ADDENDUM TO CHANGE IN CONTROL AGREEMENT
The Letter Agreement (the "Agreement") entered into on the 1st day of March,
1992 by Northeast Federal Corp, Northeast Savings, F.A. ("Northeast") and Kirk
W. Walters, a copy of which is attached hereto, concerning termination of
employment in the event of a change in control of Northeast is hereby
modified, altered and changed in accordance with the terms of Resolutions
93-56 and 93-24 passed by the respective Board of Directors of Northeast
Savings, F.A. and Northeast Federal Corp. in the following manner:
Paragraph 1 of the Agreement titled, "Term of Agreement" is hereby amended by
striking the date of "December 31, 1994" and inserting the date of "July 1,
1995" in substitution thereof.
Paragraph 4 of the Agreement titled, "Compensation Upon Termination or During
Disability" is hereby modified by striking the amount of "$225,000" in
subsection (ii) and inserting the amount of "$250,000" in substitution thereof
and by adding a new subsection (viii) which states as follows: "Any payments
made to you pursuant to the terms of this Agreement, or otherwise, are subject
to and conditioned upon compliance with 12 USC Section 1828(k) and any
regulation promulgated thereunder."
IN WITNESS WHEREOF, the parties executed this amended Letter Agreement on this
9th day of July, 1993.
NORTHEAST SAVINGS, F.A.
By: /s/ George P. Rutland
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NORTHEAST FEDERAL CORP.
By: /s/ George P. Rutland
--------------------------------
/s/ Kirk W. Walters
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Kirk W. Walters
[LOGO OF NORTHEAST SAVINGS APPEARS HERE]
January 1, 1994
Mr. Kirk W. Walters
56 Henley Way
Avon, CT 06001
Dear Mr. Walters:
This letter agreement (the "Agreement") is an amendment and restatement of
that certain Change in Control Agreement entered into between Northeast and you
dated as of March 1, 1992, as amended by Addendum dated as of July 9, 1993 (the
"Change in Control Agreement"). The purpose of this Agreement is to extend the
term of the Change in Control Agreement and to modify the provisions thereof to
the extent necessary to embody the present intention of the parties with regard
to the subject matter stated herein.
The Boards of Directors (collectively, the "Board") of Northeast Federal
Corp. and Northeast Savings, F.A. (collectively, "Northeast") continue to
consider it essential to the best interests of its stockholders to foster the
continuous employment of key management personnel. In this connection, the
Board of Northeast recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of Northeast and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
Northeast's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of Northeast, although no such change is now
contemplated.
In order to induce you to remain in the employ of Northeast in the position
set forth in a certain Employment Agreement between Northeast and you of even
date herewith, and in consideration of your agreement set forth in Section 2(ii)
hereof, Northeast agrees that you shall receive the severance benefits set forth
in this Agreement in the event your employment with Northeast is terminated
subsequent to a "change in control of Northeast" (as defined in Section 2
hereof) under the circumstances described below.
To the extent that any provision of this Agreement shall conflict with any
law governing Northeast or any rule or regulation duly promulgated pursuant to
law by any governmental regulatory agency having jurisdiction over Northeast,
specifically including, but not limited to, 12 C.F.R. Section 563.39, as amended
from time to time, such law or regulation shall govern this Agreement and such
conflicting provision of this Agreement shall be null and void and shall not be
enforceable by either party. The provisions of 12 C.F.R. Section 563.39 are
incorporated by reference and made a part hereof.
1. Term of Agreement. This amended and restated Agreement shall continue
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in effect through December 31, 1997.
Mr. Kirk W. Walters
January 1, 1994
Page 2
2. Change in Control. (i) No benefits shall be payable hereunder unless
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there shall have been a change in control of Northeast, as set forth below, and
your employment by Northeast shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
Northeast" shall mean a change in control of a nature that would be required to
be reported in response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Northeast representing
25% or more of the combined voting power of Northeast's then outstanding
securities; (B) during any period of twelve consecutive months, individuals who
at the beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by Northeast's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; (C) the business of Northeast for
which your services are principally performed is disposed of by Northeast
pursuant to a partial or complete liquidation of Northeast, a sale of assets
(including stock of a subsidiary) of Northeast, or otherwise; (D) any "person"
is or becomes the "beneficial owner," directly or indirectly, of securities of
Northeast representing 19.9% or more of the combined voting power of Northeast's
then outstanding securities and one or more designees of such "person" is then a
member of or is thereafter elected to the Board of Northeast; (E) any "person"
is or becomes the "beneficial owner," directly or indirectly, of securities of
Northeast representing 10% or more of the combined voting power of Northeast's
then outstanding securities and two or more designees of such "person" are then
members of or are thereafter elected to the Board of Northeast; or (F) Northeast
makes a public announcement of or enters into a definitive agreement to (i)
merge with another entity or (ii) to sell all of its assets to another entity.
(ii) For purposes of this Agreement, a "potential change in control of
Northeast" shall be deemed to have occurred if (A) Northeast enters into an
agreement, the consummation of which would result in the occurrence of a change
in control of Northeast; (B) any person (including Northeast) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a change in control of Northeast; (C) any person becomes the
beneficial owner, directly or indirectly, of securities of Northeast
representing 9.5% or more of the combined voting power of Northeast's then
outstanding securities; or (D) the Board adopts a resolution to the effect that
a potential change in control of Northeast for purposes of this Agreement has
occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of Northeast, you will
remain in the employ of Northeast for a period of six (6) months from the
occurrence of any such potential change in control of Northeast.
3. Termination Following Change in Control. If any of the events
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described in Section 2 hereof constituting a change in control of Northeast
shall have occurred, you shall be entitled to the benefits provided in Section 4
hereof upon the subsequent termination of your employment during the term of
this Agreement, unless such termination is (A) because of your death or
Retirement, (B) by Northeast for Cause or Disability or (C) by you other than
for Good Reason.
(i) Disability; Retirement. 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 of Northeast's decision to terminate your employment
(the "Notice of Termination," as defined in Section 3(iv) below) is given you
shall not have returned to the full-time
Mr. Kirk W. Walters
January 1, 1994
Page 3
performance of your duties. Termination of your employment by Northeast or you
based on "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.
(ii) Cause. Termination by Northeast of your employment for "Cause" shall
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mean termination upon (A) your willful and continued failure to substantially
perform your duties with Northeast (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), after a demand for
substantial performance is delivered to you by the Board which specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties; (B) your engaging willfully in conduct
which is demonstrably and materially injurious to Northeast, monetarily or
otherwise; (C) your personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order of the Office of Thrift Supervision or the Federal
Deposit Insurance Corporation; or (D) your material breach of any provision of
this Agreement. For purposes of this Subsection, 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 counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
you engaged in conduct set forth above in clauses (A), (B), (C) or (D) of the
first sentence of this Subsection and specifying the particulars thereof in
detail.
(iii) Good Reason. You shall be entitled to terminate your employment
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for Good Reason. For purposes of this Agreement, "Good Reason" shall, without
your express written consent, mean:
(A) the assignment to you of any duties inconsistent with your position
with Northeast as set forth in your Employment Agreement with Northeast of even
date herewith, or a substantial alteration in the nature or status of your
responsibilities from those in effect immediately prior to a change in control
of Northeast other than any such alteration primarily attributable to the fact
that Northeast may no longer be a public company;
(B) a reduction by Northeast in your annual base salary as set forth in
your Employment Agreement with Northeast of even date herewith, except for
across-the-board salary reductions similarly affecting all executives of
Northeast and all executives of any person in control of Northeast;
(C) the relocation of your principal employment location at the time of a
change in control to a location greater than thirty (30) miles from such
principal employment location;
(D) the failure by Northeast to continue in effect, or to continue your
participation in, any stock option plan in which you participate at the time of
a change in control of Northeast, 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 in connection with the change in control of Northeast;
(E) 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
Mr. Kirk W. Walters
January 1, 1994
Page 4
disability plans in which you participate at the time of a change in control of
Northeast, 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 at
the time of the change in control of Northeast, or the failure by Northeast to
provide you with the four (4) weeks of paid vacation to which you are entitled;
(F) the failure of Northeast to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 6 hereof; or
(G) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Subsection
(iv) below (and, if applicable, Subsection (ii) above). For purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall
not be affected by your incapacity due to physical or mental illness.
(iv) Notice of Termination. Any purported termination by Northeast or by
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you shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 7 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice 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.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
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your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), and (B) if your employment is terminated pursuant to Subsection (ii) or
(iii) above or for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (iii) above shall not be more than sixty (60) days from
the date such Notice of Termination is given). 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 full compensation in effect when the notice
giving rise to the dispute was given (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 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). The
pendency of a dispute shall not extend the Date of Termination hereunder as the
same has been specified above. Amounts paid under this Section are in addition
to all other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. The benefits
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provided under circumstances described in Sections 2 and 3 hereof shall be as
follows:
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate specified in your
Mr. Kirk W. Walters
January 1, 1994
Page 5
Employment Agreement with Northeast of even date herewith and all compensation,
including annual incentive pay, if any, paid during the period until this
Agreement is terminated pursuant to Section 3(i) hereof. Thereafter, your
benefits shall be determined in accordance with Northeast's insurance and
retirement programs then in effect.
(ii) If your employment shall be terminated for Cause, Northeast shall pay
you your full base salary through the Date of Termination, or, if applicable,
through any period during which a dispute exists concerning termination as
provided in Section 3(v) above, at the rate in effect at the time Notice of
Termination is given, and Northeast shall have no further obligations to you
under this Agreement. Base salary is presently defined as $350,000.
(iii) If your employment by Northeast shall be terminated (a) by Northeast
other than for Cause, Retirement or Disability or (b) by you for Good Reason,
then you shall be entitled to the benefits provided below:
(A) Northeast shall pay you your full base salary through the Date of
Termination, or, if applicable, through any period during which a dispute
exists concerning termination as provided in Section 3(v) above, at the
rate in effect at the time Notice of Termination is given, and any
incentives earned prior to the Date of Termination but as yet not paid.
(B) In lieu of any further salary payments to you for periods
subsequent to the period described in (A) above, Northeast shall pay to
you, not later than the fifth (5th) day following the Date of Termination,
or, if applicable, the date of the final resolution of any dispute
concerning termination as provided in Section 3(v) above, a lump sum
severance payment in accordance with the schedule set forth below:
If the Date of Termination occurs 2.99 times base salary
within one year following change in at the Date of Termination
control
If the Date of Termination occurs 2 times base salary
more than one but within two at the Date of Termination
years following change in control
If the Date of Termination occurs base salary
more than two years following change at the Date of Termination
in control
(C) If you receive a severance payment pursuant to Section 4(iii)(B)
above, then for purposes of determining the average of your highest three
(3) years of compensation during employment pursuant to Section 4.2 of the
Northeast Savings, F.A. Supplemental Executive Retirement Plan dated as of
February 1, 1991, as amended from time to time, you shall be deemed to have
received base salary at the rate in effect on the Date of Termination for
the following additional period following your Date of Termination:
If the Date of Termination occurs 36 months
within one year following change in
control
Mr. Kirk W. Walters
January 1, 1994
Page 6
If the Date of Termination occurs 24 months
more than one but within two
years following change in control
If the Date of Termination occurs 12 months
more than two years following change
in control
(D) In addition to (A), (B) and (C) above, (i) you shall be entitled
to receive outplacement services with a firm of your choosing at the
expense of Northeast, and (ii) 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 Section 4(iii)(D)(ii)
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 Section 4(iii)(D)(ii) 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.
(iv) For a period of the greater of one (1) year or the remaining term of
the Agreement as specified in Section 1 above after any termination hereunder
other than termination by Northeast for Cause, Northeast shall arrange to
provide you with (1) 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 (2) 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 the change in control
of Northeast 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.
(v) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer.
(vi) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under any agreement
relating to retirement benefits.
(vii) 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. Kirk W. Walters
January 1, 1994
Page 7
5. Successive Changes in Control. If during the term of this Agreement,
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more than one event constituting a change in control shall occur, the latest of
the events to occur shall be deemed the change in control for purposes of
determining your entitlement to benefits hereunder.
6. Successors; Binding Agreement. (i) Northeast will require any
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successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Northeast to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Northeast would be required to perform it if
no such succession had taken place. Failure of Northeast to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to terms as you would be
entitled hereunder if you terminated your employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, "Northeast" shall mean Northeast as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(ii) 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.
7. Notice. For the purposes of this Agreement, notices and all other
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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.
8. Miscellaneous. No provision of this Agreement may be modified, waived
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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.
9. Validity. The invalidity or unenforceability of any provision of this
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Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several counterparts,
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each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
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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
Mr. Kirk W. Walters
January 1, 1994
Page 8
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.
12. Exclusivity. It is understood that if payments are due and made to
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the Officer named herein under this Agreement, no payments will be required to
be made under the Employment Agreement executed on the same date as this
Agreement.
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
January, 1994:
/s/ Kirk W. Walters
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Kirk W. Walters
Exhibit A
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Kirk W. Walters
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. 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