to Section
2(a) shall not exceed three times the Executive's "base amount," as that term is
defined in Section 280G(b)(3) of the Code, less one dollar. The determination of
any reduction in the payment to be made pursuant to Section 2(a) shall be based
upon an analysis prepared by Elias,
Matz, Xxxxxxx & Xxxxxxx L.L.P. ("EMTH") and paid for by Progress and/or Progress
Bank. EMTH shall provide its analysis no later than five (5) days prior to the
Effective Time of the Merger, and may use such actuaries as it may deem
necessary or advisable for the purpose.
(c) At the same time as EMTH provides its analysis pursuant to the last two
sentences of Section 2(b) above regarding any reduction in the payment to be
made pursuant to Section 2(a), the Executive shall represent and warrant, in
writing addressed to Progress, Progress Bank, FleetBoston and Fleet National
Bank, that (i) the amounts set forth on such analysis are complete and accurate
and reflect the amounts of the actual payments to which he is entitled pursuant
to the terms of the Progress Employment Agreement and the Progress Bank
Employment Agreement in the event of a "change in control" of Progress and/or
Progress Bank and (ii) the base amount (as defined in Section 280G(b)(3) of the
Code) used in EMTH's analysis is complete, accurate and calculated in accordance
with Section 280G(b)(3) and the regulations promulgated thereunder. Such
representation and warranty shall be made part of this Agreement and shall be
attached as an exhibit hereto.
3. Releases; Indemnification.
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(a) Upon payment of the amounts set forth in Section 2(a) hereof (as such
amount may be adjusted pursuant to Section 2(b) hereof), the Executive, for
himself and for his heirs, successors and assigns, does hereby release
completely and forever discharge Progress, Progress Bank and their successors
from any obligation under the Progress Employment Agreement and the Progress
Bank Employment Agreement, provided that, notwithstanding the foregoing, the
Executive does not hereby release Progress, Progress Bank and their successors
from any obligation to the Executive under Sections 6(b) and 6(c) of the
Progress Employment Agreement with respect to payments by them to the Executive,
which the parties hereto agree shall remain in full force and effect.
(b) For and in consideration of the commitments made herein by the
Executive, each of Progress and Progress Bank for itself, and for its successors
and assigns, does hereby release completely and forever discharge the Executive
and his heirs, successors and assigns, to the fullest extent permitted by
applicable law, from any obligation under the Progress Employment Agreement and
the Progress Bank Employment Agreement.
(c) In the event that (i) any representations and warranties made by the
Executive in Section 2 hereof are subsequently determined to be incorrect,
inaccurate or false and (ii) as a result of such inaccuracy a payment to the
Executive pursuant to this Agreement is determined by a final judicial
adjudication or a final administrative settlement to constitute an "excess
parachute payment" as defined in Section 280G(b)(2) of the Code, then the
Executive shall pay to Fleet Boston or Fleet National Bank an amount (the
"Adjustment Amount") that shall put the parties hereto in the same position they
would have been in if the representation and warranty has been true, complete
and accurate. In determining the Adjustment Amount, the independent tax counsel
or accountants of FleetBoston shall take into account any and all penalties and
interest incurred by Progress, Progress Bank, FleetBoston or Fleet National Bank
as a result of the falseness, incompleteness, inaccuracy of such representation
and warranty.
4. General.
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(a) Heirs, Successors and Assigns. The terms of this Agreement shall be
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binding upon the parties hereto and their respective heirs, successors and
assigns.
(b) Final Agreement. This Agreement represents the entire understanding
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of the parties with respect to the subject matter hereof and supersedes all
prior understandings, written or oral. The terms of this Agreement may be
changed, modified or discharged only by an instrument in writing signed by each
of the parties hereto.
(c) Governing Law. This Agreement shall be construed, enforced and
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interpreted in accordance with and governed by the laws of the Commonwealth of
Pennsylvania, without reference to its principles of conflicts of law, except to
the extent that federal law shall be deemed to preempt such state laws.
(d) Defined Terms. Any capitalized terms not defined in this Agreement
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shall have as their meaning the definitions contained in the Merger Agreement.
(e) Voluntary Action and Waiver. The Executive acknowledges that by his
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free and voluntary act of signing below, the Executive agrees to all of the
terms of this Agreement and intends to be legally bound thereby. The Executive
acknowledges that he has been advised to consult with an attorney prior to
executing this Agreement.
5. Effectiveness. Notwithstanding anything to the contrary contained
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herein, this Agreement shall be subject to consummation of the Merger in
accordance with the terms of the Merger Agreement, as the same may be amended by
the parties thereto in accordance with its terms. In the event the Merger
Agreement is terminated for any reason, this Agreement shall be deemed null and
void.
6. Survival. All representations, warranties, covenants and agreements
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contained in this Agreement shall survive the Effective Time of the Merger.
[Signature Page Follows]
IN WITNESS WHEREOF, Progress, Progress Bank, FleetBoston and Fleet National
Bank have each caused this Agreement to be executed by their duly authorized
officers, and the Executive has signed this Agreement, effective as of the date
first above written.
WITNESS: EXECUTIVE:
/s/ Xxxx X. Xxxxxx /s/ W. Xxxx Xxxxxx
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Name: Xxxx X. Xxxxxx Name: W. Xxxx Xxxxxx
Title: President and Chief Executive
Officer
ATTEST: PROGRESS FINANCIAL CORPORATION
/s/ Xxxx X. Xxxxxx By:/s/ Xxxxxxx X. High
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Name: Xxxx X. Xxxxxx Name: Xxxxxxx X. High
Title: Chief Operating Officer and
Chief Financial Officer
ATTEST: PROGRESS BANK
/s/ Xxxx X. Xxxxxx By:/s/ Xxxxxxx X. High
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Name: Xxxx X. Xxxxxx Name: Xxxxxxx X. High
Title: Chief Operating Officer and
Chief Financial Officer
ATTEST: FLEETBOSTON FINANCIAL CORPORATION
/s/ Xxxxxx X. Xxxxxxxx By:/s/ Xxxxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxxx X. Xxxxxxxx
Title: Senior Vice President
ATTEST: FLEET NATIONAL BANK
/s/ Xxxxxx X. Xxxxxxxx By:/s/ Xxxxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxxx X. Xxxxxxxx
Title: Senior Vice President
