UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| 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-12
1ST INDEPENDENCE FINANCIAL GROUP, INC.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
[1st Independence Financial Group, Inc. Letterhead]
April 12, 2006
Dear Stockholder:
On behalf of the Board of Directors and management of 1st Independence Financial
Group, Inc. (the "Company"), I cordially invite you to attend the Annual Meeting
of Stockholders to be held at 3801 Charlestown Road, New Albany, Indiana, on
Thursday, May 18, 2006, at 5:30 p.m., Eastern Daylight Time.
The attached Notice of Annual Meeting and Proxy Statement describe the business
to be transacted at the Annual Meeting. During the Annual Meeting, we will
report on the operations of the Company during the year ended December 31, 2005.
You will be asked to elect four directors, approve the 1st Independence
Restricted Stock Plan and to ratify the appointment of BKD, LLP as the Company's
independent registered public accounting firm for the year ending December 31,
2006. The Board of Directors has unanimously approved each of these proposals
and recommends that you vote FOR them.
Your vote is important, regardless of the number of shares you own and
regardless of whether you plan to attend the Annual Meeting. I encourage you to
read the enclosed proxy statement carefully and sign and return your enclosed
proxy card as promptly as possible because a failure to do so could cause a
delay in the Annual Meeting and additional expense to the Company. This will not
prevent you from voting in person, but it will assure that your vote will be
counted if you are unable to attend the Annual Meeting. If you do decide to
attend the Annual Meeting and feel for whatever reason that you want to change
your vote at that time, you will be able to do so.
Sincerely,
/s/ N. William White
--------------------
N. William White
President and Chief Executive Officer
1ST INDEPENDENCE FINANCIAL GROUP, INC.
104 SOUTH CHILES STREET
HARRODSBURG, KENTUCKY 40330-1620
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2006
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of 1st Independence Financial Group, Inc. (the "Company"), will be held at the
3801 Charlestown Road, New Albany, Indiana, on Thursday, May 18, 2006, at 5:30
p.m., Eastern Daylight Time, for the following purposes:
1. To elect four directors;
2. To approve the 1st Independence Restricted Stock Plan; and
3. To ratify the appointment of BKD, LLP as the Company's independent
registered public accounting firm for the year ending December 31, 2006;
all as set forth in the Proxy Statement accompanying this notice, and to
transact such other business as may properly come before the Meeting and any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Meeting. Stockholders of record at the close of business on
March 31, 2006 are the stockholders entitled to vote at the Meeting and any
adjournments thereof.
A copy of the Company's Annual Report for the year ended December 31, 2005 is
enclosed.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WE
ENCOURAGE YOU TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE REPRESENTED AND VOTED
AT THE MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS OF RECORD CAN VOTE BY
WRITTEN PROXY CARD. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Teresa W. Noel
------------------
Teresa W. Noel
Secretary
Harrodsburg, Kentucky
April 12, 2006
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING.
PROXY STATEMENT
OF
1ST INDEPENDENCE FINANCIAL GROUP, INC.
104 SOUTH CHILES STREET
HARRODSBURG, KENTUCKY 40330-1620
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2006
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of 1st Independence Financial Group, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company which
will be held at 3801 Charlestown Road, New Albany, Indiana, on Thursday, May 18,
2006, at 5:30 p.m., Eastern Daylight Time (the "Meeting"). The accompanying
Notice of Annual Meeting of Stockholders, this Proxy Statement and the form of
proxy are being first mailed to stockholders on or about April 12, 2006.
During the Annual Meeting, we will report on the operations of the Company
during the year ended December 31, 2005.
All properly executed written proxies that are delivered pursuant to this Proxy
Statement will be voted on all matters that properly come before the Meeting for
a vote. If your signed proxy specifies instructions with respect to matters
being voted upon, your shares will be voted in accordance with your
instructions. If no instructions are specified, your shares will be voted
o FOR the election of the persons named below as directors for a three
year term:
Stephen R. Manecke
Dr. Ronald L. Receveur
W. Dudley Shryock
H. Lowell Wainwright, Jr.
o FOR approval of the 1st Independence Restricted Stock Plan;
o FOR the ratification of the appointment of BKD, LLP as the Company's
independent registered public accounting firm for the year ending December 31,
2006; and
o in the discretion of the proxy holders, as to any other matters that
may properly come before the Meeting.
Revocability of Proxy
Your proxy may be revoked at any time prior to being voted by: (i) filing a
written notice of such revocation with the Secretary of the Company at 104 South
Chiles Street, Harrodsburg, Kentucky, 40330-1620, (ii) submitting a duly
executed proxy bearing a later date, or (iii) attending the Meeting and giving
the Secretary notice of your intention to vote in person.
Stockholder Proposals
In order to be considered for inclusion in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held in 2007, all stockholder proposals
must be submitted to the Secretary at the Company's office, 104 South Chiles
Street, Harrodsburg, Kentucky 40330-1620, on or before December 13, 2006. Under
the Company's bylaws, in order to be considered for possible action by
stockholders at the 2007 Annual Meeting of Stockholders, stockholder proposals
not included in the Company's Proxy Statement must be submitted to the Secretary
of the Company, at the address set forth above, no later than December 13, 2006.
Other Matters
The Board of Directors does not know of any matters other than Proposal 1,
Proposal 2 and Proposal 3 that are likely to be brought before the Meeting. If
any other matters, not now known, properly come before the Meeting or any
adjournments, the persons named in the enclosed proxy card, or their
substitutes, will vote the proxy in accordance with their judgment on such
matters.
The cost of soliciting proxies will be borne by the Company. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
VOTING STOCK AND VOTE REQUIRED
The Board of Directors has fixed the close of business on March 31, 2006 as the
record date for the determination of stockholders who are entitled to notice of,
and to vote at, the Meeting. On the record date, there were 1,965,158 shares of
the Company's common stock outstanding (the "Common Stock"). Each stockholder of
record on the record date is entitled to one vote for each share held.
The certificate of incorporation of the Company ("Certificate of Incorporation")
provides that in no event shall any record owner of any outstanding Common Stock
which is beneficially owned, directly or indirectly, by a person who
beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote with respect to the
shares held in excess of the Limit.
Beneficial ownership is determined pursuant to the definition in the Certificate
of Incorporation and includes shares beneficially owned by such person or any of
his or her affiliates or associates (as such terms are defined in the
Certificate of Incorporation), shares which such person or his or her affiliates
or associates have the right to acquire upon the exercise of conversion rights
or options, and shares as to which such person and his or her affiliates or
associates have or share investment or voting power, but shall not include
shares beneficially owned by any employee stock ownership plan or similar plan
of the issuer or any subsidiary.
The presence in person or by proxy of at least a majority of the outstanding
shares of Common Stock entitled to vote (after subtracting any shares held in
excess of the Limit) is necessary to constitute a quorum at the Meeting. With
respect to any matter, any shares for which a broker indicates on the proxy that
it does not have discretionary authority as to such shares to vote on such
matter (the "Broker Non- Votes") will not be considered present for purposes of
determining whether a quorum is present. In the event there are not sufficient
votes for a quorum or to ratify any proposals at the time of the Meeting, the
Meeting may be adjourned in order to permit the further solicitation of proxies.
Tellers will be appointed at the annual meeting to count the votes cast in
person or by proxy. The results of the vote will be announced at the meeting and
in our quarterly report on Form 10-Q for the second quarter of 2006.
As to the election of directors, the proxy being provided by the Board enables a
stockholder to vote for the election of the nominees proposed by the Board of
Directors, as submitted as Proposal 1, or to withhold authority to vote for the
nominees being proposed. Directors are elected by a plurality of votes of the
shares present in person or represented by proxy at a meeting and entitled to
vote in the election of directors.
As to the approval of the 1st Independence Restricted Stock Plan, which is
submitted as Proposal 2, a stockholder may: (i) vote "FOR" the approval; (ii)
vote "AGAINST" the approval; or (iii) "ABSTAIN" with respect to the approval.
Proposal 2 shall be determined by the affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote without regard to
Broker Non-Votes, or proxies marked "ABSTAIN" as to that matter.
As to the ratification of the appointment of BKD, LLP as the Company's
independent registered public accounting firm, which is submitted as Proposal 3,
a stockholder may: (i) vote "FOR" the ratification; (ii) vote "AGAINST" the
ratification; or (iii) "ABSTAIN" with respect to the ratification. Unless
otherwise required by law, Proposal 3 shall be determined by the affirmative
vote of a majority of shares present in person or represented by proxy and
entitled to vote without regard to Broker Non-Votes, or proxies marked "ABSTAIN"
as to that matter.
All other matters that properly come before the Meeting shall be determined by
the affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote without regard to Broker Non-Votes, or proxies marked
"ABSTAIN" as to that matter.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Corporation is currently composed of ten members.
The Corporation's Certificate of Incorporation divides the Board of Directors
into three classes, as nearly equal in size as possible, with one class of
Directors elected each year for a three-year term.
The persons named below (the "Nominees"), each of whom is currently a director
of the Company, have been nominated as a director of the Company for a
three-year term.
Stephen R. Manecke
Dr. Ronald L. Receveur
W. Dudley Shryock
H. Lowell Wainwright, Jr.
A description of each director's business experience follows on pages 7 and 8.
The persons named as proxies in the enclosed proxy card intend to vote for the
election of the Nominees, unless the proxy card is marked to indicate that such
authorization is expressly withheld. Should the Nominees withdraw or be unable
to serve (which the Board of Directors does not expect) or should any other
vacancy occur in the Board of Directors, it is the intention of the persons
named in the enclosed proxy card to vote for the election of such person as may
be recommended to the Board of Directors by the Nominating Committee of the
Board. If there are no substitute nominees, the size of the Board of Directors
may be reduced.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the persons named above as directors of the Company for a term of
three years.
PROPOSAL 2 - APPROVAL OF 1st INDEPENDENCE RESTRICTED STOCK PLAN
The second item to be acted upon at the Meeting will be the approval of the 1st
Independence Restricted Stock Plan (the "Plan").
Background
The Board of Directors of the Company approved a new restricted stock plan
effective as of January 1, 2006, subject to stockholder approval. Awards will be
made under the Plan only if the Plan is approved by stockholders.
If approved by stockholders, the Plan will supersede and replace the Company's
existing restricted stock plan, the First Federal Savings Bank of Harrodsburg
Restricted Stock Plan and Trust Agreement. The Plan is designed to promote the
interests of the Company and its subsidiaries by encouraging their officers, key
employees and non-employee directors, upon whose judgment, initiative and
industry the Company and its subsidiaries are largely dependent for the
successful conduct and growth of their business, to continue their association
with the Company and its subsidiaries by providing additional incentive and
opportunity for unusual industry and efficiency through stock ownership, and by
increasing their proprietary interest in the Company and their personal interest
in its continued success and progress.
The summary of the material terms of the Plan which follows is qualified in its
entirety by reference to the full text of the Plan which is attached as Appendix
A to this Proxy Statement.
Summary of Material Provisions of the Plan
Administration. The Compensation Committee will administer the Plan. The Board
of Directors intends the Compensation Committee to be comprised of not less than
3 directors who are (a) independent under the director independence requirements
of the principal securities exchange or market on which the shares of the
Company's common stock are traded, (b) non-employee directors under Rule 16b-3
of the Securities Exchange Act of 1934, and (c) outside directors for purposes
of Code Section 162(m). Failure of the Committee to be comprised in this manner
will not result in the cancellation, termination, expiration or lapse of any
award.
Duration of the Plan. Upon approval by the stockholders, the Plan will remain in
effect until terminated by the Board of Directors of the Company.
Eligibility. Any current or future officer, key employee or non-employee
director of the Company or any of its subsidiaries designated by the
Compensation Committee of the Board of Directors is eligible to be selected to
participate in the Plan and to receive an award under the Plan. Participation in
the Plan will not confer upon any participant a right to continued employment by
the Company or any of its subsidiaries.
As of the date of this Proxy Statement, the Compensation Committee has not
determined how many employees of the Company and its subsidiaries will be
designated to participate in the Plan in 2006. The number of participants in the
Plan may change from year to year in the discretion of the Compensation
Committee.
Types of Awards. The Plan solely permits the award of restricted stock. Awards
of restricted stock may be granted with or without a purchase price that must be
paid for the shares of restricted stock after they have become vested.
Maximum Number of Shares Subject to the Plan. Subject to adjustment in the event
of a change in the capitalization of the Company, a maximum aggregate of 80,500
shares may be granted under the Plan. If a restricted stock award does not vest
and is forfeited, the shares subject to that award will be available for new
grants under the Plan.
Transferability. No awards may be assigned, transferred or pledged nor can a
lien, security interest or right to acquire be placed on an award until such
shares become fully vested.
Vesting. Unless otherwise provided in an award agreement or determined by the
Compensation Committee, restricted stock awarded under the Plan will become
vested upon completion of years of service for the Company in accordance with
the following schedule:
Years of Service
From Grant Date Vested Percentage Forfeited Percentage
--------------- ----------------- --------------------
Less than 1 0% 100%
1 20 80
2 40 60
3 60 40
4 80 20
5 100 0
A year of service means a 12 consecutive month period of continuous, active
employment with the Company commencing as of the applicable grant date.
Restrictions on the shares of restricted stock will lapse and the shares will
become fully vested upon the earliest to occur of a change in control of the
Company, the participant's death, disability or when the shares of restricted
stock become fully vested based on the participant's years of service.
The Compensation Committee will have full power and discretion to determine the
size, vesting requirements, restrictions, pay-outs and all other attributes of
awards under the Plan; amend or modify the Plan subject to limitations imposed
by applicable law and the Plan; interpret the Plan and all award or other
agreements entered into under the Plan; establish, amend or waive rules and
regulations for the Plan's administration; and make all other determinations
which may be necessary or advisable for the administration of the Plan. All
determinations of the Compensation Committee will be final.
Termination of Employment. If a participant's employment with the Company or one
of its subsidiaries is terminated for any reason other than because of
disability or death, his or her unvested awards will be forfeited as set forth
in the Plan. Provided, however, if the participant terminates employment for a
reason other than Cause (as defined in the Plan), the Compensation Committee may
in its discretion, by amending the restricted stock agreement, provide that the
participant's unvested shares of restricted stock are not forfeited on
termination of employment and that the shares will vest at the earliest of the
time prescribed by the Compensation Committee in the amended agreement, or on
the participant's death or disability. Such an amendment must also provide that
if the participant violates any non-compete or non-solicitation provision or any
other provision in the amended restricted stock agreement, all shares that were
not vested when the participant terminated employment will be forfeited
immediately.
Amendment and Termination of the Plan. The Board of Directors may amend or
terminate the Plan, or discontinue or suspend the Plan, at any time but may not,
without the consent of the participants to whom an award has been made, make any
alteration which would adversely affect an award. The Board of Directors may
also not (a) increase the aggregate number of shares subject to an award; (b)
decrease the purchase price (if any); (c) permit any member of the Compensation
Committee to be eligible for an award; (d) withdraw administration of the Plan
from the Compensation Committee or the Board of Directors; (e) extend the term
of the Plan; (f) change the manner of determining the purchase price (if any);
or (g) change the class of individuals eligible for awards. In addition, the
Compensation Committee may, in its sole discretion and subject to certain
limitations, make adjustments to awards, and such other terms and conditions of
the Plan that the Committee determines to be necessary or advisable.
Deferral of Awards. Participants are not permitted to defer the receipt of
vested shares of restricted stock.
Plan Benefits. The benefits to be received by Plan participants, including the
executive officers of the Company, and the number of and types of awards to be
made pursuant to the 2006 Plan is subject to the discretion of the Committee and
therefore not determinable at this time. In addition, because of the
discretionary nature of the Plan, the benefits or amounts that would have been
received by such persons for the last completed fiscal year if the Plan had been
in effect cannot be determined.
Approval by stockholders of the Plan requires that the number of shares voted in
favor of approval of the Plan exceed the number of shares voted against approval
of the Plan.
The Board of Directors recommends that stockholders vote "FOR" the approval of
the Plan.
PROPOSAL 3 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee selected BKD, LLP, as the Company's independent registered
public accounting firm for the year ending December 31, 2006. At the Meeting,
stockholders will consider and vote upon the ratification of the appointment of
BKD, LLP as the Company's independent registered public accounting firm for the
year ending December 31, 2006. Your ratification of the Audit Committee's
appointment of BKD, LLP is not necessary because the Audit Committee has sole
authority for appointment of our independent registered public accounting firm.
However, the Audit Committee will take your vote on this proposal into
consideration when selecting our independent registered public accounting firm
in the future.
BKD, LLP was the Company's independent registered public accounting firm for the
year ended December 31, 2005.
A representative of BKD, LLP is expected to be present at the Meeting to respond
to stockholders' questions and will have the opportunity to make a statement if
he or she so desires.
The Board of Directors recommends that stockholders vote "FOR" the ratification
of the appointment of BKD, LLP as the Company's independent registered public
accounting firm for the year ending December 31, 2006.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 15, 2006 certain information
regarding the beneficial ownership of the Company's Common Stock by each person
or group who own more than 5% of the Common Stock. Other than as noted below,
management knows of no person or group that owns more than 5% of the outstanding
shares of Common Stock as of that date.
Amount and Percent of
nature of shares of
beneficial common stock
Name and address of beneficial owner ownership outstanding
------------------------------------ ---------- ------------
Tontine Financial Partners, L.P. (1)
Tontine Management, L.L.C.
Jeffrey L. Gendell
55 Railroad Avenue, 3rd Floor
Greenwich, Connecticut 06830 163,310 8.3%
1st Independence Employee Stock Ownership
& 401K Plan (2)
104 South Chiles Street
Harrodsburg, Kentucky 40330-1620 158,587 8.1%
(1) Based solely upon information provided in a Schedule 13G/A filed with the
United States Securities and Exchange Commission by such persons on
February 14, 2006.
(2) The Employee Stock Ownership & 401K Plan ("KSOP") purchased such shares
for the exclusive benefit of plan participants with funds borrowed from
the Company. These shares are held in a suspense account and will be
allocated among ESOP participants annually on the basis of compensation as
the ESOP debt is repaid. The Bank's Board of Directors has appointed a
committee consisting Mr. N. William White - President and Chief Executive
Officer of the Company, Mr. R. Michael Wilbourn - Executive Vice President
and Chief Financial Officer of the Company and Ms. Terry L. Batson -
Senior Vice President Human Resources of the Company to serve as the KSOP
administrative committee ("KSOP Committee") and First Bankers Trust
Services, Inc. to serve as the KSOP trustees ("KSOP Trustee"). The KSOP
Committee or the Board of Directors of the Company instructs the KSOP
Trustee regarding investment of KSOP plan assets. The KSOP Trustee must
vote all shares allocated to participant accounts under the KSOP as
directed by participants. Unallocated shares and shares for which no
timely voting direction is received, will be voted by the KSOP Trustee as
directed by the KSOP Committee. As of December 31, 2005, 120,563 shares
have been allocated under the ESOP to participant accounts.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 15, 2006 certain information
regarding beneficial ownership of the Company's common stock by: (i) each of the
Company's directors, nominees and named executive officers; and (ii) all current
directors and executive officers as a group.
Amount and Nature of
Beneficial Percent of Shares of
Name of Beneficial Owner Ownership (1) Common Stock Outstanding (2)
------------------------ ------------- ----------------------------
Matthew C. Chalfant 64,438 3.3%
Jack L. Coleman, Jr. 19,465 1.0
James W. Dunn 5,330 *
Thomas Les Letton 33,100 1.7
Stephen R. Manecke 21,250 1.1
Charles L. Moore II 78,386 4.0
Ronald L. Receveur 41,150 2.1
W.Dudley Shryock 16,620 *
H. Lowell Wainwright, Jr. 10,000 *
N. William White 34,043 1.7
All directors and executive
officers of the Company as
a group (14 persons) (1) (2) (3) 353,812 17.4
----------------
(1) The share amounts also include shares of common stock that the following
persons may acquire through the exercise of stock options within 60 days of
March 15, 2006: Matthew C. Chalfant - 6,750; Jack L. Coleman, Jr. - 10,000;
James W. Dunn - 5,000; Thomas Les Letton - 10,000; Stephen R. Manecke -
5,000; Charles L. Moore II - 3,400; Ronald L. Receveur - 3,400; W.Dudley
Shryock - 10,000; N. William White - 15,250.
(2) Excludes 158,587 shares of Common Stock held by the KSOP for which such
individuals serves as a member of the KSOP Committee and has shared voting
power. Such individuals disclaim beneficial ownership with respect to such
shares held in a fiduciary capacity.
(3) The share amount also includes 7,500 shares of common stock that may be
acquired through the exercise of stock options within 60 days of March 15,
2006 by other executive officers.
* Represents less than 1% of the Company's outstanding common stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors, executive
officers and stockholders who own more than 10% of the Company's stock to file
reports of ownership and changes in ownership of their equity securities of the
Company with the Securities and Exchange Commission and to furnish the Company
with copies of such reports. Based solely upon a review of such reports, the
Company believes that all of the filings by the Company's directors, executive
officers and stockholders who own more than 10% of the Company's stock were made
on a timely basis during 2005.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors
The directors of the Company, some of whom are also Nominees, are listed in the
table below. Each director serves for a term of three years and until the
election and qualification of his successor. The following directors have been
determined by the Company to be independent: Matthew C. Chalfant , Jack L.
Coleman, Jr., James W. Dunn, Thomas Les Letton, Stephen R. Manecke, Charles L.
Moore II, Dr. Ronald L. Receveur, W. Dudley Shryock and H. Lowell Wainwright,
Jr. The age of each director is as of March 15, 2006. Each continuing director
has listed when his term will expire. Mr. Dunn's term was to expire at the 2008
Annual Meeting, however in January 2006 Mr. Dunn announced his resignation from
the Board of Directors effective as of June 30, 2006. The Board of Directors
wishes to recognize and express its gratitude to Mr. Dunn for the service and
leadership given to the Company in his capacity as a Director.
NAME AGE OFFICE AND BUSINESS EXPERIENCE
---- --- ------------------------------
Matthew C. Chalfant.......42 A director since 2004. Mr. Chalfant's term will
expire at the 2008 Annual Meeting. Mr. Chalfant is the
President of Forms America and Chalfant Industries, Inc.
Jack L. Coleman, Jr.......52 A director since 1991. Mr. Coleman's term will
expire at the 2007 Annual Meeting. Mr. Coleman is a partner
and majority stockholder of Coleman's Lumber Yard and owner
of Coleman's Home Center all located in Harrodsburg,
Kentucky. He is a member of the Kentucky House of
Representatives and is also a member of the Mercer County
Chamber of Commerce.
James W. Dunn.............57 A director since 2002. Mr. Dunn is retired and
was the deputy commissioner for employment services for the
Commonwealth of Kentucky. He was also co-owner and President
of Joy Temporary Services. Mr. Dunn currently serves on the
board of directors and is a member of the executive
committee of the Bluegrass State Skills Corporation.
Additionally, Mr. Dunn serves on the review board of
Juvenile Justice.
Thomas Les Letton.........53 A director since 1985. Mr. Letton's term will
expire at the 2007 Annual Meeting. Mr. Letton is the
President of The Letton Company, Inc., a real estate
investment company and Old Bridge, Inc., a golf course and
development company, all located in Danville, Kentucky. He
is also an owner of WFL Group which owns thirteen Papa Johns
Pizza franchises.
Stephen R. Manecke........50 A director since 2004. Mr. Manecke is a
certified public accountant and owner of Business Advisory
Services, a business management consulting company.
Charles L. Moore II.......43 A director since 2004. Mr. Moore's term will
expire at the 2007 Annual Meeting. Mr. Moore is a real
estate investor and owner of Riverside Properties, a
property management company.
Dr. Ronald L. Receveur....50 A director since 2004. Dr. Receveur is a dentist
and owner of Janus Development, a real estate development
company.
W. Dudley Shryock.........49 A director since 1998. Mr. Shryock is a certified
public accountant, practicing in Lawrenceburg, Kentucky. Mr.
Shryock is treasurer for the Anderson County Fiscal Court.
H. Lowell Wainwright, Jr..49 A director since 2005. Mr. Wainwright is a Managing
Director with Sterne, Agee & Leach Inc. an Investment Firm.
N. William White..........40 A director since 2004. Mr. White's term will
expire at the 2008 Annual Meeting. Mr. White is the
President and Chief Executive Officer of the Company and the
Bank. Prior to the merger of Harrodsburg First Financial
Bancorp, Inc. and Independence Bancorp (the "Merger"), Mr.
White served as President and Chief Executive Officer of
Independence Bancorp and Independence Bank.
Executive Officers Who Are Not Directors
The executive officers of the Company, who are not also directors of the
Company, are listed in the table below. The age of each executive officer is as
of March 15, 2006.
NAME AGE OFFICE AND BUSINESS EXPERIENCE
---- --- ------------------------------
Kathy L. Beach............42 Ms. Beach joined the Company and the Bank in
May 2004. Ms. Beach is Executive Vice President and Chief
Operations Officer of the Company and the Bank. Previously,
Ms. Beach was Chief Operations Officer at Porter Bancorp,
Inc., Shepherdsville, Kentucky.
Gregory A. DeMuth.........42 Mr. DeMuth joined the Company and the Bank in
March 2006. Mr. DeMuth is Executive Vice President and Chief
Lending Officer of the Company and the Bank. Previously, Mr.
DeMuth was Senior Vice President - Commercial Lending for
Stock Yards Bank & Trust Company in Louisville, Kentucky.
David M. Hall.............49 Mr. Hall joined the Company and the Bank in
February 2005. Mr. Hall is Executive Vice President - Retail
Banking of the Company and the Bank. Previously, Mr. Hall
was a Regional President for U. S. Bank in Lexington,
Kentucky.
R. Michael Wilbourn.......44 Mr. Wilbourn is Executive Vice President
and Chief Financial Officer of the Company and the Bank.
Prior to the Merger, Mr. Wilbourn served in the same
capacity to Independence Bancorp and Independence Bank.
Previous to his employment at Independence Bancorp and
Independence Bank, Mr. Wilbourn served as Vice
President-Senior Consultant and Analyst of Commercial
Finance of Bank One, Kentucky.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors conducts its business through meetings of the
Board and through activities of its committees. All committees act for both the
Company and the Bank. During the year ended December 31, 2005, the Board of
Directors held twelve regular meetings and one special meeting. All directors
attended at least 75% of the meetings of the Board and the committees to which
they belonged. It is the Company's policy to encourage the directors to attend
the Company's Annual Meeting of Stockholders. All of the directors attended the
Annual Meeting of Stockholders held in 2005.
In addition to other committees, as of December 31, 2005, the Company had a
standing Compensation Committee, and Audit Committee.
NAME COMPENSATION AUDIT
---- ------------ -----
Matthew C. Chalfant.................
Jack L. Coleman, Jr.................
James W. Dunn....................... X
Thomas Les Letton................... X
Stephen R. Manecke.................. *
Charles L. Moore II................. X
Ronald L. Receveur.................. *
W. Dudley Shryock................... X X
H. Lowell Wainwright, Jr............ X
N. William White....................
------------
X Member
* Chairman
Nominating Committee
The Board of Directors had no standing nominating committee or any committee
performing similar functions during 2005; such functions are performed by the
independent (as such is defined under the NASDAQ listing standards) members of
the Board of Directors. In the nominee process, the independent members of the
Board of Directors identify director nominees through a combination of
referrals, including by management, existing board members and stockholders. The
Company does not have a formal policy with respect to the consideration of any
nominees recommended by a stockholder, however, the Board of Directors will
consider written recommendations from stockholders of the Company regarding
potential nominees for election as directors. To be considered for inclusion in
the slate of nominees proposed by the Board of Directors at the next Annual
Meeting of Stockholders of the Company, such recommendations must be received in
writing by the Secretary of the Company not less than 60 or more than 90 days
prior to the date of the meeting. Once a candidate has been identified, the
independent members of the Board of Directors review the individual's experience
and background and may discuss the proposed nominee with the source of the
recommendation. If determined to be appropriate, certain independent Directors
may meet with the proposed nominee before making a final determination. The
independent members of the Board of Directors consider all factors they deem
relevant regarding a possible director nominee, including his or her business
experience, civic involvement, and general reputation in the community. In this
respect, the Company has not identified any specific minimum qualifications
which must be met to be considered as a nominee.
The Company received no security holder recommendations for nomination to the
Board of Directors in connection with the 2006 Annual Meeting of Stockholders.
The four director nominees are incumbent directors standing for re-election.
Compensation Committee
The Compensation Committee for 2005 was comprised of four directors, each of
whom met the criteria for independence under the NASDAQ listing standards. The
Compensation Committee met two times during the year ended December 31, 2005.
The Compensation Committee has primary responsibility for:
o Establishing executive compensation policies and programs.
o Establishing the base salaries for executive officers.
o Reviewing the Company's management development and succession planning
policies.
o Administering the Company's stock option plans.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company, comprised entirely of independent
directors, is responsible for reviewing the Company's executive compensation
program. The Committee is responsible for establishing and administering
executive compensation programs and has adopted a written charter for the
Compensation Committee. The compensation philosophy of the Committee supports
the Company's primary objective of creating stockholder value. The Committee
strives to ensure that executive compensation provides a means of attracting and
retaining individuals with proven abilities to lead the Company and the Bank so
growth and profitability are realized while maintaining stability and capital
strength. The following compensation strategies have been implemented by the
Committee for the executive officers, including the Chief Executive Officer, to
achieve this objective.
The Committee performs an annual review to study the Company's executive
officers' compensation. The review identifies compensation practices within the
banking industry based on size, complexity, and demographics. The reviews
identify similar positions within peer banks to compare with each of the
Company's executive officers. For 2005, the Compensation Committee reviewed a
peer group comprised of 29 banks from the Mid-West region within the asset range
of $200 - $500 million in total assets compiled by an outside consulting firm.
The Committee believes pay levels are competitive within a range the Committee
considers reasonable and necessary to attract and retain qualified officers.
Base Salary. Executive officers' salaries are determined by evaluating both the
most recent comparative peer data as described above and the role and
responsibilities of their positions. Individual salary increases are reviewed
annually and are based on the comparative performance to the peer group and the
executive's individual performance during the preceding year. The Committee also
considers the recommendations of the Chief Executive Officer as to the
parameters for annual salary adjustments for executive officers and all
employees.
Annual Incentive Compensation. The objective of annual incentive compensation is
to deliver competitive levels of compensation for the attainment of annual
financial objectives and operating results. The annual determination as to
whether incentives and the amount of the incentive to executive officers is
based upon the Committee's evaluation of the performance of each officer and the
Company's results, using a variety of performance factors including net income
per share.
Long Term Incentives. The Committee believes the granting of stock options to
executives best serves the interest of stockholders by providing those
individuals having responsibility for the management and growth of the Company
and the Bank with an opportunity to increase their ownership of the Company's
Common Stock. By increasing executive officer ownership, these individuals will
have an added incentive to maximize stockholder value. Executive officers are
granted options, from time to time, giving them the right to purchase the
Company's Common Stock at a specified price in the future. The number of stock
options granted is based upon individual performance and comparative practices
and have an exercise price of 100% of the market value on the date of the grant.
Chief Executive Officer's Compensation. In determining the base pay for Mr.
White, the Committee used the factors and peer group data detailed above. Due to
Mr. Freeman's retirement in April 2005, Mr. White assumed additional
responsibilities. His base salary was increased to $154,000 effective May 13,
2005 based on the comparison data.
In summary, the Committee believes the total compensation program for the
Company's executive officers is competitive with programs offered by similar
institutions, and executive compensation is appropriate to further the goals and
objectives of the Company and the Bank.
Compensation Committee:
Dr. Ronald L. Receveur, Chairman Thomas Les Letton W. Dudley
Schryock H. Lowell Wainwright, Jr.
Audit Committee
The Audit Committee of the Company is comprised of four independent directors as
that term for audit committee members is defined by the NASDAQ listing standards
and Rule 10A-3 of the Securities and Exchange Act of 1934. W. Dudley Shryock and
Stephen R. Manecke have been determined by the Board of Directors to be "audit
committee financial experts" (as defined by the SEC) for purposes of fulfilling
the duties of the Committee. The Audit Committee met four times during the year
ended December 31, 2005.
Among other duties, the Audit Committee is responsible for:
o overseeing that management has maintained the reliability and
integrity of the accounting policies and financial reporting and disclosure
practices of the Company;
o overseeing that management has established and maintained processes
to assure that an adequate system of internal control over key business risks is
functioning within the Company; and
o overseeing that management has established processes to assure
compliance by the Company with all applicable laws, regulations and Company
policies.
The Board of Director has adopted an Audit Committee Charter which details all
the duties and responsibilities of the Committee.
REPORT OF THE AUDIT COMMITTEE
Review of Audited Financial Statements with Management.
The Audit Committee reviewed and discussed the audited financial statement for
the year ended December 31, 2005 with the management of the Company.
Review of Financial Statements and Other Matters with Independent Accountant.
The Audit Committee discussed with BKD, LLP, the Company's independent
registered public accounting firm, the matters required to be discussed by the
Statement on Auditing Standards No. 61 ("Communications with Audit Committees"),
as may be modified or supplemented. The Audit Committee has received the written
disclosures and the letter from BKD, LLP required by Independence Standards
Board Standard No. 1 ("Independence Discussions with Audit Committees"), as may
be modified or supplemented, and has discussed with BKD, LLP its independence.
Recommendation that Financial Statements be Included in Annual Report.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2005, for filing with the United States Securities and Exchange
Commission.
Audit Committee:
Stephen R. Manecke, Chairman
Charles L. Moore II
W. Dudley Shryock
James W. Dunn
AUDIT FEES
Fees for professional services rendered by BKD, LLP, the Company's independent
registered public accounting firm for the year ended December 31, 2005, the
three months ended December 31, 2004 and the year ended September 30, 2004 are
set forth below:
Year ended Three Months Ended Year ended
December 31, 2005 December 31, 2004 September 30, 2004
----------------- ----------------- ------------------
Audit fees (1) $ 69,095 $47,773 $225,340
Audit-related fees (2) 10,688 -- 34,113
Tax fees (3) 55,745 6,724 14,075
All other fees (4) 7,623 2,819 36,141
-------- ------- --------
Total fees $143,151 $57,316 $309,669
======== ======= ========
-------------
(1) Audit fees consist of fees for professional services rendered for the
audit of the Company's financial statements and review of financial
statements included in Company's quarterly reports and services normally
provided by BKD, LLP in connection with statutory and regulatory filings
or engagements.
(2) Audit-related fees are fees for assurance and related services that are
reasonably related to the performance of the audit or review of the
Company's financial statements including due diligence services in regard
to the Merger.
(3) Tax fees consist of compliance fees for the preparation of state and
federal tax returns and consulting on various tax matters including issues
relating to the change in the Company's fiscal year end. During 2005, the
Company engaged another accounting firm to begin providing tax compliance
and consulting services.
(4) All other fees consist of the following: (i) for the year ended December
31, 2005 fees for the filing of certain bank regulatory filings and other
services not included in the first three categories above (ii) for the
three months ended December 31, 2004, all other fees were Merger related,
(iii) for the year ended September 30, 2004, all other fees consisted
primarily of extended audit services and loan review for Citizens and
related expenses.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance approval of all
audit, audit-related, tax services, and other services performed by the
independent registered public accounting firm. The policy provides for
pre-approval by the Audit Committee of specified audit and non-audit services.
Unless the specific service has been previously pre-approved with respect to
that year, the Audit Committee must approve the permitted service before the
independent registered public accounting firm is engaged to perform it. The
Audit Committee has delegated to the Chairman of the Audit Committee authority
to approve permitted services provided that the Chairman reports any decisions
to the full Audit Committee at its next scheduled meeting.
DIRECTOR COMPENSATION
For the year ended December 31, 2005, each member of the Board of Directors of
the Company received a fee of $750 per month with the exception of the Chairman
of the Audit Committee who received $1,250 per month starting in March 2005. No
additional fees are paid for committee meetings.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the cash and non-cash
compensation awarded to or earned by the Former Chairman of the Board and Chief
Executive Officer, the Current President and Chief Executive Officer and the
next most highly compensated executive officer of the Company for the years
ended December 31, 2005 and December 31, 2004 and the preceding year ended
September 30. No other executive officer of the Company had a salary and bonus
during the year ended December 31, 2005 that exceeded $100,000 for services
rendered in all capacities to the Company and the Bank.
Long-Term
Annual Compensation Compensation Awards
------------------------------ -----------------------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Position Year (1) Salary Bonus Compensation Awards Options (#) Compensation
--------------------------- -------- ------ ----- ------------ ------- ------------ -------------
N. William White 2005 $144,949 $23,100 $ -- $9,495(4) 2,500 $ 19,031(5)
President and Chief Executive 2004 60,000 7,500 -- -- 14,000 10,635
Officer (2) (3)
R. Michael Wilbourn 2005 $104,924 $15,750 $ -- $9,495(4) 2,500 $ 6,855(6)
Executive Vice President and 2004 48,462 7,500 -- -- 5,000 4,879
Chief Financial Officer (2)
Arthur L. Freeman 2005 $ 45,000 $ -- $ -- $ -- -- $376,215(7)
Former Chairman of the Board and 2004 130,000 15,000 -- -- -- 22,165
Chief Executive Officer (3) 2003 101,550 -- -- -- -- 28,934
----------------
(1) Effective October 1, 2004, the Company changed its fiscal year end from
September 30 to December 31. The amounts presented for 2005 and 2004
include the twelve months ended December 31, 2005 and 2004, respectively.
The amounts presented for 2003 include the twelve months ended September
30, 2003.
(2) Mr. White and Mr. Wilbourn commenced employment with the Company on
July 9, 2004, the effective date of the Merger.
(3) Effective April 29, 2005, Mr. Freeman retired as Chairman of the Board and
Chief Executive Officer of the Company and Mr. White assumed the
additional title of Chief Executive Officer of the Company.
(4) Represents the market value of 500 shares of Company Common Stock at the
date such shares were awarded (calculated using the closing stock price of
the Company's Common Stock on February 24, 2005 of $18.99 per share).
(5) Includes 512 shares allocated to Mr. White's account pursuant to the ESOP
at a cost of $10 per share (with an aggregate market value of $18.50 per
share at December 31, 2005 totaling $9,472), a matching contribution to
the Company's 401(k) plan of $4,911 and director fees of $9,000.
(6) Includes 376 shares allocated to Mr. Wilbourn's account pursuant to the
ESOP at a cost of $10 per share (with an aggregate market value of $18.50
per share at December 31, 2005 totaling $6,956) and a matching
contribution to the Company's 401(k) plan of $3,095.
(7) Includes 824 shares allocated to Mr. Freeman's account pursuant to the
ESOP at a cost of $10 per share (with an aggregate market value of $18.50
per share at December 31, 2005 totaling $15,244), a matching contribution
to the Company's 401(k) plan of $9,000, director fees of $3,000 and total
payments relating to a severance agreement of $355,975.
Employment Agreements. During 2004, the Company and the Bank entered into three
year employment agreements (the "Agreements") with N. William White, President
and Chief Executive Officer; R. Michael Wilbourn, Executive Vice President and
Chief Financial Officer; and Kathy L. Beach, Executive Vice President and Chief
Operations Officer. Under the Agreements, Mr. White, Mr. Wilbourn and Ms.
Beach's employment may be terminated by the Company or the Bank for "just cause"
as defined in the Agreements. If his or her employment is terminated without
just cause, he or she will be entitled to a continuation of his or her salary
from the date of termination through the remaining term of the Agreements. In
the event of the termination of employment in connection with any change in
control of either the Company or the Bank during the term of their Agreements,
Mr. White, Mr. Wilbourn and Ms. Beach will be paid a lump sum amount equal to
2.99 times his or her base compensation. In the event of a change in control at
December 31, 2005, Mr. White, Mr. Wilbourn and Ms. Beach would have been
entitled to a lump sum payment of approximately $460,460, $313,950 and $254,150,
respectively.
Stock Awards
The following table sets forth additional information concerning stock options
granted during the year ended December 31, 2005 pursuant to the 2004 Stock
Option Plan to the executive officers named in the Summary Compensation Table.
Options Granted In Last Fiscal Year
----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
% of Annual Rates of Stock
Number of Total Price
Securities Options Appreciation for Option
Underlying Granted to Term(1)
Options Employees in Exercise Price Expiration -----------------------
Name Granted(2) Fiscal Year Per Share(3) Date 5% 10%
----------------------- ------------ ------------ ---------------- ---------- -----------------------
N. William White 2,500 25% $18.99 2/24/2015 $29,857 $75,663
R. Michael Wilbourn 2,500 25 18.99 2/24/2015 29,857 75,663
Arthur L. Freeman -- -- -- -- -- --
----------------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the United States Securities and Exchange
Commission and are not intended to forecast possible future appreciation,
if any, in the market value of the Company's Common Stock.
(2) Stock options were granted as 2005 compensation under the Company's 2004
Stock Option Plan and vest over three years in the following increments:
25% on the date of grant, 25% one year from the date of grant, 25% two
years from the date of grant and the remaining 25% three years from the
date of grant.
(3) All stock options are granted at 100% of fair market value on the date of grant.
The following table sets forth information as to aggregate options exercised in
2005 and the 2005 year end option values for the named executive officers in the
Summary Compensation Table.
Aggregated Options Exercised In 2005 and 2005 Year End Option Values
----------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Securities Underlying In-The-Money
Shares Unexercised Options at Options at
Acquired December 31, 2005 December 31, 2005(1)
on Value ------------------------------- ------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------------------------
N. William White -- $ -- 14,625 1,875 $139,000 $ --
R. Michael Wilbourn -- -- 5,625 1,875 42,500 --
Arthur L. Freeman -- -- -- -- -- --
--------------
(1) In-the-money computation is based upon the December 31, 2005 closing market
price of the Company's Common Stock of $18.50.
COMPARATIVE STOCK PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's Common
Stock to the NASDAQ Market Index (U.S.) and the NASDAQ Financial Stocks Index
for the five year period ended December 31, 2005. The graph assumes an
investment of $100 in each of the Company's Common Stock, the NASDAQ Market
Index (U.S.) and the NASDAQ Financial Stocks Index on December 31, 2000 and that
all dividends were reinvested.
[GRAPHIC OMITTED]
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-------- -------- --------- -------- -------- --------
1st Independence Financial Group, Inc. $100.00 $83.45 $101.17 $184.78 $156.69 $155.94
NASDAQ Market Index (U.S.) 100.00 79.32 54.84 81.99 89.22 91.12
NASDAQ Financial Stocks Index 100.00 99.12 102.07 138.04 161.15 164.87
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
As noted previously, the Compensation Committee members are Thomas Les Letton,
Dr. Ronald L. Receveur, W. Dudley Shryock and H. Lowell Wainwright, Jr., all of
whom are independent directors under NASDAQ listing standards. No member of the
Compensation Committee is or was formerly an officer or an employee of the
Company or the Bank. No executive officer of the Company or the Bank serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors, nor has such an interlocking relationship existed in the past.
RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank, like many financial institutions, has followed a policy of granting
various types of loans to officers, directors, and employees. The loans have
been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Bank's other customers, and do not involve
more than the normal risk of collectibility, or present other unfavorable
features.
The following table illustrates the expenses of products and services provided
to the Company in 2005 from businesses with ownership interests by directors or
executive officers.
Director or Expense Paid by the Service or Product
Executive Officer Company Company Provided
----------------- --------------- ---------------- --------------------
Matthew C. Chalfant Chalfant Industries, Inc. $174,600 Leased office space
Jack L. Coleman, Jr. Patterson - Coleman LLC 6,000 Land lease for ATM
STOCKHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any stockholder who desires to contact the Board of Directors or any member of
the Board of Directors may do so in writing. Communications should be addressed
to the "Board of Directors", Attn: Secretary, 1st Independence Financial Group,
Inc., 104 South Chiles Street, Harrodsburg, Kentucky 40330-1620. Communications
received are distributed to the Chairman of the Board or the other members of
the Board as appropriate, depending on the facts and circumstances outlined in
the communications.
FORM 10-KSB
A copy of the Company's annual report on form 10-KSB for the year ended December
31, 2005 is being provided with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Teresa W. Noel
Teresa W. Noel
Secretary
April 12, 2006
Appendix A
1st INDEPENDENCE RESTRICTED STOCK PLAN
Effective January 1, 2006
ADOPTION OF
1st INDEPENDENCE RESTRICTED STOCK PLAN
Pursuant to resolutions adopted by the Board of Directors of 1ST
Independence Financial Group, Inc. ("Company") on December 15, 2005, the
undersigned officers of the Company hereby adopt the 1st Independence Restricted
Stock Plan on behalf of the Company, in the form attached hereto.
Dated this 15th day of December , 2005.
1st INDEPENDENCE FINANCIAL GROUP, INC.
By: /s/ N. William White
-----------------------------------------
N. William White, President & CEO
ATTEST:
By: /s/ R. Michael Wilbourn
----------------------------------------------------------
R. Michael Wilbourn, Executive
Vice President and Chief Financial Officer
TABLE OF CONTENTS
Page
----
ARTICLE I.............................................................24
---------
Establishment and Purpose..........................................24
Section 1.1. Establishment of the Plan.....................24
------------ -------------------------
Section 1.2. Purposes of the Plan..........................24
------------ --------------------
ARTICLE II............................................................25
----------
Definitions........................................................25
Section 2.1. "Award".......................................25
------------
Section 2.2. "Board".......................................25
------------
Section 2.3. "Cause".......................................25
------------
Section 2.4. "Change in Control"...........................25
------------
Section 2.5. "Code"........................................26
------------
Section 2.6. "Committee"...................................26
------------
Section 2.7. "Company".....................................26
------------
Section 2.8. "Company Stock"...............................26
------------
Section 2.9. "Director"....................................27
------------
Section 2.10. "Effective Date".............................27
-------------
Section 2.11. "Fair Market Value"..........................27
-------------
Section 2.12. "Grant Date".................................27
-------------
Section 2.13. "Non-employee Director"......................27
-------------
Section 2.14. "Participant"................................27
-------------
Section 2.15. "Period of Restriction"......................27
-------------
Section 2.16. "Plan".......................................27
-------------
Section 2.17. "Purchase Price".............................27
-------------
Section 2.18. "Restricted Stock"...........................27
-------------
Section 2.19. "Restricted Stock Agreement".................27
-------------
Section 2.20. "Rule 16b-3".................................27
-------------
Section 2.21. "Subsidiary".................................27
-------------
Section 2.22. "Total and Permanent Disability".............27
-------------
ARTICLE III...........................................................29
-----------
Administration.....................................................29
Section 3.1. The Committee.................................29
------------ -------------
Section 3.2. Authority of the Committee....................29
------------ --------------------------
ARTICLE IV............................................................30
----------
Eligibility........................................................30
Section 4.1. Eligibility...................................30
------------ -----------
Section 4.2. Participation.................................30
------------ -------------
ARTICLE V.............................................................31
---------
Restricted Stock...................................................31
Section 5.1. Number of Shares..............................31
------------ ----------------
Section 5.2. Grant of Restricted Stock.....................31
------------ -------------------------
Section 5.3. Restricted Stock Agreement....................31
------------ --------------------------
Section 5.4. Vesting and Transfer of Restricted Stock......31
------------ ----------------------------------------
Section 5.5. Return of Restricted Stock to Company.........33
------------ -------------------------------------
Section 5.6. Shareholder Rights............................33
------------ ------------------
Section 5.7. Dividends and Voting Rights...................33
------------ ---------------------------
Section 5.8. Changes in Stock..............................33
------------ ----------------
ARTICLE VI............................................................35
----------
Amendment, Termination and Duration................................35
Section 6.1. Amendment, Suspension or Termination..........35
------------ ------------------------------------
Section 6.2. Duration of the Plan and Shareholder Approval.35
------------ ---------------------------------------------
ARTICLE VII...........................................................36
-----------
Tax Withholding....................................................36
Section 7.1. Withholding Requirements......................36
------------ ------------------------
Section 7.2. Withholding Arrangements......................36
------------ ------------------------
ARTICLE VIII..........................................................37
------------
Legal Construction.................................................37
Section 8.1. Gender and Number.............................37
------------ -----------------
Section 8.2. Severability..................................37
------------ ------------
Section 8.3. Requirements of Law...........................37
------------ -------------------
Section 8.4. Governing Law.................................37
------------ -------------
Section 8.5. Headings......................................37
------------ --------
Section 8.6. Mistake of Fact...............................37
------------ ---------------
Section 8.7. Evidence......................................37
------------ --------
ARTICLE IX............................................................38
----------
Miscellaneous......................................................38
Section 9.1. No Effect on Employment or Service............38
------------ ----------------------------------
Section 9.2. Liability and Indemnification.................38
------------ -----------------------------
Section 9.3. Successors....................................38
------------ ----------
Section 9.4. Use of Proceeds...............................38
------------ ---------------
Section 9.5. Investment Representations....................38
------------ --------------------------
Section 9.6. Funding.......................................39
------------ -------
1st INDEPENDENCE RESTRICTED STOCK PLAN
1
Establishment and Purpose
..1 Establishment of the Plan. 1st Independence Financial Group, Inc., a Delaware
corporation (the "Company"), hereby establishes an equity-based incentive
compensation plan to be known as the 1st Independence Restricted Stock Plan (the
"Plan"), set forth in this document. The Plan provides for the award of
Restricted Stock. The Plan and the grant of Awards hereunder are conditioned on
the Plan's approval by the shareholders of the Company. The Plan is adopted
effective as of January 1, 2006; no Restricted Stock may be awarded until the
Plan has been approved by a majority of the shares of common stock of the
Company represented at the shareholder's meeting at which approval of the Plan
is considered.
..2 Purposes of the Plan. The Plan is designed to promote the interests of the
Company and its Subsidiaries by encouraging their officers, key employees and
Non-employee Directors, upon whose judgment, initiative and industry the Company
and its Subsidiaries are largely dependent for the successful conduct and growth
of their business, to continue their association with the Company and its
Subsidiaries by providing additional incentive and opportunity for unusual
industry and efficiency through stock ownership, and by increasing their
proprietary interest in the Company and their personal interest in its continued
success and progress.
2
Definitions
For purposes of the Plan, the following words and phrases have the
following meanings unless a different meaning is plainly required by the
context:
..1 "Award" means an award of Restricted Stock.
..2 "Board" means the Board of Directors of the Company, unless the context
clearly requires otherwise, and to the extent that any powers and discretion
vested in the Board of Directors are delegated to any committee of the Board,
the term "Board" shall also mean such committee.
..3 "Cause" means: (i) the willful and continued failure of a Participant to
perform his required duties as an officer or key employee of the Company or any
Subsidiary, (ii) action by a Participant involving willful misfeasance or gross
negligence, (iii) the requirement or direction of a federal or state regulatory
agency having jurisdiction over the Company or any Subsidiary to terminate the
employment of a Participant, (iv) conviction of a Participant of the commission
of any criminal offense involving dishonesty or breach of trust, or (v) any
intentional breach by a Participant of a material term, condition or covenant of
any agreement of employment, termination or severance or any other agreement
between the Participant and the Company or any Subsidiary.
..4 "Change in Control" of the Company will be deemed to have occurred if
one of the following events takes place:
..A Change in Ownership. A change in the ownership of the Company
occurs on the date that any person, or group of persons, as
defined in subparagraph (b), acquires ownership of stock of
the Company that, together with stock held by the person or
group, constitutes more than 50 percent of the total fair
market value or total voting power of the stock. However, if
any person or group is considered to own more than 50 percent
of the total fair market value or total voting power of the
stock, the acquisition of additional stock by the same person
or group is not considered to cause a change in the ownership
of the Company. An increase in the percentage of stock owned
by any person or group, as a result of a transaction in which
the Company acquires its stock in exchange for property will
be treated as an acquisition of stock.
..B Change in the Effective Control. A change in the effective
control of the Company will occur when: (i) any person or
group acquires, or has acquired during the twelve-month period
ending on the date of the most recent acquisition by such
person(s), ownership of stock of the Company possessing 35
percent or more of the total voting power; or (ii) a majority
of members of the Board is replaced during any twelve-month
period by Directors whose appointment or election is not
endorsed by a majority of the members of the Company's Board
prior to the date of the appointment or election. However, if
any person or group is considered to effectively control the
Company, the acquisition of additional control of the Company
by the same person(s) is not considered to cause a change in
the effective control.
..C Change in the Ownership of a Substantial Portion of the
Company's Assets. A change in the ownership of a substantial
portion of the Company's assets occurs on the date that any
person or group acquires, or has acquired during the 12-month
period ending on the date of the most recent acquisition by
such person(s), assets from the Company that have a total
gross fair market value equal to or more than 40 percent of
the total gross fair market value of all of the assets
immediately prior to such acquisition(s). Gross fair market
value means the value of the assets of the Company, or the
value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.
However, there is no Change in Control under this subparagraph
when there is a transfer to an entity that is controlled by
the shareholders of the transferring Company immediately after
the transfer. A transfer of assets by the Company is not
treated as a change in the ownership of such assets if the
assets are transferred to: (i) a shareholder of the Company
(immediately before the asset transfer) in exchange for or
with respect to its stock; (ii) an entity, 50 percent or more
of the total value or voting power of which is owned, directly
or indirectly, by the Company; (iii) a person, or group of
persons, that owns, directly or indirectly, 50 percent or more
of the total value or voting power of all the outstanding
stock of the Company or (iv) an entity, at least 50 percent of
the total value or voting power of which is owned, directly or
indirectly, by a person described in (iii). For purposes of
this subparagraph, except as otherwise provided, a person's
status is determined immediately after the transfer of the
assets. For example, a transfer to a Company in which the
transferor Company has no ownership interest before the
transaction, but which is a majority-owned subsidiary of the
transferor Company after the transaction is not treated as a
change in the ownership of the assets of the transferor
Company.
..D Acting as a Group. For purposes of this Section, persons will not be
considered to be acting as a group solely because they
purchase or own stock of the Company at the same time, or as a
result of the same public offering. However, persons will be
considered to be acting as a group if they are owners of a
Company that enters into a merger, consolidation, purchase or
acquisition of stock or similar business transaction with the
Company. If a person, including an entity, owns stock in both
Companies that enter into a merger, consolidation, purchase or
acquisition of stock or similar transaction, such shareholder
is considered to be acting as a group with other shareholders
in a Company prior to the transaction giving rise to the
change and not with respect to the ownership interest in the
other Company.
..5 "Code" means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or to a regulation adopted thereunder will include
such section, guidance issued by the Internal Revenue Service or the Treasury
Department with respect to such section, any valid regulation promulgated under
such section, and any comparable provision of any future law, legislation or
regulation amending, supplementing or superseding such section or regulation.
..6 "Committee" means the Compensation Committee of the Board who has been
designated from time to time by the Board pursuant to Section 3.1 to administer
the Plan; and who is serving on the date that the Plan is approved by the
shareholders of the Company or thereafter.
..7 "Company" means 1st Independence Financial Group, Inc., an Indiana
corporation, and any successor thereto.
..8 "Company Stock" means the common voting stock of the Company.
..9 "Director" means any individual who is a member of the Board.
..10 "Effective Date" means January 1, 2006.
..11 "Fair Market Value" means the mean between the reported closing bid and
asked prices for the shares of Company Stock, as quoted by the North American
Securities Dealers Automated Quotation System ("NASDAQ"). If the common stock of
the Company is not quoted by NASDAQ, Fair Market Value shall be determined by
the Committee based upon quotations of the entities which make a market in
Company stock and such other factors as the Committee shall deem appropriate. If
the common stock of the Company is not quoted by entities which make a market in
the Company's stock, the Fair Market Value shall be determined by the Committee
in good faith based upon a valuation of the Company Stock conducted by a
qualified appraiser and such other factors as the Committee deems appropriate.
..12 "Grant Date" means, with respect to any Award granted under the Plan, the
date as of which the Award was granted by the Committee, regardless if the
Restricted Stock Agreement to which the Award relates is executed subsequent to
such date.
..13 "Non-employee Director" means any individual who is a member of the
Board and who is not an employee of the Company.
..14 "Participant" means an officer, key employee or Non-employee Director
to whom an Award has been granted.
..15 "Period of Restriction" means the period during which the transfer of shares
of Restricted Stock is subject to restrictions and, therefore, are subject to a
substantial risk of forfeiture. As provided in Article V, such restrictions may
be based on the passage of time or the occurrence of such other events as may be
determined by the Committee in its sole discretion.
..16 "Plan" means the 1st Independence Financial Group Restricted Stock Plan, as
set forth in this instrument and as hereafter amended from time to time.
..17 "Purchase Price" means the price at which a share of Restricted Stock
of the Company may be purchased by a Participant.
..18 "Restricted Stock" means an Award granted to a Participant pursuant
to Article V.
..19 "Restricted Stock Agreement" means the written agreement which sets
forth the terms and provisions applicable to each Award.
..20 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any future
rule or regulation amending, supplementing or superseding such rule.
..21 "Subsidiary" means any banking institution or other corporation more than 50
percent of whose total combined voting stock of all classes is held by the
Company or by another corporation qualifying as a Subsidiary within this
definition.
..22 "Total and Permanent Disability" means a Participant who:
is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or
mental impairment which can be expected to result in
death or can be expected to last for a continuous
period of not less than 12 months; or
is, by reason of any medically determinable physical
or mental impairment which can be expected to result
in death or can be expected to last for a continuous
period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3
months under an accident and health plan covering
employees of the Participant's employer.
3
Administration
..1 The Committee. The Plan will be administered by a Committee of not less than
three Directors of the Company who will be designated from time to time by the
Board. No Director who is also an officer or key employee of the Company or any
of its Subsidiaries will be eligible to serve as a member of the Committee. The
decision of a majority of the members of the Committee will constitute a
decision of the Committee. It is intended that the Committee be comprised solely
of Directors who both are (a) "Non-employee Directors" under Rule 16b-3, and (b)
"outside Directors" as described in Treasury Regulation Section 1.162-27(e)(3).
Failure of the Committee to be so comprised will not result in the cancellation,
termination, expiration or lapse of any Award. Until and unless this Article is
amended to provide otherwise, all references in the Plan to the Committee are to
the Compensation Committee of the Board.
..2 Authority of the Committee.
..1 Except as limited by law or by the Articles of Incorporation or
By-Laws of the Company, and subject to the provisions of the
Plan, the Committee will have full power and discretion to:
(i) select officers, key employees and Non-employee Directors
to receive Awards; (ii) determine the sizes of Awards; (iii)
determine the terms and conditions of Awards in a manner
consistent with the Plan; (iv) construe and interpret the
Plan, all Restricted Stock Agreements and any other agreements
or instruments entered into under the Plan; (v) establish,
amend or waive rules and regulations for the Plan's
administration; and (vi) amend the terms and conditions of any
outstanding Restricted Stock Agreement to the extent such
terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee will
make all other determinations which may be necessary or
advisable for the administration of the Plan. Each Award will
be evidenced by a written Restricted Stock Agreement between
the Company and the Participant and will contain terms and
conditions established by the Committee consistent with the
provisions of the Plan. Any notice or document required to be
given to or filed with the Committee will be properly given or
filed if hand delivered (and a delivery receipt is received)
or mailed by certified mail, return receipt requested, postage
paid, to the Committee at 1st Independence Bank, P.O. Box
1433, 3801 Charlestown Road, New Albany, Indiana 47151-1433.
..2 The Committee is authorized, subject to the provisions of the
Plan, to adopt, amend and rescind such rules and regulations
as it may deem appropriate for the administration of the Plan
and to make determinations and interpretations which it deems
consistent with the Plan's provisions. The Committee's
determinations and interpretations in this regard will be
final and conclusive.
4
Eligibility
..1 Eligibility. Officers, key employees and Non-employee Directors of the
Company or of any of its Subsidiaries, as selected by the Committee, are
eligible to receive Awards. An officer, key employee or Non-employee Director
will become a Participant as of the date specified by the Committee. A
Participant can be removed as an active Participant by the Committee effective
as of any date; provided, however, that no such removal will adversely affect
any Award previously granted to the Participant.
..2 Participation. No officer, key employee or Non-employee Director will have
the right to be selected to receive an Award under the Plan or, having been
selected, to be selected to receive a future Award. Participation in the Plan
will not give any Participant any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of the Plan.
5
Restricted Stock
..1 Number of Shares. Awards of Restricted Stock will be made in shares of
Company Stock which can be unissued shares or reacquired shares (including
shares purchased in the open market), or a combination thereof, as the Committee
may from time to time determine in its sole discretion. Subject to the
provisions of Section 5.8, the maximum number of shares to be delivered upon the
grant of all Restricted Stock awarded under the Plan will not exceed 80,500
shares. Shares of Restricted Stock which are forfeited can be made the subject
of further Awards.
..2 Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant shares of Restricted
Stock to any officer, key employee or Non-employee Director in such amounts as
the Committee determines in its sole discretion. Subject to the limitations of
Section 5.1, the Committee will determine the number of shares of Restricted
Stock to be granted to each Participant in its sole discretion.
..3 Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced
by a Restricted Stock Agreement that specifies the Period of Restriction, the
number of shares granted, the Grant Date, the Purchase Price (if any) and such
other terms and conditions as the Committee determines in its sole discretion.
..4 Vesting and Transfer of Restricted Stock. Shares issued due to grant of an
Award will be subject to the terms and conditions specified herein and to such
other terms, conditions and restrictions as the Committee in its sole discretion
may determine and provide in the Restricted Stock Agreement. The Company may
cause any certificate for shares to be delivered hereunder to be properly marked
with a legend or other notation which reflects the limitations on transfer of
such shares as provided in the Plan, the applicable Restricted Stock Agreement
or as the Committee may otherwise require in its sole discretion.
..1 Restrictions on Transferability. Except as provided in this
subsection, no shares of Restricted Stock awarded under the
Plan may be sold, assigned, transferred, pledged or
hypothecated by the Participant in any way, whether by
operation of law or otherwise and shall not be subject to
execution, attachment or similar process. Each certificate
evidencing shares of Restricted Stock awarded under the Plan
will bear a legend which sets forth such restrictions; and,
any attempted sale, assignment, transfer, pledge,
hypothecation, execution, attachment or similar disposition
will be null and void and of no effect.
..2 Vesting. Unless otherwise provided in the applicable
Restricted Stock Agreement or determined by the Committee in
its sole discretion, Restricted Stock awarded under the Plan
will become vested upon completion of years of service for the
Company in accordance with the following schedule:
Years of Service Vested Percentage Forfeited Percentage
From Grant Date
1 20% 80%
2 40% 60%
3 60% 40%
4 80% 20%
5 100% 0%
Notwithstanding the vesting schedule specified above, the
Committee may, in its sole discretion, amend the vesting
schedule for a particular Restricted Stock Award in a manner
which causes the Restricted Stock to which the Award relates
to vest under a more rapid schedule. The Committee shall not
amend such schedule to (i) require a Participant to complete
more years of service than specified in the schedule, or (ii)
reduce the percentage rates specified in the schedule, to
slow the rate at which the Restricted Stock vests.
For purposes of this Section 5.4, a "year of service" means a
period of 12 consecutive months of continuous, active
employment of the Participant with the Company commencing as
of the applicable Grant Date.
..3 Lapse of Restrictions and Vesting. The restrictions on shares of
Restricted Stock contained in subsections 5.4(a) and (b) will
lapse and such shares will become fully vested, nonforfeitable
and transferable upon the earliest to occur of: (i) the
date(s) prescribed by the Committee in the Restricted Stock
Agreement; (ii) the Participant's death; or (iii) the
Participant's Total and Permanent Disability. The specific
terms and conditions regarding the lapse of restrictions and
the vesting of shares of Restricted Stock will be contained in
the Restricted Stock Agreement. In no event will a Participant
have any right under the Plan or in a Restricted Stock
Agreement to affect the time at which the Restricted Stock
awarded to him becomes vested.
..4 Forfeiture of Shares on Termination of Employment. If a
Participant's employment with the Company or any Subsidiary is
terminated for any reason other than for Cause or on account
of the Total and Permanent Disability or death, prior to the
time the shares of Restricted Stock become vested, as provided
in subsections 5.4(b) or (c), all of the unvested shares of
Restricted Stock will be forfeited and will thereupon revert
to the Company. Such forfeiture will be effective on the date
of the Participant's termination of employment. Transfer of
employment from the Company to a Subsidiary, or vice versa, or
from one Subsidiary to another, will not be deemed termination
of employment. The Committee has the authority to determine in
each case whether a leave of absence on military or government
service is deemed a termination of employment.
Notwithstanding the foregoing provisions of this
Section, if a Participant's employment terminates for any
reason other than Cause, the Committee may, in its sole
discretion, by means of a written amendment to the Restricted
Stock Agreement, provide that (i) the unvested shares of
Restricted Stock will not be forfeited upon termination of
employment, and (ii) the restrictions on shares of Restricted
Stock contained in subsections 5.4(a) and (b) will lapse and
such shares will become fully vested, nonforfeitable and
transferable upon the earliest to occur of: (x) the date(s)
prescribed by the Committee in the amendment to the Restricted
Stock Agreement, (y) the Participant's death, or (z) the
Participant's Total and Permanent Disability; provided,
however, that the Committee will provide in any such amendment
that (A) shares of Restricted Stock that were not vested on
the date the Participant terminated employment will be
immediately forfeited; and (B) shares of Restricted Stock
which became vested after the Participant terminated
employment must be returned to the Company, upon a finding by
the Committee, as determined in its sole discretion, that the
Participant has violated any provision of the amended
Restricted Stock Agreement, including without limitation any
non-competition, non-solicitation or non-disclosure provision
thereof.
..5 Forfeiture on Termination For Cause. If a Participant's
employment is terminated for Cause prior to the time the
shares of Restricted Stock become vested, as provided in
subsections 5.4(b) or (c), all of the unvested shares will be
forfeited and thereupon revert to the Company. Such forfeiture
will be effective on the date the Participant receives notice
of his termination for Cause.
..6 Change in Control of Company. In the event of a Change in
Control of the Company (i) the restrictions on the transfer of
all shares of Restricted Stock provided in subsection 5.4(a),
will immediately lapse, and (ii) all of the shares of
Restricted Stock subject to forfeiture under subsections
5.4(b), (d) and (e) will immediately become fully vested and
nonforfeitable.
..5 Return of Restricted Stock to Company. On the date set forth in the
applicable Restricted Stock Agreement, the Restricted Stock for which
restrictions have not lapsed by the last day of the Period of Restriction will
revert to the Company and thereafter will be available for the grant of new
Awards.
..6 Shareholder Rights. No person will have any rights of a shareholder
(including, but not limited to, voting rights) with respect to shares subject to
an Award until such shares have been recorded on the Company's official
shareholder records (or the records of its transfer agents or registrars) as
having been issued and transferred to the Participant. Upon grant of the Award
or any portion thereof, the Company will have a reasonable period in which to
issue and transfer the shares to the Participant, and the Participant will not
be treated as a shareholder for any purpose whatsoever prior to such issuance
and transfer. No payment or adjustment will be made for rights for which the
record date is prior to the date such shares are recorded as issued and
transferred in the Company's official shareholder records (or the records of its
transfer agents or registrars), except as otherwise provided herein or in a
Restricted Stock Agreement.
..7 Dividends and Voting Rights. Upon the Award of shares of Restricted Stock
under the Plan, subject to the requirements of Section 5.4 concerning
restrictions on the transferability of Restricted Stock and the requirement that
a Participant remain an employee or Non-employee Director of the Company or its
Subsidiaries, the Participant will be entitled to: (i) receive all dividends
payable and paid with respect to Restricted Stock awarded and issued to the
Participant; and (ii) exercise all voting rights associated with such Restricted
Stock. Provided, however, upon the transfer or other disposition of any shares
of Restricted Stock in violation of subsection 5.4(a) or upon the forfeiture of
any shares of Restricted Stock in accordance with subsection 5.4(b), (d) or (e),
the Participant will not be entitled to receive any dividends declared or
exercise any voting rights on or after the date such shares of Restricted Stock
were transferred or forfeited.
..8 Changes in Stock.
..1 Subject to the provisions of subsection 5.8(b), in the event of any
change in the Company's shares through stock dividends,
split-ups, recapitalizations, reclassifications, conversions
or otherwise, or in the event that other stock is converted
into or substituted for Company shares as the result of any
merger, consolidation, reorganization or similar transaction
which results in a Change in Control of the Company, then the
Committee may make appropriate adjustment or substitution in
the aggregate number, price and kind of shares available under
the Plan and in the number, price and kind of shares covered
under any Restricted Stock awarded or to be awarded under the
Plan. The Committee's determination in this respect will be
final and conclusive. Provided, however, that the Company will
not, and will not permit its Subsidiaries to, recommend,
facilitate or agree or consent to a transaction or series of
transactions which would result in a Change in Control of the
Company unless and until the person or persons or entity or
entities acquiring or succeeding to the assets or capital
stock of the Company or any of its Subsidiaries as a result of
such transaction or transactions agrees to be bound by the
terms of the Plan insofar as it pertains to Restricted Stock
theretofore awarded but which are unvested and agrees to
assume and perform the obligations of the Company hereunder.
..2 In the event of a Change in Control of the Company pursuant to
which another person or entity acquires control of the Company
(such other person or entity being the "Successor"), shares
subject to the Plan and each Award of Restricted Stock, will,
automatically by virtue of such Change in Control of the
Company, be converted into and replaced by shares of common
stock, or such other class of securities having rights and
preferences no less favorable than common voting stock of the
Successor, and the number of shares of Restricted Stock, and
the Purchase Price per share upon exercise of the Restricted
Stock, if any, will be correspondingly adjusted, so that, by
virtue of such Change in Control of the Company, each
Participant will have that number of shares of Restricted
Stock of the Successor which have a Fair Market Value equal,
as of the date of such Change in Control of the Company, to
the Fair Market Value, as of the date of such Change in
Control of the Company, of the shares of Restricted Stock of
the Company theretofore awarded to him.
Section 5.9. Information to be Furnished. Participants, or any other
persons entitled to benefits under the Plan, must furnish to the Committee such
documents, evidence, data or other information as the Committee considers
necessary or desirable for the purpose of administering the Plan. The benefits
under the Plan for each Participant and for each other person who is entitled to
benefits hereunder, are to be provided on the condition that the Participant of
the person who is entitled to benefits hereunder furnish full, true and complete
data, evidence or other information, and that he promptly signs any document
reasonably related to the administration of the Plan requested by the Committee.
No fractional shares will be issued under the Plan.
6
Amendment, Termination and Duration
..1 Amendment, Suspension or Termination. The Board may, at any time, without the
approval of the shareholders of the Company (except as otherwise required by
applicable law, rule or regulations, including without limitation any
shareholder approval of the safe harbor rule promulgated under the Securities
Exchange Act of 1934) alter, amend, modify, suspend or discontinue the Plan, but
may not, without the consent of the affected Participant or without the approval
of the shareholders of the Company, make any alteration which would: (i)
increase the aggregate number of shares subject to an Award, except as provided
in Section 5.8; (ii) decrease the Purchase Price, except as provided in Section
5.8; (iii) permit any member of the Committee to be eligible for an Award; (iv)
withdraw administration of the Plan from the Committee or Board; (v) extend the
term of the Plan, (vi) change the manner of determining the Purchase Price;
(vii) change the class of individuals eligible for Awards; or (viii) without the
consent of the affected Participant, alter or impair any Award.
..2 Duration of the Plan and Shareholder Approval. The Plan will be effective on
the Effective Date and, subject to Section 6.1 (regarding the Board's right to
supplement, amend, alter or discontinue the Plan), will remain in effect
thereafter until terminated by the Board; provided, however, that no Award can
be granted until the Plan has been approved by the holders of at least a
majority of the outstanding shares at a meeting at which approval of the Plan is
considered.
7
Tax Withholding
..1 Withholding Requirements. The Company has the power and the right, prior to
the delivery of any Company Stock on the vesting of Restricted Stock, to deduct
or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy all federal, state and local income and employment taxes
required by applicable law to be withheld with respect to exercise or vesting of
such Award. In no event will any amount withheld be in an amount that would
require the Company to incur accounting charges.
..2 Withholding Arrangements. The Committee, in its sole discretion and pursuant
to such procedures as it may specify from time to time, may permit a Participant
to satisfy a tax withholding obligation, in whole or in part, by electing to
have the Company withhold otherwise deliverable shares. The amount of the
withholding requirement will be deemed to include any amount that the Committee
agrees may be withheld at the time any such election is made, not to exceed, in
the case of income tax withholding, the amount determined, based upon minimum
statutory requirements, by using the maximum federal, state or local marginal
income tax rates applicable to the Participant with respect to the Award on the
date the amount of income tax to be withheld is determined.
8
Legal Construction
..1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also includes the feminine, the plural includes the
singular, and the singular includes the plural.
..2 Severability. In the event any provision of the Plan is held illegal or
invalid for any reason, the illegality or invalidity will not affect the
remaining parts of the Plan, and the Plan will be construed and enforced as if
the illegal or invalid provision had never been included herein.
..3 Requirements of Law. The grant of Awards and the issuance of shares under the
Plan will be subject to all applicable statutes, laws, rules and regulations and
to such approvals and requirements as may be required from time to time by any
governmental authorities or any securities exchange or market on which the
shares are then listed or traded.
..4 Governing Law. The Plan and all Restricted Stock Agreements will be construed
in accordance with and governed by the laws of the State of Indiana without
giving effect to any choice or conflict of law provisions, principles or rules
(whether of the State of Indiana or any other jurisdiction) that would cause the
application of any laws of any jurisdiction other than the State of Indiana. The
Plan and all Restricted Stock Agreements are intended to comply, and will be
construed by the Board and Committee in a manner which complies, with the
applicable provisions of Code Section 409A. To the extent there is any conflict
between a provision of the Plan or a Restricted Stock Agreement and a provision
of Code Section 409A, the applicable provision of Code Section 409A will
control.
..5 Headings. The descriptive headings and sections of the Plan are provided
herein for convenience of reference only and will not serve as a basis for
interpretation or construction of the Plan.
..6 Mistake of Fact. Any mistake of fact or misstatement of facts will be
corrected when it becomes known by a proper adjustment to an Award or Restricted
Stock Agreement.
..7 Evidence. Evidence required of anyone under the Plan may be by certificate,
affidavit, document or other information which the person relying thereon
considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
9
Miscellaneous
..1 No Effect on Employment or Service. Neither the Plan nor the grant of any
Award or the execution of any Restricted Stock Agreement will confer upon any
Participant any right to continued employment by the Company, or will interfere
with or limit in any way the right of the Company to terminate any employee's
employment or service at any time, with or without Cause. Employment with the
Company and its Subsidiaries is on an at-will basis only, unless otherwise
provided by a written employment or severance agreement, if any, between the
employee and the Company or a Subsidiary, as the case may be. If there is any
conflict between the provisions of the Plan or any Restricted Stock Agreement
executed and delivered hereunder and an employment or severance agreement
between an employee and the Company, the provisions of such employment or
severance agreement will control, including, but not limited to, the vesting and
forfeiture of any Awards.
..2 Liability and Indemnification. No member of the Board, the Committee or any
officer or employee of the Company or any Subsidiary will be personally liable
for any action, failure to act, decision or determination made in good faith in
connection with the Plan. By participating in the Plan, each Participant agrees
to release and hold harmless the Company and its Subsidiaries (and their
respective directors, officers and employees) and the Committee from and against
any tax liability, including, but not limited to, interest and penalties,
incurred by the Participant in connection with his receipt of Awards under the
Plan and the deferral, payment and exercise thereof. Each person who is or was a
member of the Committee, or of the Board, will be indemnified and held harmless
by the Company against and from (a) any loss, cost, liability or expense
(including, but not limited to, attorneys' fees) that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan or any
Restricted Stock Agreement; and (b) any and all amounts paid by him in
settlement thereof, with the Company's prior written approval, or paid by him in
satisfaction of any judgment in any such claim, action, suit or proceeding
against him; provided, however, that he will give the Company an opportunity, at
the Company's expense, to handle and defend such claim, action, suit or
proceeding before he undertakes to handle and defend the same on his own behalf.
The foregoing right of indemnification is exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-Laws, by contract, as a matter of law or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
..3 Successors. All obligations of the Company under the Plan, with respect to
Awards granted hereunder, are binding on any successor to the Company, whether
or not the existence of such successor is the result of a Change in Control of
the Company. The Company will not, and will not permit its Subsidiaries to,
recommend, facilitate or agree or consent to a transaction or series of
transactions which would result in a Change in Control of the Company unless and
until the person or persons or entity or entities acquiring control of the
Company as a result of such Change in Control agree(s) to be bound by the terms
of the Plan insofar as it pertains to Awards theretofore granted and agrees to
assume and perform the obligations of the Company and its Successor (as defined
in Section 5.8) hereunder.
..4 Use of Proceeds. The proceeds, if any, received by the Company from the sale
of stock pursuant to the Plan will be used for general corporate purposes.
..5 Investment Representations. Unless the shares subject to an Award are
registered under the Securities Act of 1933, each Participant in the Restricted
Stock Agreement between the Company and the Participant shall agree for himself
and his legal representatives that any and all shares acquired upon the award of
Restricted Stock shall be acquired for investment and not with a view to, or for
sale in connection with, any distribution thereof.
..6 Funding. Benefits payable under the Plan to any person will be paid by the
Company from its general assets. Shares to be issued hereunder will be issued
directly by the Company from its authorized but unissued shares or acquired by
the Company on the open market, or a combination thereof. Neither the Company
nor any of its Subsidiaries will be required to segregate on its books or
otherwise establish any funding procedure for any amount to be used for the
payment of benefits under the Plan. The Company (or any of its Subsidiaries)
may, however, in its sole discretion, set funds aside in investments to meet any
anticipated obligations under the Plan. Any such action or set-aside will not be
deemed to create a trust of any kind between the Company and any of its
Subsidiaries and any Participant or other person entitled to benefits under the
Plan or to constitute the funding of any Plan benefits. Consequently, any person
entitled to a payment under the Plan will have no rights greater than the rights
of any other unsecured general creditor of the Company or its Subsidiaries.
1ST INDEPENDENCE FINANCIAL GROUP, INC.
104 SOUTH CHILES STREET
HARRODSBURG, KENTUCKY 40330-1620
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ANNUAL MEETING OF STOCKHOLDERS - MAY 18, 2006
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The undersigned hereby appoints N. William White and Matthew C. Chalfant, or
either of them, with full power of substitution, to act as attorneys and proxies
for the undersigned, to vote all shares of Common Stock of 1st Independence
Financial Group, Inc. ("the Company") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held at 3801
Charlestown Road, New Albany, Indiana, on Thursday, May 18, 2006, at 5:30 p.m.,
Eastern Daylight Time, and at any and all adjournments thereof, in the following
manner:
1. The election as directors of the nominees listed below for a three-year term:
|_|FOR |_|WITHHELD
Stephen R. Manecke
Dr. Ronald L. Receveur
W. Dudley Shryock
H. Lowell Wainwright, Jr.
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided here.
___________________________________________________________________________
_________________________________________________________________
2. The approval of the 1st Independence Restricted Stock Plan.
|_|FOR |_|AGAINST |_|ABSTAIN
3. The ratification of the appointment of BKD, LLP as the Company's
independent registered public accounting firm for the year ending December
31, 2006.
|_|FOR |_|AGAINST |_|ABSTAIN
In their discretion, on such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
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THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED.
ADDITIONALLY, IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS SIGNED
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.
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(Continued and to be signed on other side)
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
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Should the undersigned be present and elect to vote at the Meeting, or at any
adjournment thereof, and after notification to the Secretary of the Company at
the Meeting of the stockholder's decision to terminate this Proxy, the power of
said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this Proxy by filing a subsequently
dated Proxy or by written notification to the Secretary of the Company of his or
her decision to terminate this Proxy.
The undersigned acknowledges
receipt from the Company prior to the
execution of this Proxy of a Notice of
Annual Meeting of Stockholders and a
Proxy Statement.
Date: _________________________________
_______________________________________
SIGNATURE OF STOCKHOLDER
_______________________________________
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy. 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 COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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