NORTH EAST INSURANCE COMPANY
1998 ANNUAL MEETING OF SHAREHOLDERS
May 14, 1998
Dear Shareholder,
You are invited to attend the Annual Meeting of Shareholders of North East
Insurance Company. The meeting will be held at the offices of Verrill &
Dana, LLP, One Portland Square, Portland, Maine (207-774-4000) at 10:30 a.m.
on Thursday, June 25, 1998.
Since obtaining a quorum for Company-sponsored initiatives can be
difficult, your vote is important. IF YOU ARE UNABLE TO ATTEND THE ANNUAL
MEETING IN PERSON, I URGE YOU TO CAST YOUR VOTE BY COMPLETING AND
RETURNING THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
Thank you in advance for your participation.
Sincerely,
/s/ Robert G. Schatz
President and Chief Executive Officer
NORTH EAST INSURANCE COMPANY
[logo]
1998 ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
North East Insurance Company will be held at the offices of Verrill & Dana,
LLP, One Portland Square, Portland, Maine at 10:30 a.m. on Thursday, June
25, 1998, to conduct the following business:
1. To consider a proposed amendment to the Articles of Incorporation
which provides for a staggered Board of Directors;
2. To elect directors;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants to the Company for the year ending
December 31, 1998;
4. To consider a proposed amendment to the Stock Option Plan in
order to increase the number of shares issuable under the Plan;
and
5. To conduct any other business which may lawfully come before said
meeting.
Dated at Scarborough, Maine this 14th day of May, 1998.
NORTH EAST INSURANCE COMPANY
By: /s/ Robert G. Schatz
President and Chief Executive Officer
NORTH EAST INSURANCE COMPANY
482 Payne Road, 4th Floor
P.O. Box 1418
Scarborough, Maine 04074
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 25, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of North East Insurance Company ("NEIC"
or the "Company") for use at the 1998 Annual Meeting of Shareholders (the
"Meeting"). The Meeting will be held at the offices of Verrill & Dana, LLP,
One Portland Square, Portland, Maine at 10:30 a.m. on Thursday, June 25,
1998.
When properly executed and returned, the enclosed proxy will be voted
in accordance with the choices marked. If no choice is specified, the proxy
will be voted as recommended by the Board of Directors. A proxy may be
revoked at any time before it is voted. Shareholders may revoke their
proxies by delivering written notice to the Clerk of the Company prior to
the vote on a given matter, by submitting a later dated proxy at or before
the Meeting, or by voting in person at the Meeting.
The record date for determining shareholders entitled to vote at the
Meeting (and any adjournment thereof) is April 28, 1998. All shareholders
of record as of the close of business on that date will be entitled to cast
one vote per share. This Proxy Statement and the accompanying form of proxy
for the Meeting are first being mailed to shareholders on or around May 14,
1998.
A description of matters to be voted upon begins at page 9 of this
Proxy Statement. Certain information concerning share ownership,
management, and compensation appears below.
OWNERSHIP OF COMMON STOCK
As of the record date noted above, a total of 3,046,842 shares of
North East Insurance Company common stock were outstanding. The common
stock is entitled to one vote per share and is the only class of NEIC stock
outstanding. Set forth below, as of the record date, is information
concerning the only persons known to the Company to beneficially own more
than five percent of the outstanding shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
- ---------------- ------------------ -----------
<S> <C> <C>
Ballantrae Partners, L.L.C. 810,000 (1) 26.6%
300 East 56th Street
Suite 20-A
New York, NY 10022
The Foothold Fund, L.P. 215,000 (2) 7.1%
408 Route 22, Unit 2
North Salem, New York 10560
_______________
<FN>
<F1> Information regarding the stock ownership of Ballantrae Partners,
L.L.C. is given on the basis of its latest amended Schedule 13D report,
filed on or about January 10, 1997. The members of Ballantrae are
Murry N. Gunty, Deborah L. Harmon, and Jonathan S. Kern.
<F2> Information regarding the stock ownership of The Foothold Fund, L.P. is
given on the basis of its latest Schedule 13D report, filed on or about
August 6, 1997. Foothold is a New York limited partnership. Its sole
general partner is The Foothold Management Corp., a New York corporation.
Peter A. Russ (a director of NEIC) is the President, sole director and
sole shareholder of Foothold Management. Foothold's Schedule 13D report
states that it was purchasing the Common Shares for investment purposes
and not for the purpose of acquiring control of North East.
</FN>
</TABLE>
The following table shows, as of the record date, the number of shares
of NEIC common stock which, to the Company's knowledge, were beneficially
owned by all directors, nominees, and executive officers of the Company.
Except as otherwise indicated, each person named owned less than one percent
of the outstanding common stock of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) OUTSTANDING
- ---- --------------------- -----------
<S> <C> <C>
Robert G. Schatz 295,859 9.1%
Ronald A. Libby 40,063 1.5%
Samuel M. Koren 9,500
Edward B. Batal 6,500
Terence P. Cummings 10,000
Robert A. Hancock 12,500
Wilson G. Hess 10,000
Joseph M. Hochadel 12,600
Bruce H. Suter 10,500
Jonathan S. Kern (2) 817,000 26.8%
Deborah L. Harmon (2) 817,000 26.8%
Murry N. Gunty (2) 810,000 26.6%
Peter A. Russ (3) 215,000 7.1%
All directors, nominees and
executive officers as a group 1,465,810 43.6%
_______________
<FN>
<F1> Includes shares owned by spouses or other relatives residing in the
same household, and by entities owned or controlled by the person
named. Also includes the following shares purchasable within the next
60 days under outstanding stock options: Mr. Schatz, 200,000; Mr.
Libby, 40,000; Messrs. Batal, Cummings, Hancock, Hess, Hochadel, and
Suter, 10,000 each; and Ms. Harmon and Mr. Kern, 7,000 each.
<F2> Ms. Harmon and Messrs. Kern and Gunty are members of Ballantrae
Partners, L.L.C., and thereby have shared beneficial ownership of the
NEIC stock owned by Ballantrae.
<F3> Mr. Russ is President of the sole general partner of The Foothold Fund,
L.P. As such, Mr. Russ is deemed to have beneficial ownership of the
shares owned by Foothold.
</FN>
</TABLE>
THE BOARD OF DIRECTORS
The Company's bylaws currently provide that all directors of the
Company are to be elected each year at an annual meeting of shareholders.
Set forth below is description of the current NEIC directors, all of whom
have been nominated for re-election to the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert G. Schatz 52 President, Chairman of the
Board, Chief Executive Officer
and Director
Edward B. Batal 57 Director
Terence P. Cummings 43 Director
Robert A. Hancock 45 Director
Deborah L. Harmon 39 Director
Wilson G. Hess 45 Director
Joseph M. Hochadel 50 Director
Jonathan S. Kern 36 Director
Bruce H. Suter 77 Director
Murry N. Gunty 31 Director
Peter A. Russ 53 Director
</TABLE>
ROBERT G. SCHATZ was elected as a Director in December 1987. He was elected
President and Chief Executive Officer in March 1988. Mr. Schatz also serves
on the Board of Trustees of Unity College, in Unity, Maine.
EDWARD B. BATAL is President of Batal Agency, an insurance agency and real
estate broker in Sanford, Maine. He has been President of the agency since
1964. Mr. Batal was elected a Director of NEIC in November 1995.
TERENCE P. CUMMINGS is a Partner with Clausen Miller P.C., a law firm in New
York City. He has been a practicing attorney in New York since 1982, and
was affiliated with Ohrenstein & Brown from 1985 to 1997. Mr. Cummings was
elected a Director of NEIC in November 1995. Mr. Cummings also serves as a
Director of First United American Life Insurance Company, a subsidiary of
Torchmark Corporation.
ROBERT A. HANCOCK is a Principal of Mann, Frankfort, Stein & Lipp, an
accounting firm in Houston, Texas. Mr. Hancock was an auditor with Ernst &
Ernst in Houston from 1975 to 1978, and was President of Hancock, Carameros
& Rawls, P.C. from 1978 to 1996. Mr. Hancock was elected a Director of NEIC
in November 1995.
DEBORAH L. HARMON was first elected as a Director in February 1997. Ms.
Harmon is an Executive Vice President of J.E. Robert Company, a real estate
investment and property management firm. Ms. Harmon is one of three members
of Ballantrae Partners, formed in 1996 to invest in NEIC stock. In January
1997, Ballantrae consummated its purchase of 810,000 shares of NEIC stock
formerly held by Bernard D. Gershuny. In August 1996, Ballantrae and NEIC
entered into a standstill agreement, described below at page 7 below. Under
the standstill agreement, Ballantrae has the right to nominate three members
of the NEIC Board of Directors.
WILSON G. HESS has served as President of Unity College in Unity, Maine
since 1990. After starting as a professor at the college in 1977, he later
became Department Chairman (1985-88) and then Dean of Academic Affairs
(1988-89). From 1989 to 1990 he served as Dean of Sterling College in
Craftsbury, Vermont. Mr. Hess was elected a Director of NEIC in November
1995.
JOSEPH M. HOCHADEL has served as a Director since 1990, and previously had
served as a Director from 1981 to 1986. Since 1981 he has been a Partner
with Monaghan, Leahy, Hochadel & Libby, a Portland, Maine law firm.
JONATHAN S. KERN was first elected as a Director in February 1997. Mr. Kern
is Executive Vice President and Chairman of the Operating Committee of J.E.
Robert Company, described above. Mr. Kern is one of three members of
Ballantrae Partners, which (as noted above) has the right to nominate three
members of the NEIC Board of Directors.
BRUCE H. SUTER was first elected as a Director of NEIC in 1990. Mr. Suter
was a Vice President of Stone & Webster Management Consultants, a management
consulting firm, from 1985 until his retirement in December 1993. Prior to
joining Stone & Webster, Mr. Suter was President and Chief Executive Officer
of Ebasco Risk Management Consultants, Inc. and Associated Consulting
Management of Ebasco, Ltd.
MURRY N. GUNTY became a director of NEIC on May 6, 1998. He is a Principal
of Lazard Freres Real Estate Investors, LLC, a real estate investment fund.
From 1993 until joining Lazard Freres in 1995, Mr. Gunty was an associate
with J.E. Robert Company, described above. He is currently a director of
Atlantic American Properties Trust, Kapson Senior Quarters Corp., The
Fortress Group, and The Rubenstein Company. Mr. Gunty is one of three
members of Ballantrae Partners, which (as noted above) has the right to
nominate three members of the NEIC Board of Directors.
PETER A. RUSS became a director of NEIC on May 6, 1998. Since 1990 Mr. Russ
has been the President, sole director, and sole shareholder of Foothold
Management Corp., which in turn is the sole general partner of The Foothold
Fund, L.P. As noted above, The Foothold Fund owns approximately 7.1% of the
outstanding common stock of NEIC. From 1993 to October 1997, Mr. Russ was
an investment analyst with Shelby Cullom Davis & Co, L.P., a securities
broker-dealer. In October 1997 he became a Managing Director of Laidlaw
Global Securities, a securities broker-dealer.
Directors who are not employees of the Company receive directors' fees
at the rate of $3,000 per annum, plus $250 for each Board meeting attended.
Directors also receive $100 for each Committee meeting attended, except
that the Committee chairman receives $150 for each such meeting. The Board
recently approved a program by which the Company will award stock options on
a quarterly basis to each non-employee director. As of the last day of the
calendar quarter, each such director is to receive a fully vested option to
purchase 1,000 shares of NEIC common stock at an exercise price equal to
market price of the stock on such date. Pursuant to the NEIC Stock Option
Plan, the non-employee directors on April 10, 1998 were granted stock
options at an exercise price of $2.8125 per share (the closing price of the
stock on that date), depending on length of service through the first
quarter of 1998, as follows: Messrs. Batal, Cummings, Hancock, Hess,
Hochadel, and Suter, 10,000 shares each; Ms. Harmon and Mr. Kern, 7,000
shares each. For further information, see "Amendment of NEIC Stock Option
Plan," at page 11 below.
The Company has an Audit Committee, a Finance and Investment
Committee, an Underwriting Committee, a Claims Committee, and an Executive
Committee.
The Audit Committee presently consists of Messrs. Hancock (Chair),
Batal, and Hochadel. Its function is to oversee the work of the Company's
chief financial officer and external accountants and to assure the existence
of an effective accounting and internal control system. The Committee held
one meeting during 1997.
The Finance and Investment Committee presently consists of Messrs.
Suter (Chair), Hancock, Harmon, and Batal, with Mr. Schatz serving as an ex-
officio member. This Committee oversees the investment of the Company's
securities portfolio and other investment-related actions of the Company.
The Committee held one meeting during 1997.
The Underwriting Committee presently consists of Messrs. Cummings
(Chair), Batal, and Hochadel. It oversees underwriting activities of the
Company and reviews and monitors relationships with agents. The Committee
held one meeting during 1997.
The Claims Committee presently consists of Messrs. Batal and Cummings.
It reviews and monitors actuarial certifications of loss and loss
adjustment reserves, and monitors the handling of insureds' claims. The
Committee held one meeting during 1997.
The Compensation Committee presently consists of Messrs. Hess (Chair),
Hancock, and Kern. The Committee is responsible for determining executive
compensation (subject to review and approval by the Board) and for
administering the NEIC Stock Option Plan. The Committee held nine meetings
in 1997.
The Executive Committee presently consists of Messrs. Hochadel
(Chair), Hess, Kern, Schatz, and Suter. Its primary function is to act on
behalf of the Board at times when it is impractical to call a special
meeting of the entire board. The powers of the Executive Committee are
limited by the Bylaws of the Company. For example, the Committee has no
power to amend the Articles of Incorporation or Bylaws of the Company. The
Committee held five meetings during 1997.
The Board also maintains various ad hoc committees, whose function it
is to study specific issues and make recommendations to the full Board.
The Board of Directors held a total of four meetings in 1997. Except
for Ms. Harmon, each of the Directors was present at 75% or more of the
total number of Board and Committee meetings he was eligible to attend in
1997.
EXECUTIVE COMPENSATION AND
RELATED MATTERS
Set forth below is certain information concerning the compensation of
each executive officer of the Company who received more than $100,000 of
salary and bonus compensation for the prior fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
------------------ ---- -------- ------- ----------------
<S> <C> <C> <C> <C>
Robert G. Schatz 1997 $175,012 $28,276 $ 7,505
President and Chief 1996 $155,289 $96,216 $73,960
Executive Officer 1995 $150,000 $30,000 $ 3,982
Ronald A. Libby 1997 $110,319 $25,293 $ 3,116
Chief Operating 1996 $101,173 $36,707 $ 7,740
Officer 1995 $ 90,346 $ -0- $ 3,557
Samuel M. Koren 1997 $ 82,351 $33,442 $ 2,680
Senior Vice President, 1996 $ 82,351 $22,361 $ 6,937
Secretary, and Clerk 1995 $ 82,351 $ -0- $ 3,847
_______________
<FN>
<F1> For Mr. Schatz, other compensation in 1997 consists of $3,365 in
retroactive salary adjustments, $2,540 for Company-paid insurance
premiums, and $1,600 of matching contributions under the 401(k) Plan;
other compensation in 1996 consists of a $60,000 special bonus in lieu
of prior year payments, $9,590 of vacation pay, $2,540 for Company-paid
insurance premiums, and $1,830 of matching contributions under the
401(k) Plan; and other compensation in 1995 consists of $2,540 for
Company-paid insurance premiums and $1,442 of matching contributions
under the 401(k) Plan. For Mr. Libby, other compensation in 1997
consists of $2,116 of vacation pay and $1,200 of matching contributions
under the 401(k) Plan; other compensation in 1996 consists of $7,740 of
vacation pay; other compensation in 1995 consists of $3,357 of vacation
pay. For Mr. Koren, other compensation in 1997 consists of $1,584 of
vacation pay and $1,096 of matching contributions under the 401(k)
Plan; other compensation in 1996 consists of $5,845 of vacation pay and
$1,092 of matching contributions under the 401(k) Plan; other
compensation in 1995 consists of $2,833 of vacation pay and $1,014 of
matching contributions under the 401(k) Plan.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN OR BASE EXPIRATION
GRANTED FISCAL YEAR PRICE($/SH) DATE
---------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Robert G. Schatz 0 0% - -
Ronald A. Libby 100,000 (1) 100% $2.375 6/10/07
Samuel M. Koren 0 0% - -
_______________
<FN>
<F1> Mr. Libby's option is subject to vesting requirements and becomes
exercisable in five equal installments of 20,000 shares each on the
grant date (June 10, 1997) and the next four anniversary dates
thereafter. Upon termination of employment, the unvested portion
of the option will expire unless termination results from
death or disability or (under certain circumstances) occurs within
one year after a Change in Control (as defined).
</FN>
</TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED FUTURE PAYOUTS
SHARES, PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER PERIOD ---------------------------------
OTHER UNTIL MATUR- THRESHOLD TARGET MAXIMUM
RIGHTS ATION OR PAYOUT ($) ($) (1) ($) (2)
-------- --------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Robert G. Schatz N/A 1/1/98-12/31/00 0 $29,284 $94,800
plus 10%
of After-
Tax Profit
over $4.41
million
Ronald A. Libby none
Samuel M. Koren none
_______________
<FN>
<F1> Subject to Note 2 below, the payout equals 5% of the amount by which
After-Tax Profit (as defined) over the three-year period exceeds
approximately $3.3 million. For illustrative purposes, the "Target"
payout shown here assumes that NEIC achieves the same level of After-
Tax Profit in 1998-2000 that was achieved in 1995-1997 (before
adjustment for the favorable impact of a $2.1 million valuation
allowance adjustment recorded by the Company in 1996).
<F2> If the Company achieves cumulative After-Tax Profit of approximately
$5.2 million for the three-year period, the payout increases to 10% of
the excess over that higher threshold, plus $94,800 calculated on the
After-Tax Profit between the lower and higher threshold. There is no
stated maximum payout.
</FN>
</TABLE>
SCHATZ EMPLOYMENT AGREEMENT
The Company is a party to a new Employment Agreement with Mr. Schatz
(its President and Chief Executive Officer) which became effective January
1, 1998. The Agreement provides for (i) a base salary of $175,000 per annum
(subject to annual adjustments based on increases in the Consumer Price
Index) and (ii) a three-year profit sharing bonus calculated on After-Tax
Profit, as described below. The term of the Agreement expires December 31,
2000, subject to renewal from year to year unless the Company gives notice
of nonrenewal.
If the Company's After-Tax Profit (as defined) over a three-year
period exceeds a threshold amount of After-Tax Profit, then Mr. Schatz will
be entitled to a bonus under the Agreement. Specifically, if After-Tax
Profit over the three-year period exceeds approximately $3.3 million, then
the bonus will equal 5% of the excess over such target; to the extent that
After-Tax Profit exceeds approximately $5.2 million, he will be entitled to
a bonus of approximately $94,800 plus 10% of the excess over such higher
threshold. (The lower and higher thresholds represent a 10% and 15%
compounded growth rate, respectively, in shareholders equity over the three-
year period.) The targeted growth rates are subject to change, to account
for capital influxes into the Company or to account for dividends or
distributions of capital to shareholders.
In October 1996, the Board of Directors had awarded Mr. Schatz a stock
option for 200,000 shares of common stock, at the then prevailing market
price per share, subject to shareholder approval of a contemplated Stock
Option Plan. The Stock Option Plan was approved by shareholders in June
1997.
The Employment Agreement provides Mr. Schatz with a lump-sum severance
payment of $175,000, in the event that the Company terminates his employment
"without cause" or Mr. Schatz terminates his employment "for good reason"
(as such terms are defined in the Agreement). Furthermore, if Mr. Schatz
complies with a non-competition covenant for one year from the date of
termination of his employment, he will be entitled to additional severance
payments totaling $175,000 plus interest at the federal long-term rate (as
defined), which amount payable in 108 monthly installments commencing one
year after termination of employment. These payments were previously
negotiated with Mr. Schatz in 1996, in settlement of his claims for unpaid
bonuses and options under his 1991 Employment Agreement.
EMPLOYMENT CONTINUITY AGREEMENTS
In October 1996 the Board approved Employment Continuity Agreements
with Mr. Libby and Mr. Koren. Under these Agreements, if the executive's
employment is terminated within twelve months after the occurrence of a
Change in Control Event (as defined), then the Company agrees to provide the
executive with special severance compensation equal to 200% of the sum of
his current annual base salary plus any profit sharing award for the prior
year, provided that the payment will be reduced if and to the extent
necessary to keep the payment from becoming non-deductible under Section
280G of the Internal Revenue Code. This same benefit accrues if the
executive terminates his employment for "good reason," which is defined to
include a reduction in his responsibilities or certain other events. The
Employment Continuity Agreement also provides for a stay-on bonus equal to
100% of his annual base salary if the executive remains employed for six
months after the Change in Control Event, subject to the condition that he
not compete with the Company for the following six months. These special
severance benefits do not apply if the Company terminates the executive's
employment for "good cause," including a substantial neglect of duties after
written notice and an opportunity to correct.
OTHER MATTERS RELATING TO
THE COMPANY'S DIRECTORS AND OFFICERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, certain
persons associated with the Company (directors, executive officers and
beneficial owners of more than 10% of the outstanding common stock) are
required to file with the Securities and Exchange Commission and the Company
various reports disclosing their ownership of Company securities and changes
in such ownership. To the Company's knowledge, all requisite reports for
1997 were filed in a timely manner except that Messrs. Batal , Koren, and
Suter each had one purchase transaction that was not timely reported on Form
4.
AGREEMENT WITH BALLANTRAE
In May 1996, Ballantrae Partners, L.L.C. entered into a contract to
purchase 810,00 shares of NEIC common stock beneficially owned by Bernard D.
Gershuny. That stock represents approximately 27% of the total outstanding
stock of NEIC. The contract was subject to a number of conditions,
including requirements to obtain necessary regulatory approvals from the
Maine Bureau of Insurance and the New York Insurance Department. Following
extensive discussions, the Company and Ballantrae in August 1996 entered
into an agreement (the "Standstill Agreement") governing certain matters
relating to control of NEIC. On the basis of this Agreement and other
factors, Board of Directors voted to endorse Ballantrae's applications for
regulatory approval. Ballantrae ultimately succeeded in obtaining
regulatory approval in Maine and New York, and consummated its purchase of
Mr. Gershuny's shares in January 1997. The following is a summary of
selected provisions of the Standstill Agreement.
Under the Standstill Agreement, the Company has agreed to limit the
size of its Board and to allow Ballantrae to nominate up to three of the
Directors. In general, Ballantrae has agreed not to initiate, participate
in, or assist any proxy solicitation over election of a competing slate of
Directors or over shareholder approval of other significant matters. These
restrictions will not be applicable in certain cases, such as if the Company
seeks to enter into a major restructuring transaction opposed by Ballantrae.
These restrictions will also not prevent Ballantrae from voting its common
stock as it sees fit. The Company has agreed not to make any changes in its
Articles of Incorporation or Bylaws during the term of the Standstill
Agreement (other than to implement a staggered Board of Directors, as noted
above), and has also agreed not to adopt certain antitakeover defenses for
specified periods following termination of the Agreement.
Ballantrae has agreed to limit its maximum ownership percentage of
NEIC stock as follows: 32.5% starting January 1, 1997; 35% starting July 1,
1997; 37.5% starting January 1, 1998; and 40% from July 1, 1998 through the
termination date of the Standstill Agreement. Ballantrae must provide prior
notice of its intended purchases or sales of common stock. Large purchases
or dispositions of NEIC stock by Ballantrae may involve other substantive or
procedural restrictions. The Company has agreed that, upon any future
issuance of common stock during the term of the Standstill Agreement (other
than pursuant to employee/director compensation plans), NEIC will offer
Ballantrae sufficient shares to protect against dilution in Ballantrae's
then existing percentage ownership. Any such sale to Ballantrae would be on
terms equivalent to the sale to third parties. The Company has also agreed
to grant Ballantrae certain rights to require NEIC to register future
resales of common stock by Ballantrae. These registration rights would
facilitate large dispositions of common stock by Ballantrae, and expire ten
years after the date of the Agreement.
The Standstill Agreement will expire on or around May 30, 1999. The
Agreement may be terminated at any time by either party upon the occurrence
of certain specified events, including for example a third party's
commencement of a tender offer for the outstanding NEIC stock.
OTHER RELATED PARTY TRANSACTIONS
The firm of Monaghan, Leahy, Hochadel & Libby provides legal services
to the Company. Mr. Hochadel, a Director of NEIC, is a partner in that
firm. Fees paid to that firm in 1997 and 1996 were approximately $135,000
and $165,000, respectively.
The Company received legal services in 1997 and 1996 from two firms in
which Mr. Cummings was or is now a Partner. Fees paid to such firms by the
Company did not exceed $60,000 in either 1997 or 1996.
During each of the past two years, Batal Agency has been an
independent insurance agent for NEIC. Mr. Batal, a Director of NEIC, is
President of that agency. Commissions paid to the agency were based on
NEIC's standard rates and did not exceed $60,000 in either 1997 or 1996.
PROPOSED RIGHTS OFFERING
In March 1998 the Company announced plans to pursue a rights offering
of common stock to NEIC shareholders (the "Rights Offering"). Such an
offering may be made only by means of a prospectus, after NEIC files a
registration statement with the Securities and Exchange Commission. No
final decision has yet been made concerning the timing or terms of such an
offering.
Following the Annual Meeting, and subject to consummation of the
Rights Offering, the Board would intend to seek additional director nominees
from among the larger shareholders of NEIC. This reflects a decision by the
Company to seek a greater level of shareholder participation on the Board of
Directors.
SUMMARY OF ACTIONS TO BE TAKEN
AMENDMENT TO AUTHORIZE STAGGERED BOARD
The Board of Directors has again approved a proposal to amend the
Articles of Incorporation to divide the Board into three classes, each to be
elected to staggered terms of office. A similar proposal failed to receive
shareholder approval last year, due in part to a vote against the amendment
by Ballantrae Partners, L.L.C. This year Ballantrae has advised the Company
that it presently intends to vote in favor of the amendment.
Under this amendment, Class I Directors would be elected initially to
a one-year term, expiring at the Annual Meeting of Shareholders in 1999;
thereafter the Class I Directors would be elected to three-year terms.
Class II Directors would be elected initially to a two-year term, expiring
at the Annual Meeting of Shareholders in 2000; thereafter the Class II
Directors would be elected to three-year terms. Class III Directors would
be elected to three-year terms, the first expiring at the Annual Meeting of
Shareholders in 2001. The Amendment also would require a two-thirds vote in
order for the shareholders to further amend this provision of the Articles
of Incorporation or to approve other changes to the Articles or Bylaws
affecting the size of the Board or the election of Directors. A copy of the
proposed Amendment appears as Exhibit A to this Proxy Statement.
The principal purpose of a staggered board is to provide for greater
continuity of membership on the board. With staggered three-year terms for
board members, only about a third of the directors are elected in any given
year. Thus a proxy contest in a single year will generally not be
sufficient to change a majority of the directors, unless the proponents can
garner sufficient votes to remove other directors from office.
Staggered boards of directors are quite common among publicly-held
companies, in which the stock ownership is subject to significant change
from year to year through open-market transactions. Having a staggered
board may encourage persons seeking to acquire control of a company to
engage in good faith, arms-length negotiations with the board concerning
their proposal, rather than waging a hostile proxy contest, and may permit
the board to engage in such negotiations from a stronger position. On the
other hand, having a staggered board could have the effect of deterring
third parties from initiating proxy contests or from acquiring substantial
blocks of a company's shares. Such proxy contests and acquisitions of
substantial blocks of shares tend, at least temporarily, to increase market
prices for a company's stock.
The NEIC Board of Directors believes that promoting greater continuity
of board composition is in the best interests of the Company and its
shareholders. NEIC's insurance business is dependent on developing and
maintaining long-term relationships with its independent agents. Over the
past several years, NEIC has experienced a number of attempted changes in
control, as different groups sought to acquire a large block of stock owned
by Bernard D. Gershuny. The Company believes that uncertainties over future
control made it more difficult for NEIC to build relationships with agents
and made it more difficult for NEIC to obtain an upgrade in its Best's
rating. In connection with Ballantrae's purchase of Mr. Gershuny's shares
in 1997, the Company took a number of steps to reassure existing officers
and employees as to continuity of management. One such step has been to
recommend that the shareholders amend the Articles of Incorporation to
implement a staggered board.
Presently, the Company's Articles of Incorporation provide that all
Director terms expire at each Annual Meeting of Shareholders. The proposed
Amendment divides Directors into classes whose terms expire over a three-
year period. As is presently the case, however, a vote of two-thirds of the
outstanding shares can remove an NEIC Director prior to expiration of his or
her term of office. Thus a two-thirds vote would in any event be sufficient
to change the entire Board of Directors of the Company at any meeting of
shareholders.
The proposed Amendment provides that the shareholders may amend board-
related provisions of the Articles of Incorporation or Bylaws only by a two-
thirds vote of the outstanding shares -- the same vote required to remove
Directors from office. In the absence of such a provision, a simple
majority vote could be sufficient to circumvent the staggered board
provisions and allow election of a majority of Directors at a single
meeting.
Approval of this proposed Amendment to the Articles of Incorporation
will require the affirmative vote of a majority of the outstanding shares of
common stock of the Company. For these purposes, abstentions and broker
non-votes will have the same effect as a vote against the proposal. (A
broker non-vote occurs when a broker, or other fiduciary, votes on at least
one matter but lacks authority to vote on another matter.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THIS PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION.
ELECTION OF DIRECTORS
The Company's articles of incorporation provide for a Board of
Directors of not fewer than 7 nor more than 21 members, as from time to time
determined by resolution of the Board of Directors or by the shareholders.
Directors are elected at each Annual Meeting of Shareholders for one year
terms. If the shareholders approve the above-described amendment to the
Certificate of Organization, then the Directors must be divided into three
classes (as close in number as is practicable) and elected to staggered
terms as described above.
A resolution will be offered at the Meeting to establish the number of
Directors at eleven and to elect the following eleven persons as Directors
in the classes stated:
CLASS I (to serve until the 1999 Annual Meeting of
Shareholders): Terence P. Cummings, Robert A. Hancock, Deborah L.
Harmon, and Robert G. Schatz.
CLASS II (to serve until the 2000 Annual Meeting of
Shareholders): Edward B. Batal, Murry N. Gunty, Joseph M. Hochadel,
and Bruce H. Suter.
CLASS III (to serve until the 2001 Annual Meeting of
Shareholders): Wilson G. Hess, Jonathan S. Kern, and Peter A. Russ.
If the above-described amendment to the Articles of Incorporation is not
approved, then each Director will be elected to a one-year term, expiring at
the 1999 Annual Meeting of Shareholders.
The foregoing individuals have each consented to be named as nominees
and to serve as directors if elected. Biographical information concerning
the nominees appears at pages 3-4 above.
Each director position will be filled by plurality vote. Abstentions
and broker non-votes will not affect the tally of votes cast in the
election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
RATIFICATION OF ACCOUNTANTS
The shareholders will be asked to ratify the appointment of Coopers &
Lybrand L.L.P. as the Company's independent accountants for the fiscal year
ending December 31, 1998. Coopers & Lybrand has served as the Company's
independent accountants since 1981. One or more representatives of Coopers
& Lybrand will be present at the Meeting, will have an opportunity to make a
statement to the Meeting if they desire to do so, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND.
AMENDMENT TO INCREASE AUTHORIZED COMMON STOCK
The Company's authorized stock presently consists of 6,000,000 shares
of common stock, $1.00 par value. As of April 28, 1998, there were
3,046,842 shares of common stock outstanding and an additional 384,000
shares reserved for issuance under outstanding stock options. Moreover, the
Board of Directors has authorized the Company to engage in a Rights Offering
(described elsewhere in this Proxy Statement) under which the Company would
issue up to an additional shares of common stock. An increase in the number
of authorized shares would permit the Company to engage in such a
transaction and still have additional authorized but unissued shares
available for use by the Company in future transactions.
Subject to shareholder approval, the Board has voted unanimously to
double the authorized common stock, to 12,000,000 shares. The additional
shares authorized under the proposed amendment would be available for any
proper corporate purpose, including future business acquisitions, or equity
financing programs. The Board would have authority to issue such shares
from time to time without further approval of the shareholders unless such
approval were otherwise required by applicable laws and regulations.
Except for the contemplated Rights Offering and except for issuances
pursuant to the NEIC Stock Option Plan, the Company presently has no
specific plans to issue additional shares. The Board believes that a
substantial increase in authorized shares is desirable in order to maintain
the Company's flexibility to issue shares from time to time without the
delays that could result if such shares had not been previously authorized
by the shareholders.
Shareholders have no preemptive rights with respect to the Company's
shares. As described above, however, the Standstill Agreement with
Ballantrae provides Ballantrae certain rights akin to preemptive rights on
future sales of common stock to third parties. See discussion at page 7
above.
The increased flexibility represented by the additional authorized
shares could, in some circumstances, have the effect of discouraging an
attempt to change control of the Company. However, applicable insurance
laws generally require prior approval from the state insurance agencies
prior to any issuance of stock to a person who will thereby have voting
control over 10% or more of the outstanding shares. These restrictions, as
a practical matter, will restrict the Board's ability to issue a large block
of stock to a single person or group in an effort to block a competing
takeover bid. Those same laws would also restrict a competing bidder's
ability to acquire as much as 10% of the outstanding shares. As a result,
use of the unissued stock as an antitakeover device would subject to
significant restrictions, and would be unlikely to occur absent special
circumstances.
The form of resolution for adoption of the proposed amendment is as
follows:
RESOLVED: THAT THE ARTICLES OF INCORPORATION OF NORTH EAST
INSURANCE COMPANY BE AMENDED TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK, $1.00 PAR VALUE, FROM 6,000,000 SHARES TO
12,000,000 SHARES.
The affirmative vote of a majority of the outstanding shares of NEIC
common stock is needed to approve the amendment. For these purposes,
abstentions and broker non-votes will have the same effect as a vote against
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THIS AMENDMENT TO THE ARTICLES OF INCORPORATION.
AMENDMENT OF NEIC STOCK OPTION PLAN
At the 1997 Annual Meeting, the NEIC shareholders approved the North
East Insurance Company Stock Option Plan, authorizing the grant of stock
options for the purchase of up to 400,000 shares of common stock. The
purpose of the Plan is to provide outside directors and key employees of the
Company with additional incentives to contribute to the success of the
Company and to assist the Company in attracting and retaining qualified
directors and employees. Pursuant to the Plan, the Company has granted
stock options covering 384,000 shares.
Subject to shareholder approval, the Board of Directors of the Company
has voted to amend the Plan to increase the number of shares available for
issuance. Specifically, the Board proposes to double the size of the Plan
to 800,000 shares.
ADMINISTRATION OF THE PLAN. The Plan is administered by a
Compensation Committee of two or more non-employee directors appointed by
the Board of Directors. The Committee has full authority to interpret the
Plan and to establish rules and regulations governing the administration of
the Plan. In its discretion, the Board may exercise any of the duties and
authority of the Committee.
AWARDS UNDER THE PLAN. The Plan provides for awards of Incentive
Stock Options (ISOs), Nonqualified Stock Options (NSOs), and Stock
Appreciation Rights (SARs). ISOs and NSOs represent the right to purchase
NEIC common stock at a designated option price per share. (These two types
of options have different tax consequences, as described below.) SARs
represent the right to receive a future payment in an amount which is
determined by reference to the value of a share of common stock.
Employees of the Company may receive Incentive Stock Options,
Nonqualified Stock Options, or Stock Appreciation Rights under the Plan, or
a combination thereof. The Committee has discretion to determine which
employees of the Company shall be granted awards under the Plan, the time or
times at which awards shall be granted, and the terms, conditions, and
restrictions of each award. Presently, the Company has approximately 42
employees who would be eligible to receive awards under the Plan.
Employees may be awarded either Incentive Stock Options or
Nonqualified Stock Options, in each case carrying an option price of not
less than 100% of the fair market value per share on the date of grant. The
term of each option shall be set forth in an option agreement. No ISO may
be exercised more than ten years after the date of grant, and no ISO may be
granted to any employee who, at the time of grant, owns more than 10% of the
outstanding voting stock of the Company.
Employees may also be awarded Stock Appreciation Rights entitling the
holder to receive payment of an amount equal to the excess of (i) the fair
market value per share of NEIC common stock on the date of exercise over
(ii) the grant price of the right (which price may not less be than 100% of
the fair market value of the common stock on the date of grant). The terms
of such an award shall be set forth in an SAR agreement. The Committee has
discretion to determine the grant price and term within which, and
conditions upon which, the right may be exercised.
The Committee may also grant Nonqualified Stock Options or Stock
Appreciation Rights to non-employee Directors of the Company. Such awards
are subject to the same limitations under the Plan as grants of Nonqualified
Stock Options or Stock Appreciation Rights. Non-employee Directors are not
eligible for Incentive Stock Options.
Payment to the Company for exercise of an ISO or NSO may be made in
cash, Company stock, or a combination thereof, or in such other manner as
the Committee may approve. Payment upon exercise of a SAR is to be made in
cash, stock, or a combination thereof, as specified in the SAR agreement.
CALCULATION OF SHARE LIMITATION. In the event that a participant
surrenders previously owned NEIC common stock in full or partial payment of
the exercise price of an option under the Plan, only the net number of
shares issued upon exercise will be counted toward the share limitation. In
the event of a stock split or other pro rata change in the number of shares
owned by shareholders, the limitation on shares issuable under the Plan will
be adjusted proportionately.
EFFECT OF TERMINATION OF EMPLOYMENT. Termination of an employee-
participant's employment may affect the exercisability of an outstanding
option or SAR. The Plan does not require employment-related limitations on
exercise, but generally provides that termination of employment will
accelerate the expiration date of an option unless the option agreement
otherwise provides. If an employee ceases to be employed by the Company,
any outstanding Incentive Stock Option will lose its favorable tax status
unless exercised within a specified time thereafter (or, in the case of
death or disability, one year thereafter).
In the case of awards to non-employee directors, termination of the
participant's status as a director will not affect the exercisability of the
award, unless the option agreement or SAR agreement otherwise provides.
EFFECT OF A CHANGE IN CONTROL. The Plan provides that upon a Change
in Control Event (as defined), and except as the terms of the option
agreement or SAR agreement otherwise provide and except for formula awards
to non-employee directors, all outstanding options and rights not previously
exercisable shall become immediately exercisable by the holder. These
provisions are generally triggered by a merger or other reorganization in
which the Company is not the surviving or continuing corporation (except for
certain transactions involving the formation of a holding company for NEIC)
or by substantial changes in the composition of the Board which have not
been approved in advance by independent directors of the Company. In view
of the limited number of shares available for issuance under the Plan,
acceleration of the exercisability of awards is not expected to have a
material effect on any proposed change in control.
TAX CONSEQUENCES OF AN AWARD. For federal tax purposes, a participant
generally will not realize income at the time a Nonqualified Stock Option or
Stock Appreciation Right is granted. When the participant exercises the
option or right, however, he or she will realize ordinary income in the
amount of the difference between option or grant price and the fair market
value of the stock or payment received by him or her. The Company may take
a business deduction at the time the option or right is exercised, in the
amount includable as ordinary income by the employee.
Under the Internal Revenue Code, Incentive Stock Options are accorded
different tax treatment. An option holder generally will not realize income
at the time of grant or exercise of an Incentive Stock Option. Upon sale of
the underlying shares, if the sale occurs at least two years after the
option was granted and at least one year after the date the shares were
transferred to the employee, the gain realized on such sale will be treated
as long-term gain. The Company may not take a business deduction with
respect to shares transferred under Incentive Stock Options if the sale
occurs in accordance with these time requirements. However, if the employee
fails to meet either of the time requirements described above, the excess of
the fair market value of the shares at the time of exercise of the Incentive
Stock Option over the option price will generally be treated as ordinary
income in the year of sale and the Company will be entitled to a
corresponding deduction.
FURTHER AMENDMENTS; TERMINATION. The Committee or the Board of
Directors may amend the Plan at any time, without shareholder approval,
unless the amendment would increase the maximum number of shares for which
awards may be granted under the Plan, or would modify the class of employees
eligible to participate in the Plan.
NEW PLAN BENEFITS. The Board has decided to implement a program to
award NSOs to non-employee directors in lieu of cash compensation. NSOs
would be granted at the rate of 1,000 shares per quarter, and would have an
exercise price equal to 100% of the fair market value of the common stock on
the last day of the quarter. As described above, options have been granted
retroactively to non-employee directors for the ten quarters between October
1, 1995 and March 31, 1998 (or the seven quarters between July 1, 1996 and
March 31, 1998), all of which bear an exercise of $2.8125 per share (the
closing price of NEIC common stock on April 10, 1998, the effective date of
such grant). Thereafter, awards will be made quarterly as of the end of
each new quarter, until such time as the Committee or the Board determines
to change or terminate this program. Pursuant to SEC requirements, the
following table illustrates the awards contemplated to be granted in 1998,
assuming that the option price equals the April 10, 1998 market price.
There presently is no plan to grant options to employees during 1998.
NEW PLAN BENEFITS
NEIC STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE ($) IF STOCK
APPRECIATES FOR 10 YEARS AT
----------------------------- NO. OF
0%/YR. 5%/YR. 10%/YR. UNITS
------ ------ ------- ------
<S> <C> <C> <C> <C>
Robert G. Schatz 0 0 0 0
Ronald A. Libby 0 0 0 0
Samuel M. Koren 0 0 0 0
Executive Officer
Group 0 0 0 0
Non-Executive
Director Group
(11 persons) 0 $72,519 $183,778 41,000
Non-Executive
Officer Employee
Group 0 0 0 0
</TABLE>
The affirmative vote of a majority of the outstanding shares of NEIC
common stock is needed to approve the Plan. For these purposes, abstentions
and broker non-votes will have the same effect as a vote against this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THIS AMENDMENT OF THE NEIC STOCK OPTION PLAN.
OTHER MATTERS
All expenses of this solicitation will be borne by the Company. No
person will receive any additional compensation for soliciting proxies from
any shareholder. In addition to use of the mails, proxies may be solicited
directly, or by telephone or other means, by Company employees. The Company
will reimburse brokerage firms, custodians, nominees, and fiduciaries for
the reasonable expenses of forwarding proxy materials to beneficial owners.
At the date of this Proxy Statement, Management knows of no other
matters that are to be brought before the Meeting. However, if any matters
other than those set forth in the accompanying Notice should properly come
before the Meeting, the persons named in the enclosed proxy will vote the
proxies on such matters in their discretion.
Shareholder Proposals for 1999 Meeting. The Company will consider for
inclusion in its proxy materials for the 1999 Annual Meeting any shareholder
proposal received by the Company in proper written form by January 14, 1999.
Any such proposals should be addressed to the Company as follows: North
East Insurance Company, 482 Payne Road, P.O. Box 1418, Scarborough, ME
04074, Attn: Chairman of the Board of Directors.
By Order of the Board of Directors
SAMUEL M. KOREN, Clerk
Exhibit A
PROPOSED AMENDMENT TO
ARTICLES OF INCORPORATION
The Articles of Incorporation (formerly Certificate of Organization)
of the Company are hereby amended such that Article Fourth shall read in its
entirety as follows:
FOURTH: The Board of Directors shall consist of not less than seven nor more
than twenty-one directors, the number of Directors to be fixed from time to
time by vote of the Directors or by the affirmative vote of at least two-
thirds of the outstanding shares of the Company entitled to vote for the
election of Directors.
At the 1998 Annual Meeting of Shareholders, the Directors shall be divided
into three classes, as nearly equal in number as possible, with the term of
office of Class I to expire at the 1999 Annual Meeting of Shareholders, the
term of office of Class II to expire at the 2000 Annual Meeting of
Shareholders, and the term of office of Class III to expire at the 2001
Annual Meeting of Shareholders, with the Directors in each class to hold
office until their respective successors are duly elected and qualified. At
each Annual Meeting of Shareholders after 1998, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding Annual Meeting of Shareholders after their
election.
In addition to any vote required by law or by any other provision of these
Articles of Incorporation, the affirmative vote of at least two-thirds of
the outstanding shares of the Company entitled to vote for the election of
Directors shall be required for any action by the shareholders to amend or
repeal this Article Fourth or to adopt, amend, or repeal any other
provisions of the Articles of Incorporation or Bylaws of the Company
governing the size of the Board, the number of Directors in each class of
Directors, the quorum or vote required to elect or remove Directors, or the
procedures for nominating Directors or filling any vacancy in the Board.
NORTH EAST INSURANCE COMPANY
PROXY
(SOLICITED BY THE BOARD OF DIRECTORS)
The undersigned appoints Robert G. Schatz and Samuel M. Koren, or either of
them, proxies with full power of substitution, to represent and vote all
shares of Common Stock of North East Insurance Company held by the
undersigned, at the Annual Meeting of Shareholders to be held June 25, 1998,
or any adjournment thereof.
1. TO APPROVE THE PROPOSED STAGGERED BOARD AMENDMENT TO THE ARTICLES
OF INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. TO FIX THE NUMBER OF DIRECTORS AT ELEVEN AND TO ELECT THE FOLLOWING
NOMINEES TO THE BOARD OF DIRECTORS FOR THE TERMS STATED
Class I (term expiring at 1999 Annual Meeting of Shareholders):
Terence P. Cummings, Robert A. Hancock, Deborah L. Harmon, and
Robert G. Schatz
Class II (term expiring at 2000 Annual Meeting of Shareholders):
Edward B. Batal, Murry N. Gunty, Joseph M. Hochadel, and
Bruce H. Suter
Class III (term expiring at 2001 Annual Meeting of Shareholders):
Wilson G. Hess, Jonathan S. Kern, and Peter A. Russ
(To withhold authority to vote for any individual nominee, strike
a line through the nominee's name)
NOTE: If Proposal 1 is not adopted by the shareholders, then each
of the nominees named above will be elected to a one-year term.
3. TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND AS AUDITORS FOR THE
CURRENT YEAR
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED
COMMON STOCK TO 12,000,000 SHARES
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO AMEND THE NEIC STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, upon such other matters as may properly come
before the Meeting.
This proxy, when properly executed, will be voted in the manner directed
hereby by the undersigned shareholder. Where no direction is made, this
proxy will be voted FOR the nominated directors and FOR Proposals 1, 3, and
4. The undersigned hereby revokes any proxy previously given and
acknowledges receipt of the Notice of, and Proxy Statement for, the
aforesaid Meeting.
Dated: ________________________, 1998
_____________________________________
Signature
_____________________________________
Signature
NOTE: Personal representatives, custodians, trustees, partners, corporate
officers, and attorneys-in-fact should add their titles as such.
PLEASE VOTE AND DATE THIS PROXY, SIGNING IT AS YOUR NAME APPEARS ON YOUR
STOCK CERTIFICATES AND RETURN THE PROXY IN THE ENVELOPE PROVIDED.
