<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BLUE RIVER BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
1999 NOTICE OF ANNUAL
SHAREHOLDERS MEETING
AND
PROXY STATEMENT
[LOGO]
<PAGE> 3
LOGO
April 30, 1999
Dear Shareholder,
On behalf of our entire Board of Directors, I cordially invite you to
attend our Annual Meeting of Shareholders on May 27, 1999. At the meeting, we
will review our performance for fiscal year 1998 and our expectations for the
future.
A notice of the meeting and Proxy Statement follow. You will also find
enclosed your proxy voting card and the 1998 Annual Report. I would like to take
this opportunity to remind you that your vote is important. Please take a moment
now to complete, sign and date the enclosed proxy voting card and return it in
the postage-paid envelope we have provided.
I look forward to seeing you on May 27th.
Sincerely,
ROBERT C. REED
Robert C. Reed
Vice Chairman
President & CEO
<PAGE> 4
LOGO
NOTICE OF THE 1999
ANNUAL MEETING OF SHAREHOLDERS
April 30, 1999
The Annual Meeting of Shareholders of Blue River Bancshares, Inc. will be
held on May 27, 1999, at 10:00 a.m., at the Ramada Inn, 1810 N. Riley Highway,
Shelbyville, Indiana, to consider and take action on the following matters:
1. Election of two directors to serve a three-year term expiring in
2002;
2. Ratification of the appointment of Deloitte & Touche LLP as
independent certified public accountants for fiscal year 1999; and
3. Transaction of any other business that is properly raised at the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" THE TWO PROPOSALS.
<TABLE>
<S> <C>
D.WARREN ROBISON
Shelbyville, Indiana D. Warren Robison
Secretary
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Meeting Information.................................. 1
Who is entitled to vote?.................................. 1
What am I voting on?...................................... 1
How does the Board of Directors recommend I vote on the
proposals?............................................. 1
Who will solicit the proxies?............................. 1
How do I vote?............................................ 1
What is a quorum?......................................... 2
What vote is required to approve each item?............... 2
Who will count the vote?.................................. 2
What are the deadlines for shareholder proposals for next
year's Annual Meeting?................................. 2
Securities Ownership of Management.......................... 2
Security Ownership of Directors and Executive Officers.... 2
Section 16(a) -- Beneficial Ownership Reporting
Compliance............................................. 3
Securities Ownership of Certain Beneficial Owners........... 3
Directors and Executive Officers of the Company............. 3
Item 1 -- Election of Directors............................. 4
Nominees.................................................. 4
Board Committees and Meeting Attendance................... 5
Executive Committee....................................... 6
Audit Committee........................................... 6
Compensation Committee.................................... 6
Nominating Committee...................................... 6
Compensation of Directors................................... 7
Directors' Stock Option Plan.............................. 7
Report of the Compensation Committee of the Board of
Directors................................................. 7
Role of the Committee..................................... 7
Executive Compensation Program............................ 8
Fiscal Year 1998 CEO Compensation......................... 8
Policy on Deductibility of Compensation................... 8
Compensation of Executive Officers.......................... 10
Summary of Compensation................................... 10
Option Exercises in Fiscal 1998 and Fiscal Year-End Option
Values................................................. 10
Employment Agreement for Executive Officer................ 10
Employee Stock Option Plan................................ 11
Savings Plan.............................................. 11
Annual Bonus Plan......................................... 12
Indebtedness of Management................................ 12
Related Transactions...................................... 12
Tax Indemnification Agreement............................. 13
Item 2 -- Ratification of Appointment of Independent
Certified Public Accountants.............................. 13
Item 3 -- Other Matters..................................... 13
Glossary.................................................... 14
</TABLE>
i
<PAGE> 6
BLUE RIVER BANCSHARES, INC.
29 East Washington Street
Shelbyville, Indiana 46176
PROXY STATEMENT
ANNUAL MEETING INFORMATION
This proxy statement contains information related to the Annual Meeting of
Shareholders of Blue River Bancshares, Inc. to be held on May 27, 1999,
beginning at 10:00 a.m., at the Ramada Inn, 1810 N. Riley Highway, Shelbyville,
Indiana, and at any postponements or adjournments thereof. The proxy statement
was prepared under the direction of the Company's Board of Directors to solicit
your proxy for use at the Annual Meeting. This Proxy Statement and form of proxy
were first mailed to Shareholders on or about April 30, 1999.
WHO IS ENTITLED TO VOTE?
Shareholders owning our Common Stock on April 26, 1999 which is the record
date of the Annual Meeting are entitled to vote at the meeting, or any
postponement or adjournment of the meeting. Each Shareholder has one vote per
share on all matters to be voted on. On April 26, 1999, there were 1,490,870
shares of Common Stock outstanding.
WHAT AM I VOTING ON?
You will be asked to elect nominees to serve on the Board of Directors for
a three-year term expiring in 2002 and to ratify the appointment of our
independent accountants for 1999. The Board of Directors is not aware of any
other matters to be presented for action at the meeting. If any other matter
requiring a vote of the Shareholders should arise, the Proxies will vote in
accordance with their best judgment.
HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSALS?
The Board recommends a vote FOR each of the nominees and FOR the
appointment of Deloitte & Touche LLP as our independent certified public
accountants for the 1999 fiscal year.
WHO WILL SOLICIT THE PROXIES?
The cost of soliciting proxies will be borne by the Company. In addition to
use of mail, proxies may be solicited personally or by telephone by directors,
officers and certain employees of the Company who will not be specially
compensated for such soliciting. The Company will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting materials to the
beneficial owners of stock and will reimburse them for the cost of forwarding
the material.
HOW DO I VOTE?
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you sign your proxy, but do not mark your choices, your Proxies
will vote for the persons nominated for election as directors and in favor of
ratifying the appointment of Deloitte & Touche LLP as independent certified
public accountants for the 1999 fiscal year. You can revoke your proxy at any
time before it is exercised. To do so, you must give written notice of
revocation to the Secretary, Blue River Bancshares, Inc., 29 East Washington
Street, Shelbyville, Indiana 46176, submit another properly signed proxy with a
more recent date, or vote in person at the meeting.
1
<PAGE> 7
WHAT IS A QUORUM?
A "quorum" is the presence at the meeting, in person or by proxy, of the
holders of the majority of the outstanding shares. There must be a quorum for
the meeting to be held. Abstentions are counted for purposes of determining the
presence or absence of a quorum, but are not considered a vote cast under
Indiana law. Shares held by brokers in street name and for which the beneficial
owners have withheld the discretion to vote from brokers are called "broker
non-votes." They are counted to determine if a quorum is present, but are not
considered a vote cast under Indiana law. Broker non-votes will not affect the
outcome of a vote on a particular matter.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
The director nominees will be elected by a plurality of the votes cast at
the Annual Meeting. All other matters to be considered at the meeting require
the affirmative vote of a majority of the votes cast at the meeting to be
approved.
WHO WILL COUNT THE VOTE?
Tellers appointed at the Annual Meeting will tabulate the votes cast by
proxy or in person.
WHAT ARE THE DEADLINES FOR SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING?
Shareholders may submit proposals on matters appropriate for shareholder
action at future annual meetings by following the rules of the Securities and
Exchange Commission. Proposals intended for inclusion in next year's proxy
statement and proxy card must be received by the Company not later than December
31, 1999. If the Company does not receive notice of any other matter that a
Shareholder wishes to raise at the Annual Meeting in 2000 by 120 days prior to
the meeting and a matter is raised at that meeting, the proxies will have
discretionary authority to vote on the matter. All proposals and notifications
should be addressed to the Secretary.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock beneficially
owned by each director and Named Executive, and by the directors and all of the
Company's executive officers as a group. The table shows ownership as of
February 28, 1999.
For purposes of reporting total beneficial ownership, Shares which might be
acquired through stock option exercises are included.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES OF
COMMON STOCK PERCENT OF
BENEFICIALLY COMMON
NAME OWNED(1)(2) STOCK
- ---- ---------------- ----------
<S> <C> <C>
Robert C. Reed(3)........................................ 34,060 2.28%
Steven R. Abel(4)........................................ 23,258 1.56%
Wendell L. Bernard(5).................................... 4,460 .30%
Peter G. DePrez.......................................... 1,000 .07%
D. Warren Robison(6)..................................... 21,151 1.42%
Ralph W. Van Natta(7).................................... 1,929 .13%
Directors and executive officers as a group (8 persons
including those listed above).......................... 85,858 5.76%
</TABLE>
- ---------------
(1) Sole voting and investment power unless otherwise indicated.
2
<PAGE> 8
(2) Includes 18,600 Shares which executive officers and directors have the right
to acquire pursuant to stock options exercisable within sixty days of the
date of this Proxy Statement as follows: Robert C. Reed, 6,680; Steven R.
Abel, 5,480; D. Warren Robison, 5,480; Ralph Van Natta, 480; Wendell L.
Bernard 480; and directors and executive officers as a group (8 persons),
18,600.
(3) Mr. Reed holds 20,500 shares jointly with his spouse and 200 shares jointly
with his children.
(4) Mr. Abel holds 1,000 shares jointly with his spouse. Mr. Abel's spouse holds
2,998 shares individually.
(5) Mr. Bernard's shares are held jointly with his spouse.
(6) Mr. Robison holds 4,160 shares jointly with his spouse. Mr. Robison's spouse
holds 2,101 shares individually.
(7) Mr. Van Natta holds 434 shares jointly with his spouse.
SECTION 16(A) -- BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on our records, we believe that during 1998 our directors and
executive officers complied with all SEC filing requirements applicable to them.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 28, 1999 to the knowledge of the Company, no Shareholder or
affiliated group of Shareholders owns of record or beneficially more than 5% of
the Company's Common Stock outstanding on that date.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors, including nominees, and Executive Officers of the Company
are listed in the table below. Each officer serves a term of office of one year
or until the election and qualification of his successor. Each director serves a
term of three years or until the election and qualification of his successor.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
- ---- --- ------------------------------
<S> <C> <C>
Steven R. Abel............................ 49 Chairman since August, 1997; Director since March
1997 (term expires 2000); Chairman and Director of
the Bank since June 1998, President and Treasurer
from March 1997 to August 1997; licensed real
estate appraiser since 1992.
Robert C. Reed............................ 33 President and Chief Executive Officer (CEO) since
August 8, 1997; Vice-Chairman since January, 1998;
Director since August 1997 (nominee, term expires
2002); President, CEO and Director of the Bank
since June, 1998; Vice President, Regional
Director (Shelby County) of Citizens Bank of
Central Indiana from April 1996 to August 1997;
Loan Officer of Norwest Mortgage, Inc. from
November 1994 to April 1996; Branch Manager of
American Home Funding from February 1994 to
November 1994.
D. Warren Robison......................... 33 Senior Vice President since September 1998;
Secretary since August 1997; Director since March
1997 (term expires 2001); Director of the Bank
since June 1998; Vice President and Treasurer from
August 1997 to June 1998; President and sole
shareholder of Hoosier Appraisal Service, Inc. and
a licensed real estate appraiser since 1985. Vice
President of Hale Abstract Company, Inc., since
July 1992.
</TABLE>
3
<PAGE> 9
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
- ---- --- ------------------------------
<S> <C> <C>
Wendell L. Bernard........................ 54 Director since June 1998 (term expires 2000);
Director of the Bank since June 1998; Owner and
operator of a real estate agency located in
Shelbyville, Indiana. Director and Vice President
of Finance of Williams Industrial, Inc., a
manufacturing company until 1997.
Peter G. DePrez........................... 51 Nominee for Director (term expiring 2002);
Director of the Bank since January 1999; Attorney;
Advisory Board Member of National City Bank
(Shelby County) until 1998; Director and Officer
of Shelby County Newspapers, Inc.
Ralph W. Van Natta........................ 69 Director since June 1998 (term expires 2001);
Director of the Bank since June 1998; Owner and
operator of a Shelby Travel Center located in
Shelbyville, Indiana.
Stephen R. Cartwright..................... 51 Vice President and Chief Credit Officer since June
1998; Senior Vice President for Retail Lending of
Fort Wayne National Bank from January 1998 to May
1998; Senior Vice President and Direct Consumer
Loan Production Manager of First of America from
February, 1997 to January 1998; First of America's
Vice President of Indirect Lending from December
1991 to February 1997.
Bradley A. Long........................... 35 Vice President and Chief Financial Officer since
March 1998; Vice President of First of America
Bank Corporation's Bankcard Division in Kalamazoo,
Michigan from March 1997 to February 1998; First
of America's Vice President-Financial Analysis
Manager from April 1994 to March 1997.
</TABLE>
ITEM 1 -- ELECTION OF DIRECTORS
NOMINEES
Two directors will be elected at the Annual Meeting. Directors will serve
a three-year term until the 2002 annual meeting or until their earlier
resignation or removal. If any nominee is not available for election, proxies
will be voted for another person nominated by the Board of Directors or the size
of the Board will be reduced.
The nominees are as follows:
- ---------------------------------------------------
Robert C. Reed
Director since 1997
Age 33
- ---------------------------------------------------
Mr. Reed is the Vice-Chairman, President and Chief Executive Officer of the
Company. He is also President and Chief Executive Officer of Shelby County Bank,
the Company's wholly-owned bank subsidiary. Mr. Reed has over fourteen years of
banking experience in Shelby County. From April of 1996 to August of 1997, he
was Vice President and Regional Director for Citizens Bank. In this position, he
headed Citizens Bank's operations for the Shelby County market and served on the
bank's management committee. During Mr. Reed's banking career he has served in
various lending and administrative positions in Shelby County. His banking
career began with Farmers National Bank (now a part of National City Bank,
Indiana) where he served for over eight years with responsibilities for lending
and branch administration. Mr. Reed was then employed by Irwin Union Bank and
Trust Company from September 1992 to January 1994 as a branch officer and also
4
<PAGE> 10
had mortgage lending responsibilities from September 1992 to January 1994. Mr.
Reed was subsequently employed by American Home Funding. Norwest Mortgage, Inc.
next hired Mr. Reed as a loan officer. He then went to work for Citizens Bank.
Mr. Reed also has served on the boards of various civic and service
organizations. He is the past President of the Town Council in Morristown,
Indiana where he worked extensively with economic development efforts. Mr. Reed
is currently serving on the Board of Directors of the Shelby County Chamber of
Commerce, Board of Directors of Shelby County Development Corporation, Board of
Directors of Blue River Development Corporation, Board of Directors of Shelby
Industrial Development, Inc., Board of Directors of Mainstreet Shelbyville, Inc.
and is a Member of Community Bankers of Indiana.
- ---------------------------------------------------
Peter G. DePrez
Nominee
Age 51
- ---------------------------------------------------
Mr. DePrez practices general law with Brown, Linder & DePrez, P.A.,
Shelbyville, Indiana. Mr. DePrez received his undergraduate education at Trinity
college in Hartford, Connecticut and his J.D. degree from Indiana University in
1973. Mr. DePrez served as the Shelby County Deputy Prosecuting Attorney from
1974 to 1977. He practiced law with the firm of Robison, DePrez, Lux & Schooley
P.A. from 1973 to 1988.
Mr. DePrez is also active in the business and service communities of
Shelbyville and Shelby County. He is a member of the Shelby County Development
Corporation and a member of the board of directors of Shelbyville Newspapers
Inc., Shelby Industries, Inc., Shelby Industrial Development, Inc. and Blue
River Development Corporation. He is a director and officer of Shelby County
Newspapers, Inc. and is also the managing partner of RM&D Realty.
Mr. DePrez also served as a member of the Board of Directors of Farmers
National Bank of Shelbyville from 1976 until its subsequent merger with
Merchants National Bank and Trust Company. Thereafter, he served as an advisory
board member for Merchants National Bank and its successor National City Bank of
Indiana until 1998.
Mr. DePrez is a member of the Shelby County Bar Association (where he
served as President for 1984 and 1985). He is also a member of the Indiana Bar
Association, the American Bar Association, the Indiana Trial Lawyer Association
and the Association of Trial Lawyers of America.
BOARD COMMITTEES AND MEETING ATTENDANCE
The Board of Directors has four committees, the Executive Committee, the
Audit, Compensation and Nominating Committees. Committees report their actions
to the full Board at its next regular meeting. A description of the duties of
each committee follows the table below.
COMMITTEE MEMBERSHIP AND MEETINGS HELD
<TABLE>
<CAPTION>
NAME EXECUTIVE AUDIT COMPENSATION NOMINATING
- ---- --------- ----- ------------ ----------
<S> <C> <C> <C> <C>
Robert C. Reed............................ / /
Steven R. Abel............................ * *
Wendell L. Bernard........................ / /
D. Warren Robison......................... / * * /
Ralph W. Van Natta........................ / / /
No. of Meetings in Fiscal 1998**.......... 3 4 3 2
</TABLE>
- ---------------
/ Member
* Chairperson
** The Board held 7 meetings in 1998. Each director attended all meetings of
the Board of Directors and Committees of the Board.
5
<PAGE> 11
EXECUTIVE COMMITTEE
- When the Board is not in session, has all of the power and authority of
the Board except under certain circumstances.
AUDIT COMMITTEE
- Examines the activities of the Company's independent auditors and
internal audit department to determine whether these activities are
reasonably designed to assure the soundness of accounting and financial
procedures.
- Reviews the Company's accounting policies and the objectivity of its
financial reporting.
- Considers annually the qualifications of the Company's independent
auditors and the scope of their audit and makes recommendations to the
Board as to their selection.
- Receives reports from the internal auditors and reviews the scope of the
internal audit program.
COMPENSATION COMMITTEE
- Establishes executive compensation policies and programs.
- Establishes the base salaries for executive officers.
- Reviews the Company's management development and succession planning
policies.
- Administers the Company's stock option plans and employee bonus plan.
NOMINATING COMMITTEE
- Reviews the qualifications of persons eligible to stand for election as
directors and makes recommendations to the Board on this matter.
- Considers as nominees for director qualified persons recommended by
directors, management and shareholders. The Nominating Committee also
considers proposals from Shareholders for any new business. Written
recommendations for director nominees and proposals for any new business
should be delivered to the Secretary, Blue River Bancshares, Inc., 29
East Washington Street, Shelbyville, Indiana 46176. Any Shareholder
desiring to make a nomination for director or a proposal for any new
business must notify the Secretary of the Company 120 days prior to the
meeting. Notification must include certain information detailed in the
Company's Articles of Incorporation.
6
<PAGE> 12
COMPENSATION OF DIRECTORS
The following table shows all components of director compensation for 1998:
DIRECTORS' COMPENSATION(1)
<TABLE>
<CAPTION>
CASH EQUITY
COMPONENT COMPONENT(2) OTHER(3)
--------- ------------- ---------
<S> <C> <C> <C>
Board attendance fee per Director (per month)... $1,200
Committee Chairperson fee (per month)........... $ 300
Grants of stock options per Director............ 2,400
Other benefits paid in 1998..................... $5,973
</TABLE>
- ---------------
(1) A director who is an officer or employee of the Company or its subsidiaries
is not compensated for service on the Board or on any Committee of the
Board.
(2) An award of option representing 2,400 shares of common was made to each
director effective June 22, 1998 pursuant to the Directors' Stock Option
Plan described below.
(3) Total amount of Health, Life and Disability insurance premiums paid for
directors Abel and Bernard and Life and Disability insurance premiums paid
for director Robison.
DIRECTORS' STOCK OPTION PLAN
The Board of Directors of the Company adopted, with the approval of
shareholders, a nonqualified stock option plan which provides for the grant of
nonqualified stock options to those individuals who serve as Directors of the
Company or any of its subsidiaries, including the Bank.
The Directors' Stock Option Plan provides for the grant of nonqualified
stock options with an exercise price per share of the greater of the public
offering price of $12.00 per share or the fair market value of a share on the
date of grant. A total of 100,000 shares of Common Stock are reserved for
issuance under the Directors' Stock Option Plan. Options granted under the
Directors' Stock Option Plan become exercisable on the date of grant to the
extent of 20 percent of the shares covered by the option and will vest with
respect to an additional 20 percent of the shares on each anniversary of the
date of the grant. The unexercised portion of each option automatically expires,
and is no longer exercisable, on the earlier to occur of the following: (i) 15
years after the option is granted, (ii) three months after the person who was
granted the option ceases to be a director, other than due to permanent
disability, death, or for cause, (iii) one year following the death or permanent
disability of the director, or (iv) termination of the director's services, for
cause. No option will be granted under the Directors' Stock Option Plan after
July 31, 2007. In the future, an individual will become eligible to receive
grants of options under the Directors' Stock Option Plan upon his election to a
qualifying board of directors but will not receive additional options because he
is a member of more than one such board.
REPORT OF THE COMPENSATION OF THE BOARD OF DIRECTORS
ROLE OF THE COMMITTEE
The Committee establishes and oversees the Company's executive compensation
policies and programs. The Committee also recommends to the Board of Directors
base salaries, target bonus levels, actual bonuses, and long-term incentive
awards to be paid to executive officers. In carrying out these functions, we
believe it is important to align executive compensation with business objectives
and strategies, management initiatives, financial performance and enhanced
shareholder value.
7
<PAGE> 13
Our Committee is comprised of four directors, two of whom are officers of
the Company, but one is not compensated as such. Compensation for Mr. Reed is
determined by the Compensation Committee under the process described in this
report. Although Mr. Reed is a member of the Compensation Committee, he does not
participate in the discussion of, or vote upon, his compensation.
EXECUTIVE COMPENSATION PROGRAM
The executive compensation program is designed to attract and retain key
executives with outstanding abilities and to motivate them to perform to the
full extent of their abilities. We believe that executives should have a greater
portion of their compensation at risk than other employees, and that executive
compensation, as stated above, should be tied to the performance of the business
and be aligned with benefits realized by the Company's shareholders.
Compensation for Company executives consists of both cash and equity based
opportunities. The annual cash compensation consists of (i) base salary and (ii)
annual bonus opportunity under the Company's Annual Bonus Plan. Equity based
opportunities are provided on a long-term basis under the Company's 1997 Key
Employees' Stock Option Plan.
The Committee determines base salary ranges for executive officers based
upon competitive pay practices in the business in which the Company competes.
Annually the Committee reviews actual salaries of executive officers based
on judgments of past performance, job duties, scope and responsibilities, and
expected future contributions. The most recent past performance is the prime
determinant.
The Committee also oversees the Company's Annual Bonus Plan for employees.
We establish challenging objectives based on business prospects.
Each year, after completion of the audit of the Company's financial
statements, the Committee reviews business results and the individual
performance of each executive officer and determines cash bonus payments under
the terms of the Annual Bonus Plan.
FISCAL YEAR 1998 CEO COMPENSATION
The compensation for Mr. Reed recommended to the Board of Directors was
based upon a number of factors and criteria. These include the procedure for
determining base salary ranges, actual salaries within ranges, Annual Bonus Plan
targets and long-term incentive awards described earlier in this report.
Base Salary. For 1998, the Committee determined that Mr. Reed's base
salary be increased by 18% over the level set for 1997. The Committee's
determination was based on the fact that Mr. Reed was compensated at the low end
of his salary range and the Committee felt it was appropriate that his base
salary be advanced further in the range in light of the Company's successful
public offering and acquisition of Shelby County Bank. The Committee also
considered Mr. Reed's excellent overall leadership and his positive impact on
Shelby County Bank.
Annual Bonus. For 1998, Mr. Reed earned the annual bonus shown on page 10
based on (i) the fact that the Company successfully completed its public
offering, (ii) the acquisition of Shelby County Bank and (iii) Mr. Reed's
individual contributions as CEO of both the Company and Shelby County Bank,
recognizing, among other things, initiatives in business development activities.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1,000,000 for compensation paid to the Chief Executive Officer and other Named
Executive Officers unless
8
<PAGE> 14
certain requirements are met. One of the requirements is that compensation over
$1,000,000 must be based upon attainment of performance goals approved by
shareholders. The 1997 Key Employees' Stock Option Plan was approved by the
Company's shareholders and was designed to meet the requirements of Section
162(m) with respect to the stock option deductibility cap.
Compensation Committee
D. Warren Robison, Chairman
Wendell L. Bernard
Ralph W. Van Natta
Robert C. Reed
9
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows cash and other compensation paid or accrued
during the last fiscal year to the Company's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SHARES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS COMPENSATION(3)
--------------------------- ------ --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Robert C. Reed........................ 1998 $117,172 $20,000 8,400 $6,133
Vice Chairman, 1997 42,309 -0- 25,000 -0-
President and Chief Executive
Officer
</TABLE>
- ---------------
(1) Mr. Reed's annual salary in 1997 was $110,000 and his employment began on
August 11, 1997.
(2) Bonuses earned under the Annual Bonus Plan are for the year reported,
regardless of the year paid. The Company's Annual Bonus Plan is based on the
achievement of business and/or financial performance objectives which
support business plans and goals.
(3) Includes $3,094 of life, health and disability insurance premiums, $1,414
for the use of the Company's automobile and $1,625 compensation accrued to
Mr. Reed pursuant to the 401(k) plan.
OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION VALUES
Stock Options. The following tables summarize stock options granted to and
exercised by the executive officer named in the Summary Compensation Table
during 1998, and the value of the options held by such person at December 31,
1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE
NAME OPTIONS GRANTED 1998 PRICE EXPIRATION DATE
- ---- --------------- ------------- -------- ---------------
<S> <C> <C> <C> <C>
Robert C. Reed................. 6,000(1) 31.5% $12.00 June 22, 2008
</TABLE>
- ---------------
(1) Represents number of options awarded as an Executive Officer. Does not
include 2,400 options awarded as a Director of the Company.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Reed............. -0- -0- 6,680 26,720 -0- -0-
</TABLE>
EMPLOYMENT AGREEMENT FOR EXECUTIVE OFFICER
The Board of Directors of the Company has approved a three-year employment
contract with its Vice Chairman, President and Chief Executive Officer, Robert
C. Reed. Each year, the contract can be extended for additional one-year terms
to maintain a three-year term unless notice is properly given by either party to
the contract. Unless extended further, the contract will expire in 2001.
10
<PAGE> 16
Mr. Reed receives his current salary under the contract, which salary is subject
to increases approved by the Board of Directors. The contract also provides,
among other things, for participation in other fringe benefits and benefit plans
available to the Company's employees. Mr. Reed may terminate his employment upon
60 days' written notice to the Company. The Company may discharge Mr. Reed "for
cause" (as defined in the contract) at any time or upon the occurrence of
certain events specified in the contract. Upon termination of Mr. Reed's
employment by the Company for other than cause or in the event of termination by
Mr. Reed "for cause" (as defined in the contract), Mr. Reed will receive his
base compensation under the contract (a) for an additional three years (or the
remaining term of the contract, if shorter) if the termination follows a change
of control (as defined in the contract), or (b) for an additional two years (or
the remaining term of the contract, if shorter) if the termination does not
follow a change of control. In addition, during such period, Mr. Reed will
continue to participate in the Company's group insurance plans or receive
comparable benefits. Further, within a period of three months after such
termination following a change of control, Mr. Reed will have the right to cause
the Company to purchase any stock options he holds for a price equal to the fair
market value (as defined in the contract) of the shares subject to such options
minus their option price. Payments pursuant to the contract will be adjusted, if
necessary, in order to avoid any adverse tax consequences to the Company and Mr.
Reed under the so-called "golden parachute" provisions of the Code.
1997 KEY EMPLOYEE STOCK OPTION PLAN
The Board of Directors of the Company adopted a stock option plan which
provides for the grant of "incentive stock options" within the meaning of
Section 422 of the Code and of nonqualified stock options (the "Employee Stock
Option Plan"). The Employee Stock Option Plan provides for the award of stock
options to elected officers and key employees of the Company and its
subsidiaries, including the Bank. The exercise price per share for all options
granted under the Employee Stock Option Plan will not be less than the greater
of $12.00 per share or the fair market value of a share on the date of grant. No
option will be granted under the Employee Stock Option Plan after August 27,
2007. The Employee Stock Option Plan was approved by the shareholders of the
Company.
Options may be granted under the Employee Stock Option Plan only to
officers and other key employees who are in positions to make significant
contributions to the success of the Company. The Compensation Committee
administers the Employee Stock Option Plan.
Options will be exercisable in whole or in part upon such terms and
conditions as may be determined by the Committee, but in no event will any
incentive stock options be exercisable later than ten years after date of grant.
A total of 50,000 shares of Common Stock have been reserved for issuance
under the Employee Stock Option Plan. As of the date of this Proxy Statement,
options for 19,000 shares of Common Stock are outstanding under the Employee
Stock Option Plan.
SAVINGS PLAN
The Blue River Bancshares, Inc. 401(k) Profit Sharing Plan (the "Savings
Plan") is a qualified salary reduction plan within the meaning of Section 401(k)
of the Code. Under the Savings Plan, all regular employees of the Company and
its affiliates are eligible participants under the Savings Plan on the next plan
entry date (as defined). An employee who has satisfied this eligibility
requirement may participate in the Savings Plan by directing his or her employer
to make before-tax salary reduction contributions to the Savings Plan.
Contributions may be directed in any integral percentage between 1% and 15% of
the employee's basic compensation (as defined) subject to an
11
<PAGE> 17
annual dollar limitation under the Code (currently $10,000). Before-tax salary
reduction contributions are fully vested at all times and are invested by
participants in investment funds made available by Shelby County Bank, the
trustee of the Savings Plan.
The Company may also make contributions to the Savings Plan, as determined
in its sole discretion. If the Company elects to do so, it will contribute a
percentage of the compensation deferrals the participants' made that year.
Further, the Company, in its discretion, may make a profit sharing contribution
to the Savings Plan irrespective of whether the Company has any current or
accumulated net profits. Prior to the retirement or death or disability of a
participant, the amount of the matching contribution account and profit sharing
contribution account that will be vested and payable to each participant upon
termination of employment will be determined according to the following
schedule:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS OF SERVICE VESTED AND PAYABLE
- ---------------- ------------------
<S> <C>
Less than 1......................................... 0%
1................................................... 20%
2................................................... 40%
3................................................... 60%
4................................................... 80%
5 or more........................................... 100%
</TABLE>
ANNUAL BONUS PLAN
The Company maintains an Annual Bonus Plan which is administered by the
Compensation Committee. The Company implemented the Annual Bonus Plan in 1998
which provides for additional compensation in the form of cash incentive
payments which are contingent on the achievement of certain corporate and
individual performance goals. Payments under the Annual Bonus Plan, if any, are
in the discretion of the Compensation Committee. Each employee of the Company
and the Bank are eligible to participate in the Annual Bonus Plan.
INDEBTEDNESS OF MANAGEMENT
It is anticipated that the directors and officers of the Company and the
Bank and the companies with which they are associated will have banking and
other transactions with the Company and the Bank in the ordinary course of
business. It is the Bank's policy that any loans and commitments to lend to such
affiliated persons or entities included in such transactions will be made in
accordance with all applicable laws and regulations and on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated parties of similar
creditworthiness, and will not involve more than the normal risk of
collectibility or present other unfavorable features to the Company and the
Bank. Applicable law and Bank policy generally require that transactions between
the Company or the Bank, and any officer, director, principal shareholder or
other affiliate of the Company or the Bank will be on terms no less favorable to
the Company or the Bank than could be obtained on an arm's-length basis from
unaffiliated independent third parties.
RELATED TRANSACTIONS
Messrs. Abel, Reed and Robison (collectively, the "Founders") were the sole
shareholders of the Company prior to the closing of the Company's public
offering on June 26, 1998, and each owned 30,000 Shares. Immediately prior to
the closing, the Shares owned by the Founders were redeemed by the Company at
their initial cost of $0.20 per Share. The Founders then purchased Shares in the
offering at the initial public offering price of $12.00 per Share. The Founders
extended to the Company lines of credit in an aggregate amount of $450,000 to
fund certain expenses of the
12
<PAGE> 18
Company. As of June 26, 1998, there was $335,800 outstanding under such lines of
credit. All advances under the lines of credit were due and payable on demand.
Interest at 8.5% was paid by the Company on the outstanding balances under the
lines of credit, which was the prime rate of interest charged by most of the
Indianapolis banks at the time such loans were made. The Founders elected to
receive repayment of the loans at the closing of the offering in the form of
Shares sold in the offering, valued at the initial public offering price of
$12.00 per Share. The lines of credit with the Founders were then retired.
TAX INDEMNIFICATION AGREEMENT
The Company and the Founders are parties to a tax indemnification agreement
relating to their respective income tax liabilities associated with the Company.
Subject to certain limitations, this tax indemnification agreement generally
provides that the Founders, as the sole shareholders of the Company prior to the
offering, are indemnified by the Company, and the Company is indemnified by the
Founders, with respect to certain federal and state income taxes (plus interest
and penalties) shifted between the Founders, on the one hand, and the Company,
on the other hand, for taxable years ending either before or after the closing
of the offering as a result of adjustments to tax returns of the Founders and
the Company.
ITEM 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors appointed Deloitte & Touche LLP as independent
certified public accountants to examine and report on the consolidated financial
statements of the Company for the 1999 fiscal year and recommends that the
Shareholders ratify the appointment. If the Shareholders do not ratify the
appointment of Deloitte & Touche LLP, the Audit Committee and the Board of
Directors will consider the appointment of other independent certified public
accountants. One or more representatives of Deloitte & Touche LLP will be
present at the Annual Meeting. They will have the opportunity to respond to
appropriate questions and to make a statement if they wish to do so.
ITEM 3 -- OTHER MATTERS
The Board of Directors is not aware of any other matter to be presented for
action at the meeting. If any other matter requiring a vote of the Shareholders
should arise, the Proxies (or their substitutes) will vote in accordance with
their best judgment.
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<PAGE> 19
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<PAGE> 20
GLOSSARY
Annual Meeting............. 1999 Annual Meeting of Shareholders of Blue River
Bancshares, Inc.
Bank....................... Shelby County Bank, a wholly-owned Subsidiary of
the Company.
Board or Board of
Directors.................. Board of Directors of Blue River Bancshares, Inc.
Common Stock or Stock
or Shares................ Blue River Bancshares, Inc. Common Stock.
Named Executive............ The Company's Chief Executive Officer.
Proxies.................... Wendell L. Bernard and D. Warren Robison
Securities and Exchange
Commission or SEC
or Commission............ The United States Securities and Exchange
Commission.
Shareholder................ A holder of Common Stock of the Company.
Company.................... Blue River Bancshares, Inc.
14
<PAGE> 21
PROXY BLUE RIVER BANCSHARES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wendell L. Bernard and D. Warren Robison, or
either of them, as proxies of the undersigned, each with full power of
substitution and resubstitution, to represent and to vote all of the shares of
common stock of Blue River Bancshares, Inc. ("Blue River") which the undersigned
beneficially holds of record on April 26, 1999 and would be entitled to vote at
the Annual Meeting of Shareholders of Blue River, to be held at the Ramada Inn,
1810 N. Riley Highway, Shelbyville, Indiana, on May 27, 1999, at 10:00 a.m.,
local time, and at any adjournments thereof, with all of the powers the
undersigned would possess if personally present, on the matters set forth below.
1. The election as directors of Robert C. Reed and Peter G.
DePrez, each for a three year term.
[ ] FOR [ ] WITHHOLD [ ] FOR ALL
EXCEPT
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in
the space provided below.
-----------------------------------------------------------------------------
2. Ratification of the appointment of Deloitte & Touche LLP as
auditors for the fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, on such other matters as may properly
come before the Annual Meeting.
PLEASE SIGN ON REVERSE SIDE
<PAGE> 22
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND THE RATIFICATION
OF PROPOSAL 2. ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PROXIES. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
DATED: , 1999
---------------------
---------------------------------
(Signature of Shareholder)
---------------------------------
(Signature of Shareholder)
Please sign exactly as your name
appears on your stock
certificates and on the label
placed to the left. Joint owners
should each sign personally.
Trustees, guardians, executors
and others signing in a
representative capacity should
indicate the capacity in which
they sign.
