SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant: No.
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MFB Corp.
(Name Of Registrant As Specified In Its Charter)
MFB Corp.
(Name of Person(s) Filing Proxy Statement)
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[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
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computed pursuant to Exchange Act Rule 0-11 (Set forth
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state how it was determined): N/A
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MFB CORP.
121 South Church Street
Mishawaka, Indiana 46544
(219) 255-3146
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held On January 20, 1998
Notice is hereby given that the Annual Meeting of Shareholders of MFB Corp.
(the "Holding Company") will be held at the McKinley Branch Office of Mishawaka
Federal Savings at 411 W. McKinley Avenue, Mishawaka, Indiana 46545, on Tuesday,
January 20, 1998, at 7:00 p.m., Eastern Standard Time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of two directors of the Holding
Company to serve three-year terms expiring in 2001.
2. Approval of Stock Option Plan. Approval and ratification of the MFB
Corp. 1997 Stock Option Plan (the "Option Plan").
3. Ratification of Auditors. Ratification of the appointment of Crowe,
Chizek and Company LLP as auditors for MFB Corp. for the fiscal year
ending September 30, 1998.
4. Other Business. Such other matters as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on December 1, 1997, are
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended September 30, 1997,
is enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ Charles J. Viater
Charles J. Viater, President and
Chief Executive Officer
Mishawaka, Indiana
December 15, 1997
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
MFB CORP.
121 South Church Street
Mishawaka, Indiana 46544
(219) 255-3146
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PROXY STATEMENT
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FOR
ANNUAL MEETING OF SHAREHOLDERS
January 20, 1998
This Proxy Statement is being furnished to the holders of common stock,
without par value (the "Common Stock"), of MFB Corp. (the "Holding Company"), an
Indiana corporation, in connection with the solicitation of proxies by the Board
of Directors of the Holding Company to be voted at the Annual Meeting of
Shareholders to be held at 7:00 p.m., Eastern Standard Time, on January 20,
1998, at the McKinley Branch Office of MFB Financial at 411 W. McKinley Avenue,
Mishawaka, Indiana, and at any adjournment of such meeting. The principal asset
of the Holding Company consists of 100% of the issued and outstanding shares of
common stock, $.01 par value per share, of MFB Financial. This Proxy Statement
is expected to be mailed to the shareholders on or about December 15, 1997.
The proxy solicited hereby, if properly signed and returned to the Holding
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Holding Company
written notice thereof (M. Gilbert Eberhart, 121 South Church Street, Mishawaka,
Indiana 46544), (ii) submitting a duly executed proxy bearing a later date, or
(iii) by appearing at the Annual Meeting and giving the Secretary notice of his
or her intention to vote in person. Proxies solicited hereby may be exercised
only at the Annual Meeting and any adjournment thereof and will not be used for
any other meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on December 1, 1997
("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 1,627,767 shares of the Common Stock issued and
outstanding, and the Holding Company had no other class of equity securities
outstanding. Each share of Common Stock is entitled to one vote at the Annual
Meeting on all matters properly presented at the Annual Meeting. The holders of
over 50% of the outstanding shares of Common Stock as of the Voting Record Date
must be present in person or by proxy at the Annual Meeting to constitute a
quorum. In determining whether a quorum is present, shareholders who abstain,
cast broker non-votes, or withhold authority to vote on one or more director
nominees will be deemed present at the Annual Meeting.
The following table sets forth certain information regarding the beneficial
ownership at the Common Stock as of December 1, 1997, by each person who is
known by the Holding Company to own beneficially 5% or more of the Common Stock.
Unless otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
Number of Shares
Name and Address of of Common Stock Percent of
Beneficial Owner (1) Beneficially Owned Class (2)
- ------------------------------------------ -------------------- -------------
First Manhattan Co., General Partner 100,883 (3) 6.20%
First Save Associates, L.P. and
Second First Save Associates, L.P. (3)
437 Madison Avenue
New York, New York 10022
Valley American Bank and 134,399 (4) 8.26%
Trust Company, Trustee
101 North Main Street
P.O. Box 328
South Bend, Indiana 46624-0328
John Hancock Mutual Life Insurance Company 90,000 (5) 5.53%
John Hancock Subsidiaries, Inc.
John Hancock Asset Management
The Berkeley Financial Group
John Hancock Advisers, Inc. (5)
101 Huntington Avenue
Boston, Massachusetts 02199
(1) The information in this chart is based on Schedule 13D and 13G reports
filed by the above-listed persons with the Securities and Exchange
Commission and subsequent communications from such persons. It does not
reflect any changes in those shareholdings which may have occurred since
the date of such filings or communications.
(2) Based upon 1,627,767 shares of Common Stock outstanding which does not
include options for 190,350 shares of Common Stock granted to certain
directors, officers and employees of the Holding Company and MFB Financial.
(3) First Manhattan Co. is a securities broker and dealer and investment
advisor. First Manhattan Co. is the general partner of each of the limited
partnerships which own these shares. First Manhattan Co. disclaims that
First Save Associates, L.P. and Second First Save Associates, L.P., both of
which are New Jersey limited partnerships, constitute a group. First Save
Associates, L.P. has sole voting and dispositive power with respect to
50,450 of he shares listed above. Second Save Associates, L.P. has sole
voting and dispositive power with respect to 50,433 of the shares listed
above.
(4) These shares are held by the Trustee of the Holding Company's Employee
Stock Ownership Plan. The employees participating in that Plan are entitled
to instruct the Trustee how to vote shares held in their accounts under the
Plan. Unallocated shares held in a suspense account under the Plan are
required under the Plan terms to be voted by the Trustee in the same
proportion as allocated shares are voted.
(5) Sole voting and dispositive power with respect to these shares is held by
John Hancock Advisers, Inc., a registered investment adviser. The other
listed companies directly or indirectly control John Hancock Advisers, Inc.
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors consists of seven members. The By-Laws provide that
the Board of Directors is to be divided into three classes as nearly equal in
number as possible. The members of each class are to be elected for a term of
three years and until their successors are elected and qualified. One class of
directors is to be elected annually. Directors must have their principal
domicile in St. Joseph County, Indiana, must have had a loan or deposit
relationship with MFB Financial for a continuous period of 12 months prior to
their nomination to the board, and non-employee directors must have served as a
member of a civic or community organization based in St. Joseph County, Indiana
for at least a continuous period of 12 months during the five years prior to
their nomination to the Board. The nominees for director this year are Marian K.
Torian and Reginald H. Wagle, each of whom is a current director of the Holding
Company. If elected by the shareholders at the Annual Meeting, the terms of Mrs.
Torian and Mr. Wagle will expire in 2001.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election at
the time of the Annual Meeting, the proxy holders will nominate and vote for a
replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected.
The following table sets forth certain information regarding the nominees
for the position of director of the Holding Company, including the number and
percent of shares of Common Stock beneficially owned by such persons as of the
Voting Record Date. Unless otherwise indicated, each nominee has sole investment
and/or voting power with respect to the shares shown as beneficially owned by
him. No nominee for director is related to any other nominee for director or
executive officer of the Holding Company by blood, marriage, or adoption, and
there are no arrangements or understandings between any nominee and any other
person pursuant to which such nominee was selected. The table also sets forth
the number of shares of Holding Company Common Stock beneficially owned by all
directors and executive officers of the Holding Company as a group.
Director Common Stock
Director of of the Beneficially
Expiration of MFB Holding Owned as of
Term as Financial Company December 1, Percentage
Name Director Since Since 1997 (1) of Class
- ------------------------------------------------------------------------------------------------------------------
Director Nominees:
- ------------------
Marian K. Torian 2001 1975 1994 25,400(2) 1.55%
Reginald H. Wagle 2001 1982 1994 34,100(3) 2.08%
Directors Continuing in Office:
- -------------------------------
M. Gilbert Eberhart, DDS 2000 1979 1994 41,900(3) 2.56%
Thomas F. Hums 1996 1961 1994 73,354(4) 4.37%
Dr. Jonathan E. Kintner, OD 2000 1977 1994 40,420(3) 2.46%
Michael J. Marien 1996 1987 1994 50,300(3) 3.07%
Charles J. Viater 1996 1995 1995 33,081(5) 2.03%
All directors and executive officers
as a group (10 persons) 364,537(6) 20.52%
(1) Based upon information furnished by the respective director nominees. Under
applicable regulations, shares are deemed to be beneficially owned by a
person if he or she directly or indirectly has or shares the power to vote
or dispose of the shares, whether or not he or she has any economic power
with respect to the shares. Includes shares beneficially owned by members
of the immediate families of the director nominees residing in their homes.
(2) Of these shares, 11,000 shares are subject to a stock option granted under
the MFB Corp. Stock Option Plan (the "Option Plan"), and 1,960 are held
under MFB Financial's Recognition and Retention Plan and Trust (the "RRP").
(3) Of these shares, 12,000 shares are subject to a stock option granted under
the Option Plan and 1,960 are held under the RRP.
(4) Of these shares, 50,000 are subject to a stock option granted under the
Option Plan.
(5) Includes 2,954 whole shares allocated to Mr. Viater under the MFB Financial
Employee Stock Ownership Plan and Trust (the"ESOP"), 627 whole shares
allocated to his account under the MFB Financial Employees' Savings &
Profit Sharing Plan and Trust (the "401(k) Plan"), and 10,000 shares
subject to a stock option granted under the Option Plan. Does not include
20,000 shares subject to stock options granted under the Option Plan which
are not exercisable within 60 days of the Voting Record Date.
(6) The total of such shares includes 149,000 shares subject to stock options
granted under the Option Plan, 14,600 shares which are held under the RRP,
12,651 shares allocated to such persons under the ESOP, and 1,192 shares
allocated to such persons under the 401(k) Plan.
Presented below is certain information concerning the directors and
director nominees of the Holding Company:
M. Gilbert Eberhart, DDS (age 63) has served as Secretary of MFB Financial
since 1987. He is also a dentist based in Mishawaka.
Thomas F. Hums (age 64) is retired and perviously served as President and
Chief Executive Officer of the Holding Company and MFB Financial.
Dr. Jonathan E. Kintner, OD (age 54) is an optometrist based in Mishawaka.
Michael J. Marien (age 50) is a Sales Representative with Signode
Corporation, a division of ITW.
Marian K. Torian (age 76) serves as the Holding Company's Chairman of the
Board and has served as Chairman of MFB Financial and of MFB Financial Services,
Inc. since 1977. She also served as a teacher with School City of Mishawaka.
Charles J. Viater (age 43) has served as the President and Chief Executive
Officer of the Holding Company and of MFB Financial since September 1, 1995.
During the prior five years, he served as Executive Vice President and Chief
Financial Officer of Amity Federal Savings (Tinley Park, Illinois) which was
acquired by another financial institution in 1995.
Reginald H. Wagle (age 55) has served as Vice President of Memorial Health
Foundation since 1992. Until 1992, he was a free-lance political consultant and
until 1991, he also served as District Director for the Office of United States
Representative John P.
Hiler, Third Congressional District of Indiana.
Christine A. Lauber serves as a non-voting advisory director of the Holding
Company. Ms. Lauber serves for a one-year term, running from the date of the
Annual Meeting, is entitled to attend meetings of the Holding Company's Board of
Directors and receives advisory director fees of $4,000 per year and $425 per
Board meeting attended. Ms. Lauber is a certified public accountant in private
practice in South Bend, Indiana.
THE DIRECTORS WILL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST AT
THE ANNUAL SHAREHOLDERS MEETING. PLURALITY MEANS THAT INDIVIDUALS WHO RECEIVE
THE LARGEST NUMBER OF VOTES CAST ARE ELECTED UP TO THE MAXIMUM NUMBER OF
DIRECTORS TO BE CHOSEN AT THE MEETING. ABSTENTIONS, BROKER NON-VOTES, AND
INSTRUCTIONS ON THE ACCOMPANYING PROXY TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR
MORE OF THE NOMINEES WILL RESULT IN THE RESPECTIVE NOMINEE RECEIVING FEWER
VOTES. HOWEVER, THE NUMBER OF VOTES OTHERWISE RECEIVED BY THE NOMINEE WILL NOT
BE REDUCED BY SUCH ACTION.
The Board of Directors and its Committees
During the fiscal year ended September 30, 1997, the Board of Directors of
the Holding Company met or acted by written consent twelve times. No director
attended fewer than 75% of the aggregate total number of meetings during the
last fiscal year of the Board of Directors of the Holding Company held while he
served as director and of meetings of committees which he served during that
fiscal year. The Board of Directors of the Holding Company has an Audit
Committee and a Stock Compensation Committee. All committee members are
appointed by the Board of Directors.
The Audit Committee, comprised of all members of the Board of Directors,
recommends the appointment of the Holding Company's independent accountants, and
meets with them to outline the scope and review the results of such audit. The
Audit Committee held one meeting during the fiscal year ended September 30,
1997.
The Stock Compensation Committee administers the Option Plan and the RRPs.
The members of that Committee are Mrs. Torian and Messrs. Eberhart, Kintner,
Marien and Wagle. It held one meeting during the fiscal year ended September 30,
1997.
The Board of Directors nominated the slate of directors set forth in the
Proxy Statement. Although the Board of Directors of the Holding Company will
consider nominees recommended by shareholders, it has not actively solicited
recommendations for nominees from shareholders nor has it established procedures
for this purpose. Article III, Section 12 of the Holding Company's By-Laws
provides that shareholders entitled to vote for the election of directors may
name nominees for election to the Board of Directors but there are certain
requirements that must be satisfied in order to do so. Among other things,
written notice of a proposed nomination must be received by the Secretary of the
Holding Company not less than 120 days prior to the Annual Meeting; provided,
however, that in the event that less than 130 days' notice or public disclosure
of the date of the meeting is given or made to shareholders (which notice or
public disclosure includes the date of the Annual Meeting specified in the
Holding Company's By-Laws if the Annual Meeting is held on such date), notice
must be received not later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made.
Management Remuneration and Related Transactions
Remuneration of Named Executive Officer
During the fiscal year ended September 30, 1997, no cash compensation was
paid directly by the Holding Company to any of its executive officers. Each of
such officers was compensated by MFB Financial.
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to the Holding Company and its
subsidiaries for the last two fiscal years of the person who served as chief
executive officer of the Holding Company during the fiscal year ended September
30, 1997 (the "Named Executive Officer"). There were no other executive officers
of the Holding Company who earned over $100,000 in salary and bonuses during
that fiscal year.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
Name Other All
and Annual Restricted Securities Other
Principal Fiscal Compen- Stock Underlying Compen-
Position Year Salary ($)(1) Bonus ($) sation($)(2) Awards($) Options(#) sation($)(3)
Charles J. Viater 1997 $136,858 12,000 --- --- --- $25,193
President and Director 1996 $127,203 --- --- --- 10,000 (5) 4,750
1995 (4) $ 10,663 --- --- --- 20,000 (6) ---
(1) Includes fees received for service on MFB Financial's Board of Directors.
(2) The Named Executive Officer of the Holding Company receive certain
perquisites, but the incremental cost of providing such perquisites does
not exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
(3) Includes MFB Financial's contributions to the MFB Financial Employee Stock
Ownership Plan and Trust allocable to the Named Executive Officer.
(4) Mr. Hums retired as President and Chief Executive Officer of the Holding
Company and Mr. Viater assumed those positions on September 1, 1995. Mr.
Viater was not previously employed by the Holding Company or MFB Financial.
(5) These options vest at the rate of 20% per year commencing August 9, 1997.
(6) These options vest at the rate of 20% per year commencing September 1,
1996.
Stock Options
The following table includes the number of shares covered by stock options
held by the Named Executive Officer as of September 30, 1997. Also reported are
the values for "in-the-money" options (options whose exercise price is lower
than the market value of the shares at fiscal year end) which represent the
spread between the exercise price of any such existing stock options and the
fiscal year-end market price of the stock. The Named Executive Officer did not
receive or exercise any stock options during the fiscal year.
Outstanding Stock Option Grants and Value Realized As Of 9/30/97
Number of Unexercised Value of Unexercised In-the-Money
Options at Fiscal Year End Options at Fiscal Year End (1)
Name Exercisable Unexercisable(2) Exercisable Unexercisable(2)
Charles J. Viater 10,000 20,000 $80,750 $160,500
(1) Amounts reflecting gains on outstanding options are based on the average
between the high and low prices for the shares on September 30, 1997, which
was $23.125 per share.
(2) The shares represented could not be acquired by the Named Executive Officer
as of September 30, 1997.
Employment Contracts
MFB Financial has entered into a three-year employment contract with Mr.
Viater, the Holding Company's Named Executive Officer. The contract extends
annually for an additional one-year term to maintain its three-year term if the
Board of Directors of MFB Financial determines to so extend it, unless notice
not to extend is properly given by either party to the contract. Mr. Viater
receives salary under the contract equal to his current salary subject to
increases approved by the Board of Directors. The contract also provides, among
other things, for participation in other fringe benefits and benefit plans
available to MFB Financial's employees. Mr. Viater may terminate his employment
upon sixty days' written notice to MFB Financial. MFB Financial may discharge
him for cause (as defined in the contract) at any time or in certain events
specified by OTS regulations. If MFB Financial terminates Mr. Viater's
employment for other than cause or if Mr. Viater terminates his own employment
for cause (as defined in the contract), he will receive his base compensation
under the contract for an additional three years if the termination follows a
change of control of the Holding Company (as defined below). In addition, during
such period, he will continue to participate in MFB Financial's group insurance
plans or receive comparable benefits. Moreover, within a period of three months
after such termination following a change of control, Mr. Viater will have the
right to cause MFB Financial to purchase any stock options they hold for a price
equal to the fair market value (as defined in the contact) of the shares subject
to such options minus their option price. Mr. Viater's employment may not be
terminated by MFB Financial without cause. If the payments provided for in the
contract, together with any other payments made to Mr. Viater by MFB Financial,
are deemed to be payments in violation of the "golden parachute" rules of the
Code, such payments will be reduced to the largest amount which would not cause
MFB Financial to lose a tax deduction for such payments under those rules. As of
the date hereof, the cash compensation which would be paid under the contracts
if the three-year payment obligation were triggered under the contracts would be
$417,924 to Mr. Viater. For purposes of this employment contract, a change of
control of the Holding Company is generally an acquisition of control, as
defined in regulations issued under the Change in Bank Control Act and the
Savings and Loan Holding Company Act.
The employment contracts provide MFB Financial protection of its
confidential business information and protection from competition by Mr. Viater
should he voluntarily terminate his employment without cause or be terminated by
MFB Financial for cause. Similar contracts have been entered into with respect
to three other executive officers of the Holding Company.
Compensation of Directors
All directors of MFB Financial receive an annual fee of $4,000, plus a fee
of $425 per Board meeting attended. Members of Board Committees, who are not
employees of MFB Financial, are paid a separate fee of $30 per meeting. As
Chairman of the Board of MFB Financial, Mrs. Torian receives additional
directors' fees of $2,600 per year.
Directors of the Holding Company are not currently paid directors' fees.
The Holding Company may, if it believes it is necessary to attract qualified
directors or otherwise beneficial to the Holding Company, adopt a policy of
paying directors' fees.
Transactions With Certain Related Persons
MFB Financial has followed a policy of offering to its directors and
executive officers real estate mortgage loans secured by their principal
residence and other loans. These loans are made in the ordinary course of
business with the same collateral, interest rates and underwriting criteria as
those of comparable transactions prevailing at the time and do not involve more
than the normal risk of collectibility or present other unfavorable features.
PROPOSAL II -- STOCK OPTION PLAN
The Board of Directors of the Holding Company adopted the MFB Corp. Stock
Option Plan (the "Option Plan") on August 19, 1997. The essential features of
the Option Plan are summarized below, but the Option Plan is set forth in full
in Exhibit A to this Proxy Statement, and all statements made in this summary
are qualified by reference to the full text of the Option Plan.
Purpose
The purpose of the Option Plan is to provide to certain directors, officers
and other key employees of the Holding Company and its subsidiaries (currently
approximately ten persons) a favorable opportunity to acquire Common Stock of
the Holding Company and thereby increase the incentive of such persons to work
for the success of the Holding Company and its subsidiaries and better enabling
such entities to attract or retain capable directors and executive personnel.
The Option Plan provides for the grant of both incentive stock options
(options that afford favorable tax treatment to recipients upon compliance with
certain restrictions and that do not normally result in tax deductions to the
Holding Company) and options that do not so qualify (non-qualified stock
options).
Administration
The Option Plan is administered, construed and interpreted by a committee
consisting of at least two members of the Holding Company's Board of Directors.
Currently, the Holding Company's Stock Compensation Committee administers the
Option Plan. The Stock Compensation Committee selects the individuals to whom
options or cash awards will be granted and determines the time of grant, the
number of shares of stock to be covered by each option, the amount of any cash
awards, the option price, the period within which the option may be exercised,
whether the option is an incentive stock option or non-qualified stock option,
and any other terms and conditions of the options or cash awards granted.
Members of the Stock Compensation Committee must be nonemployee directors of the
Holding Company. The current members of that Committee are set forth on page 4
of this Proxy Statement.
Reservation of Shares
The Holding Company has reserved 150,000 shares of its Common Stock for
issuance upon exercise of options to be granted under the Option Plan. No stock
options have been granted under the Option Plan as yet. Shares issued under the
Option Plan may be authorized but unissued shares or treasury shares of the
Holding Company. In the event of corporate changes affecting the Holding
Company's Common Stock, such as reorganizations, recapitalizations, stock
splits, stock dividends, mergers, consolidations, liquidations, and
extraordinary distributions (consisting of cash, securities, or other assets),
the Stock Compensation Committee may make appropriate adjustments in the number
and kind of shares reserved under the Option Plan and in the option price under,
and the number and kind of shares covered by, outstanding options granted under
the Option Plan. Any shares subject to an option which expires or is terminated
before exercise will again be available for issuance under the Option Plan.
Options and cash awards may be granted to directors, officers (including
officers who are members of the Board of Directors) and other key employees of
the Holding Company and its subsidiaries who are materially responsible for the
management or operation of the business of the Holding Company or its
subsidiaries and have provided valuable services to the Holding Company or its
subsidiaries.
Such individuals may be granted more than one option under the Option Plan.
Terms of the Options
Stock Option Price. The price to be paid for shares of Common Stock upon
the exercise of each incentive stock option shall not be less than the fair
market value of such shares on the date on which the option is granted. However,
the Committee does have the discretion to award non-qualified stock options to
eligible employees and directors of the Holding Company or of its subsidiaries
at a price no less than 85% of the fair market value of the Common Stock on the
date the option is granted. Incentive stock options granted to holders of more
than 10% of the combined voting power of all classes of stock of the Holding
Company may be granted at an option price no less than 110% of the fair market
value of the stock on the date of grant.
Option Term. No option may have a term longer than ten years and one day
from the date grant. However, under the Internal Revenue Code of 1986, as
amended (the "Code"), incentive stock options may not have terms in excess of
ten years. Incentive stock options granted to holders of more than 10% of the
combined voting power of all classes of stock of the Holding Company may not
have terms in excess of five years.
Exercise of Option. The option price of each share of stock is to be paid
in full in cash at the time of exercise. Under certain circumstances, the Option
Plan permits optionees to deliver a notice to their broker to deliver to the
Holding Company the total option price in cash and the amount of any taxes to be
withheld from the optionee's compensation as a result of any withholding tax
obligation of the Holding Company. Payment of the option price may also be
effected by tendering whole shares of the Holding Company's Common Stock owned
by the Optionee and cash having a fair market value equal to the cash exercise
price of the shares with respect to which the option is being exercised. Options
may be exercisable in full at any time during their term or in such
installments, on a cumulative basis, as the Stock Compensation Committee may
determine, except that no option may be exercised at any time as to fewer than
100 shares unless the exercise is with respect to an entire residue of fewer
than 100 shares, and no option may be exercised during the first six months of
its term.
Exercise of Options by Other than Outside Directors. Except as provided
below, upon termination of an optionholder's employment by the Holding Company
and its subsidiaries, all rights under any options granted to him but not yet
exercised terminate. In the event that an optionee retires pursuant to any then
existing pension plan of the Holding Company or its subsidiaries, his option may
be exercised by him in whole or in part within three years after his retirement
until the expiration of the option term fixed by the Committee, whether or not
the option was otherwise exercisable by him at his date of retirement; provided,
however, that if he remains a director or director emeritus of the Holding
Company he may exercise such option until the later of (a) three years after his
retirement or (b) six months after he ceases to be a director or director
emeritus of the Holding Company. If an optionee's employment by the Holding
Company and its subsidiaries terminates by reason of permanent and total
disability, his option may be exercised by him in whole or in part within one
year after such termination of employment, whether or not the option was
otherwise exercisable by him at the time of such termination of employment. If
the optionee dies while employed by the Holding Company or its subsidiaries,
within three years after his retirement (or, if later, six months following his
termination of service as a director or director emeritus of the Holding
Company), or within one year after his termination of employment because of
permanent and total disability, his option may be exercised by his estate or by
the person or persons entitled thereto by will or by the applicable laws of
descent or distribution at any time within one year after the date of such
death, whether or not the option was otherwise exercisable by the optionee at
the date of his death. Notwithstanding the foregoing, in no event may any option
be exercised after the expiration of the option term set by the Stock
Compensation Committee.
Exercise of Options by Outside Directors. Options granted to Outside
Directors terminate six months after the date such Outside Director ceases to be
a director and director emeritus of the Holding Company for any reason. If an
optionee who is an Outside Director ceases to be a director and a director
emeritus by reason of disability, any option granted to him may be exercised in
whole or in part within one year of such termination of service, whether or not
the option was otherwise exercisable by him at the time of such termination of
service. In the event of the death of an Outside Director while serving as a
director or director emeritus of the Holding Company, within six months after he
ceases to be a director and a director emeritus of the Holding Company, or
within one year after he ceases to be a director and a director emeritus of the
Holding Company by reason of disability, any option granted to him may be
exercised by his estate or by the person or persons entitled thereto by will or
by the applicable laws of descent or distribution at any time within one year
after the date of such death, whether or not the option was exercisable by the
optionee at the date of his death. Notwithstanding the foregoing, in no event
may any option be exercised after the expiration of the option term set by the
Stock Compensation Committee.
Nontransferability of Option. Options may not be transferred except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order. During the lifetime of an optionee, they may be exercised only
by him or his guardian or legal representative.
Maximum Incentive Stock Options. The aggregate fair market value of stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year under the Option Plan may not exceed
$100,000. For purposes of these computations, the fair market value of the
shares is to be determined as of the date the option is granted and computed in
the manner determined by the Stock Compensation Committee consistent with the
requirements of the Code. This limitation does not apply to non-qualified stock
options granted under the Option Plan.
Cash Awards. The Stock Compensation Committee may grant to optionees who
are granted non-qualified stock options the right to receive a cash amount which
is intended to reimburse the optionee for all or a portion of the federal, state
and local income taxes imposed upon the optionee as a result of the exercise of
a non-qualified stock option and the receipt of a cash award.
Replacement and Extension of the Terms of Options and Cash Awards. The
Stock Compensation Committee from time to time may permit an optionee under the
Option Plan or any other stock option plan adopted by the Holding Company or any
of its subsidiaries, to surrender for cancellation any unexercised outstanding
stock option and receive from the optionee's employing corporation in exchange
therefor an option for such number of shares of Common Stock as may be
designated by the Stock Compensation Committee. Such optionees may also be
granted related cash awards.
Change of Control. In the event of a change of control of the Holding
Company, and subject to certain limitations set forth in the Option Plan,
outstanding options which are not otherwise exercisable will become immediately
exercisable. Change of control, for this purpose, means an acquisition of
control of the Holding Company or MFB Financial within the meaning of 12 C.F.R.
ss. 574.4(a) (other than a change of control resulting from a trustee or other
fiduciary holding shares of Common Stock under an employee benefit plan of the
Holding Company or any of its subsidiaries). This provision could result in
adverse tax consequences to the Holding Company and to the optionee as a result
of the golden parachute provisions in the Code. Under the golden parachute
provisions, compensatory payments made by the Holding Company to an employee
following a change in control which are contingent on a change in control and
which exceed certain limits based on the average annual compensation of the
employee for the five calendar years before the change in control are not
deductible by the Holding Company and would subject the optionee to a 20% excise
tax. The value of any option which would become immediately exercisable
following a change in control (the spread between the then fair market value of
the option shares and the option price) could be deemed to be a compensatory
payment contingent on a change in control, and, thus, if such amount, when added
to any other payments made by the Holding Company to the employee which are
contingent on a change in control, would exceed the limits described above, the
excess amounts would be non-deductible and subject to the excise tax.
The effect of this change of control provision which, under certain
circumstances, could accelerate benefits to optionholders may be to increase the
cost of a potential business combination or acquisition of control of the
Holding Company. To the extent that this increased cost is significant,
potential acquirors may be deterred from pursuing a transaction involving the
Holding Company, and its shareholders may be deprived of an opportunity to sell
their shares at a favorable price. However, the options which have been granted
to date under the Option Plan are fully exercisable within six months following
the date of the grant, so the change of control provision described above is not
expected to have a significant deterrent effect. Moreover, to the extent this
provision could operate to accelerate benefits under stock options awarded in
the future, the Board of Directors believes that the expected benefits of these
provisions in attracting and retaining qualified management personnel outweigh
these possible disadvantages.
Other Provisions
The Stock Compensation Committee may provide for such other terms,
provisions and conditions of an option as are not inconsistent with the Option
Plan. The Stock Compensation Committee may also prescribe, and amend, waive and
rescind rules and regulations relating to the Option Plan, may accelerate the
vesting of stock options or cash awards granted or made under the Option Plan,
may make amendments or modifications in the terms and conditions (including
exercisability) of the options relating to the effect of termination of
employment of the optionees, and may waive any restrictions or conditions
applicable to any option or the exercise thereof.
Amendment and Termination
The Board of Directors of the Holding Company may amend the Option Plan
from time to time, and, with the consent of the optionee, the terms and
provisions of his option or cash award, provided, however, that (1) no amendment
may, without the consent of an optionee, make any changes in any outstanding
option or cash award which would adversely affect the rights of the optionee and
(2) without approval of the holders of at least a majority of the shares of the
Holding Company voting in person or by proxy at a duly constituted meeting, or
adjournment thereof, the following changes in the Option Plan may not be made:
an increase in the number of shares reserved for issuance under the Option Plan
(except as permitted by the antidilutive provisions in the Option Plan); an
extension of the option terms to more than 10 years and one day from the date of
grant of the option; or a material modification of the class of employees
eligible to receive options or cash awards under the Option Plan. The Board of
Directors of the Holding Company may terminate the Option Plan at any time. In
any event, no incentive stock options may be granted under the Stock Option Plan
after January 19, 2008.
Federal Income Tax Consequences
The grant of incentive and non-qualified stock options will have no federal
tax consequences to the Holding Company or the optionee. Moreover, if an
incentive stock option is exercised (a) while the employee is employed by the
Holding Company or its subsidiaries, (b) within three months after the optionee
ceases to be an employee of the Holding Company or its subsidiaries, (c) after
the optionee's death, or (d) within one year after the optionee ceases to be an
employee of the Holding Company or its subsidiaries if the optionee's employment
is terminated because of permanent and total disability (within the meaning of
ss. 22(e)(3) of the Code), the exercise of the incentive stock option will
ordinarily have no federal income tax consequences to the Holding Company or the
optionee. However, the amount by which the fair market value of the shares at
the time of exercise exceeds the option price of the option will, along with
other specified items, be considered taxable income in the taxable year of the
optionee in which the option was exercised for purposes of determining the
applicability of the alternative minimum tax. As a result, the exercise of an
incentive stock option may subject an optionee to an alternative minimum tax
depending on that optionee's particular circumstances.
On the other hand, the recipient of a non-qualified stock option generally
will realize taxable ordinary income at the time of exercise of his option in an
amount equal to the excess of the fair market value of the shares acquired at
the time of such exercise over the option price. A like amount is generally
deductible by the Holding Company for federal income tax purposes as of that
date, as long as the Holding Company withholds federal income tax with respect
to that taxable amount, assuming the optionholder's income is subject to income
tax withholding by the Holding Company. The Option Plan permits, under certain
circumstances, holders of non-qualified stock options to satisfy their
withholding obligation by having shares equal in value to the applicable
withholding taxes withheld from the shares which they would otherwise receive
upon the exercise of a non-qualified stock option.
Upon the sale of the shares acquired upon the exercise of an incentive
stock option no sooner than two years after the grant of the option and no
sooner than one year after receipt of the shares by the optionee, any capital
gain recognized would be taxed to the optionee at long-term or mid-term rates.
Upon the sale of shares acquired upon the exercise of an incentive stock option
prior to two years after the grant of an option or prior to one year after
receipt of the shares by the optionee, the optionee will generally recognize, in
the year of disposition, ordinary income equal to the lesser of (a) the spread
between the fair market value of the shares on the date of exercise and the
exercise price; and (b) the gain realized upon the disposition of those shares.
The Holding Company will be entitled to a deduction equal to the amount of
income recognized as ordinary income by the optionee, so long as the Holding
Company withholds federal income tax with respect to that taxable amount
(assuming the optionholder's income is subject to income tax withholding by the
Holding Company). If the spread is the basis for determining the amount of
ordinary income realized by the optionee, there will be additional long-term,
mid-term or short-term capital gain realized if the proceeds of such sale exceed
such spread.
Upon the subsequent sale of shares acquired upon exercise of a
non-qualified stock option, the optionholder will recognize long-term capital
gain or loss if the shares are deemed to have been held for more than 18 months,
mid-term capital gain or loss if the shares have been held for more than 12
months but less than 18 months, and short-term capital gain or loss in all other
cases. Currently, long-term capital gains for noncorporate taxpayers are
generally taxed at a maximum rate of 20% and mid-term capital gains for
noncorporate taxpayers are generally taxed at a maximum rate of 28%. Short-term
capital gains are taxed at the same rates as ordinary income.
Financial Accounting Consequences
At this time, neither the grant of incentive or non-qualified stock options
nor the issuance of shares upon exercise of such options will result in a
compensation expense charge to the Holding Company's earnings for financial
accounting purposes, except that for non-qualified stock options, earnings will
be charged with the excess, if any, of the fair market value on the date of
grant over the exercise price of the option shares. Option proceeds from the
exercise of these options and tax savings from non-qualified stock options
(other than tax savings resulting from charges to earnings made when the
exercise price is less than fair market value of the option shares on the date
of grant) are credited to capital. The Financial Accounting Standards Board (the
"FASB") has adopted rules that require increased disclosure about the value of
stock options in financial statements for the Holding Company, including their
impact on earnings.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE AND
RATIFY THE OPTION PLAN. SUCH ACTION REQUIRES THE APPROVAL OF THE HOLDERS OF AT
LEAST A MAJORITY OF THE SHARES OF THE HOLDING COMPANY'S COMMON STOCK VOTING IN
PERSON OR BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING, OR ANY
ADJOURNMENT THEREOF. ABSTENTIONS WILL BE INCLUDED IN THE NUMBER OF SHARES
PRESENT AND ENTITLED TO VOTE ON THE PROPOSAL AND ACCORDINGLY TREATED AS "NO"
VOTES, BUT BROKER NON-VOTES WILL BE EXCLUDED FROM THE NUMBER OF SHARES PRESENT
AND ENTITLED TO VOTE ON THE PROPOSAL AND WILL HAVE NO EFFECT ON THE VOTE.
PROPOSAL III -- RATIFICATION OF AUDITORS
The Board of Directors proposes for the ratification of the shareholders at
the Annual Meeting the appointment of Crowe, Chizek and Company LLP, certified
public accountants, as independent auditors for the fiscal year ended September
30, 1998. Crowe, Chizek and Company LLP has served as auditors for MFB Financial
since 1977. A representative of Crowe, Chizek and Company LLP will be present at
the Annual Meeting with the opportunity to make a statement if he so desires. He
will also be available to respond to any appropriate questions shareholders may
have.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"), requires that the Holding Company's officers and directors and
persons who own more than 10% of the Holding Company's Common Stock file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish the Holding Company with copies of
all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for those persons, the Holding Company believes that during the
fiscal year ended September 30, 1997, all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners with respect to
Section 16(a) of the 1934 Act were satisfied in a timely manner; provided,
however that Marian K. Torian was approximately two months late in reporting the
exercise of a stock option for 1,000 shares and simultaneous sale on the open
market of 550 of those shares.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
Annual Meeting of the Holding Company and included in the Holding Company's
proxy statement, must be received at the main office of the Holding Company no
later than 120 days in advance of December 15, 1998. Any such proposal should be
sent to the attention of the Secretary of the Holding Company at 121 South
Church Street, Mishawaka, Indiana, 46544.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described in the Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Holding Company.
The Holding Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy material to the beneficial owners of the Common Stock. In addition to
solicitation by mail, directors, officers, and employees of the Holding Company
may solicit proxies personally or by telephone without additional compensation.
Each shareholder is urged to complete, date and sign the proxy and return
it promptly in the enclosed envelope.
By Order of the Board of Directors
/s/ Charles J. Viater
Charles J. Viater, President
December 15, 1997
MFB CORP.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of the MFB Corp. 1997 Stock Option Plan (the
"Plan") is to provide to directors, officers and other key employees of MFB
Corp. (the "Holding Company") and its majority-owned and wholly-owned
subsidiaries (individually a "Subsidiary" and collectively the "Subsidiaries"),
including, but not limited to, MFB Financial ("MFB"), who are materially
responsible for the management or operation of the business of the Holding
Company or a Subsidiary and have provided valuable services to the Holding
Company or a Subsidiary, a favorable opportunity to acquire Common Stock,
without par value ("Common Stock"), of the Holding Company, thereby providing
them with an increased incentive to work for the success of the Holding Company
and its Subsidiaries and better enabling each such entity to attract and retain
capable directors and executive personnel.
2. Administration of the Plan. The Plan shall be administered,
construed and interpreted by a committee (the "Committee") consisting of at
least two members of the Board of Directors of the Holding Company, each of whom
is a "Non-Employee Director" within the meaning of the definition of that term
contained in Reg. ss. 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The members of the Committee shall be
designated from time to time by the Board of Directors of the Holding Company.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or
successive options or cash awards shall be granted under the Plan;
(b) the time when options or cash awards shall be granted
hereunder;
(c) the number of shares of Common Stock to be covered under each
option and the amount of any cash awards;
(d) the option price to be paid upon the exercise of each option;
(e) the period within which each such option may be exercised;
(f) the extent to which an option is an incentive stock option or
a non-qualified stock option; and
(g) the terms and conditions of the respective agreements by
which options granted or cash awards shall be evidenced.
The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options or cash awards made hereunder, to make amendments or modifications
in the terms and conditions (including exercisability) of the options relating
to the effect of termination of employment of the optionee (subject to the last
sentence of Section 12 hereof), to waive any restrictions or conditions
applicable to any option or the exercise thereof, and to make all other
determinations necessary or advisable in the administration of the Plan.
3. Eligibility. The Committee may, consistent with the purposes of the
Plan, grant options and cash awards to officers, directors and other key
employees of the Holding Company or of a Subsidiary who in the opinion of the
Committee are from time to time materially responsible for the management or
operation of the business of the Holding Company or of a Subsidiary and have
provided valuable services to the Holding Company or a Subsidiary; provided,
however, that in no event may any employee who owns (after application of the
ownership rules in ss. 425(d) of the Internal Revenue Code of 1986, as amended
(the "Code")) shares of stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Holding Company or any of
its Subsidiaries be granted an incentive stock option hereunder unless at the
time such option is granted the option price is at least 110% of the fair market
value of the stock subject to the option and such option by its terms is not
exercisable after the expiration of five (5) years from the date such option is
granted. An individual who has been granted an option under the Plan (an
"Optionee"), if he is otherwise eligible, may be granted an additional option or
options if the Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for issuance upon
the exercise of options granted under the Plan, 150,000 shares of Common Stock
of the Holding Company, which may be authorized but unissued shares or treasury
shares of the Holding Company. Subject to Section 7 hereof, the shares for which
options may be granted under the Plan shall not exceed that number. If any
option shall expire or terminate or be surrendered for any reason without having
been exercised in full, the unpurchased shares subject thereto shall (unless the
Plan shall have terminated) become available for other options under the Plan.
5. Terms of Options. Each option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Option Price. The price to be paid for shares of stock upon
the exercise of each option shall be determined by the Committee at the
time such option is granted, but such price in no event shall be less
than the fair market value, as determined by the Committee consistent
with Treas. Reg. ss. 20.2031-2 and any requirements of ss. 422A of the
Code, of such stock on the date on which such option is granted;
provided, however that the Committee shall have discretion to award
non-qualified stock options to eligible employees or directors of the
Holding Company or of a Subsidiary at a price no less than 85% of the
fair market value of the Common Stock on the date of grant, as
determined by the Committee consistent with Treas. Reg ss. 20.2031-2.
(b) Period for Exercise of Option. An option shall not be
exercisable after the expiration of such period as shall be fixed by
the Committee at the time of the grant thereof, but such period in no
event shall exceed ten (10) years and one day from the date on which
such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten (10) years and
non-qualified stock options shall be for a period not in excess of ten
(10) years and one day from the date of grant thereof. Options shall be
subject to earlier termination as hereinafter provided.
(c) Exercise of Options. The option price of each share of stock
purchased upon exercise of an option shall be paid in full at the time
of such exercise. Payment may be in (i) cash, (ii) if the Optionee may
do so in conformity with Regulation T (12 C.F.R. ss. 220.3(e)(4))
without violating ss. 16(b) or ss. 16(c) of the 1934 Act, pursuant to a
broker's cashless exercise procedure, by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Holding Company the total option price in cash
and, if desired, the amount of any taxes to be withheld from the
Optionee's compensation as a result of any withholding tax obligation
of the Holding Company or any of its Subsidiaries, as specified in such
notice, or (iii) with the approval of the Committee, by tendering whole
shares of the Holding Company's Common Stock owned by the Optionee and
cash having a fair market value equal to the cash exercise price of the
shares with respect to which the option is being exercised. For this
purpose, any shares so tendered by an Optionee shall be deemed to have
a fair market value equal to the mean between the highest and lowest
quoted selling prices for the shares on the date of exercise of the
option (or if there were no sales on such date the weighted average of
the means between the highest and lowest quoted selling prices for the
shares on the nearest date before and the nearest date after the date
of exercise of the options as prescribed by Treas. Reg. ss. 20-2031-2),
as reported in The Wall Street Journal or a similar publication
selected by the Committee. The Committee shall have the authority to
grant options exercisable in full at any time during their term, or
exercisable in such installments at such times during their term as the
Committee may determine; provided, however, that options shall not be
exercisable during the first six (6) months of their term. Installments
not purchased in earlier periods shall be cumulated and be available
for purchase in later periods. Subject to the other provisions of this
Plan, an option may be exercised at any time or from time to time
during the term of the option as to any or all whole shares which have
become subject to purchase pursuant to the terms of the option or the
Plan, but not at any time as to fewer than one hundred (100) shares
unless the remaining shares which have become subject to purchase are
fewer than one hundred (100) shares. An option may be exercised only by
written notice to the Holding Company, mailed to the attention of its
Secretary, signed by the Optionee (or such other person or persons as
shall demonstrate to the Holding Company his or their right to exercise
the option), specifying the number of shares in respect of which it is
being exercised, and accompanied by payment in full in either cash or
by check in the amount of the aggregate purchase price therefor, by
delivery of the irrevocable broker instructions referred to above, or,
if the Committee has approved the use of the stock swap feature
provided for above, followed as soon as practicable by the delivery of
the option price for such shares.
(d) Certificates. The certificate or certificates for the shares
issuable upon an exercise of an option shall be issued as promptly as
practicable after such exercise. An Optionee shall not have any rights
of a shareholder in respect to the shares of stock subject to an option
until the date of issuance of a stock certificate to him for such
shares. In no case may a fraction of a share be purchased or issued
under the Plan, but if, upon the exercise of an option, a fractional
share would otherwise be issuable, the Holding Company shall pay cash
in lieu thereof.
(e) Termination of Option. If an Optionee (other than a director
of the Holding Company or a Subsidiary who is not an employee of the
Holding Company or a Subsidiary (an "Outside Director")) ceases to be
an employee of the Holding Company and the Subsidiaries for any reason
other than retirement, permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), or death, any option granted to
him shall forthwith terminate. Leave of absence approved by the
Committee shall not constitute cessation of employment. If an Optionee
(other than an Outside Director) ceases to be an employee of the
Holding Company and the Subsidiaries by reason of retirement, any
option granted to him may be exercised by him in whole or in part
within three (3) years after the date of his retirement, whether or not
the option was otherwise exercisable at the date of his retirement;
provided, however, that if such employee remains a director or director
emeritus of the Holding Company, the option granted to him may be
exercised by him in whole or in part until the later of (a) three (3)
years after the date of his retirement, or (b) six months after his
service as a director or director emeritus of the Holding Company
terminates. (The term "retirement" as used herein means such
termination of employment as shall entitle such individual to early or
normal retirement benefits under any then existing pension plan of the
Holding Company or a Subsidiary.) If an Optionee (other than an Outside
Director) ceases to be an employee of the Holding Company and the
Subsidiaries by reason of permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), any option granted to him may be
exercised by him in whole or in part within one (1) year after the date
of his termination of employment by reason of such disability whether
or not the option was otherwise exercisable at the date of such
termination. Options granted to Outside Directors shall cease to be
exercisable six (6) months after the date such Outside Director is no
longer a director or director emeritus of the Holding Company or a
Subsidiary for any reason other than death or disability. If an
Optionee who is an Outside Director ceases to be a director and a
director emeritus by reason of disability, any option granted to him
may be exercised in whole or in part within one (1) year after the date
the Optionee ceases to be a director and a director emeritus by reason
of such disability, whether or not the option was otherwise exercisable
at such date. In the event of the death of an Optionee while in the
employ or service as a director or director emeritus of the Holding
Company or a Subsidiary, or, if the Optionee is not an Outside
Director, within three (3) years after the date of his retirement (or,
if later, six months following his termination of service as a director
or director emeritus of the Holding Company or a Subsidiary) or within
one (1) year after the termination of his employment by reason of
permanent and total disability (within the meaning of ss. 22(e)(3) of
the Code), or, if the Optionee is an Outside Director, within six (6)
months after he is no longer a director and a director emeritus of the
Holding Company or of Subsidiary for reasons other than disability or,
within one (1) year after the termination of his service by reason of
disability, any option granted to him may be exercised in whole or in
part at any time within one (1) year after the date of such death by
the executor or administrator of his estate or by the person or persons
entitled to the option by will or by applicable laws of descent and
distribution until the expiration of the option term as fixed by the
Committee, whether or not the option was otherwise exercisable at the
date of his death. Notwithstanding the foregoing provisions of this
subsection (e), no option shall in any event be exercisable after the
expiration of the period fixed by the Committee in accordance with
subsection (b) above.
(f) Nontransferability of Option. No option may be transferred by
the Optionee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and during the lifetime of the
Optionee options shall be exercisable only by the Optionee or his
guardian or legal representative.
(g) No Right to Continued Service. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any
right to continue in the employ or service of the Holding Company or
its Subsidiaries or affect any rights the Holding Company, a
Subsidiary, or the shareholders of the Holding Company may have to
terminate his service at any time.
(h) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of ss. 422A of the Code) are exercisable for the first time
by an Optionee during any calendar year under the Plan or any other
plan of the Holding Company or its Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value of such shares shall
be determined as of the date the option is granted and shall be
computed in such manner as shall be determined by the Committee,
consistent with the requirements of ss. 422A of the Code.
(i) Agreement. Each option shall be evidenced by an agreement
between the Optionee and the Holding Company which shall provide, among
other things, that, with respect to incentive stock options, the
Optionee will advise the Holding Company immediately upon any sale or
transfer of the shares of Common Stock received upon exercise of the
option to the extent such sale or transfer takes place prior to the
later of (a) two (2) years from the date of grant or (b) one (1) year
from the date of exercise.
(j) Investment Representations. Unless the shares subject to an
option are registered under applicable federal and state securities
laws, each Optionee by accepting an option shall be deemed to agree for
himself and his legal representatives that any option granted to him
and any and all shares of Common Stock purchased upon the exercise of
the option shall be acquired for investment and not with a view to, or
for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an option shall be accompanied
by a representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common Stock
are being acquired in good faith for investment and not with a view to,
or for sale in connection with, any distribution thereof (except in
case of the Optionee's legal representatives for distribution, but not
for sale, to his legal heirs, legatees and other testamentary
beneficiaries). Any shares issued pursuant to an exercise of an option
may bear a legend evidencing such representations and restrictions.
6. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under ss. 422A of the Code
or non-qualified stock options, provided, however, that Outside Directors shall
be granted only non-qualified stock options. All options granted hereunder will
be clearly identified as either incentive stock options or non-qualified stock
options. In no event will the exercise of an incentive stock option affect the
right to exercise any non-qualified stock option, nor shall the exercise of any
non-qualified stock option affect the right to exercise any incentive stock
option. Nothing in this Plan shall be construed to prohibit the grant of
incentive stock options and non-qualified stock options to the same person,
provided, further, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.
7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the outstanding stock of the Holding Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation,
extraordinary distribution (consisting of cash, securities, or other assets), or
any other change after the effective date of the Plan in the nature of the
shares of stock of the Holding Company, the Committee shall determine what
changes, if any, are appropriate in the number and kind of shares reserved under
the Plan, and the Committee shall determine what changes, if any, are
appropriate in the option price under and the number and kind of shares covered
by outstanding options granted under the Plan. Any determination of the
Committee hereunder shall be conclusive.
8. Cash Awards. The Committee may, at any time and in its discretion,
grant to any Optionee who is granted a non-qualified stock option the right to
receive, at such times and in such amounts as determined by the Committee in its
discretion, a cash amount ("cash award") which is intended to reimburse the
Optionee for all or a portion of the federal, state and local income taxes
imposed upon such Optionee as a consequence of the exercise of a non-qualified
stock option and the receipt of a cash award.
9. Replacement and Extension of the Terms of Options and Cash Awards.
The Committee from time to time may permit an Optionee under the Plan or any
other stock option plan heretofore or hereafter adopted by the Holding Company
or any Subsidiary to surrender for cancellation any unexercised outstanding
stock option and receive from his employing corporation in exchange therefor an
option for such number of shares of Common Stock as may be designated by the
Committee. Such Optionees also may be granted related cash awards as provided in
Section 8 hereof.
10. Change in Control. In the event of a Change in Control, all options
previously granted and still outstanding under the Plan regardless of their
terms, shall become exercisable. For this purpose, "Change in Control" shall
mean a change in control of the Holding Company or MFB, within the meaning of 12
C.F.R. ss. 574.4(a) (other than a change of control resulting from a trustee or
other fiduciary holding shares of Common Stock under an employee benefit plan of
the Holding Company or any of its Subsidiaries).
11. Tax Withholding. Whenever the Holding Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Holding
Company shall have the right to require the Optionee or his or her legal
representative to remit to the Holding Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares, and whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee may make a written election to have
shares of Common Stock having an aggregate fair market value, as determined by
the Committee, consistent with the requirements of Treas. Reg. ss. 20.2031-2,
sufficient to satisfy the applicable withholding taxes, withheld from the shares
otherwise to be received upon the exercise of a non-qualified option.
12. Amendment. The Board of Directors of the Holding Company may amend
the Plan from time to time and, with the consent of the Optionee, the terms and
provisions of his option or cash award, except that without the approval of the
holders of at least a majority of the shares of the Holding Company voting in
person or by proxy at a duly constituted meeting or adjournment thereof:
(a) the number of shares of stock which may be reserved for
issuance under the Plan may not be increased, except as provided in
Section 7 hereof;
(b) the period during which an option may be exercised may not
be extended beyond ten (10) years and one day from the date on which
such option was granted; and
(c) the class of persons to whom options or cash awards may be
granted under the Plan shall not be modified materially.
No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options or cash awards
theretofore granted under the Plan which would adversely affect the rights of
such Optionees.
13. Termination. The Board of Directors of the Holding Company may
terminate the Plan at any time and no option or cash award shall be granted
thereafter. Such termination, however, shall not affect the validity of any
option or cash award theretofore granted under the Plan. In any event, no
incentive stock option may be granted under the Plan after the date which is ten
(10) years from the effective date of the Plan.
14. Successors. This Plan shall be binding upon the successors and
assigns of the Holding Company.
15. Governing Law. The terms of any options granted hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and their
successors in interest shall be governed by Indiana law.
16. Government and Other Regulations. The obligations of the Holding
Company to issue or transfer and deliver shares under options granted under the
Plan or make cash awards shall be subject to compliance with all applicable
laws, governmental rules and regulations, and administrative action.
17. Effective Date. The Plan shall become effective on the date the
Plan is approved by the holders of at least a majority of the shares of the
Holding Company voting in person or by proxy at a duly constituted meeting or
adjournment thereof and any options granted pursuant to the Plan may not be
exercised until the Board of Directors of the Holding Company has been advised
by counsel that such approval has been obtained and all other applicable legal
requirements have been met.
|X| PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE MFB CORP.
[PROXY CARD, LEFT COLUMN]
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 1998
The undersigned hereby appoints Michael J. Portolese and Timothy C. Boenne,
with full powers of substitution, to act as attorneys and proxies for the
undersigned to vote all shares of capital stock of MFB Corp. which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at the McKinley Branch Office, 411 W. McKinley Avenue, Mishawaka, Indiana, on
Tuesday, January 20, 1998, at 7:00 P.M., and at any and all adjournments
thereof, as follows:
Please be sure to sign and Date
date this Proxy in the box
below.
Shareholder sign above Co-holder (if any) sign
above
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[PROXY CARD RIGHT COLUMN]
For With- For All
hold Except
1. The election as directors of |_| |_| |_|
Marian K. Torian and Reginald H. Wagle, each for a three year term (except
as marked to the contrary below).
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
For Against Abstain
2. Approval and ratification of the |_| |_| |_|
MFB Corp. 1997 Stock Option
Plan
For Against Abstain
3. Ratification of the appointment of |_| |_| |_|
Crowe Chizek & Co. as audi-
tors for the fiscal year ending
September 30, 1998.
The Board of Directors recommends a vote "FOR" each of the listed
propositions.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This proxy may be revoked at any time prior to the voting thereof.
The undersigned acknowledges receipt from MFB Corp., prior to the execution
of this proxy, of a Notice of the Meeting, a Proxy Statement and an Annual
Report to Shareholders.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH 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 MEETING.
[PROXY CARD, BACK]
Detach above card, sign, date and mail in postage paid envelope provided.
MFB CORP.
Please sign as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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