(LOGO OF NORTHEAST SAVINGS APPEARS HERE)
January 1, 1994
Mr. Kirk W. Walters
56 Henley Way
Avon, CT 06001
Dear Mr. Walters:
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 as its Chief Executive Officer,
President, Chief Operating Officer and Chief Financial Officer. 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. You also shall be eligible to
participate in the stock option plans listed in the attached Exhibit A in
accordance with the terms of such plans and to receive the benefits outlined in
Exhibit A.
Northeast agrees to employ you, and you hereby agree to serve in the
capacity and with the titles set forth above 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).
During the employment term, your base salary will be that amount determined
annually by the Board, which amount in no event shall be less than $350,000.
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; provided, however, that the payments due
under this paragraph (1) shall in no event exceed 2.99 times base salary at the
rate in effect on the date of your termination; (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 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.
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
Mr. Kirk W. Walters
January 1, 1994
Page 2
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.
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-the-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
Mr. Kirk W. Walters
January 1, 1994
Page 3
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.
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.
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.
Mr. Kirk W. Walters
January 1, 1994
Page 4
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 (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.
Mr. Kirk W. Walters
January 1, 1994
Page 5
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.
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, N.A.
By /s/ George P. Rutland
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George P. Rutland
Chairman of the Board
NORTHEAST FEDERAL CORP.
By /s/ George P. Rutland
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George P. Rutland
Chairman of the Board
ACCEPTED AND AGREED TO
THIS 1st DAY OF
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January, 1994:
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/s/ Kirk W. Walters
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Kirk W. Walters
Exhibit A
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Kirk W. Walters
Compensation 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. Supplemental Executive Retirement Plan
9. Thrift and Profit Sharing Plan
10. Employee Stock Ownership Plan
11. Cash Balance Retirement Plan
12. Medical Insurance Plan
13. Dental Insurance Plan