Exhibit 10.16
AGREEMENT
This Agreement is made as of this 15 day of July, 1998, by and between
First Essex Bank, FSB (the "Bank"), a corporation with a principal place of
business in Lawrence, Massachusetts, and Xxxxx X. Xxxxxx, an individual residing
in Wilton, New Hampshire ("Employee").
1. Termination. Employee has voluntarily resigned his employment with and
any positions as an officer of, the Bank and/or any of its parents, affiliates
or subsidiaries (including without limitation First Essex Bancorp, Inc.
("Bancorp") (collectively, the "Bank Entities"), which resignation shall become
effective as of the earlier of (a) July 31, 1998, or (b) the resignation date
specified in a written notice which he delivers to the Bank (the "Termination
Date"). As of the Termination Date, Employee shall have no further duties and
responsibilities to the Bank Entities. Prior to the Termination Date, Employee
shall assist in transitioning his duties and responsibilities to his successor,
and shall carry out other duties and responsibilities as may be assigned to him
by the Bank. Consistent with the above obligations, Employee shall be free to
devote time and attention to preparing for his post-employment business
activities.
2. Compensation. Prior to the Termination Date, Employee will continue to
(1) receive his salary at the annual rate of $145,000.00 ("Base Salary"), minus
withholdings as required by law, which will be paid to Employee in accordance
with the Bank's usual payroll practices, (2) be reimbursed for all reasonable
expenses incurred by Employee in connection with his duties and responsibilities
prior to the Termination Date, subject to the terms of the Bank's expense
reimbursement policies, (3) participate in all benefit plans of the Bank for
which he is otherwise eligible in accordance with the terms of those plans,
except that Employee will not continue to accrue vacation after the date of this
Agreement, (4) continue to have use of his company automobile on the same terms
as he has previously enjoyed the use of it. Subject to his execution of this
agreement and to the provisions of paragraph 9 below, within fourteen (14) days
after the later of (1) the Termination Date, or (2) the expiration of the seven
(7) day revocation period provided for in paragraph 9 below, the Bank will pay
to Employee a lump sum equal to the amount of his Base Salary that would have
been paid to him during the period commencing on the Termination Date and ending
on December 31, 1998 (the "Severance Pay"), minus withholdings as required by
law. On the Termination Date, Employee will also be offered the opportunity to
purchase his company car at net book value as reflected on the books of the Bank
as of the Termination Date. Employee will receive separate notification of his
right under COBRA to continue his participation in the Bank's group health
insurance plans, on the same basis that he enjoyed such coverage prior to his
termination. If Employee elects such coverage, he will be required to pay the
full premium cost of such COBRA coverage.
3. Stock options. Employee has been granted certain unvested incentive
stock options and nonqualified stock options pursuant to the First Essex
Bancorp, Inc. 1987 and 1997 Stock Option Plans as set forth in the attached
Schedule 1. The Bank agrees to take the appropriate corporate action sot hat on
the Termination Date, Employee shall be 100 percent vested in all
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stock options. The parties understand that as a result of the immediate vesting
of Employee's incentive stock options, the previously unvested incentive stock
options shall be converted to nonqualified stock options, which options shall be
exercisable only for cash. Notwithstanding any provisions of the 1987 and 1997
Stock Option Plans to the contrary, Employee shall have three (3) months from
the Termination Date to exercise all stock options, after which time all such
stock options shall expire.
The Bank agrees that it will reimburse Employee for one-half (1/2) of the
incremental grossed up tax cost incurred by Employee as a result of Employee's
exercise of options which were granted as incentive stock options but became
nonqualified stock options because of accelerated vesting pursuant to the
preceding paragraph (the "Option Reimbursement"). For purposes of determining
the Option Reimbursement, the parties will assume that for federal income tax
purposes, the excess of the fair market value of shares received over the
exercise price of nonqualified stock options is taxed at the time of exercise at
a rate of thirty-nine and six tenths percent (39.6%) and that the incentive
stock options which are converted to nonqualified stock options under Section
4.5 would have been held following exercise for a sufficient period so that the
gain thereupon would have been taxable at a twenty percent (20%) rate. For
purposes of calculating the gain to be taxed at twenty percent (20%), the price
per share of Bancorp stock on the Termination Date shall be utilized. The Option
Reimbursement shall be determined by first calculating the difference between
the federal and state income taxes that would have been paid if the nonvested
incentive stock options had been taxed at the twenty percent (20%) rate as
described above versus the federal and state income tax attributable to the same
options when the options are converted to nonqualified options and exercised by
the Employee under Section 3 of this Agreement. Fifty percent (50%) of this
figure shall then be grossed-up so as to take into account the payment of
federal and state income tax by the Bank. This is the value of the Option
Reimbursement, which shall be determined by the Bank and communicated to
Employee as of the Termination Date. If Employee agrees with the Bank's
calculation, Employee shall be reimbursed with fourteen (14) days. If the
Employee objects to the Bank's calculation, Employee will provide written notice
to the Bank within the fourteen (14) day period. If the parties cannot resolve
the disagreement within fourteen (14) days, the parties shall select a certified
public accountant who shall determine the appropriate value of the
reimbursement.
4. Severance Payments. The Bank has heretofore made compensatory severance
payments to Employee by paying certain expenses Employee has incurred in
undertaking a new business. The parties agree that Bank will continue to pay or
reimburse Employee for such expenses up to a limit of $60,000.00. All such
payments shall be treated by Bank as compensation paid to Employee for
employment tax, withholding and reporting purposes. Bank agrees to make
additional compensatory payments to Employee so that Employee is made whole on
an after-tax basis (i.e., taking into account the payments made pursuant to this
sentence) for one-half of the federal (assuming a 39.6% tax rate) and state tax
that Employee incurs on the payments made pursuant to this paragraph 4. The
partial tax reimbursement described in the preceding sentence shall be subject
to procedures similar to those described in the last four sentences of paragraph
3 of this Separation Agreement.
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5. Confidential Information. Both before and after Employee's employment at
the Bank terminates, Employee will treat all proprietary or other confidential
information of the Bank Entities as strictly confidential, and will not disclose
or use any such information on his own behalf or on behalf of any other person
or entity.
6. Confidentiality of Agreement. Employee agrees to hold as secret and
confidential all details of this Agreement, except as required to seek legal
counsel, financial or tax advice. Specifically, Employee agrees not to discuss
any aspect of this Agreement with any employee or ex-employee of the Bank
Entities, or any other third parties (other than with immediate family or as
permitted above), without the Bank's prior, written authorization. Employee may,
however, disclose the agreement if required to do so by law.
7. Nondisparagement. Employee agrees that he will not at any time speak or
act in any manner that is intended to damage the good will, products or business
of the Bank Entities, including its officers, directors or employees, and that
he will not engage in any other deprecating or disparaging conduct or
communications with respect to the Bank Entities. After the Termination Date,
Employee shall not hold himself out as employed by or in any way affiliated with
the Bank Entities without their prior written permission.
8. General Release. In consideration of, and contingent upon, the Bank's
performance of the above, Employee, his heirs, successors, and assigns, hereby
remise, release and forever discharge the Bank Entities, their officers,
directors, agents, representatives and employees, parent companies, affiliates
and subsidiaries, from any and all debts, demands, actions, causes of action,
accounts, covenants, contracts, agreements, claims, damages, omissions,
promises, and any and all claims and liabilities whatsoever of every name and
nature, both in law and equity, including, without limitation, any and all
claims that Employee may have arising under the federal Age Discrimination in
Employment Act of 1967, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Americans With Disabilities Act, Mass. Gen. Laws ch. 151B, as
amended, and any other federal state or local statutes, regulations, ordinances
or common law, including, without limitation, any and all claims in connection
with or arising out of Employee's employment, or termination of his employment,
with the Bank Entities, which against the Bank Entities, their parent companies,
affiliates and subsidiaries, its officers, directors, agents, representatives
and employees, successors and assigns, Employee now has or ever had to the
present date. Employee acknowledges and agrees that the severance pay he is to
receive under this Agreement represents monies that he is not otherwise entitled
to receive from the Bank.
9. Consultation with Counsel; No Representations; Revocation. Employee
agrees and acknowledges that the Bank has advised him to obtain counsel in
connection with the negotiation, execution and tax consequences of this
Agreement, that he has had a full and complete opportunity to consult with
counsel of his own choosing concerning the terms, enforceability and tax or
other implications of this Agreement, and that the Bank has made no
representations or warranties to him concerning the terms, enforceability and
tax or other implications of this Agreement other than as are reflected in this
Agreement.
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10. Time for Signing; Revocation of Signature. Employee shall have
twenty-one (21) days from his receipt of this Agreement to consider whether to
sign this Agreement. Should he sign the Agreement, he shall have seven (7) days
thereafter to revoke his signature. The Bank's obligations under this Agreement
shall not mature until the expiration of the seven (7) day revocation period.
11. Entire Agreement. This Separation Agreement constitutes the entire
Agreement and understanding between Employee and the Bank and supersedes all
other agreements between them. This Agreement may be modified, altered or
amended only by a document signed by Employee and the Bank.
12. Governing Law; Choice of Forum. This is a Massachusetts contract and
shall be construed in accordance with, and governed in all respects by, the laws
of the Commonwealth of Massachusetts. All disputes arising out of, or in any way
related to, this Agreement shall be brought in courts located in the
Commonwealth of Massachusetts, and the parties hereby consent to jurisdiction in
such courts.
13. Indemnification. As a former employee of the Bank, Employee shall be
entitled to indemnification with respect to his acts or omissions as an employee
of the Bank on the terms and conditions set forth in the By-Laws of the Bank.
Signed under seal this 15 day of July, 1998.
EMPLOYEE FIRST ESSEX BANK, FSB
/s/ Xxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx By:
Title: President
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