SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
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 Rule 14a-11(c) or Rule 14a-12
NORTHEAST INDIANA BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[NORTHEAST INDIANA BANCORP LETTERHEAD]
March 23, 2001
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
April 25, 2001 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 two directors and the
ratification of the appointment of our independent auditors. 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
(219) 356-3311
www.firstfed-neib.com
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 25, 2001
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 April 25, 2001 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 two directors of Northeast Indiana
Bancorp, each with a term of three years;
Proposal II. The ratification of the appointment of Crowe, Chizek
and Company LLP, as independent auditors for
Northeast Indiana Bancorp for the fiscal year ending
December 31, 2001;
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 9, 2001 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 23, 2001
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
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NORTHEAST INDIANA BANCORP, INC.
648 North Jefferson Street
Huntington, Indiana 46750
(219) 356-3311
www.firstfed-neib.com
ANNUAL MEETING OF STOCKHOLDERS
April 25, 2001
This proxy statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Northeast Indiana Bancorp, Inc. 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 23, 2001.
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: April 25, 2001
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 two directors of Northeast Indiana
Bancorp, each with a term of three years;
o the ratification of the appointment of Crowe, Chizek
and Company LLP as Northeast Indiana Bancorp's
independent auditors for the fiscal year ending
December 31, 2001; and
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 9, 2001 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 9, 2001, 1,688,036 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 ratify the appointment of
the independent auditors, proxies marked to abstain have the same effect as
votes against 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 each of the Board of Directors' nominees and
"FOR" the proposal to ratify Crowe, Chizek and Company LLP as Northeast Indiana
Bancorp's independent auditors for the fiscal year ending December 31, 2001.
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 each of
the Board of Directors' nominees and "FOR" the ratification of the appointment
of Crowe, Chizek and Company LLP as our independent auditors for the fiscal year
ending December 31, 2001. 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 9, 2001, 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 9, 2001, 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.
2
Shares
Beneficially Percent
Beneficial Owner Owned of Class
- ------------------------------------------------------ ------------- ---------
Northeast Indiana Bancorp, Inc. Employee Stock 203,579 (1) 12.06%
Ownership Plan ("ESOP")
First Manhattan Co. 157,190 (2) 9.31
437 Madison Avenue
New York, New York 10022
Stephen E. Zahn, Chairman of the Board, President and 164,651 (3) 9.42
Chief Executive Officer
Dan L. Stephan, Director 23,202 (4) 1.36
J. David Carnes, Director 30,584 (5) 1.80
Randall C. Rider, Director 30,584 (6) 1.80
Michael S. Zahn, Director and Senior Vice President 12,949 (7) 0.77
Directors and executive officers as a group (8 persons) 348,985 (8) 18.95
- ------------------------
(1) The amount reported represents 203,579 shares of common stock held by
the ESOP, 110,862 of which have been allocated to accounts of
participants as of March 9, 2001. 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 8, 2001. First
Manhattan Co. reports that it has sole voting and dispositive power
over 140,640 of the shares listed above, shared voting power over 5,000
shares, and shared dispositive power over 16,550 shares.
(3) The amount of shares beneficially owned by Mr. S. Zahn includes: (i)
38,229 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)
18,557 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;
and (vi) 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 9, 2001.
(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 9, 2001.
(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 9, 2001.
(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 9, 2001.
(7) The amount of shares beneficially owned by Mr. M. Zahn includes: (i)
6,128 shares owned directly; (ii) 2,317 shares allocated to Mr. M.
Zahn's ESOP account; and (iii) 4,504 shares which Mr. M. Zahn has the
right to acquire pursuant to stock options that are exercisable at or
within 60 days of March 9, 2001. The amount does not include 1,577
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 153,603 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 9, 2001 and an aggregate of
40,128 shares allocated to the ESOP accounts of the executive officers
as of March 9, 2001.
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 nominees
for election. Each 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
Stephen E. Zahn Chairman of the Board, President and Chief Executive Officer 58 1965 2004
Dan L. Stephan Director 53 1987 2004
DIRECTORS CONTINUING IN OFFICE
J. David Carnes Director 49 1991 2002
Michael S. Zahn Director and Senior Vice President 31 2000 2003
Randall C. Rider Director 50 1989 2003
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(1) At December 31, 2000.
(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.
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.
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.
J. David Carnes, MD. Dr. Carnes has, since 1981, practiced medicine in
Huntington, Indiana.
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.
4
Randall C. Rider. Mr. Rider is President of Lime City Manufacturing
Co., Inc., a position he has held since 1983.
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 15 times during fiscal 2000. During fiscal
2000, 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 three times during fiscal 2000. 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 the
Board members who are not up for election. This Committee met once during fiscal
2000.
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 2000.
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 2000.
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 14 times during the year ended December 31, 2000. During 2000, 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 three times during fiscal 2000.
The Nominating Committee meets annually to recommend nominations to
First Federal Savings Bank's Board of Directors. This committee is comprised of
the Board members who are not up for election. This Committee met once during
fiscal 2000.
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 2000.
5
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 financial statements of Northeast Indiana Bancorp for the fiscal year
ended December 31, 2000:
o The Audit Committee has reviewed and discussed with Northeast
Indiana Bancorp's management Northeast Indiana Bancorp's
fiscal 2000 audited 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 financial statements be included in
Northeast Indiana Bancorp's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2000.
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 is attached to this proxy
statement as Appendix A.
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
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 2000, Director Michael Zahn deferred a total of $2500 in Board
fees pursuant to this program. No other director deferred his First Federal
Savings Bank Board fees in fiscal 2000.
6
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 2000 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 $100,000 in fiscal 2000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
-------------------- ----------------------
Restricted
Stock Options/ All Other
Fiscal Salary Bonus Award(s) SARs Compensation
Name and Principal Position Year ($)(1) ($) ($) (#) ($)
--------------------------- ---- -------- ------- ----- ----- ------------
Stephen E. Zahn, Chairman of 2000 $158,570 $ --- $ --- --- $168,176 (2)
the Board, President and Chief 1999 153,600 22,500 --- --- 75,971
Executive Officer 1998 137,600 30,000 --- --- 85,554
- --------------------------
(1) Includes directors' fees of $11,600, $11,600 and $9,000 for 2000, 1999 and
1998, respectively.
(2) 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 5,181 shares
of restricted stock, worth approximately $55,000, which were scheduled to
vest in fiscal 2000.
The following table provides information as to the value of the options
held by our President and Chief Executive Officer on December 31, 2000. No
options or stock appreciation rights were granted during fiscal 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)(1)
---------------------------- ----------------------------
Shares Acquired Value Realized Exercisable Unexercisable Exercisable Unexercisable
Name on Exercise (#) ($) (#) (#) ($) ($)
- ---------------- --------------- -------------- ----------- ------------- ----------- -------------
Stephen E. Zahn --- $--- 47,360 13,205 $19,655 $5,480
(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 $10.125 per share of the
common stock as reported on the NASDAQ National Market on December 29,
2000, the last trading day in fiscal 2000.
7
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, 2000 under circumstances entitling him to
severance pay as described above, he would have been entitled to receive a lump
sum cash payment of approximately $724,159.
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
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
8
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. Set forth below is
certain information as to loans made by First Federal Savings Bank to executive
officers at this preferential rate available to all employees who have completed
the requisite service requirement.
Largest
Amount
Outstanding Interest
Date of Type of Original Since Balance at Rate at
Name and Position Loan Loan Amount 1/1/00 12/31/00 12/31/00
----------------- ---- ---- ------ ------ -------- --------
Michael S. Zahn, Senior Vice President 12/96 Residence $132,000 $124,973 $121,137 6.625%
10/99 Consumer 17,000 16,166 4,770 7.25
Dee Ann Hammel, Senior Vice President, 10/98 Residence 134,100 131,301 128,741 6.00
Chief Operations Officer and Secretary 01/00 Line of Credit 30,000 29,939 28,525 9.50
Darrell E. Blocker, Senior Vice President, 02/97 Residence 142,400 130,405 125,583 6.12
Treasurer and Chief Financial Officer 07/98 Home Equity 39,100 35,845 34,105 9.13
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
We have renewed our arrangement with Crowe, Chizek and Company LLP to
be our independent auditors for the fiscal year ending December 31, 2001,
subject to the ratification of the appointment by our stockholders.
Representatives of Crowe, Chizek and Company LLP are expected to attend the
Meeting to respond to appropriate questions and to make a statement if they so
desire.
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 financial statements for fiscal 2000 and the
reviews of the financial statements included in Northeast Indiana Bancorp's
Forms 10-QSB for that year were $49,950.
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 2000.
All Other Fees. Other than audit fees, the aggregate fees billed to
Northeast Indiana Bancorp by Crowe, Chizek and Company LLP for fiscal 2000 were
$9,180.
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 2000 by Crowe, Chizek and Company LLP, the principal
independent auditors, is compatible with maintaining the principal auditors'
independence.
9
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 23, 2001.
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.
10
APPENDIX A
Northeast Indiana Bancorp, Inc.
Audit Committee of the Board of Directors - Charter
May 22, 2000
1. PURPOSE
The Audit Committee is a committee of the Board of Directors. The primary
function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing:
1. The financial information which will be provided to
shareholders, governmental or regulatory bodies, the public,
and others.
2. The Corporation's auditing, accounting, and financial
reporting process.
3. The systems of internal controls related to finance,
accounting, legal compliance, regulatory compliance and ethics
that management and the Board of Directors have established.
4. The audit process.
Consistent with this function, the Audit Committee should encourage continuous
improvement of, and foster adherence to, the Corporation's policies, procedures,
and practices at all levels.
The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
2. Review and appraise the audit efforts of the Corporation's
independent accountants.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee will be comprised of two or more directors as determined by
the Board. A majority of the members will be independent of the management of
the Corporation and free of any relationship that, in the opinion of the Board
of Directors, would interfere with his or her exercise of independent judgement
as a Committee member.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside consultant. The
members of the Committee and a Chairman shall be elected by the Board annually.
The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the Board of Directors.
A-1
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately with the
Committee. The Committee may ask members of management or others to attend
meetings and provide pertinent information as necessary.
In addition, the Committee or at least the Chair of the Committee should meet
with the independent accountants and management, either in person or by phone,
quarterly to review the Corporation's financial statements. This review should
be done prior to the Corporation's 10-QSB or 10-KSB filing and its public
release of earnings. This discussion should include a discussion of significant
adjustments, management judgements and accounting estimates, significant new
accounting policies, and disagreements with management.
IV. RESPONSIBILITIES AND DUTIES
In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communication between the independent
accountant, and the Board of Directors.
2. Confirm and assure the independence of the independent accountant,
including a review of management consulting services provided by the
independent accountant and related fees.
3. Review and update the Committee's charter annually.
4. Recommend to the Board of Directors the independent accountants to be
nominated, approve the compensation of the independent accountant, and
review and approve, if applicable, the discharge of the independent
accountants.
5. Review with the internal accountant the coordination of audit efforts
to assure completeness of coverage, reduction of redundant efforts, and
the effective use of audit resources.
6. Inquire of management, and the independent accountant about significant
risks or exposures and assess the steps management has taken to
minimize such risk to the Corporation.
7. Consider, in consultation with the independent accountant the audit
scope and plan of the independent accountant. Determine if the
independent accountants are utilizing a risk-based approach.
8. Consider and review with the independent accountant:
(a) the adequacy of the Corporation's internal controls including
computerized information system controls and security;
(b) any related significant findings and recommendations of the
independent accountant together with management responses thereto; and
(c) the status of previous audit recommendations and management's
follow up on those recommendations.
9. Review with management and the independent accountant at the completion
of the annual audit:
(a) the Corporation's annual financial statements and related
footnotes;
(b) the independent accountant's audit of the financial statements and
the accountant's report thereon;
(c) any significant changes required in the independent accountant's
audit plan;
A-2
(d) any serious difficulties or disputes with management encountered
during the course of the audit; and
(e) other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards.
10. Review filings with the SEC and other published documents containing
the Corporation's financial statements and consider whether the
information contained in these documents is consistent with the
information contained in the financial statements.
11. Review with management and the independent accountant the interim
financial report before it is filed with the SEC and other regulators.
12. Review with management, and if necessary, with the Corporation's
counsel, any legal matter that could have a significant impact on the
Corporation's financial statements.
13. Review legal and regulatory matters that may have a material impact on
the financial statements, related Corporation compliance policies, and
programs and reports received from regulators.
14. Meet with the independent accountant, and management in separate
executive sessions to discuss any matters that the committee or these
groups believe should be discussed privately with the Audit Committee.
15. Report Committee actions to the Board of Directors with such
recommendations as the committee may deem appropriate.
16. Prepare an Audit Committee Report for inclusion in the Corporation's
Proxy Statement.
17. Conduct or authorize, if necessary, investigations into any matters
within the Committee's scope of responsibilities. The Committee shall
be empowered to retain independent counsel, accountants, or others to
assist in the conduct of any investigation.
18. Perform such other functions as assigned by law, the Corporation's
Certificate of Incorporation or Bylaws, or the Board of Directors.
19. Advise financial management and the independent accountant that they
are expected to provide a timely analysis of significant current
financial reporting issues and practices.
20. Provide that financial management and the independent accountant
discuss with the audit committee their qualitative judgements about the
appropriateness, not just the acceptability, of accounting principles
and financial disclosure practices used or proposed to be adopted by
the Corporation and, particularly, about the degree of aggressiveness
or conservatism of its accounting principles and underlying estimates.
21. Determine with regard to new transactions or events, the accountant's
reasoning for the appropriateness of the accounting principles and
disclosure practices adopted by the Corporation.
A-3
REVOCABLE PROXY
NORTHEAST INDIANA BANCORP, INC.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
April 25, 2001
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 April 25, 2001 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:
I. The election of the following directors for a three-year term to expire in
the year 2004:
WITH-
[ ] FOR [ ] HOLD [ ] EXCEPT
STEPHEN E. ZAHN DAN L. STEPHAN
INSTRUCTION: To vote for both nominees, mark "For." To withhold authority to
vote for both nominees, mark "Withhold." To withhold authority to vote for one
nominee, but not both, mark "Except" and write that nominee's name in the space
provided below.
- --------------------------------------------------------------------------------
II. The ratification of the appointment of Crowe, Chizek and Company LLP as
auditors for Northeast Indiana Bancorp for the fiscal year ending December 31,
2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
NORTHEAST INDIANA BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the above signed 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 above signed acknowledges receipt, prior to the execution of this
proxy, of Notice of the Annual Meeting, a Proxy Statement dated March 23, 2001
and the Annual Report to Stockholders for the fiscal year ended December 31,
2000.
Please sign exactly as your name appears above on this proxy 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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If your address has changed, please correct the address in the space
provided below and return this portion with the proxy in the envelope provided.
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