<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from N/A to
______ ______
File Number: 1-10571
NORTHEAST FEDERAL CORP.
_______________________
(Exact name of registrant as specified in its charter)
Delaware 06-1288154
_______________________________ ______________________________________
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation of organization)
70 Batterson Park Road
Farmington, Connecticut 06032
_______________________________________ _________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203/679-0500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
___________________ _________________________________________
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act
Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
_____ ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates
of the registrant as of February 28, 1995.
Common Stock, $.01 par value -- $160,973,607
The number of shares outstanding for each of the registrant's classes of common
stock issued and outstanding as of February 28, 1995
Common Stock, $.01 par value -- 14,974,289
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NORTHEAST FEDERAL CORP.
1994 FORM 10-K/A ANNUAL REPORT
TABLE OF CONTENTS
Item 10. Directors and Executive Officers of the Registrant ..................1
Item 11. Executive Compensation..............................................5
Item 12. Security Ownership of Certain Beneficial Owners and Management......17
Item 13. Certain Relationships and Related Transactions......................19
<PAGE> 3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
INFORMATION AS TO DIRECTORS
There are presently twelve members of the Board of Directors of Northeast
Federal Corp. ("Northeast Federal" or the "Company") 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 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, F.A. ("Northeast Savings" or the
"Association"). 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.
One director has 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 Rhode Island Depositors
Economic Protection Corporation ("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"). 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). Currently, DEPCO has elected
only one director identified below as the Series B Preferred Stock Director, to
the Board even though DEPCO has the right to appoint another director. This
director will continue to hold this position 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. The Series
B Preferred Stock Director is also a member of the Northeast Savings Board of
Directors.
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The directors, their age at December 31, 1994, and the year in which the
term for which they have been elected will expire as set forth below:
<TABLE>
<CAPTION>
Director of
Northeast Federal Term to
Name Age Since Expire
---- --- ----------------- -------
COMMON STOCK DIRECTORS
<S> <C> <C> <C>
Gerald P. Carmen 64 1990 1995
David W. Clark, Jr. 57 1990 1996
George J. Fantini, Jr. 52 1990 1997
Richard H. Gordon 54 1990 1997
Beverly Lannquist Hamilton 48 1990 1995
Barbara C. Lawrence 67 1991 1995
Thomas P. O'Neill III 50 1990 1995
George W. Sarney 55 1990 1995
Raymond T. Schuler 65 1990 1996
John R. Silber 68 1990 1997
Kirk W. Walters 39 1990 1996
Frederick W. Zuckerman 60 1990 1996
SERIES B. PREFERRED STOCK
DIRECTOR
John F. McJennett, III 55 1994 *
- --------------------
* See discussion above concerning Series B Preferred Stock Director.
</TABLE>
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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
directors are set forth below. The information set forth below is as of December
31, 1994. None of the 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 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.
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.(1)
George J. Fantini, Jr. -- Senior Vice President, The Boston Financial
Group, which provides real estate oriented financial services.
Richard H. Gordon -- Commercial Real Estate Developer.
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
___________________________
(1)
CompuDyne Corporation is the parent company of CompuDyne, Inc. On December
31, 1991, CompuDyne, Inc., one of seven wholly owned subsidiaries of CompuDyne
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.
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Thomas P. O'Neill III -- Chairman, McDermott/O'Neill & Associates; former
President, Bay States Investors, Inc.
George W. Sarney -- President and Chief Operating Officer, Siebe Control
Systems and President, The Foxboro Company; former Senior Vice President and
Group Executive, Energy and Environment 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.
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.
John R. Silber -- President, Boston University; Member of the Board of
Directors of Seragen, Inc. and United States Surgical Corporation.
Kirk W. Walters -- Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer of Northeast
Federal Corp. and Chairman of the Board, President, Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer of Northeast Savings, F.A.;
former Senior Vice President and Controller, California Federal Bank, a federal
savings bank.
Frederick W. Zuckerman -- Senior Advisor, Fitch Investors Service, Inc.;
Senior Advisor, Rothschild, Inc.; former IBM Vice President and Treasurer, IBM
Corporation; former Senior Vice President and Treasurer, RJR Nabisco, Inc.;
former Vice President and Treasurer of Chrysler Corporation; former Business
Consultant; Member of the Board of Trustee of Meditrust; Member of the Board of
Directors of The Singapore Fund, Anacomp, Inc., The Turner Corporation, The
Japan Equity Fund, NVR. Inc. and Pantone.
SERIES B PREFERRED STOCK DIRECTOR
John F. McJennett, III -- Executive Director; the Rhode Island Depositors
Economic Protection Corporation ("DEPCO"); President, Adams Hill Consulting,
Inc.; former Executive Vice President and Group Executive, Rhode Island Hospital
Trust National Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
JoAnn Dolan (Age 43) - Executive Vice President, Corporate 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.
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Daniel J. Steinmetz (Age 42) - 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 38) - 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.
Lynne C. Wilson (Age 32) - 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.
ITEM 11. EXECUTIVE COMPENSATION
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,
1994, the Directors also served as directors of Northeast Savings. Directors of
Northeast Savings are paid $12,000 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 and Personnel Committees who receive $750 for
each committee meeting attended. The Chairman of the Audit Committee, Personnel
Committee, and the Community Reinvestment Committee are paid a retainer of
$2,500 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. The Series B Preferred Stock Director also serves as a director of
Northeast Savings. Directors' fees paid for services of such director, John F.
McJennett, III, are paid to DEPCO. 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 for 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.
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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. This plan
was terminated on January 17, 1995 and participating directors were paid an
aggregate of $292,846.
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 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 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 vested on July 1, 1994. On May 23, 1994, Outside Directors of the
Company, with the exception of Barbara Lawrence, received options to purchase
2,000 shares of Common Stock of the Company, which vest on May 23, 1995.
Directors' Pension Plan. Northeast Savings has a pension plan for directors
who are not employees of Northeast (the "Directors Pension Plan"), which
provides an annual benefit of $15,000 for the lesser of ten years or the
cumulative period of full and partial years of board service by a director,
determined in full calendar quarters. Payment of such benefit commences after
the annual meeting of stockholders after a director attains age 70. The
Directors Pension Plan also contains a change in control provision pursuant to
which each eligible and active director as of the date of the change in control
is deemed to have the years of service such director would have if he remained a
director until the June 30 after he attained age 70, and that each director
would be paid the actuarial present value of his or her pension benefit prior to
the change in control. The proposed merger (the "Merger") between Shawmut
National Corporation ("Shawmut") and the Company would constitute a change in
control under the Directors Pension Plan. Assuming the change in control
occurred as of January 31, 1995, directors Carmen, Clark, Fantini, Gordon,
Hamilton, Lawrence, O'Neill, Sarney, Schuler, Silber and Zuckerman each would
receive a payment in an amount ranging between $31,696 and $93,942 as the full
payment of his or her benefits under the Directors Pension Plan. The aggregate
of such payments would be $656,856. The amount of such payments that result from
an increase in the value of a director's interest under the Directors Pension
Plan as a result of the Merger ranges from $0 to $32,673.
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EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by Northeast Savings for services rendered in all capacities during the
fiscal year ended December 31, 1994 and 1993 and the nine month fiscal year
ended December 31, 1992 to the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company serving at December 31,
1994 as well as the former chief executive officer and one former executive
officer (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Other
Annual
Compen-
Name and Year Salary Bonus sation
Principal Position Ended ($) ($) ($)
- ----------------------- ------------ ------------- -------- ------------
<S> <C> <C> <C> <C>
Kirk W. Walters(1) 12/31/94 $404,241 $450,000 $ 58,848(5)
Chairman of the Board, 12/31/93 258,847 0 34,087(5)
President and Chief 12/31/92(3) 185,577(4) 0 --(6)
Executive Officer
George P. Rutland(2) 12/31/94 350,012 225,000 81,253(8)
Former Chairman of 12/31/93 450,008 0 158,466(9)
the Board &Chief 12/31/92(3) 346,160(4) 0 45,584(10)
Executive Officer --
JoAnn Dolan 12/31/94 145,898 50,750 --(6)
Executive Vice 12/31/93 134,864 0 --(6)
President Loan 12/31/92(3) 99,576(4) 0 --(6)
Administration and
Operations of Northeast
Savings
Daniel J. Steinmetz 12/31/94 110,635 38,500 --(6)
Executive Vice 12/31/93 94,231 0 --(6)
President, Commercial 12/31/92(3) 71,308(4) 0 --(6)
Lending of Northeast
Savings
Victor A. Vrigian,Jr. 12/31/94 100,731 35,000 --(6)
Executive Vice 12/31/93 85,956 0 --(6)
President, Retail 12/31/92(3) 57,542(4) 0 --(6)
Banking and Marketing
of the Association
Lynne C. Wilson 12/31/94 85,491 29,750 --(6)
Senior Vice President, 12/31/93 71,783 7,500 --(6)
Controller and Principal 12/31/92(3) 51,981(4) 0 --(6)
Accounting Officer of
the Company
Tami W. Kaschuluk 12/31/94 $64,426 0 12,025(17)
Former Executive 12/31/93 126,354 0 --(6)
Vice President, Chief 12/31/92(3) 89,572(4) 0 --(6)
Appraiser of Northeast
Savings(16)
</TABLE>
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<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Awards Payouts
------------------------ -------
Restricted Securities All Other
Stock Underlying LTIP Compen-
Name and Award(s) Options Payouts sation
Principal Position ($) ($) ($) ($)
- ---------------------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Kirk W. Walters(1) None 25,000 None $179,635(7)
Chairman of the Board, None 350,000 None 36,878
President and Chief None 0 None 36,896
Executive Officer
George P. Rutland(2) None 0 None 199,557(11)
Former Chairman of None 245,000 None 104,363
the Board &Chief None 0 None 88,443
Executive Officer
JoAnn Dolan None 5,000 None 105,199(12)
Executive Vice None 25,000 None 18,020
President Loan None 0 None 16,868
Administration and
Operations of Northeast
Savings
Daniel J. Steinmetz None 20,000 None 113,533(13)
Executive Vice None 10,000 None 14,801
President, Commercial None 0 None 16,465
Lending of Northeast
Savings
Victor A. Vrigian,Jr. None 5,000 None 93,679(14)
Executive Vice None 25,000 None 11,046
President, Retail None 0 None 10,485
Banking and Marketing
of the Association
Lynne C. Wilson None 5,000 None 65,430(15)
Senior Vice President, None 5,000 None 9,125
Controller and Principal None 0 None 8,545
Accounting Officer of
the Company
Tami W. Kaschuluk None 5,000 None $150,515(18)
Former Executive None 25,000 None 18,107
Vice President, Chief None 0 None 16,690
Appraiser of Northeast
Savings(16)
- ------------------------
(1) Mr. Walters was promoted to the position of Chief Executive Officer
effective January 1, 1994, and Mr. Walters was named Chairman of the Board
in May, 1994.
(2) Mr. Rutland stepped down as Chief Executive Officer effective January 1,
1994, and Mr. Rutland resigned as Chairman of the Board and director in
May 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: Kirk W. Walters - $248,622; George P. Rutland -
$469,154; JoAnn Dolan - $134,220; Daniel J. Steinmetz - $96,160; Victor A.
Vrigian - $73,135; Lynne C. Wilson - $69,712; and Tami W. Kaschuluk -
$120,379.
(5) Includes $24,000 for 1994 and $19,000 for 1993 pursuant to an automobile
allowance. Also includes $23,156 for tax preparation for 1994.
(6) 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.
(7) 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 $4,500; (b) the Association's contribution to the Northeast Savings,
F.A. 1993 Deferred Compensation Plan for Key Executives of Northeast
Savings (the "Deferred Compensation Plan") of $25,627; (c) the fair market
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value as of December 31, 1994 of the shares of Common Stock allocated as
of that date to the employee's account in the Northeast Savings, F.A.
Employee Stock Ownership Plan ("ESOP") based upon the employer's
contribution for the year was $10,075; (d) additional allocations of
shares pursuant to the ESOP with a value at December 31, 1994 of $12,566;
(e) premium payments under an executive life insurance plan pursuant to a
split dollar life insurance arrangement of $21,175; (f) premium payments
for an executive disability program of $5,601; and (g) payments for
outplacement services as a result of entry into a merger agreement in June
of 1994 of $100,091.
(8) Includes an annual recurring reimbursement for life insurance plus a gross
up of such amount of $51,990 and $17,263 for tax preparation.
(9) Includes an annual recurring reimbursement of $31,955 for life insurance
plus a cumulative income tax gross up on life insurance reimbursement 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.
(10) Includes an annual recurring reimbursement of $31,955 for life insurance.
(11) Includes: (a) the Association's contribution to the 401(k) Plan of $4,500;
(b) the Association's contribution to the Deferred Compensation Plan of
$16,847; (c) the fair market value as of December 31, 1994 of the shares
of Common Stock allocated as of that date to the employee's account in the
ESOP based on the employer's contribution for the year was $10,075; (d)
additional allocations of shares pursuant to the ESOP with a fair market
value at December 31, 1994 of $16,713; (e) premium payments under an
executive life insurance plan pursuant to a split dollar life insurance
arrangement of $149,745; and (f) premium payments for an executive
disability program of $1,677.
(12) Includes: (a) the Association's contribution to the 401(k) Plan of $4,377;
(b) the Association's contribution to the Deferred Compensation Plan of
$5,724; (c) the fair market value as of December 31, 1994 of the shares of
Common Stock allocated as of that date to the employee's account in the
ESOP based on the employer's contribution for the year was $10,036; (d)
additional allocations of shares pursuant to the ESOP with a fair market
value at December 31, 1994 of $9,585; (e) premium payments under an
executive life insurance plan pursuant to a split dollar life insurance
arrangement of $5,915; (f) premium payments for an executive disability
program of $1,696; and (g) amounts paid out under the Supplemental Medical
Reimbursement Plan ("SMRP") and certain life insurance plans as a result
of termination of such plans in 1994 of $18,365 and $49,501, respectively.
(13) Includes: (a) the Association's contribution to the 401(k) Plan of $3,319;
(b) the Association's contribution to the Deferred Compensation Plan of
$4,341; (c) the fair market value as of December 31, 1994 of the shares of
Common Stock allocated as of that date to the employee's account in the
ESOP based on the employer's contribution for the year was $9,658; (d)
additional allocations of shares pursuant to the ESOP with a fair market
value at December 31, 1994 of $5,558; (e) premium payments under an
executive life insurance plan pursuant to a split dollar life insurance
arrangement of $7,575; (f) premium payments for an executive disability
program of $1,276; and (g) amounts paid out under the SMRP and certain
life insurance plans as a result of termination of such plans in 1994 of
$18,365 and $63,441, respectively.
(14) Includes: (a) the Association's contribution to the 401(k) Plan of $3,022;
(b) the Association's contribution to the Deferred Compensation Plan of
$3,951; (c) the fair market value as of December 31, 1994 of the shares of
Common Stock allocated as of that date to the employee's account in the
ESOP based on the employer's contribution for the year was $8,790; (d)
additional allocations of shares pursuant to the ESOP with a fair market
value at December 31, 1994 of $5,789; (e) premium payments under an
executive life insurance plan pursuant to a split dollar life insurance
arrangement of $5,091; (f) premium payments for an executive disability
program of $778; (g) amounts paid out under the SMRP and certain life
insurance plans as a result of termination of such plans in 1994 of
$18,365 and $44,105, respectively; and (h) payments for reimbursement of
moving expenses of $3,788.
(15) Includes: (a) the Association's contribution to the 401(k) Plan of $2,565;
(b) the fair market value as of December 31, 1994 of the shares of Common
Stock allocated as of that date to the employee's account in the ESOP
based on the employer's contribution for the year was $7,463; (c)
additional allocations of shares pursuant to the ESOP with a fair market
value at December 31, 1994 of $2,775; (d) premium payments under an
executive life insurance plan pursuant to a split dollar life insurance
arrangement of $4,758; (e) premium payments for an executive disability
program of $683; and (f) amounts paid out under the SMRP and certain life
insurance plans as a result of termination of such plans of in 1994
$16,528 and $30,658, respectively.
(16) Ms. Kaschuluk resigned as Executive Vice President in June of 1994.
(17) Includes $12,025 for 1994 pursuant to an automobilie allowance.
(18) Includes: (a) the Association's contribution to the 401(k) Plan of $1,933;
(b) the Association's contribution to the Deferred Compensation Plan of
$1,933; (c) additional allocations of shares pursuant to the ESOP with a
fair market value at December 31, 1994 of $6,596; (d) premium payments
under an executive life insurance plan pursuant to a split dollar life
insurance arrangement of $8,320; (e) premium payments for an executive
disability program of $1,287; (f) amounts to be paid out under certain
life insurance plans as a result of termination of such plans of $67,465;
and (g) severance payments of $62,981.
</TABLE>
<PAGE> 12
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 non-contributory defined benefit pension 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% 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.
9
<PAGE> 13
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>
Kirk W. Walters $73,610
George P. Rutland 9,097
Lynne C. Wilson 67,195
JoAnn Dolan 51,496
Daniel J. Steinmetz 41,263
Victor A. Vrigian 55,798
Tami W. Kaschuluk --
</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 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.
10
<PAGE> 14
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 full vesting occurred on February 1,
1994. 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. Mr. Walters is entitled to such benefits only upon
his termination of employment. If Mr. Walters' employment had been terminated on
December 31, 1994, the amount due to him under the SERP would have been
$590,000.
Change in Control Arrangements. 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,
former Chairman of the Board and Chief Executive Officer, and Kirk W. Walters,
Chairman of the Board, Chief Executive Officer, President, Chief Operating
Officer, and Chief Financial Officer. In the context of the Agreements Northeast
Federal and Northeast Savings are referred to collectively as Northeast. The
term of the Agreements runs until December 31, 1997.
In the event of a "change in control" of Northeast, Messrs. Rutland and
Walters are entitled to certain payments in the event of their termination of
employment other than upon death, retirement or disability or by Northeast for
"cause" or a termination by themselves for "good reason" following such change
in control (a "Change in Control Termination"). Execution of the merger
agreement between Shawmut and the Company, dated June 11, 1994 (the "Merger
Agreement") resulted in a change in control under these agreements. The Merger
Agreement expressly provides that Shawmut will honor these agreements. If either
person terminates his employment, because of, among other things, a substantial
alteration in the nature or status of his responsibilities or an assignment of
duties inconsistent with his office, a reduction in his 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 change in
control agreements, such termination will be considered to be for "good reason."
Upon a Change in Control Termination, Mr. Walters would be entitled to,
among other benefits, payment of 2.99 times his base salary upon such
termination of employment, 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 in control; and
payment of his base salary if the termination occurs more than two years
following a change in control; provided, however, that in the event Mr. Walters'
employment is terminated, if any such payments together with any other payments
or benefits received or to be received by Mr. Walters under any other plan,
arrangement or agreement which he has the right to receive would constitute a
"parachute payment" for federal income tax purposes, such payments shall be
reduced to the largest amount as will result in no portion of such aggregate
11
<PAGE> 15
payments being subject to the federal excise tax with respect to "excess
parachute payments" so as to enable him to retain the payments he would have
retained had he not been subject to such excise tax.
Upon a Change in Control Termination, Mr. Rutland would be entitled to,
among other benefits, the greater of (i) all salary payments due pursuant to his
change in control agreement for the remaining employment term or (ii) one year's
base salary, at the rate in effect on the date of termination; provided, that if
any of such payment, together with any other payments or benefits received or to
be received by Mr. Rutland under any other plan, arrangement or agreement which
he has the right to receive would constitute a "parachute payment" for federal
income tax purposes, he is entitled to a "gross up" payment for any portion of
such payments that are subject to the federal excise tax relating to "excess
parachute payments" so as to enable him to retain the payments he would have
retained had he not been subject to such excise tax.
Assuming the Merger with Shawmut were consummated on May 31, 1995, if
Messrs. Rutland and Walters were to terminate their employment at the Effective
Time upon a Change in Control Termination, Mr. Rutland would be entitled to
approximately $1,156,033 and Mr. Walters would be entitled to approximately
$1,105,173 pursuant to their change in control agreements, subject to certain
conditions.
In addition, Northeast Savings has maintained two executive life insurance
plans to cover executives of Northeast Savings and its principal subsidiaries.
Under the plans, if a change in control occurs, Northeast Savings is required to
release its interest in the life insurance policies covered by the plans to the
covered employee upon the happening of one of the following: (i) termination of
the employee's employment; (ii) termination of the plan or (iii) an amendment
reducing employee benefits under the plan. The Merger Agreement constituted a
change in control under the plans. In light of the prospective requirement for
the release of Northeast Savings' interest to the covered employees subsequent
to the Merger, and with the consent of Shawmut, Northeast Savings terminated
both plans effective December 1, 1994. The benefits due thereunder have been
paid to the executive officers. The amount of Mr. Walter's benefit is included
in the amount payable to him pursuant to the "Change in Control Agreement"
described above. The four other current named executive officers of Northeast
have been paid an aggregate of approximately $187,705. Mr. Rutland satisfied the
age and service requirements for early retirement benefits under the plans, and
accordingly, he was entitled to the $1.7 million paid to him in 1995 upon such
termination, regardless of whether there is a change in control.
Noncompetition Agreement. In addition, Mr. Walters has entered into a
noncompetition agreement with Shawmut (the "Noncompetition Agreement"). Pursuant
to the Noncompetition Agreement, Mr. Walters has agreed not to engage in
competitive activity with Shawmut by becoming the chairman, chief executive
officer or president (or perform the duties of such positions) of any bank,
savings and loan, savings bank, credit union or other depository institution or
bank holding company, savings and loan holding company or other depository
institution holding company for a period of 30 months commencing upon the first
date following the Effectivse Time that he is not employed by Northeast or
Shawmut, if at the time of his commencement of employment with such entity the
12
<PAGE> 16
entity has total assets or deposits in excessof $1 billion and maintains its
principal office(s) in Connecticut or Massachusetts, or more than 50% of its
deposits or assets are in Connecticut and Massachusetts.
In consideration for his agreement not to compete, Mr. Walters will be paid
an amount currently estimated to be approximately $1,553,800 (and subject to
revaluation prior to the Effective Time), to be paid in three installments:
approximately $736,055 at the closing of the Merger and $395,372 on each of the
13th and 25th month anniversary of the closing of the Merger; provided, that if
any such payment, together with any other payments under any other plan,
agreement or arrangement would constitute a "parachute payment" for federal
income tax purposes, Mr. Walters would be entitled to a "gross up" payment for
any portion of such payments that are subject to the federal excise tax relating
to "excess parachute payments" so as to enable him to retain the payments he
would have retained had he not been subject to such excise tax.
Employment Agreement. The Company and the Association have entered into
agreements ("Employment Agreements") with George P. Rutland, former Chairman of
the Board and Chief Executive Officer, and Kirk W. Walters, Chairman of the
Board, Chief Executive Officer, 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 to the 31st of December 1997
(the "Term").
During the first year of the employment term, Mr. Rutland's base salary is
required to be at least as follows: for the 1994 calendar year, $350,000; for
the 1995 calendar year, $250,000; for the 1996 calendar year, $200,000 and for
the 1997 calendar year, $150,000. If during the term Mr. Rutland is terminated
other than for cause, as defined in the Employment Agreement, or the Company and
the Association will pay to Mr. Rutland: (1) a lump sum severance payment equal
to the greater of (i) the payments due for the remaining term of the Employment
Agreement, or (ii) one (1) year base salary, at the rate in effect at the
termination; (2) life, disability, accident, medical and dental insurance
benefits substantially similar to those received by Mr. Rutland immediately
prior to his receipt of the Notice of Termination and continuing for a period of
the greater of one (1) year or the remainder of the employment term; and (3)
directors' and officers' liability insurance, specifically naming Mr. Rutland as
an insured, with coverage (including deductibles) at least as favorable as that
in effect immediately prior to his receipt of the Notice of Termination and
comparable prior acts ("tail") coverage for a period of ten (10) years following
his date of termination, or such lesser period as he agrees to in writing.
Assuming Mr. Rutland was terminated as of May 31, 1995, Mr. Rutland would be
entitled to approximately $1.2 million. To the extent payments are made under
the Change in Control Agreement with Mr. Rutland, there would be no obligation
for payment under the Employment Agreement with Mr. Rutland.
If during the term Mr. Walters is terminated other than for cause, as defined
in the Employment Agreement, or due to disability, as defined in the Employment
Agreement, the Company and the Association will pay to Mr. Walters: (1) a lump
13
<PAGE> 17
sum severance payment equal to the greater of (i) the payments due for the
remaining term of the Employment Agreement, or (ii) one (1) year's base salary
at the rate in effect on the date of his termination; provided, however, the
payments due shall not exceed 2.99 times base salary; (2) life, disability,
accident, medical and dental insurance benefits substantially similar to those
which Mr. Walters is receiving immediately prior to his receipt of the Notice of
Termination, and continuing for a period of the greater of one (1) year or the
remainder of the employment term; and (3) directors' and officers' liability
insurance, specifically naming Mr. Walters as an insured, with coverage
(including deductibles) at least as favorable as that in effect immediately
prior to his receipt of the Notice of Termination and comparable prior acts
("tail") coverage for a period of ten (10) years following his date of
termination, or such lesser period as Mr. Walters shall agree to in writing.
Assuming Mr. Walters was terminated as of May 31, 1995, Mr. Walters would be
entitled to approximately $2.1 million. To the extent payments are made under
the Change in Control Agreement with Mr. Walters, there would be no obligation
for payments under the Employment Agreement with Mr. Walters.
Retention Bonus Arrangements. Shawmut has committed to pay bonuses, at 50%
of base salary, to 16 executive officers of Northeast, not including Mr. Walters
and Mr. Rutland, provided they continue in their current positions through the
consummation of the Merger and to pay additional bonuses, at 50% of base salary,
to such employees if such employees are not offered similar positions following
the Merger, or do not accept similar positions. These payments are to be made in
recognition of the essential roles these individuals will play in the Merger
process and as compensation for the additional work that will be required and to
encourage such individuals to remain with Shawmut following the Merger. Under
these arrangements, such executive officers of Northeast may be paid bonuses up
to an aggregate maximum amount of approximately $1.7 million under such bonus
arrangements. Such executives are also generally provided with continued health
coverage for 18 months upon a termination of employment at any time prior to 18
months from the Effective Time, and continued coverage under a Supplemental
Medical Reimbursement Plan ("SMRP") and disability plan for 18 months after the
Effective Time. Northeast Savings, with the consent of Shawmut, elected to
terminate its SMRP and disability plan effective December 1, 1994 and to pay the
covered executives an amount equivalent to their coverage under or reimbursable
to them under the plans for an 18 month period. In consideration for Shawmut's
consent, Shawmut was relieved of any obligation to provide the 18 months
coverage after the Effective Time discussed above. As a result of the
termination of the SMRP, the four current named executive officers, other than
Messrs. Walters and Rutland, have been paid an aggregate of $72,000. Messrs.
Rutland and Walters were also covered under the SMRP, however, benefits paid
to them are included in the amount due under the "Change in Control Agreements"
described above.
Stock Options. The Company has established the Northeast Federal Corp. 1993
Stock Option Plan (the "Employee Option Plan"). The Employee Option Plan was
approved by stockholders on June 18, 1993. The following table lists options
granted during the fiscal year ended December 31, 1994 to the officers included
in the Summary Compensation Table and contains information about the potential
value of these options based upon certain assumptions as to the appreciation in
the Company's Common Stock over the life of the option.
14
<PAGE> 18
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
Value at Assumed
Annual Rate of Stock
Number of Percent Price Appreciation
Securities of Total for Option Term (3)(4)
underlying Options/ ----------------------
Options/ SARs Excercise or
SARs Granted Base
Granted in Fiscal Price Expiration
Name (#)(1)(2) Year ($/share) Date 5% ($) 10% ($)
- ---------------------- ----------- --------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kirk W. Walters 25,000(4) 18.5% $ 6.25 3/17/03 $ 86,145 $212,179
George P. Rutland -- -- -- -- -- --
Lynne C. Wilson 5,000(4) 3.7 6.25 3/17/03 17,229 42,436
JoAnn Dolan 5,000(4) 3.7 6.25 3/17/03 17,229 42,436
Daniel Steinmetz 20,000(4) 14.8 6.25 3/17/03 68,916 169,743
Victor A. Vrigian, Jr. 5,000(4) 3.7 6.25 3/17/03 17,229 42,436
Tami W. Kaschuluk 5,000(4) 3.7 6.25 3/17/03 17,229 42,436
- ---------------------
(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) All options are now fully vested and exercisable as of June 11, 1994 by
virtue of the execution of the Merger Agreement.
</TABLE>
The following table shows certain information regarding options exercised
during the fiscal year ended December 31, 1994 and held as of December 31, 1994
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, 1994.
15
<PAGE> 19
OPTIONS AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Options/SARs(1) Options/SARs(1)(2)
------------------------------- -------------------------------
Exercisable Unexercisable Exercisable($) Unexercisable
----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Kirk W. Walters 445,000 0 $1,734,063 --
George P. Rutland 420,000 0 1,989,716 --
Lynne C. Wilson 15,000 0 58,348 --
JoAnn Dolan 45,000 0 203,125 --
Daniel J. Steinmetz 35,000 0 112,813 --
Victor A. Vrigian, Jr. 35,000 0 129,750 --
Tami W. Kaschuluk 35,000 0 129,550 --
- ----------------------
(1) All options are fully vested and exercisable as of June 11, 1994 by virtue of the execution of the Merger
Agreement.
(2) The closing price of the Company's Common Stock on December 31, 1994 was $8.375.
</TABLE>
16
<PAGE> 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Ownership by Directors and Executive Officers. The following table sets
forth information as of February 10, 1995 with respect to the shares of the
Common Stock beneficially owned by each director of Northeast Federal, certain
executive officers and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount of
Common Stock
Beneficially Percent
Owned as of the of
Record Date Class(1)
---------------- ---------
<S> <C> <C>
Gerald P. Carmen ................................................... 20,520(2) *
David W. Clark , Jr ................................................ 74,081(2) *
George J. Fantini, Jr .............................................. 20,520(2) *
Richard H. Gordon .................................................. 73,361(2) *
Beverly Lannquist Hamilton ......................................... 22,375(2) *
Barbara C. Lawrence ................................................ 12,000 *
John F. McJennett, III ............................................. --(3) *
Thomas P. O'Neill III .............................................. 33,162(2) *
George W. Sarney ................................................... 39,893(2) *
Raymond T. Schuler ................................................. 163,983(4) 1.14%
John R. Silber ..................................................... 65,638(2) *
Kirk W. Walters .................................................... 473,338(5)(6) 3.20%
Frederick W. Zuckerman ............................................. 36,000(2) *
JoAnn Dolan ........................................................ 53,235(7)(8) *
Daniel J. Steinmetz ................................................ 40,920(9)(10) *
Victor Vrigian ..................................................... 40,962(11)(12) *
Lynne C. Wilson .................................................... 17,602(13)(14) *
All directors and executive officers of Northeast Federal as a group 1,187,590(15)(16) 7.86%
- ----------------------
(1) An asterisk in this column indicates that the percentage does not exceed
1.0% of Northeast's voting stock.
(2) Includes 20,000 options to purchase Common Stock exercisable within 60
days of the record date (February 10, 1995).
(3) Does not include Common Stock beneficially owned by DEPCO -- See "By
Other Beneficial Owners".
(4) Includes 30,000 options to purchase Common Stock exercisable within 60
days of the record date (February 10, 1995).
(5) Includes 7,765 shares of Common Stock held for the benefit of Mr. Walters in the
Northeast Savings Thrift and Profit Sharing Plan ("401(k) Plan") as of December
31, 1994. Also includes 7,374 shares of Common Stock allocated to Mr. Walters'
account pursuant to the Northeast Savings Employee Stock Ownership Plan
("ESOP") as of December 31, 1994.
(6) Includes 445,000 options to purchase Common Stock exercisable within 60
days of the record date.
(7) Includes 2,330 shares of Common Stock held for the benefit of Ms. Dolan
in the Northeast Savings 401(k) as of December 31,1994. Also includes
5,905 shares of Common Stock allocated to Ms. Dolan's account pursuant to
the Northeast Savings ESOP as of December 31, 1994.
(8) Includes 45,000 options to purchase Common Stock exercisable within 60
days of the record date.
17
<PAGE> 21
(9) Includes 1,038 shares of Common Stock held for the benefit of Mr.
Steinmetz in the Northeast Savings 401(k) as of December 31, 1994. Also
includes 3,883 shares of Common Stock allocated to Mr. Steinmetz's
account pursuant to the Northeast Savings ESOP as of December 31, 1994.
(10) Includes 35,000 options to purchase Common Stock exercisable within 60
days of the record date.
(11) Includes 341 shares of Common Stock held for the benefit of Mr. Vrigian
in the Northeast Savings 401(k) as of December 31, 1994. Also includes
3,892 shares of Common Stock allocated to Mr. Vrigian pursuant to the
Northeast Savings ESOP as of December 31, 1994.
(12) Includes 35,000 options to purchase Common Stock exercisable within 60
days of the record date.
(13) Includes 348 shares of Common Stock held for the benefit of Ms. Wilson in
the Northeast Savings 401(k) Plan as of December 31, 1994. Also includes
2,254 shares of Common Stock allocated to Ms. Wilson's account pursuant
to the Northeast Savings ESOP as of December 31, 1994.
(14) Includes 15,000 options to purchase Common Stock exercisable within 60
days of the record date.
(15) All shares above are individually held or held jointly or individually by
a spouse or child.
(16) Includes 785,000 options to purchase Common Stock held by executive
officers and directors which are exercisable within 60 days of the record
date.
</TABLE>
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 voting securities. Certain information known to the
Company as of February 10, 1995, with respect to such persons appears in the
following table:
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class
- -------------- ------------------- ------------ ----------
<S> <C> <C> <C>
Common Stock Rhode Island Depositors 800,000 5.58%
Economic Protection
Corporation
89 Jefferson Boulevard
Warwick, RI 02888
Common Stock First Manhattan Co. 848,951(1) 5.92%
437 Madison Avenue
New York, NY 10022
- ----------------------
(1) A Schedule 13G dated February 10, 1995 has been filed by First Manhattan
Co.
</TABLE>
18
<PAGE> 21
ITEM 13. 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, 1994.
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.
19
<PAGE> 22
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
Director of Highest
Northeast Balance Note Prefer- Principal
Federal at Since Annual ential Balance at
December 31, Type of January 1, Interest Interest December
Name 1994 Loan 1994 Rate(1) Rate 31, 1994
- --------------- ----------------- ----------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kirk W. Walters Chairman of the Adjustable $306,696 7.50% 5.5%(2) $300,413
Board, President Rate
and Chief Residential
Executive Officer Mortgage
- -----------------
(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.
</TABLE>
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, 1994, the Association leased
25,002 square feet of space pursuant to the 1983 agreement at a monthly rental
payment of $58,234. 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.
20
<PAGE> 23
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 most recent
monthly rental payment was $16,065. 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 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 $3,307 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. As a
result of these two branch sales, the Association no longer leases any office
premises from Mr. O'Neill.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORTHEAST FEDERAL CORP.
-----------------------
(Registrant)
May 1, 1995 By: /s/ Kirk W. Walters
-------------------
Kirk W. Walters
Chairman of the Board, Chief Executive
Officer, President, Chief Operating Officer,
and Chief Financial Officer
22
