(LOGO OF NORTHEAST SAVINGS APPEARS HERE)
January 1, 1994
Mr. George P. Rutland
83 Stagecoach Road
Avon, CT 06001
Dear Mr. Rutland:
The Boards of Directors (collectively, the "Board") of Northeast Federal
Corp. and Northeast Savings, F.A. (collectively, "Northeast") desire to enter
into an agreement with you concerning certain of the terms and conditions of
your continued employment with Northeast.
Northeast agrees to employ you, and you hereby agree to serve in the
capacity and with the titles set forth below until December 31, 1997 (the
"employment term"), provided your employment is not terminated due to your
death, or for Cause or due to your Disability or Retirement (as such capitalized
terms are hereinafter defined).
You shall serve as Chairman of the Board and a Director of Northeast
through December 31, 1994. Thereafter, commencing January 1, 1995 and for the
remainder of the employment term, you shall serve as an Officer in charge of
West Coast operations, the title of such position to be mutually determined
prior to your assuming such position. Any terms and conditions of employment
not specifically mentioned in this letter agreement will be governed by the
usual personnel policies and practices as they relate to other senior officers
of Northeast, and you shall be eligible for such fringe benefits as are such
other senior officers. During the employment term, you shall be eligible to
participate in the stock option plans listed in the attached Exhibit A in
accordance with the terms of such plans. In addition, you shall be entitled to
the benefits outlined in Exhibit A; provided that, throughout the employment
term, the levels of such benefits provided to you thereunder (other than any
such benefits provided pursuant to a tax-qualified retirement plan, which shall
be governed by such plan) shall be commensurate with the levels in effect as of
December 31, 1993 based on your salary and position as of such date.
During the employment term, your base salary shall be as follows: for the
1994 calendar year, $350,000; for the 1995 calendar year, $250,000; for the 1996
calendar year, $200,000; and for the 1997 calendar year, $150,000.
Additionally, your base salary in 1994 and 1995 shall be increased to include an
additional amount which, after providing for all applicable income taxes, will
provide $31,994 to pay the annual premium cost of a special life insurance
policy. In addition to paying your base salary and other compensation and
providing you with employee and fringe benefits, Northeast shall provide you
with a leased automobile of your choosing, at its expense, during the employment
term.
If during the employment term your employment with Northeast is terminated
by Northeast other than for Cause or due to your Disability, you shall be
provided with (1) a lump sum severance payment equal to the greater of (i) the
payments due pursuant to this Agreement for the remaining employment term, or
(ii) one (1) year's base salary, at the rate in effect on the date of your
termination pursuant to this paragraph; (2) life, disability, accident, medical
and dental insurance benefits substantially similar to those which you are
receiving immediately prior to your receipt of the Notice of Termination as the
same are set forth in the attached Exhibit A, and continuing for a period of the
greater of one (1) year or the
Mr. George P. Rutland
January 1, 1994
Page 2
remainder of the employment term; and (3) directors' and officers' liability
insurance, specifically naming you as an insured, with coverage (including
deductibles) at least as favorable as that in effect immediately prior to your
receipt of the Notice of Termination and comparable prior acts ("tail") coverage
for a period of ten (10) years following your date of termination, or such
lesser period as you shall agree to in writing. The benefit specified in (3)
hereof shall also apply in the event of your Retirement upon completion of your
employment term or prior thereto with the consent of Northeast. In addition,
subsequent to your termination pursuant to this paragraph, Northeast shall
arrange to provide you and your spouse with medical, dental and supplemental
medical benefits substantially similar to those which you and your spouse are
receiving immediately prior to such termination, such medical, dental and
supplemental medical benefits to be provided until the later of you and your
spouse's death or December 31, 1997. Any such medical or dental benefits
provided under this Agreement shall be secondary to any benefits to which you or
your spouse may be entitled under the federal Social Security Act.
For purposes of this Agreement, Disability shall occur if, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from your duties with Northeast on a full-time basis for six (6) consecutive
months and a finding is made by the Board that you are unable to perform the
essential functions or material duties of your position with Northeast, with or
without reasonable accommodation. Termination for Disability shall occur if,
within thirty (30) days after written notice of such finding and Northeast's
decision to terminate your employment (the "Notice of Termination", as defined
below) is given, you shall not have returned to the full-time performance of
your duties. "Retirement" shall mean termination in accordance with Northeast's
retirement policy, including early retirement, generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
Termination for Cause shall mean termination because of your engaging
willfully in conduct which is demonstrably and materially injurious to
Northeast, monetarily or otherwise, your dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, willful failure
to perform stated duties (other than such failure resulting from your incapacity
due to physical or mental illness or any such actual or anticipated failure
resulting from your termination for Good Reason), violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or a final cease-
and-desist order of the Office of Thrift Supervision or the Federal Deposit
Insurance Corporation. For purposes of this Agreement, no act, or failure to
act, on your part shall be considered "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your action or
omission was in the best interest of Northeast. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for that purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you engaged in conduct set forth above and specifying the particulars
thereof in detail.
Mr. George P. Rutland
January 1, 1994
Page 3
Your termination of your employment for "Good Reason" as hereinafter set
forth shall be deemed termination by Northeast other than for Cause under this
Agreement. "Good Reason" shall, without your express written consent, mean:
1. the assignment to you of any duties inconsistent with your position
with Northeast during the employment term, as more particularly
described above, or a substantial alteration in the nature or status
of your responsibilities other than any such alterations primarily
attributable to the fact that Northeast may no longer be a public
company;
2. a reduction by Northeast in your annual base salary, as specified
above in this Agreement, except for across-to-board salary reductions
similarly affecting all executives of Northeast and all executives of
any person in control of Northeast;
3. the failure by Northeast to continue in effect, or to continue your
participation in, any stock option plan in which you may be
participating at the time of execution of this Agreement, as such
plans are more particularly described in the attached Exhibit A,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to you under such plan;
4. the failure by Northeast to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Northeast's
pension, life insurance, medical, health and accident, or disability
plans in which you may be participating at the time of execution of
this Agreement, as such benefits are listed in the attached Exhibit A,
the taking of any action by Northeast which would directly or
indirectly materially reduce any of such benefits or deprive you of
any material fringe benefit enjoyed by you, or the failure by
Northeast to provide you with the four (4) weeks of paid vacation to
which you are entitled; or
5. any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements as set
forth above. For purposes of this Agreement, no such purported
termination shall be effective.
Your right to terminate your employment for Good Reason shall not be
affected by your incapacity due to physical or mental illness.
During the employment term, any purported termination of your employment
hereunder by Northeast or by you shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice given within the appropriate period
specified below which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated. The required period for Notice of Termination
shall be as follows: (A) if your employment is terminated due to Disability or
for Cause, thirty (30) days; (B) if your employment is terminated for Good
Reason, sixty (60) days; and (C) if your employment is terminated for any other
reason, the time period specified in the Notice of Termination.
Mr. George P. Rutland
January 1, 1994
Page 4
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to
Northeast shall be directed to the attention of the Board with a copy to the
Secretary of Northeast, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If within thirty (30) days after any Notice of Termination is given, the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination and if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence, Northeast will continue to pay your compensation as
provided for in this Agreement (including, but not limited to, base salary) and
will continue you as a participant in all compensation, benefit and insurance
plans in which you were participating when the notice giving rise to the dispute
was given, until the earlier of (1) the end of the employment term, or (2) the
date the dispute is finally resolved, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
After the employment term, you may terminate your employment upon
reasonable notice, and Northeast may terminate your employment for Cause or for
reasons other than for Cause upon reasonable notice. In addition to any other
benefits you are entitled to after the employment term, Northeast shall arrange
to provide you and your spouse with medical, dental and supplemental medical
benefits substantially similar to those you and your spouse are receiving on
January 1, 1994, such medical, dental and supplemental medical benefits to be
provided until the later of you and your spouse's deaths. Any such medical,
dental or supplemental medical benefits provided under this Agreement shall be
secondary to any benefits to which you or your spouse may be entitled under the
Federal Social Security Act.
Acceptance of severance payments pursuant to this Agreement shall release
and forever discharge Northeast and its subsidiaries from each and every claim,
demand, action, cause of action, damage award, expense, cost, claim for
attorneys' fees, or liability of any kind whatsoever, whether known or unknown,
vested or contingent, in law, equity or otherwise, which you then have, have
ever had or may thereafter have against Northeast or any of its subsidiaries.
As a condition to Northeast's obligation to make severance payments to you
hereunder, you agree to execute and deliver to Northeast such additional release
as Northeast shall request at such time.
Should you be entitled to and elect to accept payments from Northeast
pursuant to rights acquired by you which follow a "change in control of
Northeast" as defined in the Agreement between Northeast and you dated January
1, 1994 (the "Change in Control Agreement") granting such rights, such payments
shall be in lieu of payments required pursuant to this Agreement and any and all
rights granted you under this Agreement shall terminate and this Agreement shall
be null and void. When and if you are entitled to rights under this and any
other agreement requiring severance payments to you by Northeast, Northeast may
require you to terminate such other agreement as a condition to its obligation
to make any payments or any further payments under this Agreement.
Should you become entitled to a severance payment under this Agreement or
to any other payments or benefits received or to be received by you under any
other plan, arrangement or agreement
Mr. George P. Rutland
January 1, 1994
Page 5
(the "Total Payments") and should any part or all of the Total Payments be
deemed contingent on a change in ownership or control of Northeast, as
determined under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), you shall be entitled to be paid by Northeast an additional amount
such that the net amount retained by you, after deduction of any federal excise
tax imposed pursuant to Section 4999 of the Code (the "Excise Tax") on the Total
Payments and any federal or state income tax and Excise Tax upon the payment
provided for by this paragraph shall be equal to the Total Payments. The
parties agree that the applicability of said Section 280G hereunder and any
calculations to be made pursuant to this paragraph shall be made by an
independent tax advisor chosen by Northeast which may include Northeast's
independent accountants or benefits consultants, and shall be at Northeast's
expense. The parties further agree that they shall reasonably cooperate with
each other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the severance payments payable hereunder.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Hartford, Connecticut
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid following the date of termination during
the pendency of any dispute or controversy arising under or in connection with
this Agreement. Any arbitrator or arbitrators selected to resolve a dispute or
controversy hereunder shall have at least five (5) years of experience as an
attorney or benefits consultant specializing in employment or benefits matters.
The Board expects to include you in any annual Incentive Compensation Plan
which may be available to other senior officers.
This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or if there
is no such designee, to your estate.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by you
and such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Connecticut.
This Agreement shall be subject to and be deemed to include all of the
provisions of 12 C.F.R. Section 563.39 as amended from time to time, a copy of
which is enclosed as if the same were fully set forth herein. In addition, any
payments made to you pursuant to the terms of this Agreement, or otherwise, are
subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and
any regulation promulgated thereunder.
Mr. George P. Rutland
January 1, 1994
Page 6
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
This Agreement supersedes the Employment Agreement between Northeast and
you dated as of March 1, 1992, as amended by an Addendum dated as of July 9,
1993, which shall be void and of no effect on and after the date of execution of
this Agreement.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to Northeast the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
NORTHEAST SAVINGS, F.A.
By /s/ Kirk W. Walters
---------------------------------------
Kirk W. Walters
Chief Executive Officer, President, Chief
Operating Officer, and Chief Financial
Officer
NORTHEAST FEDERAL CORP.
By /s/ Kirk W. Walters
---------------------------------------
Kirk W. Walters
Chief Executive Officer, President, Chief
Operating Officer, and Chief Financial
Officer
ACCEPTED AND AGREED TO
THIS 1st DAY OF
January, 1994:
/s/ George P. Rutland
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George P. Rutland
Exhibit A
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George P. Rutland
Option Plans
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1. 1993 Stock Option Plan
2. 1986 Stock Option Plan
3. 1983 Stock Option Plan
Benefits
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1. Long Term Disability Income Plan
2. Executive Disability Plan
3. Group Life, Accidental Death and
Dismemberment
4. Executive Life Insurance
5. Optional Life Insurance
6. Supplemental Medical Reimbursement Plan
7. 1993 Deferred Compensation Plan
for Key Executives
8. Thrift and Profit Sharing Plan
9. Employee Stock Ownership Plan
10. Cash Balance Retirement Plan
11. Medical Insurance Plan
12. Dental Insurance Plan