SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
NORTHEAST INDIANA BANCORP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
________________________________________________________________________________
[NORTHEAST INDIANA BANCORP LETTERHEAD]
March 27, 2002
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Northeast Indiana
Bancorp, Inc., we cordially invite you to attend the annual meeting of
stockholders. The meeting will be held at 1:00 p.m. eastern standard time, on
May 1, 2002 at First Federal Savings Bank's North Office, located at 100
Frontage Road, Huntington, Indiana.
An important aspect of the annual meeting process is the stockholder
vote on corporate business items. I urge you to exercise your rights as a
stockholder to vote and participate in this process. Stockholders are being
asked to consider and vote upon the election of one director and the approval of
the 2002 Omnibus Incentive Plan. We encourage you to attend the annual meeting
in person. Whether or not you plan to attend, however, please read the enclosed
proxy statement and then complete, sign and date the enclosed proxy card and
return it in the accompanying postpaid return envelope as promptly as possible.
This will save us the additional expense in soliciting proxies and will ensure
that your shares are represented at the annual meeting.
Very truly yours,
/s/Stephen E. Zahn
------------------
Stephen E. Zahn
Chairman of the Board, President
and Chief Executive Officer
NORTHEAST INDIANA BANCORP, INC.
648 North Jefferson Street
Huntington, Indiana 46750
(260) 356-3311
www.firstfed-neib.com
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on May 1, 2002
Notice is hereby given that an annual meeting of stockholders of
Northeast Indiana Bancorp, Inc. will be held at 1:00 p.m. eastern standard time,
on May 1, 2002 at First Federal Savings Bank's North Office, located at 100
Frontage Road, Huntington, Indiana.
A proxy card and a proxy statement for the annual meeting are enclosed.
The annual meeting is for the purpose of considering and acting upon:
Proposal I. The election of one director of Northeast Indiana
Bancorp, with a term of three years;
Proposal II. The approval of the 2002 Omnibus Incentive Plan.
A copy of the plan is included as Exhibit A to the
enclosed proxy statement;
and such other matters as may properly come before the annual meeting, or any
adjournments or postponements thereof. We are not aware of any other business to
come before the annual meeting.
Any action may be taken on the foregoing proposals at the annual
meeting on the date specified above, or on any date or dates to which the annual
meeting may be postponed or adjourned. Stockholders of record at the close of
business on March 8, 2002 are the stockholders entitled to vote at the annual
meeting, and any adjournments or postponements thereof. A complete list of
stockholders entitled to vote at the annual meeting will be available for your
inspection at Northeast Indiana Bancorp's executive office, located at 648 North
Jefferson Street, Huntington, Indiana 46750, during the ten days prior to the
annual meeting and also will be available for inspection at the annual meeting.
You are requested to complete and sign the enclosed form of proxy,
which is solicited on behalf of the Board of Directors, and to mail it promptly
in the enclosed envelope. Your proxy will not be used if you attend and vote at
the annual meeting in person.
By Order of the Board of Directors
/s/Stephen E. Zahn
------------------
Stephen E. Zahn
Chairman of the Board, President
and Chief Executive Officer
Huntington, Indiana
March 27, 2002
IMPORTANT: The prompt return of proxies will save us the expense of further
requests for proxies to ensure a quorum at the annual meeting. A pre-addressed
envelope is enclosed for your convenience. No postage is required if mailed
within the United States.
PROXY STATEMENT
NORTHEAST INDIANA BANCORP, INC.
648 North Jefferson Street
Huntington, Indiana 46750
(260) 356-3311
www.firstfed-neib.com
ANNUAL MEETING OF STOCKHOLDERS
May 1, 2002
This proxy statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Northeast Indiana Bancorp, Inc.
(Northeast Indiana Bancorp) of proxies from the holders of Northeast Indiana
Bancorp common stock for use at our annual meeting of stockholders. We are first
mailing this proxy statement and the enclosed form of proxy to our stockholders
on or about March 27, 2002.
Certain of the information provided herein relates to our wholly owned
subsidiary, First Federal Savings Bank.
Time and Place of the Annual Meeting; Matters to be Considered
Our annual meeting will be held as follows:
Date: May 1, 2002
Time: 1:00 p.m., eastern standard time
Place: North Office of First Federal Savings Bank
100 Frontage Road
Huntington, Indiana
At the annual meeting, stockholders are being asked to consider and
vote upon the following proposals:
o the election of one director of Northeast Indiana Bancorp,
with a term of three years;
o the approval of the 2002 Omnibus Incentive Plan. A copy of the
plan is included as Exhibit A to the enclosed proxy statement;
any other matters that may properly come before the annual meeting. As of the
date of this proxy statement, we are not aware of any other business to be
presented for consideration at the annual meeting.
Voting Rights of Stockholders; Votes Required for Approval
Only holders of record of Northeast Indiana Bancorp common stock on
March 8, 2002 are entitled to notice of and to vote at the annual meeting. You
are entitled to one vote for each share of Northeast Indiana Bancorp common
stock you own as of the record date. On March 8, 2002, 1,532,979 shares of
Northeast Indiana Bancorp common stock were outstanding and entitled to vote at
the annual meeting.
Directors shall be elected by a plurality of the votes cast in person
or by proxy at the annual meeting. In all matters other than the election of
directors, the affirmative vote of a majority of the votes cast on the matter
shall be the act of the stockholders. In the election of directors, votes may be
cast in favor of or withheld from each nominee. Votes that are withheld are not
included in determining the number of votes cast and, therefore, have no effect
on the voting results. With respect to the proposal to approve the 2002 Omnibus
Incentive Plan, proxies marked to abstain have the same effect as votes against
1
the proposal. Broker non-votes have no effect on the vote. One-third of the
shares of the Northeast Indiana Bancorp common stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the annual
meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum.
The Northeast Indiana Bancorp Board of Directors unanimously recommends
that you vote "FOR" the election of the Board of Directors' nominee and "FOR"
the proposal to approve the 2002 Omnibus Stock Incentive Plan.
Voting of Proxies; Revocability of Proxies; Proxy Solicitation Costs
Proxies are solicited to provide all stockholders of record on the
voting record date an opportunity to vote on matters scheduled for the annual
meeting and described in these materials. Shares of Northeast Indiana Bancorp
common stock can only be voted if the stockholder is present in person at the
annual meeting or by proxy. To ensure your representation at the annual meeting,
we recommend you vote by proxy even if you plan to attend the annual meeting.
You can always change your vote at the annual meeting.
Voting instructions are included on your proxy card. Shares of
Northeast Indiana Bancorp common stock represented by properly executed proxies
will be voted by the individuals named in such proxy in accordance with the
stockholder's instructions. Where properly executed proxies are returned to us
with no specific instruction as to how to vote at the annual meeting, the
persons named in the proxy will vote the shares "FOR" the election of the Board
of Directors' nominee and "FOR" the approval of the 2002 Omnibus Stock Incentive
Plan. Should any other matters be properly presented at the annual meeting for
action, the persons named in the enclosed proxy and acting thereunder will have
the discretion to vote on these matters in accordance with their best judgment.
You may receive more than one proxy card depending on how your shares
are held. For example, you may hold some of your shares individually, some
jointly with your spouse and some in trust for your children - in which case you
will receive three separate proxy cards to vote.
You may revoke your proxy before it is voted by: (i) submitting a new
proxy with a later date relating to the same shares and delivering it to the
Secretary of Northeast Indiana Bancorp; (ii) notifying the Secretary of
Northeast Indiana Bancorp in writing before the annual meeting that you have
revoked your proxy; or (iii) voting in person at the annual meeting. Any written
notice shall be delivered to Dee Ann Hammel, Secretary of Northeast Indiana
Bancorp at 648 Jefferson Street, Huntington, Indiana 46750.
If you plan to attend the annual meeting and wish to vote in person, we
will give you a ballot at the annual meeting. However, if your shares are held
in the name of your broker, bank or other nominee, you must bring an account
statement or letter from the nominee indicating that you were the beneficial
owner of Northeast Indiana Bancorp common stock on March 8, 2002, the record
date for voting at the annual meeting and the number of shares held by the
nominee on your behalf.
We will pay the cost of soliciting proxies. In addition to this
mailing, our directors, officers and employees may also solicit proxies
personally, electronically or by telephone. We will also reimburse brokers and
other nominees for their reasonable expenses in sending these materials to you
and obtaining your voting instructions.
Voting Securities and Principal Holders Thereof
The following table sets forth as of March 8, 2002, information
regarding share ownership of: (i) those persons or entities known by us to
beneficially own more than five percent of the Northeast Indiana Bancorp common
stock; (ii) each member of the Northeast Indiana Bancorp Board of Directors;
(iii) each executive officer of Northeast Indiana Bancorp named in the Summary
Compensation table appearing under "Executive Compensation" below; and (iv) all
current directors and executive officers of Northeast Indiana Bancorp as a
group. The address of each of the beneficial owners, except where otherwise
indicated, is the same address as Northeast Indiana Bancorp.
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Shares Percent
Beneficial Owner Beneficially Owned of Class
Northeast Indiana Bancorp, Inc. Employee Stock 203,577(1) 13.28%
Ownership Plan ("ESOP")
First Manhattan Co. 124,690(2) 8.13
437 Madison Avenue
New York, New York 10022
Stephen E. Zahn, Chairman of the Board, President and 169,109(3) 10.61
Chief Executive Officer
Dan L. Stephan, Director 23,202(4) 1.50
J. David Carnes, Director 30,584(5) 1.98
Randall C. Rider, Director 30,584(6) 1.98
Michael S. Zahn, Director and Senior Vice President 17,003(7) 1.11
Directors and executive officers as a group (8 persons) 355,652(8) 21.04
(1) The amount reported represents 203,577 shares of common stock held by
the ESOP, 110,860 of which have been allocated to accounts of
participants as of March 8, 2002. First Federal Savings Bank is the
trustee of the ESOP and may be deemed to beneficially own the shares
held by the ESOP which have not been allocated to accounts of
participants. Participants in the ESOP are entitled to instruct the
ESOP trustee as to the voting of the shares allocated to their ESOP
accounts. For each issue voted upon by the stockholders of Northeast
Indiana Bancorp, the unallocated shares held by the ESOP are voted by
the ESOP trustee in the same proportion as the participants who
directed the trustee as to the voting of the shares allocated to their
plan accounts. Allocated shares as to which the ESOP trustee receives
no voting instructions are voted by the trustee in its discretion.
(2) As reported on Schedule 13G/A filed on February 14, 2002. First
Manhattan Co. reports that it has sole voting and dispositive power
over 109,790 of the shares listed above, shared voting power over 3,350
shares, and shared dispositive power over 14,900 shares.
(3) The amount of shares beneficially owned by Mr. S. Zahn includes: (i)
10,564 shares owned directly; (ii) 5,445 shares held jointly by Mr. S.
Zahn and his wife; (iii) 4,673 shares held by Mr. S. Zahn's wife with
respect to which Mr. S. Zahn shares voting and dispositive power; (iv)
20,827 shares allocated to Mr. S. Zahn's ESOP account; (v) 37,182
shares held in a revocable trust as to which Mr. S. Zahn is a trustee;
or (vi) 27,667 shares which Mr. Zahn owns and controls through an IRA
account; (vii) 2,186 shares held in Mr. S. Zahn's 401(k) account; and
(viii)60,565 shares which Mr. S. Zahn has the right to acquire pursuant
to stock options that are exercisable at or within 60 days of March 8,
2002.
(4) The amount of shares beneficially owned by Mr. Stephan includes: (i)
10,000 shares owned directly and (ii) 13,202 shares which Mr. Stephan
has the right to acquire pursuant to stock options that are exercisable
at or within 60 days of March 8, 2002.
(5) The amount of shares beneficially owned by Dr. Carnes includes: (i)
8,307 shares owned directly; (ii) 9,075 shares held jointly by Dr.
Carnes and his wife; and (iii) 13,202 shares which Dr. Carnes has the
right to acquire pursuant to stock options that are exercisable at or
within 60 days of March 8, 2002.
(6) The amount of shares beneficially owned by Mr. Rider includes: (i)
8,911 shares owned directly; (ii) 8,471 shares held by Mr. Rider's wife
with respect to which Mr. Rider shares voting and dispositive power;
and (iii) 13,202 shares which Mr. Rider has the right to acquire
pursuant to stock options that are exercisable at or within 60 days of
March 8, 2002.
(7) The amount of shares beneficially owned by Mr. M. Zahn includes: (i)
6,701 shares owned directly; (ii) 3,159 shares allocated to Mr. M.
Zahn's ESOP account; and (iii) 7,143 shares which Mr. M. Zahn has the
right to acquire pursuant to stock options that are exercisable at or
within 60 days of March 8, 2002. The amount does not include 1,004
shares of restricted stock with respect to which Mr. M. Zahn has no
voting or dispositive power until vesting.
(8) The amount includes shares held directly, as well as jointly with
family members, shares held in retirement accounts, in a fiduciary
capacity, by certain family members or by trusts of which the director
or executive officer is a trustee or substantial beneficiary, with
respect to which the individual may be deemed to have sole or shared
voting and/or dispositive power. The amount also includes an aggregate
of 157,092 shares which directors and executive officers as a group
have the right to acquire pursuant to stock options that are
exercisable at or within 60 days of March 8, 2002 and an aggregate of
46,929 shares allocated to the ESOP accounts of the executive officers
as of March 8, 2002.
3
PROPOSAL I - ELECTION OF DIRECTORS
Our Board of Directors currently consists of five members, each of whom
is also a director of First Federal Savings Bank. Directors are generally
elected to serve for three-year staggered terms or until their respective
successors have been elected and qualified. Approximately one-third of the
directors are elected annually.
The following table sets forth certain information regarding the Board
of Directors, including each director's term of office and the Board nominee for
election. The nominee has consented to being named in this proxy statement and
has agreed to serve if elected. If a nominee is unable to stand for election,
the Board of Directors may either reduce the number of directors to be elected
or select a substitute nominee. If a substitute nominee is selected, the proxy
holders will vote your shares for the substitute nominee, unless you have
withheld authority. Except as described herein, there are no arrangements or
understandings between any director or nominee and any other person pursuant to
which such director or nominee was selected.
Director Term
Name Position(s) Held with Northeast Indiana Bancorp Age(1) Since(2) Expires
NOMINEES
J. David Carnes Director 50 1991 2005
DIRECTORS CONTINUING IN OFFICE
Stephen E. Zahn Chairman of the Board, President and Chief Executive 59 1965 2004
Officer
Michael S. Zahn Director and Senior Vice President 32 2000 2003
Randall C. Rider Director 51 1989 2003
Dan L. Stephan Director 54 1987 2004
(1) At December 31, 2001.
(2) Includes service as a director of First Federal Savings Bank.
The business experience of each director is set forth below. All
directors have held their present positions for at least the past five years,
except as otherwise indicated.
J. David Carnes, MD. Dr. Carnes has, since 1981, practiced medicine in
Huntington, Indiana.
Stephen E. Zahn. Mr. S. Zahn is the Chairman of the Board, President
and Chief Executive Officer of Northeast Indiana Bancorp and First Federal
Savings Bank. Mr. S. Zahn has served in such capacities for Northeast Indiana
Bancorp since 1995. Mr. S. Zahn joined First Federal Savings Bank in 1964 as
Secretary and Treasurer. He became President of First Federal Savings Bank in
1980 and Chairman of the Board and Chief Executive Officer of First Federal
Savings Bank in 1991. Mr. S. Zahn is the father of Michael S. Zahn, Director and
Senior Vice President of Northeast Indiana Bancorp and First Federal Savings
Bank.
Michael S. Zahn, Mr. M. Zahn is Senior Vice-President of Northeast
Indiana Bancorp and First Federal Savings Bank. Mr. M. Zahn joined First Federal
Savings Bank in 1996 as a loan officer. Prior to his employment with First
Federal Savings Bank, Mr. Zahn worked as a Senior Underwriter for a regional
insurance carrier. Mr. M. Zahn is the son of Stephen E. Zahn, Chairman of the
Board, President and Chief Executive Officer of Northeast Indiana Bancorp and
First Federal Savings Bank.
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Randall C. Rider. Mr. Rider is President of Lime City Manufacturing
Co., Inc., a position he has held since 1983.
Dan L. Stephan. Mr. Stephan is a retired State Representative to the
Indiana Legislature, a position he was first elected to in 1980 and retired at
end of 1998. Mr. Stephan is also employed as a sales representative for the
Variable Annuity Life Insurance Company.
Meetings and Committees of the Board of Directors
Board and Committee Meetings of Northeast Indiana Bancorp. Meetings of
Northeast Indiana Bancorp's Board of Directors are generally held on a monthly
basis. The Board of Directors met 13 times during fiscal 2001. During fiscal
2001, no incumbent director attended fewer than 75% of the total number of Board
meetings and the total number of meetings held by the Board committees on which
he served.
The Board of Directors has standing Audit, Nominating, Proxy and
Compensation Committees. We do not have a standing executive committee.
The Audit Committee reviews audit reports and related matters to ensure
effective compliance with regulations and internal policies and procedures. This
committee also acts on the recommendation by management to engage an accounting
firm to perform the annual audit and acts as a liaison between the auditors and
the Board. The current members of this committee are Directors Rider (Chairman),
Stephan, and Carnes. This Committee met four times during fiscal 2001. For
additional information regarding the Audit Committee, see "Audit Committee
Matters" below.
The Nominating Committee meets annually in order to nominate candidates
for membership on the Board of Directors. This committee is comprised of Board
members who are not up for election. The Nominating Committee will consider
nominees who are recommended by stockholders, provided such nominees are
recommended in accordance with the nominating procedures set forth in the
Northeast Indiana Bancorp's By-Laws. This Committee met once during fiscal 2001.
The Proxy Committee meets annually to review proxies for the current
year prior to the annual meeting. Members of the committee are Directors Stephen
Zahn and Michael Zahn. This Committee met once during fiscal 2001.
The Compensation Committee establishes our compensation policies and
reviews compensation matters. The current members of this committee are
Directors Stephan and Carnes. This committee met twice during fiscal 2001.
Board and Committee Meetings of First Federal Savings Bank. First
Federal Savings Bank's Board of Directors meets at least monthly. The Board of
Directors met 13 times during the year ended December 31, 2001. During 2001, no
director of First Federal Savings Bank attended fewer than 75% of the total
number of Board meetings and the total number of meetings held by the Board
committees on which he served. First Federal Savings Bank has standing
Nominating, Audit and Compensation Committees.
The Audit Committee is responsible for setting policies with regard to
internal controls and outside auditors. In addition, the Audit Committee reviews
the reports of the independent auditors and regulators. This committee is
comprised of Directors Rider (Chairman), Stephan and Carnes. The Audit Committee
met four times during fiscal 2001.
The Nominating Committee meets annually to recommend nominations to
First Federal Savings Bank's Board of Directors. This committee is comprised of
Board members who are not up for election. The Nominating Committee will
consider nominees who are recommended by stockholders, provided such nominees
are recommended in accordance with the nominating procedures set forth in the
First Federal Saving Bank's By-Laws. This Committee met once during fiscal 2001.
5
The Compensation Committee reviews and makes recommendations to First
Federal Savings Bank's Board of Directors for compensation issues. This
committee, currently comprised of Directors Stephan and Carnes, met once during
fiscal 2001.
Audit Committee Matters
Audit Committee Report. The Audit Committee of the Board of Directors
of Northeast Indiana Bancorp has issued the following report with respect to the
audited consolidated financial statements of Northeast Indiana Bancorp as of and
for the fiscal year ended December 31, 2001:
o The Audit Committee has reviewed and discussed with Northeast Indiana
Bancorp's management Northeast Indiana Bancorp's fiscal 2001 audited
consolidated financial statements;
o The Audit Committee has discussed with Northeast Indiana Bancorp's
independent auditors (Crowe, Chizek and Company LLP) the matters
required to be discussed by Statement on Auditing Standards No. 61;
o The Audit Committee has received the written disclosures and letter
from the independent auditors required by Independence Standards Board
No. 1 (which relates to the auditors' independence from Northeast
Indiana Bancorp and its related entities) and has discussed with the
auditors their independence from Northeast Indiana Bancorp; and
o Based on the review and discussions referred to in the three items
above, the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in Northeast
Indiana Bancorp's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2001.
Submitted by the Audit Committee of the Board of Directors of Northeast
Indiana Bancorp:
Randall C. Rider, Chairman
Dan L. Stephan
J. David Carnes
Independence. A majority of the members of the Audit Committee are
"independent" under the definition of independence contained in the National
Association of Securities Dealers' listing standards for the Nasdaq Stock
Market.
Audit Committee Charter. Northeast Indiana Bancorp has adopted a
written audit committee charter. A copy of the charter was attached to the proxy
statement of Northeast Indiana Bancorp filed with the SEC on March 26, 2001.
Director Compensation
Directors of Northeast Indiana Bancorp are paid $200 per regular
meeting for their service in such capacity. Directors of First Federal Savings
Bank receive a retainer fee of $1,250 per quarter and $350 per regular monthly
meeting. Directors do not receive any compensation for participation on the
committees of the Boards of Directors of Northeast Bancorp and First Federal
Savings Bank.
Deferred Compensation Program. First Federal Savings Bank has a
deferred compensation program for the benefit of its directors. This program
permits participating directors to defer up to a maximum of $400 of Board fees
per month or $4,800 per year, over a five year period which ended December 31,
1996, except for Director Michael Zahn who may defer up to a maximum of $500 of
Board fees per month or $6,000 per year, over a five year period which will end
July 31, 2005. Generally upon attaining age 65, the director (or in the event of
death, his designated beneficiary) receives a monthly cash payment based upon
the amount of fees deferred for a period of up to 120 months. In addition, the
designated beneficiary of each participating director will receive a $10,000
burial fee. In order to balance the expected payments under the deferred
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compensation plan, First Federal Savings Bank has purchased life insurance
policies on the lives of the participating directors. Although the insurance
policies do not generate periodic payments to cover the monthly payments owed to
retiring directors, the death benefits payable on the insurance policies have
been selected to actuarially approximate the future monthly payment obligation.
During fiscal 2001, Director Michael Zahn deferred a total of $6,000 in Board
fees pursuant to this program. No other director deferred his First Federal
Savings Bank Board fees in fiscal 2001.
Executive Compensation
Our executive officers do not receive any compensation for services
performed in their capacity as such. The following table sets forth the
compensation paid by First Federal Savings Bank during fiscal 2001 to the
President and Chief Executive Officer of Northeast Indiana Bancorp and First
Federal Savings Bank. No other executive officer earned salary and bonus
exceeding $100,000 in fiscal 2001.
====================================================================================================================
SUMMARY COMPENSATION TABLE
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Long Term Compensation
Annual Compensation Awards
---------------------------------------------------------------------- --------------------------
Restricted
Stock Options/ All Other
Fiscal Salary Bonus Award(s) SARs Compensation
Name and Principal Position Year ($)(1) ($) ($) (#) ($)
----------------------------------------------------------------------- ---------------------------------------------
Stephen E. Zahn, Chairman of 2001 $161,500 $15,000 $--- --- $90,866(2)
the Board, President and Chief
Executive Officer
2000 158,570 --- --- 168,176(3)
---
1999 153,600 22,500 --- --- 75,971(4)
======================================================================== ============================================
(1) Includes directors' fees of $11,600 for each of 2001, 2000 and 1999,
respectively.
(2) Includes: (i) $9,648 of life, health and disability insurance premiums
paid by First Federal Savings Bank; (ii) $4,497 of contributions by
First Federal Savings Bank to Mr. S. Zahn's 401(k) plan account; (iii)
$43,318 accrued by First Federal Savings Bank under the Executive
Supplemental Retirement Income Plan on behalf of Mr. S. Zahn; (iv)
$4,232 allocated based on the personal use of an automobile by Mr. S.
Zahn; and (v) $29,171 accrued by First Federal Savings Bank under the
Shareholder Benefit Plan on behalf of Mr. S. Zahn.
(3) Includes: (i) $8,441 of life, health and disability insurance premiums
paid by First Federal Savings Bank; (ii) $5,084 of contributions by
First Federal Savings Bank to Mr. S. Zahn's 401(k) plan account; (iii)
$38,184 accrued by First Federal Savings Bank under the Executive
Supplemental Retirement Income Plan on behalf of Mr. S. Zahn; (iv)
$40,782 of contributions to Mr. S. Zahn's ESOP account; and (v) $75,685
accrued by First Federal Savings Bank under the Shareholder Benefit
Plan on behalf of Mr. S. Zahn. In connection with the $75,685 benefit
accrued on his behalf under the Shareholder Benefit Plan, Mr. S. Zahn
relinquished 5,281 shares of restricted stock in 1999, worth
approximately $55,000, which were scheduled to vest in fiscal 2000.
(4) Includes: (i) $7,151 of life, health and disability insurance premiums
paid by First Federal Savings Bank; (ii) $5,000 of contributions by
First Federal Savings Bank to Mr. S. Zahn's 401(k) plan account; (iii)
$9,703 paid by First Federal Savings Bank's pension plan; and (iv)
$39,018 accrued by First Federal Savings Bank under the Executive
Supplemental Retirement Income Plan on behalf of Mr. S. Zahn.
7
The following table provides information as to the value of the options
held by our President and Chief Executive Officer on December 31, 2001. No
options or stock appreciation rights were granted during fiscal 2001.
===================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
-------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)(1)
---------------------------------------------------------------
Shares Acquired Value Exercisable Unexercisable Exercisable Unexercisable ($)
Name on Exercise (#) Realized ($) (#) (#) ($)
-------------------------------------------------------------------------------------------------------------------
Stephen E. Zahn --- $--- 60,565 --- $188,963 $---
===================================================================================================================
(1) Represents the aggregate market value (market price of the common stock
less the exercise price) of the options granted based upon the average
of the closing bid and the asked price of $12.83 per share of the
common stock as reported on the NASDAQ National Market on December 31,
2001, the last trading day in fiscal 2001.
Employment Agreement
In December 1995, First Federal Savings Bank entered into an employment
contract with Mr. S. Zahn. The employment contract provides for an annual base
salary in an amount established by the Board of Directors. The initial term of
the employment contract was for three years. The contract provides for
extensions of one year, in addition to the then-remaining term under the
agreement, on each anniversary of the effective date of the contract, subject to
a formal performance evaluation performed by disinterested members of the Board
of Directors of First Federal Savings Bank, and the contract has been renewed
each year since the expiration of the initial term. The contract provides for
termination upon Mr. S. Zahn's death, for cause, or in certain events specified
by Office of Thrift Supervision regulations. The employment contract is also
terminable by Mr. S. Zahn upon 90 days notice to First Federal Savings Bank.
The employment contract provides for payment to Mr. S. Zahn of the
greater of his salary for the remainder of the term of the agreement, or 299% of
his base compensation, in the event there is a "change in control" of First
Federal Savings Bank where employment terminates involuntarily in connection
with such change in control or within twelve months thereafter. For the purposes
of the employment contract, a "change in control" is defined as any event which
would require the filing of an application for acquisition of control or notice
of change in control pursuant to Office of Thrift Supervision regulations. Such
events are generally triggered by the acquisition of control of more than 10% of
Northeast Indiana Bancorp's common stock. Based on his current salary, if Mr. S.
Zahn was terminated in December, 2001 under circumstances entitling him to
severance pay as described above, he would have been entitled to receive a lump
sum cash payment of approximately $767,980.
Executive Supplemental Retirement Income Plan. First Federal Savings
Bank maintains a supplemental retirement income plan established in 1992 for the
benefit of Mr. S. Zahn. Amended and restated in 1996 pursuant to an agreement
entered into with Mr. S. Zahn, payments made by First Federal Savings Bank are
placed into a secular trust account with an independent administrator. Upon
reaching age 65, Mr. S. Zahn (or in the event of Mr. S. Zahn's death, his
beneficiary) shall receive monthly cash payments for a period of 180 months of
up to 60% of Mr. S. Zahn's final base compensation paid by the Bank annually of
approximately $43,500 after tax. In addition, Mr. S. Zahn's designated
8
beneficiary will receive a $30,000 burial fee. First Federal Savings Bank has
purchased a life insurance policy with respect to this program which is
comparable to the policies described herein for First Federal Savings Bank
directors' deferred compensation program. All expenses related to this program
are paid by First Federal Savings Bank.
Shareholder Benefit Plan. In January of 2000, the Bank set up a
deferred compensation plan for Mr. S. Zahn based on the savings to the
institution. In connection with the establishment of this plan, Mr. S. Zahn
relinquished shares of stock granted to him pursuant to the Northeast Indiana
Bancorp, Inc. Recognition and Retention Plan. The Bank agreed to accrue a
benefit for Mr. S. Zahn based on the difference between the income derived from
the Bank's investment in a no-load, no-surrender charge life insurance policy
and the Bank's after-tax cost of funds as determined by the last available
quarterly rate of the 6th District Cost of Funds from the Federal Home Loan Bank
in Indianapolis plus fifty basis points.
This benefit accrues over the working life of Mr. S. Zahn such that,
upon reaching the age of 65, he shall be entitled to the annuitized value of the
accrued benefit payable over a fifteen year period. Should Mr. S. Zahn die prior
to reaching age 65, his beneficiary is entitled to a Survivor's Benefit payable
over a fifteen year period. In the event that Mr. S. Zahn is involuntarily
terminated, including termination coincident with or within three years of a
change in control of the Bank (as defined), Mr. S. Zahn is entitled to receive a
benefit as if he had continued to be employed with the Bank until his retirement
age of 65. If Mr. S. Zahn voluntarily terminates his employment with the Bank,
he is entitled to the accrued benefit determined as of the date of termination.
Certain Transactions
First Federal Savings Bank has followed a policy of granting loans to
eligible directors, officers, employees and members of their immediate families
for the financing of their personal residences and for consumer purposes. All
loans to senior officers and directors are subject to Office of Thrift
Supervision regulations restricting loans and other transactions with affiliated
persons of First Federal Savings Bank. Under applicable law, all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public and must not involve more than the normal risk of repayment or
present other unfavorable features.
In this regard, all outstanding loans to directors have been made in
the ordinary course of business and on the same terms and conditions, including
interest rates and collateral, as those prevailing at the time for comparable
transactions and do not involve more than the normal risk of collectibility or
present other unfavorable features. Although, all outstanding loans to executive
officers have been made in the ordinary course of business and do not involve
more than the normal risk of collectibility, as employees, the executive
officers are eligible for a 1/2% discount from the current rate offered after
one year of service and a 1% discount from the current rate offered after 5
years of service on one residential and one consumer loan.
PROPOSAL II - APPROVAL OF OMNIBUS INCENTIVE PLAN
In order to promote the long-term interests of Northeast Indiana
Bancorp and its stockholders by providing a flexible and comprehensive means for
attracting and retaining directors, advisory directors, officers and employees
of Northeast Indiana Bancorp and its corporate affiliates and to replace the
existing Stock Option and Incentive Plan, which has been depleted of awards, our
Board of Directors has adopted and recommends that you vote to approve the 2002
Omnibus Incentive Plan (the "2002 Plan").
Description of the 2002 Plan
Effective March 25, 2002, the Board of Directors adopted the 2002 Plan.
It is designed to provide for the granting of incentive awards in the form of
stock options, stock appreciation rights, restricted stock and performance
awards (denominated in cash, securities or other property) to any director,
advisory director, officer or employee of the Company or its corporate
affiliates (including but not limited to First Federal Savings Bank). The awards
will be granted at the discretion of a committee charged with administering the
9
plan comprised of two or more members of the Board of Directors of the Company,
each of whom shall be non-employee, outside directors. We have made available a
total of 158,753 shares of common stock for issuance under the 2002 Plan.
The plan provides the committee with broad discretion to select the
officers, employees, consultants, and advisors to whom awards may be granted, as
well as the type, size, and terms and conditions of each award. The 2002 Plan
permits grants of the following types of awards:
o non-qualified and incentive stock options;
o stock appreciation rights;
o restricted stock grants; and
o other performance-based awards.
The committee may grant either stock options intended to qualify as
incentive stock options under Section 422 of the Code ("ISOs") or stock options
not intended to qualify as such ("NQSOs"). ISOs may be granted only to employees
of the Company or its corporate affiliates.
The term of an NQSO granted under the plan may not exceed 15 years. The
term of an ISO may not exceed ten years, provided that the term of an ISO
granted to an employee who owns stock comprising more than ten percent of the
combined voting power of all classes of stock of Northeast Indiana Bancorp and
its corporate affiliates (defined in the 2002 Plan as a "Ten Percent Holder")
may not exceed five years. The exercise price of a stock option granted under
the plan will be determined by the committee, provided that (i) the exercise
price of an ISO may not be less than 100% of the market value of a share of
common stock on the date of grant of such option and (ii) the exercise price of
an ISO granted to a Ten Percent Holder may not be less than 110% of the market
value of a share of Northeast Indiana Bancorp's common stock on the date of
grant of such option.
The committee is authorized to award stock appreciation rights
("SARs"), each of which, upon exercise thereof, will entitle the holder thereof
to receive a number of shares of the Company's common stock or cash or a
combination thereof, as the Committee shall determine, the aggregate value of
which shall equal (as nearly as possible) the amount by which the market value
per share of the Company's common stock on the date of exercise exceeds the
exercise price of the SAR, multiplied by the number of shares underlying the
SAR. A SAR may be related to an option or granted independently of an option.
The committee will determine the exercise price and term of each SAR, provided
that (i) the term of a SAR may not exceed 15 years and (ii) an option related to
a SAR which is an ISO must satisfy all requirements pertaining to ISOs (e.g.,
exercise price, term).
The committee may grant awards of restricted stock, subject to such
restrictions as the committee may impose thereon, which restrictions may lapse
in the manner deemed appropriate by the committee. The restrictions may include,
among other things, limitations on dividend and voting rights.
The committee is authorized to grant performance-based awards to
participants of the 2002 Plan which may be denominated in cash, shares of our
common stock, other securities, other awards under the plan or other property.
The term of such an award may not exceed 15 years. The specific performance
goals for each award are at the discretion of the committee.
Unless the committee provides otherwise, in the event of a
participant's termination of service to Northeast Indiana Bancorp by reason of
disability, the participant may exercise an option or SAR theretofore granted to
such participant within a period of three months from the date of termination of
service in the case of an ISO or one year from the date of termination of
service in the case of a NQSO or SAR (but in no event after the expiration date
of the award). If a participant to whom an option or SAR was granted is
terminated for cause, all rights under such option or SAR will expire
immediately.
Unless the committee provides otherwise, in the event of termination of
service due to retirement, a participant to whom an option or SAR is granted may
exercise such award following retirement for a period of three months, in the
case of an ISO, or two years following retirement, in the case of a NQSO or a
SAR (but in no event after the expiration date of the award). In the event of
the death of a participant to whom an option or SAR is granted, the person to
whom the award is transferred may exercise such award within a period of two
10
years following the death of the participant (but in no event after the
expiration date of the award).
In the event of termination of service of a participant to whom
restricted stock is granted for any reason other than death, disability or
retirement, unless the committee determines otherwise, all shares of restricted
stock as to which applicable restrictions have not yet lapsed will be forfeited
and returned to Northeast Indiana Bancorp. Unless the committee determines
otherwise, in the event of termination of service of the person to whom
restricted stock is granted due to death, disability or retirement, all shares
subject to restrictions at the time of termination will become free of such
restrictions.
The rights of a participant who is granted a performance or other award
in the event of termination of service of such participant will be governed by
the terms of the applicable award agreement.
In the event of a merger or other business combination of Northeast
Indiana Bancorp in which we are not the surviving entity, any participant to
whom an option or SAR has been granted will, with limited exception, have the
right after consummation of such transaction and during the remaining term of
the option or SAR to receive upon exercise of such award an amount equal to the
excess of the fair market value on the date of exercise of the securities or
other consideration receivable in the merger in respect of a share common stock
over the exercise price of the option or SAR, multiplied by the number of shares
of common stock with respect to which the option or SAR is exercised.
Upon a change in control of Northeast Indiana Bancorp, unless otherwise
provided by the committee in the applicable award agreement, any restrictions or
vesting period with respect to any outstanding awards will immediately lapse and
all such awards will become fully vested.
An ISO awarded under the plan may be transferred only upon the death of
the participant to whom it has been granted, by will or the laws of descent and
distribution. An award other than an ISO may be transferred during the lifetime
of the participant to whom it was awarded pursuant to a qualified domestic
relations order or by gift to any member of the participant's immediate family
or to a trust for the benefit of any member of the participant's immediate
family.
Our Board of Directors may amend or terminate the 2002 Plan without the
approval of the shareholders or consent of the participants of the 2002 Plan,
except when otherwise required by law or regulation or by the rules of any stock
exchange or automated quotation system on which the shares our common stock may
be listed or quoted, and except that the committee may not amend any outstanding
award without the consent of the participant.
AUDITORS
We have renewed our arrangement with Crowe, Chizek and Company LLP to
be our independent auditors for the fiscal year ending December 31, 2002. A
representative of Crowe, Chizek and Company LLP is expected to attend the
Meeting to respond to appropriate questions.
Audit Fees. The aggregate fees billed to Northeast Indiana Bancorp by
Crowe, Chizek and Company LLP for professional services rendered for the audit
of Northeast Indiana Bancorp's consolidated financial statements for fiscal 2001
and the reviews of the consolidated financial statements included in Northeast
Indiana Bancorp's Forms 10-QSB for that year were $46,500.
Financial Information Systems Design and Implementation Fees. There
were no fees for financial information systems design and implementation billed
to Northeast Indiana Bancorp's by Crowe, Chizek and Company LLP for fiscal 2001.
All Other Fees. Other than audit fees, the aggregate fees billed to
Northeast Indiana Bancorp by Crowe, Chizek and Company LLP for fiscal 2001 were
$41,710.
11
The Audit Committee of the Board of Directors has considered whether
the providing of all non-auditing services (and the aggregate fees billed for
such services) in fiscal 2001 by Crowe, Chizek and Company LLP, the principal
independent auditors, is compatible with maintaining the principal auditors'
independence.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in our proxy materials for next
year's annual meeting of stockholders, any stockholder proposal to take action
at such meeting must be received at our executive office, located at 648 North
Jefferson Street, Huntington, Indiana 46750, no later than November 27, 2002.
Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended. Otherwise, any
stockholder proposal to take action at such meeting must be received at our
executive office at least 30 days prior to the date of next year's annual
meeting. However, in the event that less than 40 days' notice of the date of the
next annual meeting is given, the stockholder proposal must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or public announcement
of the date of such meeting was first made. All stockholder proposals must also
comply with our Certificate of Incorporation and Bylaws and Delaware law.
OTHER MATTERS
We are not aware of any business to come before the annual meeting
other than those matters described above in this proxy statement. However, if
any other matter should properly come before the annual meeting, it is intended
that holders of the proxies will act in accordance with their best judgment.
12
APPENDIX A
NORTHEAST INDIANA BANCORP, INC.
2002 OMNIBUS INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Company and its stockholders by providing a means for
attracting and retaining directors, advisory directors, officers and employees
of the Company and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary
corporation" of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Award" -- means the grant by the Committee under this Plan of
an Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation
Right, Restricted Stock or a Performance Award, or any combination thereof, as
provided in the Plan.
"Award Agreement" -- means the agreement evidencing the grant
of an Award made under the Plan.
"Cause" -- means termination of service by reason of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties or gross
negligence.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3
hereof.
"Company" -- means Northeast Indiana Bancorp, Inc. and any
successor thereto.
"Continuous Service" -- means the absence of any interruption
or termination of service as a director, advisory director, officer or employee
of the Company or an Affiliate, except that when used with respect to a person
granted an Incentive Stock Option means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of transfers
between payroll locations of the Company or between the Company, its parent, its
subsidiaries or its successor.
"ERISA" -- means the Employee Retirement Income Security Act
of 1974, as amended.
"Incentive Stock Option" -- means an option to purchase Shares
granted by the Committee which is intended to qualify as an Incentive Stock
Option under Section 422 of the Code. Unless otherwise set forth in the Award
Agreement, any Option which does not qualify as an Incentive Stock Option for
any reason shall be deemed a Non-Qualified Stock Option.
A-1
"Market Value" -- means the closing high bid with respect to a
Share on the date in question on the Nasdaq Stock Market, or any similar system
then in use, or, if the Shares are not then traded on the Nasdaq Stock Market or
any similar system, the closing sales price on such date (or, if there is no
reported sale on such date, on the last preceding date on which any reported
sale occurred) of a Share on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if on such date the Shares are not quoted on the
Composite Tape, on the New York Stock Exchange, or if the Shares are not listed
or admitted to trading on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 (the
"Exchange Act") on which the Shares are listed or admitted to trading, or, if
the Shares are not listed or admitted to trading on any such exchange, the fair
market value on such date of a Share as the Committee shall determine.
"Non-Qualified Stock Option" -- means an option to purchase
Shares granted by the Committee which does not qualify, for any reason, as an
Incentive Stock Option under Section 422 of the Code.
"Option" -- means an Incentive Stock Option or a Non-Qualified
Stock Option awarded to a Participant pursuant to Section 5(a) hereof.
"Participant" -- means any director, advisory director,
officer or employee of the Company or any Affiliate who is selected by the
Committee to receive an Award.
"Performance Award" -- means an Award granted pursuant to
Section 5(d) herein.
"Plan" -- means this 2002 Omnibus Incentive Plan of the
Company.
"Related" -- means (i) in the case of a Stock Appreciation
Right, a Stock Appreciation Right which is granted in connection with, and to
the extent exercisable, in whole or in part, in lieu of, an Option or another
Stock Appreciation Right and (ii) in the case of an Option, an Option with
respect to which and to the extent a Stock Appreciation Right is exercisable, in
whole or in part, in lieu thereof.
"Restricted Stock" -- means Shares awarded to a Participant
pursuant to Section 5(c) hereof.
"Retirement" -- means retirement from employment with the
Company or an Affiliate thereof, as an employee, director, director emeritus or
advisory director thereof, having reached the age of 65.
"Shares" -- means the shares of common stock of the Company.
"Stock Appreciation Right" -- means a stock appreciation right
with respect to Shares granted by the Committee pursuant to the Plan.
"Ten Percent Holder" -- means any individual who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company and any Affiliate.
"Termination of Service" - means cessation of service, for any
reason, whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director, advisory director or employee of the
Corporation or any affiliate for purpose of any other Award.
A-2
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members of the Board of Directors of the Company, each
of whom (i) shall be an outside director as defined under Section 162(m) of the
Code and the regulations thereunder and (ii) shall be a Non-Employee Director as
defined under Rule 16(b) of the Securities Exchange Act of 1934 or any similar
or successor provision. The members of the Committee shall be appointed by the
Board of Directors of the Company. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board of Directors of the Company,
the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, to correct any defect or supply
an omission or reconcile any inconsistency in the Plan, and make all
determinations deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
4. Shares Subject to Plan.
----------------------
(a) Subject to adjustment by the operation of Section 7, the
maximum number of Shares with respect to which Awards may be made under the Plan
is 158,753 Shares. The Shares with respect to which Awards may be made under the
Plan may be either authorized and unissued shares or previously issued shares
reacquired and held as treasury shares. Shares which are subject to Related
Stock Appreciation Rights and Related Options shall be counted only once in
determining whether the maximum number of Shares with respect to which Awards
may be granted under the Plan has been exceeded. An Award shall not be
considered to have been made under the Plan with respect to any Option or Stock
Appreciation Right which terminates or with respect to Restricted Stock which is
forfeited, and new Awards may be granted under the Plan with respect to the
number of Shares as to which such termination or forfeiture has occurred.
(b) During any calendar year, no Participant may be granted
Awards under the Plan of more than 79,376 Shares, subject to adjustment as
provided in Section 7.
5. Awards.
------
(a) Options. The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine, including the granting of Options in tandem
with other Awards under the Plan:
(i) Exercise Price. The exercise price per Share for
an Option shall be determined by the Committee; provided that,
in the case of an Incentive Stock Option, the exercise price
thereof shall not be less than 100% of the Market Value of a
Share on the date of grant of such Option; provided further
that, in the case of an Incentive Stock Option granted to a
Ten Percent Holder, the exercise price thereof shall not be
less than 110% of the Market Value of a Share on the date of
grant of such Option.
A-3
(ii) Option Term. The term of each Option shall be
fixed by the Committee, but shall be no greater than 15 years;
provided that, in the case of an Incentive Stock Option, the
term of such Option shall not exceed ten years; provided
further that, in the case of an Incentive Stock Option granted
to a Ten Percent Holder, the term of such option shall not
exceed five years.
(iii) Time and Method of Exercise. Except as provided
in paragraph (a) of Section 6, no Option granted hereunder may
be exercised unless at the time the Participant exercises such
Option, such Participant has maintained Continuous Service
since the date of grant of such Option. To exercise an Option
under the Plan, the Participant to whom such Option was
granted shall give written notice to the Company in form
satisfactory to the Committee (and, if partial exercises have
been permitted by the Committee, by specifying the number of
Shares with respect to which such Participant elects to
exercise such Option) together with full payment of the
exercise price, if any and to the extent notice is received by
the Company. Payment, if any is required, shall be made either
(i) in cash (including check, bank draft or money order) or,
if the Committee specifically approves in writing on an
individual basis, (ii) by delivering (A) Shares already owned
by the Participant and having a fair market value equal to the
applicable exercise price, such fair market value to be
determined in such appropriate manner as may be provided by
the Committee or as may be required in order to comply with or
to conform to requirements of any applicable laws or
regulations, or (B) a combination of cash and such Shares.
(iv) Option Agreements. At the time of an Award of an
Option, the Participant shall enter into an Award Agreement
with the Company in a form specified by the Committee,
agreeing to the terms and conditions of the Award and such
other matters as the Committee shall in its sole discretion
determine.
(v) Limitations on Value of Exercisable Incentive
Stock Options. The aggregate Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for
the first time by a Participant in any calendar year shall not
exceed $100,000.
(vi) Eligible Recipients of Incentive Stock Options.
Incentive Stock Options may be granted by the Committee only
to employees of the Company or its Affiliates.
(vii) Incentive Stock Options must be granted no
later than 10 years from the date the Plan is adopted or
approved by the stockholders, whichever is earlier.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants with the following
terms and conditions and with such additional terms and conditions not
inconsistent with the provisions of the Plan as the Committee shall determine:
(i) General. A Stock Appreciation Right shall, upon
its exercise, entitle the Participant to whom such Stock
Appreciation Right was granted to receive a number of Shares
or cash or combination thereof, as the Committee in its
discretion shall determine, the aggregate value of which
(i.e., the sum of the amount of cash and/or Market Value of
such Shares on date of exercise) shall equal (as nearly as
possible, it being understood that the Company shall not issue
any fractional shares) the amount by which the Market Value
per Share on the date of such exercise shall exceed the
A-4
exercise price of such Stock Appreciation Right, multiplied by
the number of Shares with respect to which such Stock
Appreciation Right shall have been exercised.
(ii) Related Options. A Stock Appreciation Right may
be Related to an Option or may be granted independently of any
Option as the Committee shall from time to time in each case
determine. In the case of a Related Option, such Related
Option shall cease to be exercisable to the extent of the
Shares with respect to which the Related Stock Appreciation
Right was exercised. Upon the exercise or termination of a
Related Option, any Related Stock Appreciation Right shall
terminate to the extent of the Shares with respect to which
the Related Option was exercised or terminated. If the Related
Option is an Incentive Stock Option, the Related Option shall
satisfy all restrictions and the limitations imposed on
Incentive Stock Options under paragraph (a) of this Section 5
(including, without limitation, restrictions on exercise price
and term).
(iii) Exercise Price and Term. The exercise price and
term of each Stock Appreciation Right shall be fixed by the
Committee; provided that, that the term of a Stock
Appreciation Right shall not exceed 15 years.
(iv) Stock Appreciation Right Agreements. At the time
of an Award of a Stock Appreciation Right, the Participant
shall enter into an Award Agreement with the Company in a form
specified by the Committee, agreeing to the terms and
conditions of the Award and such other matters as the
Committee shall in its sole discretion determine.
(v) Time and Method of Exercise. Except as provided
in paragraph (a) of Section 6, no Stock Appreciation Right may
be exercised unless at the time the Participant exercises such
Stock Appreciation Right, such Participant has maintained
Continuous Service since the date of grant of such Stock
Appreciation Right. To exercise a Stock Appreciation Right
under the Plan, the Participant to whom such Stock
Appreciation Right was granted shall give written notice to
the Company in form satisfactory to the Committee (and, if
partial exercises have been permitted by the Committee, by
specifying the number of Shares with respect to which such
Participant elects to exercise such Stock Appreciation Right)
together with full payment of the exercise price, if any and
to the extent required. The date of exercise shall be the date
on which such notice is received by the Company. Payment, if
any is required, shall be made either (i) in cash (including
check, bank draft or money order) or with the specific written
permission of the Committee (ii) by delivering (A) Shares
already owned by the Participant and having a fair market
value equal to the applicable exercise price, such fair market
value to be determined in such appropriate manner as may be
provided by the Committee or as may be required in order to
comply with or to conform to requirements of any applicable
laws or regulations, or (B) a combination of cash and such
Shares.
(c) Restricted Stock. The Committee is hereby authorized to
grant Awards of Restricted Stock to Participants with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock shall be
subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to
vote a Share of Restricted Stock or the right to receive any
dividend or other right or property with respect thereto),
A-5
which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise as the
Committee may deem appropriate. During the period of time in
which the Shares awarded as Restricted Stock are subject to
the restrictions contemplated herein (a "Restricted Period"),
unless otherwise permitted by the Plan or by the Committee as
provided in the applicable Award Agreement, such Shares may
not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant. Except for the restrictions
which may be imposed on Restricted Stock, a Participant to
whom Shares of Restricted Stock have been awarded shall have
all the rights of a stockholder, including but not limited to
the right to receive all dividends paid on such Shares and the
right to vote such Shares.
(ii) Restricted Stock Agreements. At the time of an
Award of Shares of Restricted Stock, the Participant shall
enter into an Award Agreement with the Company in a form
specified by the Committee, agreeing to the terms and
conditions of the Award and such other matters as the
Committee shall in its sole discretion determine.
(iii) Stock Certificates. Any Restricted Stock
granted under the Plan shall be evidenced by issuance of a
stock certificate or certificates, which certificate or
certificates shall be held by the Company. Such certificate or
certificates shall be registered in the name of the
Participant and shall bear the following (or similar) legend:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the
terms and conditions (including forfeiture) contained
in the Company's 2002 Omnibus Incentive Plan and an
Agreement entered into between the registered owner
and the Company. Copies of such Plan and Agreement
are on file in the offices of the Secretary of the
Company, 648 N. Jefferson Street, Huntington, IN
46750-2101."
(iv) Removal of Restrictions. Shares representing
Restricted Stock that are no longer subject to restrictions
shall be delivered to the holder thereof promptly after the
applicable restrictions lapse or are waived.
(d) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
the applicable Award Agreement. At the time of grant of a Performance Award, the
Participant shall enter into an Award Agreement with the Company in a form
specified by the Committee, agreeing to the terms and conditions of the
Performance Award and such other matters as the Committee shall in its sole
discretion determine. A Performance Award granted under the Plan (i) may be
denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted and the
amount of any payment or transfer to be made pursuant to any Performance Award
shall be determined by the Committee as provided in the applicable Award
Agreement. Unless otherwise provided in the Performance Award, the term of a
Performance Award shall not exceed 15 years.
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6. Termination of Service.
----------------------
(a) Options and Stock Appreciation Rights.
(i) If a Participant to whom an Option or Stock
Appreciation Right was granted shall cease to maintain
Continuous Service for any reason (including total and partial
disability but excluding Retirement, death and termination of
employment by the Company or any Affiliate for Cause), such
Participant may, but only within the period of three months,
in the case of an Incentive Stock Option, or one year, in the
case of a Non-Qualified Stock Option or Stock Appreciation
Right, immediately succeeding such cessation of Continuous
Service and in no event after the expiration date of such
Option or Stock Appreciation Right, exercise such Option or
Stock Appreciation Right to the extent that such Participant
was entitled to exercise such Option or Stock Appreciation
Right at the date of such cessation of Continuous Service. If
the Continuous Service of a Participant to whom an Option or
Stock Appreciation Right was granted by the Company is
terminated for Cause, all rights under any Option or Stock
Appreciation Right of such Participant shall expire
immediately upon the giving to the Participant of notice of
such termination.
(ii) If a Participant to whom an Option or Stock
Appreciation Right was granted shall cease to maintain
Continuous Service due to Retirement, such Participant may,
but only within the period of three months, in the case of an
Incentive Stock Option, or two years, in the case of a
Non-Qualified Stock Option or Stock Appreciation Right,
immediately succeeding such cessation of Continuous Service
and in no event after the expiration date of such Option or
Stock Appreciation Right, exercise such Option or Stock
Appreciation Right to the extent that such Participant was
entitled to exercise such Option or Stock Appreciation Right
at the date of such cessation of Continuous Service.
(iii) In the event of the death of a Participant
while in the Continuous Service of the Company or an Affiliate
or after the Participant's cessation of Continuous Service but
within the periods referred to in paragraphs (a)(i) and
(a)(ii) of this Section 6, the person to whom any Option or
Stock Appreciation Right held by the Participant at the time
of his or her death is transferred by will or the laws of
descent and distribution, or, in the case of an Award other
than an Incentive Stock Option, pursuant to a qualified
domestic relations order, as defined in the Code or Title I of
ERISA or the rules thereunder, or as otherwise permitted to be
transferred under Section 10 of the Plan, may, but only within
the period of two years immediately succeeding the date of
death of such Participant, and in no event after the
expiration date of such Option or Stock Appreciation Right,
exercise such Option or Stock Appreciation Right to the extent
that such Participant was entitled to exercise such Option or
Stock Appreciation Right immediately prior to his death.
Following the death of any Participant to whom an Option was
granted under the Plan, irrespective of whether any Related
Stock Appreciation Right shall have theretofore been granted
to the Participant or whether the person entitled to exercise
such Related Stock Appreciation Right desires to do so, the
Committee may, as an alternative means of settlement of such
Option, elect to pay to the person to whom such Option is
transferred as permitted by Section 10 of this Plan, the
amount by which the Market Value per Share on the date of
exercise of such Option shall exceed the exercise price of
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such Option, multiplied by the number of Shares with respect
to which such Option is properly exercised. Any such
settlement of an Option shall be considered an exercise of
such Option for all purposes of the Plan.
(iv) Notwithstanding the provisions of subparagraphs
(i) through (iii) above, the Committee may, in its sole
discretion, establish different terms and conditions
pertaining to the effect of termination to the extent
permitted by applicable federal and state law.
(b) Restricted Stock. Except as otherwise provided in this
Plan, if a Participant ceases to maintain Continuous Services for any reason
(other than death, total or partial disability or Retirement) unless the
Committee, in its sole discretion, shall otherwise determine, all shares of
Restricted Stock theretofore awarded to such Participant and which at the time
of such termination of Continuous Service are subject to the restrictions
imposed by paragraph (c)(i) of Section 5 shall upon such termination of
Continuous Service be forfeited and returned to the Company. Unless the
Committee, in its sole discretion, shall otherwise determine, if a Participant
ceases to maintain Continuous Service by reason of death, total or partial
disability or Retirement, all shares of Restricted Stock theretofore awarded to
such Participant and which at the time of such termination of Continuous Service
are subject to the restrictions imposed by paragraph (c)(i) of Section 5 shall
upon such termination of Continuous Service be free of restrictions and shall
not be forfeited.
(c) Performance Awards. In the event that a Participant to
whom a Performance Award has been granted shall cease to maintain Continuous
Service for any reason, the rights of such Participant or any person to whom the
Award may have been transferred as permitted by Section 10 shall be governed by
the terms of the Plan and the applicable Award Agreement.
7. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Company, the maximum aggregate number and
class of shares and exercise price of the Award, if any, as to which Awards may
be granted under the Plan and the number and class of shares and exercise price
of the Award, if any, with respect to which Awards have been granted under the
Plan shall be appropriately adjusted by the Committee, whose determination shall
be conclusive. Any Award which is adjusted as a result of this Section 7 shall
be subject to the same restrictions as the original Award.
8. Effect of Merger on Options and Stock Appreciation Rights. In the
case of any merger, consolidation or combination of the Company (other than a
merger, consolidation or combination in which the Company is the continuing
corporation and which does not result in the outstanding Shares being converted
into or exchanged for different securities, cash or other property, or any
combination thereof), any Participant to whom an Option or Stock Appreciation
Right has been granted shall have the additional right (subject to the
provisions of the Plan and any limitation applicable to such Option or Stock
Appreciation Right), thereafter and during the term of each such Option or Stock
Appreciation Right, to receive upon exercise of any such Option or Stock
Appreciation Right an amount equal to the excess of the fair market value on the
date of such exercise of the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect of
a Share over the exercise price of such Stock Appreciation Right or Option,
multiplied by the number of Shares with respect to which such Option or Stock
Appreciation Right shall have been exercised. Such amount may be payable fully
in cash, fully in one or more of the kind or kinds of property payable in such
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merger, consolidation or combination, or partly in cash and partly in one or
more of such kind or kinds of property, all in the discretion of the Committee.
9. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 9 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, shall become the
beneficial owner of shares of the Company with respect to which 25% or more of
the total number of votes for the election of the Board of Directors of the
Company may be cast, (ii) as a result of, or in connection with, any cash tender
offer, merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the persons who were directors of the
Company shall cease to constitute a majority of the Board of Directors of the
Company, or (iii) the stockholders of the Company shall approve an agreement
providing either for a transaction in which the Company will cease to be an
independent publicly-owned corporation or for a sale or other disposition of all
or substantially all the assets of the Company. Upon a change in control, unless
the Committee shall have otherwise provided in the applicable Award Agreement,
any restrictions or vesting period with respect to any outstanding Awards shall
lapse and all such Awards shall become fully vested in the Participant to whom
such Awards were awarded; provided, however, that no Award which has previously
been exercised or otherwise terminated shall become exercisable.
10. Assignments and Transfers. No Award granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution,
except that an Award other than an Incentive Stock Option may be transferred
pursuant to a qualified domestic relations order or by gift to any member of the
Participant's immediate family or to a trust for the benefit of one or more of
such immediate family members. During the lifetime of an Award recipient, an
Award shall be exercisable only by the Award recipient unless it has been
transferred as permitted hereby, in which case it shall be exercisable only by
such transferee. For the purpose of this Section 10, a Participant's "immediate
family" shall mean the Participant's spouse, children and grandchildren.
11. Employee Rights Under the Plan. No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again as
a Participant and no officer, employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Company or any Affiliate. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee any right to be
retained in the employ of or serve as a director or advisory director of the
Company or any Affiliate.
12. Delivery and Registration of Stock. The Company's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933, as amended, or any other federal,
state or local securities legislation. It may be provided that any
representation requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such representation under
such Securities Act or other securities legislation. The Company shall not be
required to deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange or automated quotation system on which
Shares may then be listed or quoted, and (ii) the completion of such
registration or other qualification of such Shares under any state or federal
law, rule or regulation, as the committee shall determine to be necessary or
advisable.
13. Withholding Tax. Upon the termination of the restricted period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
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any successor provision thereto, to include the value of such shares in taxable
income), the Company shall have the right to require the Participant or other
person receiving such shares to pay the Company the amount of any taxes which
the Company is required to withhold with respect to such shares, or, in lieu
thereof, to retain or sell without notice, a sufficient number of shares held by
it to cover the amount required to be withheld. The Company shall have the right
to deduct from all dividends paid with respect to shares of Restricted Stock the
amount of any taxes which the Company is required to withhold with respect to
such dividend payments.
The Company shall have the right to deduct from all amounts paid in
cash with respect to the exercise of a Stock Appreciation Right under the Plan
any taxes required by law to be withheld with respect to such cash payments.
Where a Participant or other person is entitled to receive Shares pursuant to
the exercise of an Option or Stock Appreciation Right pursuant to the Plan, the
Company shall have the right to require the Participant or such other person to
pay the Company the amount of any taxes which the Company is required to
withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.
All withholding decisions pursuant to this Section 13 shall be at the
sole discretion of the Committee or the Company.
14. Amendment or Termination.
------------------------
(a) Subject to paragraph (b) of this Section 14, the Board of
Directors of the Company may amend, alter, suspend, discontinue, or terminate
the Plan at any time without the consent of shareholders or Participants, except
that any such action will be subject to the approval of the Company's
shareholders if, when and to the extent such shareholder approval is necessary
or required for purposes of any applicable federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Shares may then be listed or quoted, or if the Board of Directors of the
Company, in its discretion, determines to seek such shareholder approval.
(b) Except as otherwise provided herein, the Committee may
waive any conditions of or rights of the Company or modify or amend the terms of
any outstanding Award. The Committee may not, however, amend, alter, suspend,
discontinue or terminate any outstanding Award without the consent of the
Participant or holder thereof, except as otherwise herein provided.
15. Effective Date and Term of Plan. The Plan shall become effective
upon its adoption by the Board of Directors of the Company, subject to the
approval of the Plan by the shareholders of the Company. It shall continue in
effect for a term of 15 years unless sooner terminated under Section 14 hereof.
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REVOCABLE PROXY
NORTHEAST INDIANA BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 1, 2002
The undersigned hereby appoints the Board of Directors of Northeast Indiana
Bancorp, Inc., and its survivor, with full power of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of common stock of
Northeast Indiana Bancorp, Inc. which the undersigned is entitled to vote at the
annual meeting of stockholders, to be held on May 1, 2002 at the First Federal
Savings Bank's North Office, located at 100 Frontage Road, Huntington, Indiana
at 1:00 p.m., eastern standard time, and at any and all adjournments or
postponements thereof, as follows:
FOR WITHHELD
I. The election of the following
director for a three-year term
to expire in the year 2005:
J. DAVID CARNES [ ] [ ]
FOR AGAINST ABSTAIN
II. The approval of 2002 Omnibus [ ] [ ] [ ]
Incentive Plan.
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the annual meeting, or any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE LISTED PROPOSALS.
--------------------------------------------------------------------------------
This proxy will be voted as directed, but if no instructions are specified, this
proxy will be voted for the proposals stated. If any other business is presented
at such annual meeting, this proxy will be voted by those named in this proxy in
their best judgment. At the present time, the board of directors knows of no
other business to be presented at the annual meeting.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the annual
meeting, or at any adjournments or postponements thereof, and after notification
to the Secretary of Northeast Indiana Bancorp, Inc. at the annual meeting of the
stockholder's decision to terminate this proxy, then the power of such attorneys
and proxies shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt, prior to the execution of this
proxy, of Notice of the Annual Meeting, a Proxy Statement dated March 27, 2002
and the Annual Report to Stockholders for the fiscal year ended December 31,
2001.
Dated: ____________________
----------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
---------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name
appears above on this card. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If
shares are held jointly, each holder
should sign.
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PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
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