<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Northeast Federal Corp.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Craig W. Smith, Secretary
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- - --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
(LOGO OF NORTHEAST FEDERAL CORP. APPEARS HERE)
50 State House Square
Hartford, CT 06103
April 28, 1994
Dear Fellow Common Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Northeast Federal Corp., the holding company of Northeast Savings, F.A., which
will be held at The Hartford Club, 46 Prospect Street, Hartford, Connecticut at
10:00 a.m. on May 20, 1994. I, and the other members of the Board of Directors
and management, look forward to greeting personally the common stockholders
able to attend.
On the following pages you will find the formal Notice of Annual Meeting and
the proxy statement. At the meeting, stockholders will be asked to elect four
directors, as described in the accompanying proxy statement.
Whether or not you plan to attend the meeting in person, it is important that
your shares be represented and voted at the meeting. Accordingly, please take a
moment to date, sign and return the enclosed proxy card.
We hope you will participate in the Annual Meeting, either in person or by
proxy.
Cordially,
(SIGNATURE OF GEORGE P. RUTLAND APPEARS HERE)
George P. Rutland
Chairman of the Board
<PAGE>
(LOGO OF NORTHEAST FEDERAL CORP. APPEARS HERE)
50 State House Square
Hartford, CT 06103
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 20, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Common Stockholders of
Northeast Federal Corp. will be held at The Hartford Club, 46 Prospect Street,
Hartford, Connecticut on Friday, May 20, 1994, at 10:00 a.m. for the following
purposes:
(1) to elect four directors to serve three-year terms;
(2) to transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on March 25, 1994, as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting, or any
adjournment thereof. A list of such stockholders will be available for
inspection at the time and place of the meeting and during the ten days prior
to the meeting, at the Office of the Secretary, Northeast Federal Corp., 50
State House Square, Hartford, Connecticut 06103.
NORTHEAST FEDERAL CORP.
(SIGNATURE OF CRAIG W. SMITH APPEARS HERE)
Craig W. Smith
Secretary
Hartford, Connecticut
April 28, 1994
- - --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY, THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE VOTE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH DOES
NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU ARE PRESENT AT THE MEETING.
- - --------------------------------------------------------------------------------
<PAGE>
(LOGO OF NORTHEAST FEDERAL CORP. APPEARS HERE)
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
Voting and Solicitation of Proxies.......................................... 1
Election of Directors....................................................... 2
Information as to Nominees and Continuing Directors......................... 3
Information Regarding the Board of Directors................................ 6
Security Ownership of Certain Beneficial Owners and Management.............. 9
Executive Compensation and Certain Relationships and Related Transactions... 12
Personnel Committee Report.................................................. 22
Stock Performance Graph..................................................... 26
Other Information........................................................... 27
</TABLE>
<PAGE>
(LOGO OF NORTHEAST FEDERAL CORP. APPEARS HERE)
50 State House Square
Hartford, Connecticut 06103
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1994
VOTING AND SOLICITATION OF PROXIES
This proxy statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of
Northeast Federal Corp. ("Northeast Federal" or the "Company") for the Annual
Meeting of its stockholders to be held at The Hartford Club, 46 Prospect
Street, Hartford, Connecticut on Friday, May 20, 1994, at 10:00 a.m. and any
adjournments thereof. The 1993 Summary Annual Report and Form 10-K including
Consolidated Financial Statements for the fiscal year ended December 31, 1993
accompany this Proxy Statement but are not a part of this Proxy Statement.
Whether or not you are able to attend in person, it is important that your
shares be represented at the meeting. No action may be taken unless a majority
of the outstanding shares of the Common Stock (the "Common Stock" and the
holders of such stock the "Common Stockholders") is represented. To make sure
your shares are represented at the meeting, please vote on each matter
specified on the enclosed proxy card and return it, dated and signed in the
enclosed prepaid envelope.
If the enclosed proxy card is properly executed and returned, and is not
revoked, it will be voted in accordance with the instructions indicated by the
stockholder. The proxy provides a space for you to withhold your vote for the
nominees for the Board of Directors if you choose to do so. You are urged to
indicate the way you wish to vote on each matter in the space provided.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS
NAMED IN THE PROXY STATEMENT.
You may revoke your proxy at any time prior to its exercise by filing with
the Secretary of Northeast Federal a written notice of revocation, by
delivering to Northeast Federal a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. If you are a stockholder
whose shares are not registered in your own name, you will need to obtain
documentation as to your ownership and the right to vote from the recordholder
in order to vote personally at the meeting.
This proxy statement and the accompanying proxy are first being sent to the
stockholders on or about April 28, 1994.
The cost of soliciting the proxies will be borne by Northeast Federal. In
addition to the solicitation of proxies by mail, proxies may be solicited by
directors or officers of Northeast Federal in person or by telephone or
telegraph. In addition, Northeast Federal will retain Morrow & Co., Inc. to aid
in the solicitation for an estimated cost of $4,000 plus out-of-pocket
expenses. Northeast Federal will also request persons, firms and corporations
holding shares in their names, or in the names of their nominees, which are
beneficially owned by others, to send proxy materials to and obtain proxies
from such beneficial owners and will reimburse such holders for their
reasonable expense in so doing.
<PAGE>
Common Stockholders will vote for four directors and upon any other item of
business properly brought before the meeting. The securities which can be voted
at the meeting for the four nominees for Director and the other matters to be
voted at the meeting consist of shares of Common Stock of Northeast Federal
with each share entitling its owner to one vote on matters other than the
election of directors, in respect to which election, a cumulative vote is
permitted as discussed below. The close of business on March 25, 1994, has been
fixed by the Board of Directors as the record date for determination of
stockholders entitled to vote at the meeting. The number of shares of Common
Stock outstanding on the record date was 13,443,957.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock is necessary to constitute a
quorum for the Annual Meeting. In the event there are not sufficient votes for
a quorum or to approve any proposal at the time of this Annual Meeting, the
Annual Meeting may be adjourned in order to permit further solicitation of
proxies.
As to the election of directors, the proxy cards solicited by the Board of
Directors from the holders of the Common Stock enable such holders to vote for
the election of the nominees for Director proposed by the Board of Directors or
to withhold authority to vote for one or more of the nominees proposed.
Directors are elected by a plurality of votes cast, without regard to either
(i) broker non-votes or (ii) proxies as to which authority to vote for one or
more of the nominees being proposed is withheld.
Proxies solicited hereby will be returned to the proxy solicitor or the
Company's transfer agent and will be tabulated by the inspectors of election
designated by the Board, at least one of whom will not be an employee or a
director of the Company or any of its affiliates. After the final adjournment
of the Annual Meeting, the proxies will be returned to the Company for
safekeeping.
ITEM 1. ELECTION OF DIRECTORS
GENERAL
At each election of directors, every Common Stockholder entitled to vote has
the right to vote, in person or by proxy, the number of shares owned for as
many persons as there are directors to be elected by the Common Stockholders or
to cumulate votes by giving one nominee as many votes as the number of such
directors to be elected multiplied by the number of the shares owned shall
equal, or by distributing such accumulated votes in such manner as selected by
such holder among any number of nominees.
Pursuant to the Bylaws of Northeast Federal, the Board of Directors has
nominated the individuals named below for election by the Common Stockholders
as directors. It is the intention of the persons named in the proxy to vote for
the election of all or cumulatively for any one or more of the nominees for
directors named below, at their discretion, unless the proxy is marked to
indicate that such authorization is expressly withheld. The Board of Directors
believes that all such nominees will stand for election and will serve as
directors if so elected. If any person nominated is unable to stand for
election or to serve his prescribed term of office, the proxy committee
reserves full discretion to vote for any other person who may be nominated.
There are presently thirteen members of the Board of Directors of Northeast
Federal Corp. who were elected by the Common Stockholders (the "Common Stock
Directors"). The Common Stock Directors serve three-year terms and
approximately one-third of the Common Stock Directors are elected each year at
the Annual Meeting. Directors serve until their successors are
2
<PAGE>
elected and qualified. The present Common Stock Directors of Northeast Federal
also serve on the Board of Directors of its federal savings and loan
subsidiary, Northeast Savings. Each of the Common Stock Directors was a
director of Northeast Savings prior to the formation of the holding company and
the reorganization which was effective July 9, 1990, with the exception of Kirk
W. Walters, who was elected to both Boards on November 16, 1990 and Barbara C.
Lawrence who was elected to both Boards on June 28, 1991. See "Information as
to Nominees and Continuing Directors."
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The nominees and continuing directors, their age at December 31, 1993, and
the year in which the term for which they are proposed to be elected or have
been elected will expire are set forth below.
<TABLE>
<CAPTION>
DIRECTOR OF
NORTHEAST FEDERAL TERM TO
NAME AGE SINCE EXPIRE
---- --- ----------------- -------
<S> <C> <C> <C>
COMMON STOCK NOMINEES
George J. Fantini, Jr. 51 1990 1997
Richard H. Gordon 52 1990 1997
George P. Rutland 61 1990 1997
John R. Silber 67 1990 1997
CONTINUING COMMON STOCK DIRECTORS
Gerald P. Carmen 63 1990 1995
David W. Clark, Jr. 56 1990 1996
Beverly Lannquist Hamilton 47 1990 1995
Barbara C. Lawrence 66 1991 1995
Thomas P. O'Neill III 49 1990 1995
George W. Sarney 54 1990 1995
Raymond T. Schuler 64 1990 1996
Kirk W. Walters 38 1990 1996
Frederick W. Zuckerman 59 1990 1996
SERIES B PREFERRED STOCK DIRECTORS
Richard H. Gaskill 51 1992 *
Jerome F. Williams 39 1992 *
</TABLE>
- - --------
*See "Series B Preferred Stock Directors" below.
The business experience for the past five years, the positions, if any, held
with the Company during the last five years, and a listing of other
directorships of publicly traded and certain other companies held by each of
the nominees and continuing directors are set forth below. The information set
forth below is as of December 31, 1993. None of the nominees or continuing
directors has a business relationship with Northeast Federal or Northeast
Savings as the same is described in Item 404(b) of Regulation S-K of the
Securities and Exchange Commission (the "SEC"), except as set forth in the
section entitled "Certain Relationships and Related Transactions."
COMMON STOCK NOMINEES
George J. Fantini, Jr.--Senior Vice President, The Boston Financial Group,
which provides real estate oriented financial services.
3
<PAGE>
Richard H. Gordon--Commercial Real Estate Developer.
George P. Rutland/1/--Chairman of the Board and Chief Executive Officer,
Northeast Federal Corp. and Chairman of the Board and Chief Executive Officer,
Northeast Savings, F.A.; former President and Chief Executive Officer of
CalFed, Inc.
John R. Silber--President, Boston University; Member of the Board of
Directors of Seragen, Inc.
CONTINUING COMMON STOCK DIRECTORS
Gerald P. Carmen--Partner, The Carmen Group; former Principal, Financial
Institution Services Corporation; former President of the Federal Asset
Disposition Association; former U.S. Ambassador to the United Nations Office
and other international organizations in Geneva, Switzerland; member of the
Board of Directors of the Mediplex Group, Inc., and Nostalgia Network, Inc.
David W. Clark, Jr.--Managing Director of Pryor & Clark Company, a private
investment firm; director of Checkpoint Systems, Inc., Acme United Corp.,
Conning & Co., Corcap Inc., and Compudyne Corporation/2/.
Beverly Lannquist Hamilton--President, ARCO Investment Management Company;
former Deputy Comptroller, City of New York; former Vice President--Investor
Relations and Pension Investment, United Technologies Corporation; Member of
the Board of Directors of Connecticut Natural Gas Corporation.
Barbara C. Lawrence--Member of the Board of Directors of Lawrence Insurance
Group.
Thomas P. O'Neill III--Chairman, McDermott/O'Neill & Associates; former
President, Bay State Investors, Inc.; Member of the Board of Directors of
Meeschaert Capital Accumulation Fund, Inc.
George W. Sarney--President, Siebe Control Systems and President, The
Foxboro Company; former Senior Vice President and Group Executive, Energy and
Environmental Group, Raytheon Company; former Vice President and General
Manager, Turbine Marketing and Projects Division and former Vice President and
General Manager, Gas Turbine Division, General Electric Company. Member of the
Board of Directors of Bay State Gas Company, Cincinnati Incorporated, and
Siebe PLC.
- - --------
/1/ Mr. Rutland stepped down as Chief Executive Officer effective January 1,
1994 at which time Mr. Walters assumed the position of Chief Executive
Officer.
/2/ CompuDyne Corporation is the parent company of CompuDyne, Inc. On December
31, 1991, CompuDyne, Inc., one of seven wholly owned subsidiaries of
CompuDype Corporation, filed a voluntary petition under Chapter 7 of the
United States Bankruptcy Code. Mr. Clark had served as Chairman of the Board
and Chief Executive Officer of CompuDyne, Inc. until November 30, 1990.
CompuDyne, Inc. had ceased all operations a year prior to the filing and had
no bank or secured debt. At the time of filing, however, CompuDyne, Inc. was
the subject of various claims relating to hazardous substances at five
previously operated manufacturing locations and was subject to a class
action suit relating to asbestos contamination. All of the environmental
matters related to a period five to ten years prior to Mr. Clark's
association either with CompuDyne Corporation or CompuDyne, Inc.
4
<PAGE>
Raymond T. Schuler--Retired Vice Chairman, and former President and Chief
Executive Officer, The Business Council of New York State, Inc.; Member of the
Board of Directors of Consolidated Rail Corporation, and Oneida Ltd.
Kirk W. Walters/3/ --President, Chief Operating Officer and Chief Financial
Officer, Northeast Federal Corp. and President, Chief Operating Officer and
Chief Financial Officer, Northeast Savings F.A.; and former Senior Vice
President and Controller, California Federal Bank, a federal savings bank.
Frederick W. Zuckerman--IBM Vice President and Treasurer, IBM Corporation;
former Senior Vice President and Treasurer, RJR Nabisco, Inc.; former Business
Consultant; former Vice President and Treasurer of Chrysler Corporation;
Member of the Board of Trustees of Meditrust; Member of the Board of Directors
of The Singapore Fund, Anacomp, Inc., The Turner Corporation, The Japan Equity
Fund and NVR, Inc.
SERIES B PREFERRED STOCK DIRECTORS
Richard H. Gaskill--Independent Business Consultant; former Executive
Director of the Rhode Island Depositors Economic Protection Corporation
("DEPCO"); and former Senior Vice President for Corporate Development of Apple
Bank.
Jerome F. Williams--Deputy Director of the Rhode Island Department of
Administration; and former Deputy General Treasurer for Finance for the State
of Rhode Island.
As indicated, two directors have been elected by the holder of the Company's
$8.50 Cumulative Convertible Preferred Stock, Series B (the "Series B
Preferred Stock") which stock was issued by the Company to DEPCO in connection
with the acquisition by Northeast Savings of the assets of four Rhode Island
financial institutions in state receivership proceedings (the "May 1992
Transactions"). DEPCO was created by act of the Rhode Island legislature for
the purpose of protecting depositors of financial institutions in the State of
Rhode Island whose deposits were previously insured by the Rhode Island Share
and Deposit Indemnity Corporation, a private deposit insurance fund which
entered into conservatorship proceedings. The Stock and Warrant Purchase
Agreement entered into with DEPCO in connection with the acquisition permits
DEPCO to transfer the Series B Preferred Stock to another agency or
instrumentality of the State of Rhode Island, and such transferee is deemed a
"nominee" of DEPCO. On June 24, 1992, the Company was advised by DEPCO that it
had transferred the Series B Preferred Stock to the Rhode Island State
Investment Commission (RISIC). The RISIC transferred the Series B Preferred
Stock back to DEPCO on September 28, 1993.
The Certificate of Designation for the Series B Preferred Stock increases
the Board of Directors by two and gives DEPCO or its nominee the right to
elect two directors so long as DEPCO or its nominee holds at least 211,020
shares of the Series B Preferred Stock (one director, if DEPCO or its nominee
holds less than that number, but at least 105,510 shares of Series B Preferred
Stock). RISIC has elected the two Series B Preferred Stock Directors
identified above. These Directors will continue to hold these positions until
DEPCO, the current owner of the Series B Preferred Stock, nominates and elects
another individual to fill such position in accordance with the procedures for
such appointment set forth in the Certificate of Designation for the Series B
Preferred Stock. See "Security Ownership of Certain Beneficial Owners and
Management" for information regarding the beneficial ownership of Company
Common Stock by DEPCO.
- - --------
/3/ Mr. Walters was elected Chief Executive Officer in November 1993 effective
January 1, 1994.
5
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lynne M. Carcia (Age 31)--Senior Vice President, Controller and Principal
Accounting Officer of the Company and the Association; former Senior Vice
President and Controller of the Company and the Association; former Vice
President, Loan Accounting of the Association; former Audit Manager, Ernst &
Young.
JoAnn Dolan (Age 42)--Executive Vice President, Loan Administration and
Operations of Northeast Savings; former Executive Vice President, Consumer
Lending and Loan Administration of the Association; former Senior Vice
President, Consumer Lending of the Association.
Tami W. Kaschuluk (Age 36)--Executive Vice President & Chief Appraiser for
the Association; former Senior Vice President and Chief Appraiser for the
Association; former Manager, Appraisal Division, Cushman & Wakefield.
Daniel J. Steinmetz (Age 41)--Executive Vice President, Commercial Lending of
the Association; former Senior Vice President, Commercial Lending of the
Association; former Vice President and Regional Manager, Commercial Lending,
Bank of Boston, Connecticut.
Victor A. Vrigian, Jr. (Age 37)--Executive Vice President, Retail Banking and
Marketing of the Association; former Senior Vice President, Marketing for the
Association; former Vice President, Deposit Products of the Association.
INFORMATION REGARDING THE BOARD OF DIRECTORS
GENERAL
The Company's Board of Directors met 11 times during the fiscal year ended
December 31, 1993. During the fiscal year, the Common Stock Directors of the
Company also served on the Board of Directors of Northeast Savings, which met
11 times. Effective January 22, 1993, the Series B Preferred Stock Directors
also served on the Board of Directors of Northeast Savings for a term expiring
at the 1994 Annual Meeting of the Association unless earlier terminated.
COMMITTEES
The Northeast Federal Board of Directors has appointed three standing
committees: Audit, Executive and Personnel. The membership and principal
responsibilities of those committees and the number of meetings held by each
during the fiscal year ended December 31, 1993, appear below.
EXECUTIVE COMMITTEE (2 MEETINGS)
Between meetings of the Board of Directors, the Executive Committee has all
powers which may be delegated to it under Delaware law. In general, the
Executive Committee may supervise the management of all business of the
Company,except for matters which by law specifically require the action of the
full Board or the stockholders. The present members of the Executive Committee
are George P. Rutland, Chairman; David W. Clark, Jr.; Thomas P. O'Neill III;
Raymond T. Schuler; Kirk W. Walters; and Frederick W. Zuckerman.
6
<PAGE>
AUDIT COMMITTEE (4 MEETINGS)
The Audit Committee reviews and acts or reports to the Board of Directors
with respect to various auditing and accounting matters, including the
selection of and nature of services to be performed by the Company's
independent auditors, the performance of the independent auditors and the fees
to be paid to them. In addition, the Committee reviews the scope of audit
procedures and the accounting policies, procedures and internal controls of the
Company to determine their compliance with Company policies and applicable laws
and regulations. The Committee also reviews with management and independent
auditors the annual financial statements and the accompanying notes, as well as
management's statements and assessments and its independent public accountant's
attestation report concerning Northeast Savings' internal control structure and
financial reporting procedures. The present members of the Audit Committee are
David W. Clark, Jr., Chairman; Gerald P. Carmen; Thomas P. O'Neill III; Raymond
T. Schuler; John R. Silber; and Frederick W. Zuckerman, none of whom are
employees of the Company or the Association.
PERSONNEL COMMITTEE (5 MEETINGS)
The Personnel Committee makes recommendations to the Board concerning the
election of senior officers and reviews and approves their compensation. It
reviews and approves employee benefit plans and incentive plans and
participation therein and, where required, recommends changes to the Board of
Directors. The Committee also reviews and approves Company personnel policies.
The present members of the Personnel Committee are Raymond T. Schuler,
Chairman; David W. Clark, Jr.; Beverly Lannquist Hamilton; George W. Sarney;
and Frederick W. Zuckerman, none of whom are employees of the Company or the
Association.
NOMINATIONS
There is no Nominating Committee of the Board of Directors. Nominations to
the Board are made by the Board of Directors. The Board will consider nominees
recommended by stockholders.
Pursuant to the Company's Bylaws, nominations of persons for election to the
Board may be made by any stockholder of the Company at a meeting of
stockholders, provided that such stockholder provides notice in writing to the
Secretary of the Company not less than sixty days prior to the meeting. If less
than seventy days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, then notice of a nomination must be received
within ten days following the day on which notice of the meeting was mailed or
publicly disclosed to stockholders. Notices of nominations must contain the
type of information about the nominee that is required to be disclosed in
solicitations for proxies for elections of directors pursuant to Regulation 14A
of the SEC, as well as the name and record address of the nominating
stockholder and the class and number of shares of the Company which are
beneficially owned by the stockholder.
NORTHEAST SAVINGS, F.A. COMMITTEES (14 MEETINGS)
There are five standing committees of the Board of Directors of Northeast
Savings. They are the Executive, Audit, Personnel, Community Reinvestment and
Social Responsibility Committees.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the fiscal year ended December 31, 1993, all directors attended more
than 75 percent of the aggregate of the total number of meetings of the Board
of Directors and Committees of the
7
<PAGE>
Board on which he or she served. All absences by directors from Board Meetings
were excused by a vote of a majority of the Board.
DIRECTORS' COMPENSATION
DIRECTORS' FEES
Directors of Northeast Federal receive no compensation for their services as
such to the Company. During the fiscal year ended December 31, 1993, the Common
Stock Directors also served as directors of Northeast Savings. Directors of
Northeast Savings are paid $7,000 per annum, payable quarterly in arrears, plus
$1,000 for each Board meeting and $500 for each committee meeting attended
except for members of the Audit Committee who receive $1,000 for each Audit
Committee meeting attended. The Chairman of the Audit Committee is paid a
retainer of $2,500 per annum payable quarterly in arrears, and the Chairman of
the Personnel Committee is paid a retainer of $2,000 per annum payable
quarterly in arrears. Each director also receives $1,000 for any day when such
director performs services for the Association when so requested and authorized
by the Chairman of the Board of Directors. Directors required to travel more
than 75 miles from their principal residence to such meetings are paid an
additional fee of $200, plus ordinarily reimbursed expenses. Effective January
22, 1993, the Series B Preferred Stock Directors also served as Directors of
Northeast Savings and receive compensation as set forth above for the period of
such services. Until November 1993, directors fees for the services of Richard
H. Gaskill were paid directly to DEPCO; after November 1993, directors fees
were paid to Mr. Gaskill. Directors fees for Mr. Williams' services are paid to
the State of Rhode Island. Employees who are also directors do not receive any
compensation for service as directors other than salary and related benefits.
Directors who are not employees are not entitled to any of the fringe benefits
afforded to employees.
DIRECTORS' DEFERRED FEE PLAN
The Association also has established the Northeast Savings, F.A. 1993
Directors' Deferred Fee Plan ("Directors' Deferred Fee Plan") as a method to
all Directors of the Association to defer fees in exchange for a future cash
benefit and/or a benefit based on the fair market value of the Company's Common
Stock. A participant in the Deferred Fee Plan may elect to defer all or a
portion of his fees, which election shall be irrevocable for the calendar year
for which such election was made, except in the case of an initial election (an
election made prior to September 30, 1993 or within 90 days of becoming a
director) which shall be irrevocable until the end of the calendar year on
which such election was made. Each participant is vested immediately in the
right to receive his deferred fee. Each participant can elect to have his
deferred fees put into a deferred money account and/or a stock unit account.
Accounts in a deferred money account during a year will earn interest at a rate
equal to the rate established by the Board of Directors for such purpose prior
to the commencement of the year. Amounts in the stock unit account are required
to be provided to a trust (the "Trust") which has been established by the Board
of Directors for such purpose prior to commencement of the year.
DIRECTORS' OPTION PLAN
The Northeast Federal Corp. 1993 Stock Option Plan for Three Year Term
Outside Directors (the "Directors Option Plan"), which was approved by the
Company's stockholders at the 1993 Annual Meeting authorizes the granting of
non-statutory stock options for 500,000 shares of Common Stock to members of
the Board of Directors who were elected as a member of a class
8
<PAGE>
of directors having a three year term, who are also directors of the
Association and who are not officers of the Association or the Company
("Outside Directors"). On July 1, 1993, Outside Directors of the Company who
served as a director of the Company or the Association for three consecutive
years received options to purchase 20,000 shares of Common Stock and Outside
Directors of the Company who have served 12 consecutive years or more as
directors of the Company receive options to purchase an additional 10,000
shares of Common Stock. These options vest on July 1, 1994.
STOCK OWNERSHIP BY MANAGEMENT AND OTHER BENEFICIAL OWNERS
The following table sets forth information as of March 25, 1994 with respect
to the shares of the Company's Common Stock beneficially owned by each director
of the Company, each executive officer named in the Summary Compensation Table
and by all directors and executive officers as a group. "Common Stock
Beneficially Owned" includes stock held in joint tenancy; stock owned as
tenants in common; stock owned or held by spouse or other member of a nominee
or continuing director's household; options exercisable within 60 days of this
proxy statement; and all stock in which the nominee or director either has or
shares voting and/or investment power even though the nominee or continuing
director disclaims any beneficial interest in such stock.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME THE RECORD DATE OF CLASS(1)
- - ---- --------------- -----------
<S> <C> <C>
COMMON STOCK NOMINEES
George J. Fantini, Jr. ....................... 520 *
Richard H. Gordon............................. 53,361 *
George P. Rutland............................. 206,315(2)(3) 1.51
John R. Silber................................ 45,638 *
CONTINUING DIRECTORS
Gerald P. Carmen.............................. 520 *
David W. Clark, Jr. .......................... 54,081 *
Beverly Lannquist Hamilton.................... 2,375 *
Barbara C. Lawrence........................... 12,000 *
Thomas P. O'Neill III......................... 3,162 *
George W. Sarney.............................. 29,893 *
Raymond T. Schuler............................ 122,033 *
Kirk W. Walters............................... 81,431(4)(5) *
Frederick W. Zuckerman........................ 1,000 *
SERIES B PREFERRED DIRECTORS
Richard H. Gaskill............................ -- (6) *
Jerome F. Williams............................ -- (6) *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
JoAnn Dolan................................... 20,724(7)(8) *
Tami W. Kaschuluk............................. 13,138(9)(10) *
Daniel J. Steinmetz........................... 9,104(11)(12) *
All Directors and Executive Officers of North-
east Federal as a group (20 persons)
(13)(14)(15) 673,311 4.9
</TABLE>
9
<PAGE>
- - --------
(1) An asterisk in this column indicates that the percentage does not exceed
1.0% of the Company's voting stock.
(2) Includes 9,996 shares of Common Stock held for the benefit of Mr. Rutland
in the Northeast Savings, F.A. 401(k) Plan as of December 31, 1993. Also
includes 6,211 shares of Common Stock allocated to Mr. Rutland's account
pursuant to the Northeast Savings Employee Stock Ownership Plan as of
December 31, 1993. See also "Executive Compensation".
(3) Includes 175,000 options to purchase Common Stock exercisable within 60
days of this proxy statement.
(4) Includes 2,561 shares of Common Stock held for the benefit of Mr. Walters
in the Northeast Savings 401(k) Plan as of December 31, 1993. Also
includes 4,670 shares of Common Stock allocated to Mr. Walters account
pursuant to the Northeast Savings Employee Stock Ownership Plan as of
December 31, 1993. See also "Executive Compensation".
(5) Includes 70,000 options to purchase Common Stock exercisable within 60
days of this proxy statement.
(6) Does not include Common Stock which DEPCO may acquire immediately through
the exercise of warrants--See "By Other Beneficial Owners".
(7) Includes 2,162 shares of Common Stock held for the benefit of Ms. Dolan in
the Northeast Savings 401(k) Thrift and Profit Sharing Plan as of December
31, 1993. Also includes 3,562 shares of Common Stock allocated to Ms.
Dolan account pursuant to the Northeast Savings Employee Stock Ownership
Plan as of December 31, 1993. See also "Executive Compensation".
(8) Includes 15,000 options to purchase Common Stock exercisable within 60
days of this proxy statement.
(9) Includes 3,020 shares of Common Stock held for the benefit of Ms.
Kaschuluk in the Northeast Savings 401(k) Thrift and Profit Sharing Plan
as of December 31, 1993. Also includes 2,452 shares of Common Stock
allocated to Ms. Kaschuluk pursuant to the Northeast Savings Employee
Stock Ownership Plan as of December 31, 1993. See also "Executive
Compensation".
(10) Includes 7,666 options to purchase Common Stock exercisable within 60 days
of this proxy statement.
(11) Includes 1,038 shares of Common Stock held for the benefit of Mr.
Steinmetz in the Northeast Savings 401(k) Thrift and Profit Sharing Plan
as of December 31, 1993. Also includes 2,066 shares of Common Stock
allocated to Mr. Steinmetz's account pursuant to the Northeast Savings
Employee Stock Ownership Plan as of December 31, 1993. See also "Executive
Compensation".
(12) Includes 5,000 options to purchase Common Stock exercisable within 60 days
of this proxy statement.
(13) All shares above are individually held or held jointly or individually by
a spouse or child.
(14) Includes 19,217 shares held for the benefit of the executive officers with
Northeast Savings 401(k) Plan. Also includes 22,144 shares of Common Stock
allocated to officers accounts pursuant to the Northeast Savings Employee
Stock Ownership Plan as of December 31, 1993. See also "Securities
Ownership of Certain Beneficial Owners" and "Executive Compensation".
(15) Includes 285,332 options to purchase Common Stock held by executive
officers and exercisable within 60 days of this proxy statement.
10
<PAGE>
Under federal securities laws, the Company's directors, its executive
officers, and any persons holding 10 percent or more of any class of equity
securities are required to report their ownership of the Company's equity
securities and any changes in that ownership to the SEC and the New York Stock
Exchange. Specific due dates for these reports have been established and the
Company is required to report in this proxy statement any failure to file by
these dates during the fiscal year ended December 31, 1993. Based on reports
and representations submitted by the directors and executive officers of the
Company, all required forms were timely filed with the SEC except that Barbara
C. Lawrence, a director of the Company, filed a late report on Form 4. The Form
4 related to a sale of the Company's Common Stock on November 24, 1993 by
United Community Life Insurance Company, and the Form 4 was filed on December
28, 1993. Mrs. Lawrence has disclaimed beneficial ownership of the shares.
United Community Insurance Company is wholly-owned by Lawrence Insurance Group,
which is approximately 93% owned by Lawrence Group, Inc. Lawrence Group, Inc.
is 5% owned by Mrs. Lawrence and 95% owned by Albert W. Lawrence, husband of
Mrs. Lawrence. Mrs. Lawrence is Director and Secretary of the Board of
Directors of United Community Insurance Company.
BY OTHER BENEFICIAL OWNERS
The regulations of the SEC require disclosure with respect to any person
known to the Company to be a beneficial owner, as beneficial ownership is
defined in such regulations, of more than five percent (5%) of any class
Northeast Federal voting securities. Certain information known to the Company
as of March 25, 1994, with respect to such persons appears in the following
table:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF OF BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------- ----------------- -------
<S> <C> <C> <C>
Common Stock............. DEPCO 800,000(1) 5.6%
89 Jefferson Boulevard
Warwick, RI
Common Stock............. First Manhattan Co. 1,005,228(2) 7.5%
437 Madison Avenue
New York, NY 10022
</TABLE>
- - --------
(1) In connection with the acquisition by Northeast Savings of certain of the
assets of four Rhode Island financial institutions which were in State
receivership, Northeast Federal Corp. issued to the DEPCO 351,700 shares of
Series B Preferred Stock and warrants to purchase 800,000 shares of Common
Stock of the Company. The warrants are exercisable after 90 days from the
date of issuance, May 8, 1992. The Series B Preferred Stock and warrants
were transferred to the Rhode Island State Investment Commission on June
24, 1992. The RISIC transferred the warrants back to DEPCO on September 28,
1993.
(2) A Schedule 13G dated February 11, 1994 has been filed by First Manhattan
Co.
11
<PAGE>
EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by Northeast Savings for
services rendered in all capacities during the fiscal year ended December 31,
1993, the nine month fiscal year ended December 31, 1992, and the twelve month
fiscal year ended March 31, 1992 to the Chief Executive Officer and each of the
four most highly compensated executive officers of the Company serving at
December 31, 1993 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- -----------------------------
AWARDS PAYOUTS
--------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL YEAR SALARY BONUS SATION AWARD(S) AWARDS PAYOUTS SATION
POSITION ENDED ($) ($) ($) ($) ($) ($) ($)
--------- -------- -------- ----- -------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George P. Rutland(1) 12/31/93 $450,008 0 $158,466(5) None 245,000/0 None $104,363(6)
Chairman of the Board & 12/31/92(3) 346,160(4) 0 45,584(7) None 0 None 88,443(8)
Chief Executive Officer 03/31/92 450,008 0 -- None 0 None --
Kirk W. Walters(2) 12/31/93 $258,847 0 $ 34,087(9) None 350,000/0 None $ 36,878(10)
President, Chief Operat-
ing Officer 12/31/92(3) 185,577(4) 0 -- (11) None 0 None 36,896(12)
and Chief 03/31/92 212,500 0 -- None 0 None --
Financial Officer
JoAnn Dolan 12/31/93 $134,864 0 -- (11) None 25,000/0 None $ 18,020(13)
Executive Vice President 12/31/92(3) 99,576(4) 0 -- (11) None 0 None 16,868(14)
Loan Administration and 03/31/92 121,846 0 -- None 0 None --
Operations of Northeast
Savings
Tami W. Kaschuluk 12/31/93 $126,354 0 -- (11) None 25,000/0 None $ 18,107(15)
Executive Vice President 12/31/92(3) 89,572(4) 0 -- (11) None 0 None 16,690(16)
Chief Appraiser of 03/31/92 104,231 0 -- None 0 None --
Northeast Savings
Daniel J. Steinmetz 12/31/93 $ 94,231 0 -- (11) None 10,000/0 None $ 14,801(17)
Executive Vice Presi-
dent, Commercial 12/31/92(3) 71,308(4) 0 -- (11) None 0 None 16,465(18)
Lending of 03/31/92 89,442 0 -- None 0 None --
Northeast Savings
</TABLE>
- - --------
(1) Mr. Rutland stepped down as Chief Executive Officer effective January 1,
1994.
(2) Mr. Walters was promoted to the position of Chief Executive Officer
effective January 1, 1994.
(3) This line reflects compensation for the nine month fiscal year ended
December 31, 1992 as a result of the Board's decision to change the
Company's fiscal year end from March 31 to December 31.
(4) This line reflects the Named Executive Officers salaries for the nine
month fiscal year ended December 31, 1992. Salaries for the Named
Executive Officers for the twelve months from January 1, 1992 to December
31, 1992 were as follows: George P. Rutland--$469,154; Kirk W. Walters--
$248,622; JoAnn Dolan--$134,220; Tami W. Kaschuluk--$120,379; Daniel J.
Steinmetz--$96,160.
(5) Includes cumulative income tax gross up of $105,664 for the fiscal year
ended December 31, 1993 for the nine month fiscal year ended December 31,
1992 and the fiscal years ended March 31, 1992, 1991, 1990, 1989. Mr.
Rutland was reimbursed for taxes relating to an annual recurring
reimbursement paid to him by the Association for a life insurance
premium.
12
<PAGE>
(6) Includes: (a) the Association's contribution to the Thrift and Profit
Sharing Plan for Employees of Northeast Savings, F.A. (the "401(k) Plan")
of $4,497; (b) the Association's contribution to the Northeast Savings,
F.A. 1993 Deferred Compensation Plan for Key Executives of Northeast
Savings, F.A. (the "Deferred Compensation Plan") of $3,635; and (c) the
Association's contribution to the Northeast Savings, F.A. Employee Stock
Ownership Plan (the "ESOP") of $12,236. The fair market value as of
December 31, 1993 of the shares of Common Stock paid for as a result of
such contribution to the ESOP and allocated as of that date to the
employee's account in the ESOP was only $3,882. The amount shown also
includes $57,383 for an executive life insurance plan pursuant to a split
dollar life insurance arrangement and $1,677 for an executive disability
program. Includes $24,935 in relocation costs paid by the Association in
connection with relocating Mr. Rutland to California to oversee the
management and disposition of the Association's non-performing assets and
real estate owned.
(7) Includes an annual recurring reimbursement of $31,955 for life insurance.
(8) Includes: (a) the Association's contribution to the 401(k) Plan of $729;
and (b) the Association's contribution to the ESOP of $14,057. The fair
market value as of December 31, 1992 of the shares of Common Stock paid
for as a result of such contribution to the ESOP and allocated as of that
date to the employee's account in the ESOP was only $6,754. The amount
shown also includes $1,257 for an executive disability program and $72,400
from an executive life insurance plan pursuant to a split dollar life
insurance arrangement, which were not paid during the fiscal year, but in
the prior fiscal year for coverage during the nine month fiscal year ended
December 31, 1992. For the twelve months from January 1, 1992 to December
31, 1992, the Association's contribution to the 401(k) and the ESOP were
$4,364 and $14,058 respectively. The Association's contribution to the
executive disability program for the twelve month period was $1,677.
(9) Includes $19,000 automobile allowance.
(10) Includes: (a) the Association's contribution to the 401(k) Plan of $4,497;
and (b) the Association's contribution to the ESOP of $12,236. The fair
market value as of December 31, 1993 of the shares of Common Stock paid
for as a result of such contribution to the ESOP and allocated as of that
date to the employee's account in the ESOP was only $3,882. The amount
shown also includes $16,473 for an executive life insurance plan pursuant
to a split dollar life insurance arrangement and $3,672 for an executive
disability program.
(11) Under the "Other Annual Compensation" category perquisites for the fiscal
year did not exceed the lesser of $50,000 or 10% of salary and bonus as
reported for the named executive.
(12) Includes: (a) the Association's contribution to the 401(k) Plan of $2,547;
and (b) the Association's contribution to the ESOP of approximately
$14,057. The fair market value as of December 31, 1992 of the shares of
Common Stock paid for as a result of such contribution to the ESOP and
allocated as of that date was only $6,754. The amount shown also includes
$2,492 for an executive disability program and $17,800 for an executive
life insurance plan pursuant to a split dollar life insurance arrangement,
which were not paid during the fiscal year, but in the prior fiscal year
for the coverage during the nine month fiscal year ended December 31,
1992. For the twelve months from January 1, 1992 to December 31, 1992, the
Association's contribution to the 401(K) and the ESOP were $4,364 and
$14,058 respectively. The Association's contribution to the executive
disability program for the twelve month period was $3,323.
(13) Includes: (a) the Association's contribution to the 401(k) Plan of $4,021;
(b) the Association's contribution to the Deferred Compensation Plan of
$1,461; and (c) the Association's contribution to the ESOP of $6,997. The
fair market value as of December 31, 1993 of the shares of Common Stock
paid for as a result of such contribution to the ESOP and allocated as of
the date of the employee's account in the ESOP was only $2,220. Also
includes $4,021 for an executive life insurance plan pursuant to a split
dollar life insurance arrangement and $1,520 for an executive disability
program.
13
<PAGE>
(14) Includes: (a) the Association's contribution to the 401(k) Plan of $2,954;
and (b) the Association's contribution to the ESOP of $8,146. The fair
market value as of December 31, 1992 of shares of Common Stock paid for as
a result of such contribution to the ESOP and allocated as of the date of
the employee's account in the ESOP was only $3,913. The amount shown also
includes $1,140 for an executive disability program and $4,628 for an
executive life insurance plan pursuant to a split dollar life insurance
arrangement, which were not paid during the fiscal year, but in the prior
fiscal year for coverage during the nine months ended December 31, 1992.
For the twelve months from January 1, 1992 to December 31, 1992, the
Association's contribution to the 401(k) and the ESOP were $3,978 and
$8,146 respectively. The Association's contribution to the executive
disability program for the twelve months was $1,520.
(15) Includes: (a) the Association's contribution to the 401(k) Plan of $3,791;
(b) the Association's contribution to the Deferred Compensation Plan of
$1,417; and (c) the Association's contribution to the ESOP of $6,556. The
fair market value as of December 31, 1992 of shares of Common Stock paid
for as a result of such contribution to the ESOP and allocated as of the
date of the employees account in the ESOP was only $2,080. Also includes
$4,961 for an executive life insurance plan pursuant to a split dollar
arrangement and $1,202 for an executive disability program.
(16) Includes: (a) the Association's contribution to the 401(k) Plan of $2,479;
and (b) the Association's contribution to the ESOP of $7,317. The fair
market value as of December 31, 1992 of shares of Common Stock paid for as
a result of such contribution to the ESOP and allocated as of that date to
the employee's account in the ESOP was only $3,515. The amount shown also
includes $902 for an executive disability program and $5,992 for an
executive life insurance plan pursuant to a split dollar arrangement which
were not paid during the fiscal year, but in the prior fiscal year for
coverage during the nine months ended December 31, 1992. For the twelve
months from January 1, 1992 to December 31, 1992, the Association's
contribution to the 401(k) and the ESOP were $3,391 and $7,317
respectively. The Association's contribution to the executive disability
program for the twelve months was $1,202.
(17) Includes: (a) the Association's contribution to the 401(k) Plan of $2,829;
(b) the Association's contribution to the Deferred Compensation Plan of
$1,009; and (c) the Association's contribution to the ESOP of $4,889. The
fair market value as of December 31, 1993 of shares of Common Stock paid
for as a result of such contribution to the ESOP and allocated as of that
date to the employee's account in the ESOP was only $1,551. Also includes
$4,897 for an executive life insurance plan pursuant to a split dollar
life insurance arrangement and $1,177 for an executive disability program.
(18) Includes: (a) the Association's contribution to the 401(k) Plan of $2,139;
and (b) the Association's contribution to the ESOP of $5,907. The fair
market value as of December 31, 1993 of the shares of Common Stock paid
for as a result of such contribution to the ESOP and allocated as of the
date of the employee's account in the ESOP was only $2,838. Also includes
$883 for an executive disability program and $5,668 for an executive life
insurance plan payable pursuant to a split dollar life insurance
arrangement which were not paid during the fiscal year, but in the prior
fiscal year for coverage during the nine months ended December 31, 1992.
For the twelve months from January 1, 1992 to December 31, 1992, the
Association's contribution to the 401(k) and the ESOP were $2,885 and
$5,907 respectively. The Association's contribution to the executive
disability program for the twelve months was $1,177.
PENSION PLAN
Northeast Savings maintains a noncontributory defined benefit pension plan
(the "Plan") for its employees, which is a result of the merging of the four
noncontributory defined benefit pension
14
<PAGE>
plans maintained previously by the Association or its predecessors, hereinafter
designated the New York, Connecticut and Massachusetts Plans. The Plan provides
generally for monthly payments to and on behalf of each covered employee upon
such employee's normal retirement at age 65. The Plan covers all past
participants in the merged plans plus all new employees who have attained age
21 and have been employed for one year with 1,000 hours of service.
The Plan was amended and restated in its entirety on May 20, 1988, effective
July 1, 1988. An initial account balance equal to the present value of accrued
benefits under the Plan has been established for each eligible participant. The
amended and restated noncontributory defined benefit pension plan is an account
balance accumulation plan. Benefits will be based on 2.5 percent of each year's
base compensation plus commission, bonus and overtime, as determined under IRS
Regulations which include a limitation on the maximum amount of compensation
includable for purposes of calculating the benefits. As a result of such
limitation, compensation for purposes of this pension benefit calculation does
not correlate with executive compensation disclosed in the Summary Compensation
Table. Effective April 23, 1993, the Plan was amended to provide an additional
benefit of 2.5% of the participants' base salary that exceeds the Social
Security wage base. This amendment applies to active participants' in the Plan
on or after April 23, 1993 and the benefit is retroactive to July 1, 1988.
Vested benefits under the restated Plan accumulate at a rate of 20 percent
after 3 years of eligibility, and 20 percent each year thereafter to 100
percent after 7 years. The Plan, as it presently exists and as amended,
complies with the requirements of the Employee Retirement Income Security Act
of 1974. Vested benefits under the Plan, up to certain limits, are insured with
the Pension Benefit Guaranty Corporation. The estimated annual benefits payable
upon retirement at normal retirement age (65) for each of the Named Executive
Officers are as follows:
<TABLE>
<CAPTION>
PROJECTED ANNUAL BENEFIT
NAME OF INDIVIDUAL AT NORMAL RETIREMENT AGE
------------------- ------------------------
<S> <C>
George P. Rutland $ 9,414
Kirk W. Walters $73,043
JoAnn Dolan $48,491
Tami W. Kaschuluk $65,671
Daniel J. Steinmetz $43,235
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Northeast Savings also has a Supplemental Executive Retirement Plan ("SERP")
for Mr. Walters, which is funded by split dollar life insurance. The SERP
provides that if Mr. Walters retires on or after his Normal Retirement Date,
defined in the SERP as the date on which he reaches age 65, the Employer is
required to pay him a retirement benefit payable in the form of a lump sum
equal to the present value (using a rate equal to the Pension Benefit Guarantee
Corporation's immediate annuity interest rate at the time of retirement) of 60
percent of the average of Mr. Walters' highest three years compensation
(taxable income) during his employment payable for his life expectancy based on
100% of the 1983 Group Annuity Mortality Table or 15 years certain, whichever
is longer, less the sum of the following: (i) Mr. Walters' cash value in a life
insurance policy under a certain split dollar agreement dated February 1, 1991;
(ii) present value of the benefit of the Employer's contribution from
Employer's qualified plans, assuming Mr. Walters participates to the maximum
allowed whether or not he elects to participate; and (iii) present value of
projected social security benefits; and (iv) present value of the maximum
amount Mr. Walters would be entitled to defer under the Northeast Savings, F.A.
1993 Deferred Compensation Plan for Key Executives which would entitle him to a
matching contribution thereunder, assuming that
15
<PAGE>
Mr. Walters participates to the extent that he receives the maximum matching
contribution under the Compensation Plan whether or not Mr. Walters elects to
participate. If Mr. Walters suffers a partial or total disability as that term
is defined in his SERP while employed by the Employer, the Employer will pay
him a disability benefit equal to the equivalent lump sum value of the
Employer's normal retirement benefit. In accordance with the formula set forth
above, the estimated present value of the net benefit payable from the SERP at
normal retirement date for Mr. Walters would be $1,452,800.
The SERP also provides that, if Mr. Walters terminates his employment with
the Employer prior to his Normal Retirement Date for reasons other than death
or disability, he will receive his normal retirement benefit as set forth above
according to a vesting schedule whereby 75% of such benefit had vested by
February 1, 1993 and full vesting would occur on February 1, 1994. However, as
a result of a change in control as defined in the SERP, the full percentage
benefit is vested. It should be noted that because of the nature of the
calculation of the SERP retirement benefit, described above, particularly the
calculation of the reductions to the benefit, whether there would be an actual
SERP benefit, and the amount thereof, to Mr. Walters can only be determined at
the time his employment actually ceases. If Mr. Walter's employment terminated
as of December 31, 1993, he would have been entitled to the benefit disclosed
under "Change of Control Arrangements."
CHANGE IN CONTROL ARRANGEMENTS
On March 1, 1992, Northeast Savings and Northeast Federal entered into Change
in Control Agreements (the "Agreements") with two of the executive officers
named in the summary compensation table: George P. Rutland, then Chairman of
the Board and Chief Executive Officer, and Kirk W. Walters, President, Chief
Operating Officer, and Chief Financial Officer. The Agreements terminate on
December 31, 1994. In the context of the Agreements Northeast Federal and
Northeast Savings are referred to collectively as Northeast. Subsequent to the
fiscal year ended December 31, 1993, the Agreements were amended and restated
as of January 1, 1994 (the "Amended Agreements"). The term of the Amended
Agreements runs until December 31, 1997.
Change in Control is defined in the Agreements to mean a change in control of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities and Exchange
Act of 1934, as amended ("Exchange Act"); provided, without limitation, such
change in control shall be deemed to have occurred under the Agreements if (A)
any "person" (as such term is used in Section 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; or (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 nomination for
election by Northeast's shareowners, 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; or (C) disposition of the business of
Northeast for which services principally are performed by the executive
pursuant to a partial or complete liquidation of Northeast, a sale of assets
(including stock of a subsidiary) of Northeast, or otherwise; or (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 a member of or is thereafter elected to the Board of Directors; or
(E) any "person" is or becomes
16
<PAGE>
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 or are thereafter elected to the Board of Directors of Northeast; or
(F) Northeast makes a public announcement of or enters into a definitive
agreement to merge with or to sell all of its assets to another entity. As a
result of the May 1992 Transactions whereby DEPCO acquired the Series B
Preferred Stock and warrants to purchase 800,000 shares of Common Stock, the
transfer of such Series B Preferred Stock and warrants to the RISIC, and the
RISIC's election of two directors to the Company's Board of Directors, there
has been a change in control within the meaning of the Agreements. On
September 28, 1993, RISIC transferred the Series B Preferred Stock back to
DEPCO.
If an Executive terminates his employment with the Association after a
change in control (which has occurred), because, among other things, of a
substantial alteration in the nature or status of the Executive's
responsibilities or an assignment of duties inconsistent with his office, a
reduction in the Executive's base salary or substantial change in his employee
benefits, the relocation of Northeast's principal executive offices, or a
failure of Northeast to obtain a satisfactory agreement from any successors to
assume and agree to perform the Agreements, such termination will be
considered to be for "good reason" under the Agreements.
With respect to each of the two Executives, the Change in Control Agreements
provide, among other things, for the payment of 2.99 times each Executive's
base salary upon termination of his employment by Northeast Savings other than
for cause, retirement, death or disability, or by him for good reason upon a
change in control of the Association, if the termination occurs within one
year following a change in control; payment of two times his base salary if
the termination occurs more than one but less than two years following a
change of control; and for payment of his base salary if the termination
occurs more than two years following a change in control.
If the employment of the Executives were terminated by Northeast Savings
(other than for cause) or by the Executives for "good reason" on December 31,
1993, the maximum amounts which would be due them would be as follows: Mr.
Rutland $1,064,000 and Mr. Walters $500,000.
Mr. Walters became fully vested in the benefit under his SERP, which
otherwise would have been 75% vested on February 1, 1993 and 100% vested on
February 1, 1994. Mr. Walters is entitled to such benefits only upon his
termination of employment. If Mr. Walters' employment had been terminated on
December 31, 1993, the amount due to him under the SERP would have been
approximately $371,700.
EMPLOYMENT AGREEMENT
The Company and the Association have entered into agreements ("Employment
Agreements") with George P. Rutland, Chairman of the Board and Chief Executive
Officer, and Kirk W. Walters, President, Chief Operating Officer and Chief
Financial Officer, (the "Executives") whereby the Executives agree to remain
in the employ of the Company and the Association, and the Company and the
Association have agreed to retain their services for a period of twenty-four
months to the 31st of December 1994 (the "Term"). During the first year of the
employment term, Mr. Rutland's salary is required to be at least $500,000
annually and at least that amount for the remainder of the Term/1/. If during
the Term Mr. Rutland is terminated other than for cause, as
- - --------
/1/ Mr. Rutland has voluntarily reduced his salary to $450,000 per annum since
February 14, 1991, reflecting the downsizing of assets and expenses of the
Association.
17
<PAGE>
defined in the Employment Agreement, or death, or normal disability or
retirement, or terminates his employment for good reason, as defined in the
Employment Agreement, the Company and the Association will pay to Mr. Rutland a
lump sum severance payment equal to the greater of: (1) the remaining term of
the Employment Agreement; or (2) $532,000 following Mr. Rutland's last receipt
of regular pay. If during the Term Mr. Walters is terminated other than for
cause, as defined in the Employment Agreement, or due to death or normal
disability or retirement or terminates his employment for good reason, as
defined in the Employment Agreement, the Company and the Association will pay
to Mr. Walters a lump sum severance payment equal to the greater of: (1) the
remaining term of the Employment Agreement; or (2) $250,000 following Mr.
Walters' last receipt of regular pay. Messrs. Rutland and Walters will not
receive any benefits under the Employment Agreements if they are otherwise
entitled to and elect to accept benefits provided for in the Change in Control
Arrangements.
Subsequent to the fiscal year end of December 31, 1993, the Company and the
Association entered into new employment agreements with Messrs. Rutland and
Walters. The new employment agreements terminate on December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Northeast Savings offers loans to its directors, officers and employees for
the financing of their homes and for other personal, household or consumer
purposes. These loans are made in the ordinary course of business and, in the
opinion of management, do not involve more than the normal risk of
collectability or present other unfavorable features. These loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with non-affiliated persons,
except loans made under the 1990 Employee Residential Mortgage Loan Program
(the "Program") or to certain employees required to relocate as a part of their
employment with Northeast ("Relocation Mortgage Loans"). Mortgage loans made to
eligible employees pursuant to the Program are made at a rate of interest
charged to non-affiliated persons but the application, document preparation
fees, and underwriting fee, if applicable, together with a portion of the
origination fee equal to 1% of the principal amount of the loan, are waived.
Relocation Mortgage Loans are made with no origination fee and at a rate of not
more than 2 percent below the rate of interest charged to non-affiliated
persons at the time of closing if the rate is fixed or not more than 2 percent
below the fully-indexed rate at the time the loan is originated or adjusted if
the loan is an adjustable rate mortgage. However, in no event are any of the
loans described above made at a rate less than Northeast Savings' cost of
funds. Upon termination of employment, such preferential rates revert to the
market rate at the time the loan was made for fixed rate loans, or the current
adjusted rate for adjustable rate loans. All loans to directors and officers
were current as of December 31, 1993.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
the Federal Deposit Insurance Corporation Improvement Act of 1991 imposed the
restrictions of Section 22(g) and 22(h) of the Federal Reserve Act on savings
institutions. These sections impose certain restrictions on loans or other
extensions of credit made to directors, executive officers or principal
shareholders, including a requirement that extensions of credit to directors,
executive officers or principal shareholders be made on substantially the same
terms as those prevailing for loans to unrelated parties. The Association's
loan policies conform to the requirements of Sections 22(g) and 22(h) and, as a
result, the above described preferential rate loan programs are no longer
available to executive officers.
18
<PAGE>
The following table sets forth certain loan information regarding all
preferential rate loans outstanding during the past fiscal year to any director
or executive officer of the Company indebted to Northeast Savings in an amount
aggregating $60,000 or more since the beginning of the last fiscal year. No
amounts relating to such loans are included in the "Summary Compensation Table"
as the loan programs were not for the primary purpose of compensating the
executive officers.
<TABLE>
<CAPTION>
POSITION AS
OFFICER AND/OR HIGHEST
DIRECTOR OF BALANCE NOTE PREFER- PRINCIPAL
NORTHEAST SINCE ANNUAL ENTIAL BALANCE AT
FEDERAL AT TYPE OF JANUARY 1, INTEREST INTEREST DECEMBER 31,
NAME DECEMBER 31, 1993 LOAN 1993 RATE(1) RATE 1993
---- ----------------- ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
George P. Rutland Chairman of the Adjustable $440,408 6.125% 4.93%(2) 0
Board and Chief Rate
Executive Residential
Officer Mortgage
Kirk W. Walters President, Chief Adjustable $312,921 7.00% 4.0%(2) $306,696
Operating Rate
Officer and Residential
Chief Financial Mortgage
Officer
</TABLE>
- - --------
(1) The note annual interest rate shown reflects the fully-indexed rate at the
time of adjustment.
(2) This was the cost of funds to the Association at the time of adjustment.
Richard H. Gordon, a director, engages in commercial real estate development
and related activities in the Hartford area, through various corporations or
partnerships of which he or his immediate family are the principal beneficial
owners. Northeast Savings has entered into several transactions with Mr.
Gordon's companies. In the opinion of management, such transactions were made
in the ordinary course of business, on terms prevailing generally and at market
rents for such transactions. Prior to Mr. Gordon's election as a director, by
agreement dated December 29, 1983, Northeast Savings leased certain office
space, located in premises known as 90 State House Square, Hartford,
Connecticut from a partnership in which Mr. Gordon is the general partner and
50 percent owner. At December 31, 1993, the Association leased 25,002 square
feet of space pursuant to the 1983 agreement at a monthly rental payment of
$57,722. The lease term ends December 31, 1996.
Northeast Savings also leases from a separate partnership in which Mr. Gordon
is managing partner 178 square feet of space for two automatic teller machine
locations in the same building, near its banking office, at a current annual
rental of $15,753. The lease expires March 31, 1998.
Northeast Savings has also leased, with regulatory approval, approximately
82,090 square feet of space at an initial average cost of $21.95 per square
foot, triple net, for a term of ten years in another building known as 50 State
House Square, Hartford, Connecticut of which Mr. Gordon owns a 50 percent
interest. At December 31, 1993, the monthly rent payment was $202,883. The
lease term ends April 30, 1995.
Thomas P. O'Neill III, also a director, has a 21 percent interest in Hawley
Street Investors, a limited partnership which purchased a parcel of real estate
in Boston, Massachusetts from Northeast Savings in January, 1985 for $2.4
million. The Association leased back a 3,900 square foot portion of the
premises for a term of ten years at $35 per square foot, triple net. The
present monthly rental payment is $16,063.80. At the time the Hawley Street
Investors transaction was completed, Mr. O'Neill had a 65 percent interest in
Hawley Street Investors. Mr. O'Neill is also a general partner, and has a 65
percent interest in Yarmouth Bay Associates Limited Partnership (the "Yarmouth
Partnership") which purchased property on Route 28 in South Yarmouth,
Massachusetts from Northeast Savings on May 30, 1985 for $180,000. The
Association entered
19
<PAGE>
into a lease of the premises for ten years with two five-year renewal options.
Lease cost for the first five years was $2,800 per month, triple net, with
provision for increased rents indexed to the Consumer Price Index for the
second five years of the original term and each of the renewal terms. Lease
cost for the current five year term is $3,306.80 per month, triple net. Both
the sale and lease back transactions were made with Mr. O'Neill prior to the
time he was nominated and elected to his position as director. At the time that
the Yarmouth Partnership transaction was completed, Mr. O'Neill had a 40
percent interest in the Yarmouth Partnership.
On February 10, 1994, the Company announced the sale to Shawmut Bank of ten
Northeast Savings branch offices including the Boston office leased from Mr.
O'Neill. Further, on March 24, 1994, the Company announced the sale of the
Association's South Yarmouth branch office to Sandwich Cooperative Bank. When
these two branch sales are completed, the Association will no longer lease any
office premises from Mr. O'Neill.
STOCK OPTIONS
The Company has established the Northeast Federal Corp. 1993 Stock Option
Plan (the "Employee Option Plan"). The Employee Option Plan was approved by
stockholders on June 18, 1993. Until that time the Company (including its
predecessor the Association) also had maintained the 1983 Stock Option Plan and
the 1986 Stock Option Plan (the "1983 and 1986 Employee Option Plans") under
which options to purchase an aggregate of 373,616 shares of Common Stock were
outstanding at December 31, 1993. The Board of Directors terminated the ability
to grant any new options under the 1983 and 1986 Plans when the Employee Option
Plan was approved by stockholders.
The following table lists options granted during the fiscal year ended
December 31, 1993 to the officers included in the Summary Compensation Table
and contains information about the potential value of these options based upon
certain assumptions as to the appreciation in the Company's Common Stock over
the life of the option.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
------------------------------------------------------- ---------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL
OPTIONS/SARS OPTIONS/SARS EXERCISE OR
GRANTED GRANTED IN BASE PRICE
NAME (#)(1)(2) FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% ($) 10% ($)
---- ------------ ------------ ----------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
George P. Rutland 145,000(4) 18.4 4.6875 06/30/02 $ 374,730.90 $ 922,980.07
100,000(4) 12.7 5.4375 09/30/02 299,784.72 738,384.06
Kirk W. Walters 250,000(5) 31.7 4.6875 06/30/02 $ 646,087.75 $ 1,591,344.95
100,000(5) 12.7 5.4375 09/30/02 299,784.72 738,384.06
JoAnn Dolan 25,000(6) 3.2 4.6875 06/30/02 $ 64,608.78 $ 159,134.50
Tami W. Kaschuluk 21,000(7) 2.7 4.6875 06/30/02 $ 54,271.37 $ 133,672.98
800(8) .1 6.3125 04/22/02 2,784.21 6,857.64
3,200(9) .4 6.375 04/22/02 11,247.10 27,702.13
Daniel Steinmetz 10,000(10) 1.3 4.6875 06/30/02 $ 25,843.51 $ 63,653.80
</TABLE>
20
<PAGE>
- - --------
(1) Options are subject to limited rights pursuant to which options, to the
extent outstanding for at least six months, may be exercised in the event
of a change in control of the Company. Upon the exercise of a limited
right, the optionee would receive a cash payment equal to the difference
between the exercise price of the related option on the date of grant and
the fair market value of the underlying shares of Common Stock on the date
the limited right is exercised, or, at the option of the Company, such
number of shares of Common Stock having an equivalent value to such
difference.
(2) The option term is nine years.
(3) The amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and common stock holdings are
dependent on the future performance of the common stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved.
(4) Options granted on July 1, 1993, under the Employee Option Plan. 145,000
of these options granted on July 1, 1993 will vest on July 1, 1994 and
100,000 granted on September 24, 1993 will vest on September 23, 1994.
(5) Options granted on July 1, 1993, under the Employee Option Plan. 250,000
of these options vest on July 1, 1994, and 100,000 vest on September 23,
1994.
(6) Options granted on July 1, 1993 under the Employee Option Plan. These
options vest according to the following schedule: July 1, 1994, 8,334
shares, July 1, 1995, 8,333 shares; July 1, 1996, 8,333 shares.
(7) Options granted on July 1, 1993 under the Employee Option Plan. These
options vest according to the following schedule: July 1, 1994, 7,000
shares, July 1, 1995, 7,000 shares; July 1, 1996, 7,000 shares.
(8) Options granted under the 1986 Employee Option Plan. These options vest
according to the following schedule: April 23, 1993, 266 shares; April 23,
1994, 267 shares; April 23, 1995, 267 shares.
(9) Options granted under the 1983 Employee Option Plan. These options vest
according to the following schedule: April 23, 1993, 1,067 shares; April
23, 1994, 1,067 shares; April 23, 1995, 1,066 shares.
(10) Options granted under the Employee Option Plan. These options vest
according to the following schedules: July 1, 1994, 3,334 shares; July 1,
1995, 3,333 shares; July 1, 1996, 3,333 shares.
The following table shows certain information regarding options exercised
during the fiscal year ended December 31, 1993 and held as of December 31, 1993
by the Named Executive Officers of the Company and/or the Association. No
options were exercised by any of the Named Executive Officers during the fiscal
year ended December 31, 1993.
OPTIONS AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
---------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS OPTIONS/SARS
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE($)(1) (2)
--------------------- -----------------------
<S> <C> <C>
George P. Rutland 175,000/245,000 $461,478/0
Kirk W. Walters 70,000/350,000 185,313/0
JoAnn Dolan 15,000/ 25,000 40,313/0
Tami W. Kaschuluk 6,332/ 23,668 10,787/0
Daniel J. Steinmetz 5,000/ 10,000 13,438/0
</TABLE>
- - --------
(1) The closing price of the Company's Common Stock on December 31, 1993 was
$4.38.
(2) The market value of the underlying securities for all unexercisable options
was less than the exercise or base price at year-end.
21
<PAGE>
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
INCLUDED IN THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS REPORT OR PERFORMANCE GRAPH BY REFERENCE THEREIN, AND SHALL
NOT BE DEEMED SOLICITING MATERIAL OR OTHERWISE DEEMED FILED UNDER EITHER OF
SUCH ACTS.
PERSONNEL COMMITTEE REPORT
EXECUTIVE COMPENSATION
In accordance with SEC rules, the following report explains the Company's and
the Association's policies on executive compensation for 1993 regarding Mr.
Rutland, Chief Executive Officer, and the other executive officers of the
Company.
GENERAL EXECUTIVE COMPENSATION POLICIES
The Company's policies are designed to attract and retain qualified
executives and to ensure that their efforts are directed toward the long-term
interests of the Company and the Association and the Company's shareholders. As
indicated, officers of the Company do not receive compensation for their
services from the Company, other than stock options; their compensation is
received as officers of Northeast Savings. The Association strives to pay
competitive base salaries and provide employee benefit plans which are
competitive with other similar savings associations and banks for the quality
of the executive retained, while also taking into consideration the
Association's overall financial condition and challenges faced. In addition,
the Company and the Association seek to provide incentive to executives and to
promote concern for shareholder interests and Company performance through the
grant of stock options.
The Company's and the Association's Personnel Committees, both of which are
comprised of the same outside directors, at least annually review salaries,
stock options, and other aspects of executive compensation. In general, the
purpose of this evaluation is to ensure that the Association's overall
executive compensation programs remain competitive with savings associations
and banks that are similar in both asset size and geographical markets to the
Association and that total executive pay represents both the individual's
performance as well as the current and past performance of the Association.
While the income tax implications of the compensation program to the Company
and its executive officers are continually assessed, including the recently
enacted $1 million per covered employee limitation on compensation expenses
deductible by the Company, they are not presently a significant factor in the
administration of the program.
SUMMARY OF EXECUTIVE COMPENSATION
The Summary Compensation Table and the Stock Option Tables provide
shareholders a concise and comprehensive overview of compensation attributable
to the fiscal year ended December 31, 1993 and include individual compensation
information for the Chief Executive Officer and the four other executive
officers included in the Summary Compensation Table, as well as the Stock
Option Tables.
22
<PAGE>
SUMMARY OF 1993 COMPENSATION PROGRAMS
For the fiscal year ended December 31, 1993, the executive compensation
program consisted of base salary and certain executive benefit plans indicated
below under "Other Compensation Plans" and, particularly for incentive
purposes, stock option plans. Each year, the performance of executives is
reviewed and, based upon an assessment of individual performance, a
corresponding merit salary increase may be awarded. In granting merit salary
increases the Association's Personnel Committee also evaluates the
Association's financial condition and results of operations, as well as the
difficulties presented to such officers as a result of such financial
condition. In recent years the Association has been struggling to first re-
achieve and then strengthen its regulatory capital compliance after the
devastation of such capital by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and further to deal with the increase in
non-performing assets and real estate owned as a result of the recession in the
Association's market areas. With the exception of Mr. Rutland, merit increases
and/or bonuses were awarded to executive officers for fiscal year 1994 plus an
amount equal to one-twelfth of the 1994 increase was paid in December 1993. No
other merit increases were paid to Executive Officers during the fiscal year
ended December 31, 1993. Factors considered in granting such increases were
subjective in nature based upon the recommendation of the Chief Executive
Officer and the assessment by the Association's Personnel Committee of the
individual's performance and contribution to the performance of the
Association, any changes in functional responsibility, and competitive factors.
In performing such assessment the Personnel Committee had available
compensation information of other savings institutions. In particular, as
regards to Mr. Walters, such factors included recognition of his promotion to
Chief Executive Officer effective January 1, 1994. In 1991, Mr. Rutland
voluntarily reduced his salary and such reduction has remained in effect.
STOCK OPTIONS
The Board of Directors believes that stock options are important to increase
and to attract and encourage the continued employment and service of executive
officers and other key officers and employees by increasing their proprietary
interest in the Company. The Employee Option Plan, which was approved by
shareholders at the Company's 1993 Annual Meeting, authorizes the granting of
incentive and/or non-statutory options for up to 1,000,000 shares of Common
Stock to such officers of the Company, the Association and their subsidiaries
as the Personnel Committee of the Board of Directors may determine. The
Committee selects officers and employees to whom options are to be granted, the
number of options to be granted and, consistent with the Employee Option Plan,
the terms and conditions of such options. Stock options were granted to Mr.
Rutland and to the four other executive officers included in the Summary
Compensation Table. Such options were granted on the basis of subjective
factors including recognition of the responsibilities of such officers and to
further align their interests with those of the Company's stockholders. Option
grants under previous option plans were also considered in the granting of
options under the Employee Option Plan. The options granted in 1993 will
generally vest over a three year period, providing a long term focus.
OTHER COMPENSATION PLANS
Generally, the Association maintains retirement, life, and health insurance
plans that provide the same benefits to all employee participants, including
senior and executive officers.
In the fiscal year ended December 31, 1993 the Association also maintained
the following executive benefit plans for all senior officers, including the
executive officers: Executive Disability
23
<PAGE>
Plan; Supplemental Medical Reimbursement Plan; and an Executive Life Insurance
Plan. The Association also has established a Supplemental Executive Retirement
Plan for Mr. Walters.
MR. RUTLAND'S 1993 COMPENSATION
The Personnel Committee meets periodically to evaluate Mr. Rutland's
performance and reports on that evaluation to the independent directors of the
Board. The principal components of Mr. Rutland's 1993 compensation consisted of
base salary and other compensation indicated above. Mr. Rutland's base salary
did not change during the fiscal year ended December 31, 1993, nor has his
salary increased since he joined the Association in July of 1988. Mr. Rutland
was awarded options under the Stock Option Plan; in granting such options the
Company's Personnel Committee considered subjective factors, as well as the
time and attention devoted by Mr. Rutland in reducing the Association's non-
performing loans and real estate owned in California.
When Mr. Rutland was appointed Chairman, President and Chief Executive
Officer of the Association, an executive search firm, Korn/Ferry International,
assisted the Personnel Committee in locating qualified individuals for the
position and in determining compensation to be offered to such an individual,
giving consideration to the size of the institution and the duties and
responsibilities of the position.
Mr. Rutland's total cash compensation is based on his contribution to the
overall long-term strategy and financial strength of the Company, including the
development and successful implementation of the Company's capital plan. Such
plan was required of all thrift institutions that, like Northeast Savings, did
not meet the capital requirements resulting from FIRREA and was to outline the
institution's plan for achieving capital compliance. As a result of the
Association's significant reduction in asset size and the achievement of its
goal to return to the activities of a traditional thrift institution, relying
on retail deposits and mortgage loans, the Association achieved compliance with
all fully phased in capital requirements. This achievement was a priority for
Northeast Savings and was not assured at the time the new capital requirements
were enacted in 1989. As a result of the Company's compliance with its capital
requirement, the Company was released from its capital plan in May of 1991.
Since that time the Company and the Association have met all capital
requirements. Through its return to traditional thrift and banking activities,
a strategy implemented under the direction of Mr. Rutland, and through several
years of planned asset reductions and restructurings the Association exceeds
all fully phased-in regulatory capital requirements. In recognition of the
significant downsizing of assets and expenses of the Association to meet
current and future capital requirements, Mr. Rutland voluntarily reduced his
salary in February of 1991 from $500,000 to $450,000.
The ongoing recession in the Northeast and in California have had a negative
impact on the Company's financial results; the weak economies in these markets
forced the Company to increase its provision for loan losses and resulted in
higher expenses related to real estate acquired in settlement of loans (REO).
Despite the negative pressure on earnings, the Association has taken steps in
the most recently ended fiscal year which while having a negative impact on net
earnings significantly reduced non-performing assets and increased the
potential to return to profitability. In August 1993, the Association completed
a sale of $30.4 million of residential REO in a single sale. The Association
continues to direct critical resources toward reducing non-performing assets.
Because of his many years of experience in California and his indepth knowledge
of the market, Mr. Rutland now spends the majority of his time in California
dedicating his time and attention to the Association's problem loans and REO.
The Association has made progress in the last fiscal year in decreasing its
non-performing assets. The Association securitized
24
<PAGE>
approximately $360 million of mortgage loans originated in California. This
securitization improved the geographic diversity of the Association's loan
portfolio and reduces the Association's credit risk by exchanging loans for
high quality mortgage-backed securities. These improvements in the Company's
financial and operating performance were strongly influenced by the direction
and active involvement of Mr. Rutland. Effective January 1, 1994, Mr. Rutland
stepped down as Chief Executive Officer. In recognition of his reduced
responsibilities, Mr. Rutland's annual compensation for fiscal 1994 has been
reduced from $450,000 to $350,000.
PERSONNEL COMMITTEE
The foregoing report on executive compensation is provided by the below
listed directors, who comprise the Personnel Committee. The Personnel Committee
makes recommendations to the Board concerning the election of senior officers
and reviews and approves their compensation. It reviews and approves employee
benefit plans and incentive plans and participation therein and, where
required, recommends changes to the Board of Directors. All of the members of
the Personnel Committee are non-employee directors.
1993 PERSONNEL COMMITTEE MEMBERS
Raymond T. Schuler, Chairman
David W. Clark, Jr.
Beverly Lannquist Hamilton
George W. Sarney
Frederick W. Zuckerman
25
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph and table compare the cumulative total return of an
investment as of December 31, 1988, in the Common Stock of Northeast Savings
(effective July 9, 1990, the Common Stock of the Company, the successor to
Northeast Savings) with the results of an equivalent investment as of December
31, 1988, based on the S&P 500 Index and the Value Line S&L Index.
PERFORMANCE GRAPH FOR NORTHEAST FEDERAL CORP.
INDEXED COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
NORTHEAST COMMON STOCK, S&P 500 INDEX & THE VALUE LINE S&L INDEX*
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
- - -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 100 132 128 165 179 197
Value Line S&L 100 118 108 262 344 379
Northeast Federal 100 53 25 34 112 74
- - -------------------------------------------------------------------
</TABLE>
* Total return assumes reinvestment of dividends.
26
<PAGE>
OTHER INFORMATION
MATTERS PRESENTED BY STOCKHOLDERS
Pursuant to the Company's Bylaws only such business shall be conducted at an
annual meeting of stockholders as is properly brought before the meeting. For
the business to be properly brought before an annual meeting, it must be
brought by a Common Stockholder and, in addition to all other applicable
requirements, timely notice of the matter must first be given to the Secretary
of the Company. To be timely, written notice must be received by the Secretary
not less than sixty days prior to the meeting. If less than seventy days' prior
notice or prior public disclosure of the meeting has been given to
stockholders, then notice of the proposed business matter must be received by
the Secretary not later than ten days after the mailing of notice of the
meeting or such public disclosure. Any notice to the Secretary must include as
to each matter the stockholder proposes to bring before the meeting: (i) a
brief description of the business desired to be brought before the meeting and
the reason for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares which are beneficially owned by the stockholder, and (iv)
any material interest of the stockholder in such business.
AUDITORS
Deloitte & Touche serves as the independent auditors for the Company.
Representatives of Deloitte & Touche will be present at the Annual Meeting and
will be given an opportunity to make a statement if they desire to do so. They
will be available to respond to questions of stockholders.
Northeast Federal Corp. has engaged Deloitte & Touche as its new independent
accountants. Deloitte & Touche serve as the independent accountants for both
Northeast Federal and its savings and loan association subsidiary, Northeast
Savings, F.A. ("Northeast Savings"). The decision to hire new independent
accountants was recommended by the Audit Committees of both Northeast Federal
and Northeast Savings and approved by the Board of Directors on September 24,
1993. Coopers & Lybrand, who previously served as the independent accountants
for Northeast Federal and Northeast Savings were dismissed on that same day.
On September 24, 1993, the date on which the Board of Directors approved the
hiring of Deloitte & Touche as the new independent accountants for Northeast
Federal and Northeast Savings, F.A., subject to compliance with requisite
regulatory requirements, Northeast Savings, RISDIC and the trustees of certain
Rhode Island Financial Institutions had an outstanding balance due to Deloitte
& Touche for professional services performed in conjunction with the 1992
acquisition of certain assets of four Rhode Island institutions by Northeast
Savings, F.A. Fees for the services rendered were paid prior to the
commencement of the current audit engagement.
In connection with the audits of the two fiscal years ended March 31, 1992
and December 31, 1992 and the subsequent interim period through September 24,
1993, there were no disagreements with Coopers & Lybrand on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion to
the subject matter of the disagreement.
In accordance with Item 304(a) (1) (v) of Regulation S-K, during the two most
recent fiscal years and the subsequent interim period, Northeast Federal has
not been advised by Coopers & Lybrand of any of the reportable events listed in
Item 304(a) (v) (A) through (D).
27
<PAGE>
The audit reports of Coopers & Lybrand on the consolidated financial
statements of Northeast Savings, F.A. and subsidiaries as of and for the fiscal
years ended December 31, 1992 and March 31, 1992 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles, except for an explanatory
paragraph noting the Company changed its method of accounting for income taxes
for the fiscal year ended March 31, 1992.
STOCKHOLDER PROPOSALS
Any common stockholder of the Company wishing to have a proposal considered
for inclusion in the Company's 1995 proxy statement materials prepared in
connection with the Company's Annual Meeting must, in addition to other
applicable requirements, set forth such proposal in writing and file it with
the Secretary of the Company on or before December 28, 1994. The Board of
Directors of the Company will review any proposals from stockholders received
by that date and will determine whether any such proposals will be included in
its 1995 proxy solicitation materials.
In the event of any questions, please call the Company at (203) 280-1074.
By Order of the Board of Directors
(SIGNATURE OF CRAIG W. SMITH APPEARS HERE)
Craig W. Smith
Secretary
April 28, 1994
28
<PAGE>
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
50 STATE HOUSE SQUARE
HARTFORD, CONNECTICUT 06103
This Proxy/Voting Authorization is Solicited on Behalf of the Board of
Directors
The undersigned hereby appoints George P. Rutland, David W. Clark, Jr. and
Kirk W. Walters, and each of them, each with full power of substitution,
proxies of the undersigned to vote, as designated herein, all the shares of
Common Stock of Northeast Federal Corp. held of record by the undersigned on
March 25, 1994, at the Annual Meeting of Stockholders to be held on May 20,
1994 including any adjournments thereof, on all matters as may properly be
brought before said meeting.
(continued and to be signed on the reverse side)
<PAGE>
[X] PLEASE
MARK
YOUR
VOTE AS
IN THIS
EXAMPLE.
----------------
COMMON
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
- - --------------------------------------------------------------------------------
1. Election of Directors
FOR all WITHHOLD Authority
Nominees to Vote for All
listed above Nominees
[_] [_]
George J. Fantini, Jr., Richard H. Gordon, George P. Rutland, John R. Silber
To withhold authority to vote for individual nominees please write their names
here.
- - ------------------------------------------------------------------------------
WILL
ATTEND [_]
MEETING
- - --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). ON MATTERS FOR WHICH YOU DO NOT SPECIFY A
CHOICE, YOUR SHARES WILL BE VOTED FOR THE NOMINEES FOR THE ELECTION AS
DIRECTORS. IF ANY OTHER MATTERS ARE PRESENTED AT THE MEETING, THIS PROXY WILL
BE VOTED BY THE PERSON(S) NAMED IN THIS PROXY IN THEIR DISCRETION. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
Signature ______________________________
Signature ______________________________
Date ___________________________________
Please sign exactly as name appears on this Proxy. If stock is held jointly,
each owner should sign. Persons signing in a representative capacity should
give their title.
Please return promptly using the enclosed postage paid envelope
<PAGE>
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
50 STATE HOUSE SQUARE
HARTFORD, CONNECTICUT 06103
The undersigned hereby instructs Chemical Banking Corporation, as Trustee,
to vote the shares of Northeast Federal Corp. Common Stock, par value $0.01
per share, allocated to my account under the 1985 Northeast Savings, F.A.
Employee Stock Ownership Plan on March 25, 1994, at the Annual Meeting of
Stockholders to be held on May 20, 1994 and at any adjournments thereof on the
election of the nominees named on the reverse side as Directors of the Company
in the manner directed herein by the undersigned, and in its discretion upon
such other matters as may come before the meeting, all as set forth in the
Notice and the Proxy Statement for the meeting. The undersigned hereby
authorizes Chemical Banking Corporation, as Trustee, to vote upon any such
other matters which may properly come before the Annual Meeting or any
adjournments thereof in the same manner as the proxies appointed by the Board
of Directors to vote proxies solicited on behalf of the Board of Directors.
(continued and to be signed on the reverse side)
<PAGE>
[X] PLEASE
MARK
YOUR
VOTE AS
IN THIS
EXAMPLE.
----------------
COMMON
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
- - --------------------------------------------------------------------------------
1. Election of Directors
FOR all WITHHOLD Authority
Nominees to Vote for All
listed above Nominees
[_] [_]
George J. Fantini, Jr., Richard H. Gordon, George P. Rutland, John R. Silber
To withhold authority to vote for individual nominees please write their names
here.
- - ------------------------------------------------------------------------------
WILL
ATTEND [_]
MEETING
TRUSTEE AUTHORIZATION
I HEREBY AUTHORIZE CHEMICAL BANKING CORPORATION, AS TRUSTEE UNDER THE 1985
NORTHEAST SAVINGS, F.A. EMPLOYEE STOCK OWNERSHIP PLAN, TO VOTE THE SHARES OF
COMMON STOCK OF NORTHEAST FEDERAL CORP. HELD FOR MY ACCOUNT UNDER SAID PLAN AT
THE ANNUAL MEETING OF STOCKHOLDERS, IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN
ABOVE.
- - --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. ON MATTERS FOR WHICH YOU DO NOT SPECIFY A
CHOICE, YOUR SHARES WILL BE VOTED FOR THE NOMINEES FOR THE ELECTION AS
DIRECTORS. IF ANY OTHER MATTERS ARE PRESENTED AT THE MEETING, THIS PROXY WILL
BE VOTED BY THE PERSON(S) NAMED IN THIS PROXY IN THEIR DISCRETION. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
Signature ______________________________ Date _______________________________
Please return promptly using the enclosed postage paid envelope.
<PAGE>
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
50 STATE HOUSE SQUARE
HARTFORD, CONNECTICUT 06103
The undersigned hereby instructs Shawmut Bank Connecticut, N.A., as Trustee,
to vote the shares of Northeast Federal Corp. Common Stock, par value $0.01
per share, credited to my account under the Thrift and Profit Sharing Plan for
Employees of Northeast Savings, F.A. on March 25, 1994 at the Annual Meeting
of Stockholders to be held on May 20, 1994 and at any adjournments thereof on
the election of the nominees named on the reverse side as Directors of the
Company in the manner directed herein by the undersigned, and in its
discretion upon such other matters as may come before the meeting, all as set
forth in the Notice and the Proxy Statement for the meeting. The undersigned
hereby authorizes Shawmut Bank Connecticut, N.A., as Trustee, to vote upon any
such other matters which may properly come before the Annual Meeting or any
adjournments thereof in the same manner as the proxies appointed by the Board
of Directors to vote proxies solicited on behalf of the Board of Directors.
(continued and to be signed on the reverse side)
<PAGE>
[X] PLEASE
MARK
YOUR
VOTE AS
IN THIS
EXAMPLE.
----------------
COMMON
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
- - --------------------------------------------------------------------------------
1. Election of Directors
FOR all WITHHOLD Authority
Nominees to Vote for All
listed above Nominees
[_] [_]
George J. Fantini, Jr., Richard H. Gordon, George P. Rutland, John R. Silber
To withhold authority to vote for individual nominees please write their names
here.
- - ------------------------------------------------------------------------------
WILL
ATTEND [_]
MEETING
TRUSTEE AUTHORIZATION
I HEREBY AUTHORIZE SHAWMUT BANK CONNECTICUT, N.A., AS TRUSTEE FOR THE THRIFT
AND PROFIT SHARING PLAN FOR EMPLOYEES OF NORTHEAST SAVINGS, F.A., TO VOTE THE
SHARES OF COMMON STOCK OF NORTHEAST FEDERAL CORP. HELD FOR MY ACCOUNT UNDER
SAID PLAN AT THE ANNUAL MEETING OF STOCKHOLDERS, IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN ABOVE.
- - --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. ON MATTERS FOR WHICH YOU DO NOT SPECIFY A
CHOICE, YOUR SHARES WILL BE VOTED FOR THE NOMINEES FOR THE ELECTION AS
DIRECTORS. IF ANY OTHER MATTERS ARE PRESENTED AT THE MEETING, THIS PROXY WILL
BE VOTED BY THE PERSON(S) NAMED IN THIS PROXY IN THEIR DISCRETION. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
Signature ______________________________ Date _______________________________
Please return promptly using the enclosed postage paid envelope.
