April 15, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of Horizon Bancorp to be held at the Orak Shrine Temple, 3848 N. Frontage Road,
Michigan City, Indiana on Thursday, May 16, 1996 at 10:00 a.m. (local time). To
ensure that a quorum will be represented at the meeting, we encourage you to
complete, sign, date and return your proxy promptly in the enclosed postage
prepaid envelope. This will not limit your right to vote in erson or to attend
the meeting.
The Notice of Annual Meeting and the Proxy Statement on the following pages
cover the business to come before the meeting, which will include election of
directors. We urge you to read these materials carefully.
The Annual Report of Horizon Bancorp for the year ending December 31, 1995
is also enclosed. The Annual Report is not to be considered as proxy
solicitation material.
We look forward to meeting our shareholders, and welcome the opportunity to
discuss the business of your company with you.
Larry E. Reed
Robert C. Dabagia
Chairman of the Board
President
<PAGE>
HORIZON BANCORP
515 FRANKLIN SQUARE
MICHIGAN CITY, INDIANA 46360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
NOTICE IS HEREBY GIVEN THAT PURSUANT TO THE CALL OF ITS DIRECTORS, the Annual
Meeting of Shareholders of Horizon Bancorp will be held on Thursday, May 16,
1996, 10:00 a.m. (local time), at the Orak Shrine Temple, 3848 N. Frontage Road,
Michigan City, Indiana, for the purpose of considering and voting upon the
following matters:
1) The election of three (3) Directors to serve terms which will expire in 1999.
2) To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business on April 1, 1996, the
record date fixed by the Board of Directors, are entitled to notice of and to
vote at the meeting.
Your attention is directed to the accompanying Proxy Statement and Proxy.
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY IN ORDER THAT THERE MAY BE PROPER
REPRESENTATION AT THE MEETING. YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
By Order of the Board of Directors
Thomas P. McCormick
Secretary
April 15, 1996
<PAGE>
HORIZON BANCORP
515 FRANKLIN SQUARE
MICHIGAN CITY, INDIANA 46360
(219) 879-0211
April 15, 1996
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of Horizon Bancorp
("Horizon") in connection with the solicitation by the Board of Directors of
proxies to be voted at the Annual Meeting of Shareholders of Horizon to be held
at the Orak Shrine Temple, 3848 N. Frontage Road, Michigan City, Indiana on
Thursday, May 16, 1996 at 10:00 a.m. (local time), and at any adjournment
thereof. This Proxy Statement and accompanying form of proxy have been mailed to
shareholders on or about April 15, 1996.
Only shareholders of record as of April 1, 1996 will be entitled to notice of,
and to vote at, the Annual Meeting. The voting securities of Horizon consist
only of Common Stock, of which 910,874 shares were issued and outstanding on the
record date. For the matters to be voted on at the Annual Meeting, each share of
Horizon Common Stock is entitled to one vote.
EXERCISE AND VOTING OF PROXY
The enclosed proxy is designed to permit each shareholder of record of Horizon
Common Stock at the close of business on April 1, 1996 to vote at the Annual
Meeting. All properly executed proxies delivered pursuant to this solicitation
will be voted at the meeting in accordance with the instructions of the
shareholders given in the proxies. In the absence of any such instructions, the
shares of Horizon Common Stock, represented by proxy, will be voted for the
election of the three nominees for directors. On other matters that may properly
come before the meeting, this proxy will be voted, in their discretion, by the
named Proxies. Any proxy may be revoked at any time insofar as it has not been
exercised, either by delivery to Horizon of a written revocation, by a duly
executed proxy bearing a later date or by action of the shareholder at the
meeting.
The nominees for election as directors of Horizon named in the Proxy Statement
will be elected by a plurality of the votes cast. Action on other matters
presented at the meeting will be approved if the votes cast in favor exceed the
votes cast in opposition, unless a higher voting requirement is required.
Abstentions or broker non-votes will not be voted for or against any items or
other matters presented at the meeting.
The cost of soliciting proxies in the accompanying form will be borne by
Horizon. In addition to solicitation by mail, proxies may be solicited
personally or by telephone or telegraph, by certain directors, officers or
employees of Horizon or First Citizens Bank, N.A. ("Bank"), its subsidiary, who
will not be specially compensated for such solicitations. No solicitation of
proxies will be made by other paid solicitors.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best of the knowledge of Horizon, as of February 28, 1996, the following
are the only beneficial owners of more than five percent (5%) of the outstanding
shares, except as otherwise noted under Nominee's Standing for Election
NAME & ADDRESS OUTSTANDING STOCK PERCENTAGE OF OUTSTANDING STOCK
- -------------- ----------------- -------------------------------
Cede & Co. 191,652 21.02%
Box #20
Bowling Green Station, NY 10004
First Citizens Bank, N.A.,
as trustee 306,302 (1) 33.59%
P.O. Box 1125
Michigan City, IN 46360
Darhap & Co. 83,241 (2) 9.13%
P.O. Box 1125
Michigan City, IN 46360
(1) Shares indicated as beneficially owned include 295,570 share under the
Employee Stock Ownership Plan ("ESOP") and 10,732 shares under the Employees'
Thrift Plan.
(2) Shares indicated as beneficially owned are held by Darhap & Co. as nominee
for First Citizens Bank Trust Department for shares held for beneficiaries of
trusts and estates, not the Employee Stock Ownership Plan and Employees' Thrift
Plan.
ELECTION OF DIRECTORS
The Articles of Incorporation of Horizon provide that the Board of Directors
shall consist of three classes of directors. One class of directors is to be
elected each year with terms extending to the third succeeding Annual Meeting
after such election.
NOMINEES STANDING FOR ELECTION
TERMS TO EXPIRE IN 1999:
NAME, AGE, AND SHARES
YEAR FIRST BENEFICIALLY PERCENT OF
ELECTED DIRECTOR(1) PRINCIPAL OCCUPATION OWNED(2) CLASS
- ---------------- -------------------- -------- -----
Dale W. Alspaugh Chancellor,
Age - 63 Purdue University 1,030 0.10%
1986 -North Central
Robert E. McBride, M.D. Pathologist, Pathology 3,627 0.37%
Consultants, Inc.
Gene L. Rice Farmer 226 0.02%
Age - 63
1979
<PAGE>
CONTINUING DIRECTORS
TERMS TO EXPIRE IN 1998:
NAME, AGE, AND SHARES
YEAR FIRST BENEFICIALLY PERCENT OF
ELECTED DIRECTOR(1) PRINCIPAL OCCUPATION OWNED(2) CLASS
- ---------------- -------------------- -------- -----
George R. Averitt Financial consultant; 682 0.07%
Age - 64 former publisher of
1973 Michigan City News-Dispatch
(local newspaper)
James D. Brown Retired, 5,475 0.55%
Age - 69 General Construction Co., Inc.
1979 (general contractor)
Boyd W. Phelps Vice President, Seico, Inc. 1,250 0.13%
Age - 67
1971
Larry N. Middletn, Jr President, Century 21 250 0.03%
Age - 43
1995 Middleton Co., Inc.
Susan D. Sterger Executive Vice President, 100 0.01%
Age - 41 McKee Group
1995
<PAGE>
CONTINUING DIRECTORS
TERMS TO EXPIRE IN 1997:
NAME, AGE, AND SHARES
YEAR FIRST BENEFICIALLY PERCENT OF
ELECTED DIRECTOR(1) PRINCIPAL OCCUPATION OWNED(2) CLASS
- ---------------- -------------------- -------- -----
Russell L. Arndt Farmer 1,272 0.13%
Age - 67
1976
Robert C. Dabagia President and 37,871 (3) 3.81%
Age - 57 Chief Administrative
1980 Officer, Horizon and Bank
since 1986
Myles J. Kerrigan Board Member, 883 0.09%
Age - 57 Chicago Board of Trade
1979
Larry E. Reed Chairman and 46,795 (4) 4.71%
Age - 61 Chief Executive Officer
1979 Horizon and Bank
since 1986
(1) The date indicated in this column reflects the year the person listed was
first elected as a director of Horizon or one of the predecessors of Bank,
namely Citizens Bank of Michigan City ("Citizens Bank") and First Merchants
National Bank ("First Bank").
(2) The information shown regarding shares beneficially owned is based upon
information furnished to Horizon by the individuals listed. The nature of
beneficial ownership, unless otherwise noted, represents sole or shared
voting or investment power.
(3) Shares indicated as beneficially owned by Mr. Dabagia include 23,000 shares
of vested stock options granted under the 1987 Stock Option and Stock
Appreciation Rights Plan ("1987 Plan") of Horizon, 7,751 shares held by the
Horizon Employee Stock Ownership Plan ("ESOP") and Horizon Bancorp
Employees' Thrift Plan ("Thrift Plan").
(4) Shares indicated as beneficially owned by Mr. Reed include 30,000 shares of
vested stock options granted under the 1987 Stock Option and Stock
Appreciation Rights Plan ("1987 Plan") of Horizon, 10,164 shares held by
the Horizon Employee Stock Ownership Plan ("ESOP") and the Horizon Bancorp
Employees' Thrift Plan ("Thrift Plan") and 2,750 shares owned by Mr. Reed's
spouse of which Mr. Reed disclaims ownership.
Information regarding shares beneficially owned is as of February 28, 1996. As
of February 28, 1996, directors, nominees and executive officers, as a group
(15, including above 12 individuals), beneficially owned 125,552 shares
(including 70,000 shares exercisable under stock options), 12.64% of the shares
outstanding.
BOARD RECOMMENDATION
The Board unanimously recommends that the shareholders vote for the election of
the nominees. It is intended that the proxies given to the persons named in the
accompanying form of proxy will, unless otherwise indicated therein, be voted
for the election of the nominees named above. Although management has no reason
to believe that any nominee will be unable to serve, in the event any nominee
should become unavailable for election, and unless the Board of Directors shall
reduce the size of the Board to a number which shall be equal to the number of
nominees who are able and willing to serve, the persons named in the proxy will
vote for a substitute nominee who will be designated by the Board of Directors.
PROCEDURES FOR NOMINATION OF DIRECTORS
Under Horizon's by-laws, nominations for election to the Board of Directors may
be made by the Board of Directors or by any shareholder of any outstanding class
of capital stock of Horizon entitled to vote for the election of directors.
Horizon does not have a Nominating Committee of the Board of Directors.
Nominations, by any shareholder, must be made in writing and must be delivered
to the President of Horizon not less than 30 days nor more than 50 days prior to
any meeting of shareholders called for the purpose of electing directors and
must include certain detailed information and representations with respect to
such nominee as specified in the by-laws. Nominations not made in accordance
with the by-laws may be disregarded by the chairman of the meeting, in his
discretion, and upon his instructions, the vote tellers may disregard all votes
cast for any such nominee. A complete copy of the applicable provision of the
by-laws will be available upon request to the President of Horizon.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1995, Horizon's Board of Directors held twelve meetings. In 1995, all
Horizon directors attended 75% or more of the aggregate of the meetings of the
Board of Horizon, Bank and all committees upon which the Directors serve.
Horizon does not have any standing committees of its own. However, the Bank
Board of Directors has, among others, an Audit Committee and Compensation
Committee, which also serve as such for Horizon and The Loan Store, Inc., a
consumer finance subsidiary of Horizon.
The Audit Committee, whose members at December 31, 1995 were George R. Averitt,
James D. Brown, Myles J. Kerrigan, and Gene L. Rice met four times in 1995.
Larry E. Reed and Robert C. Dabagia are ex officio members of the Audit
Committee. The purpose of the Committee is to assist the Board of Directors in
fulfilling its statutory and fiduciary responsibilities for examinations of Bank
and affiliates and monitoring of accounting, auditing and financial reporting
practices. The Committee reviews the internal audit program of Bank and
recommends to the Board of Directors the engagement of an outside auditing firm.
The Compensation Committee, whose members at December 31, 1995 were Robert E.
McBride, Chairman, Russell L. Arndt, James D. Brown, Robert C. Dabagia, Larry N.
Middleton, Jr., Boyd W. Phelps, Larry E. Reed, and Susan D. Sterger met two
times in 1995. The Committee reviews all salary and employee benefit issues
relating to Bank and affiliates employees and directors.
<PAGE>
EXECUTIVE OFFICERS OF BANCORP
The following information is provided with respect to executive officers of
Horizon as of April 1, 1996:
OFFICE AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
- ---- --- --------------------------
Larry E. Reed 61 Chairman and Chief Executive Officer
Horizon and Bank since 1986.
Robert C. Dabagia 57 President and Chief Administrative Officer
Horizon and Bank since 1986
Thomas P. McCormick 42 Executive Vice President
Horizon and Bank since 1986
Diana E. Taylor 31 Vice President and Chief Financial Officer
Horizon and Bank since 1995;
Senior Auditor, Bank since 1991.
All of Horizon's executive officers hold office for a term of one year. Messrs.
Reed and Dabagia are parties to Employment Agreements ("Agreements") with
Horizon pursuant to which they have been selected to serve as Directors and
Chairman and Chief Executive Officer and President and Chief Administrative
Officer, respectively, of Horizon and Bank (see "Executive Compensation and
Other Information").
REPORT OF THE COMPENSATION COMMITTEE
DECEMBER 31, 1995
The Compensation of all elected officers of the Bank, including that of the
Chief Executive Officer, is set annually by the outside directors who are
members of the Compensation Committee of Bank's Board of Directors. The outside
director membership of the Compensation Committee is generally comprised of six
outside directors. Appointments of outside directors to the Compensation
Committee are rotated.
Compensation is composed of several segments which include base salary,
short-term incentives and long-term incentives. The Compensation Committee
compares all management compensation, including that of the Chief Executive
Officer, to the compensation paid to managers of the same position in similar
financial institutions. Data for this comparison comes from a variety of
independent and creditable sources with the principal data being that published
in an annual study by Wyatt Data Services/Cole Surveys, a division of the Wyatt
Company, one of the nation's leading independent consultants in employee
compensation. Because of timing differences, management compensation, including
that of the Chief Executive Officer, that was approved for 1995 was compared to
data for 1993 and therefore said management compensation for 1995 has not
received any benefit from increases in compensation received by management's
peers in 1994 and 1995.
MANAGEMENT SALARIES
All management salaries, including that of the Chief Executive Officer, are
governed by the Bank's formal salary administration program in which all salary
decisions are subject to detailed performance reviews which are conducted
annually. The formal salary administration program was initiated in 1977 and is
based upon a design submitted by Cole and Associates who provided consulting
services to the Bank at that time. Subsequently, Cole and Associates was
acquired by the Wyatt Company. Each year the salary administration program is
updated and each management salary is compared to those salaries being paid to
like positions in similar banks. Salary ranges for each management position in
the Bank are then computed from that data. In general, the highest salary that
would be allowable by the Bank is below the highest salary for that position as
reported in the Cole Survey data. In 1995, the highest computed top salary
allowable for the Chief Executive Officer was $248,000 and the actual salary
paid was $220,400 or 89% of the maximum allowable under the Bank's salary
administration program.
<PAGE>
SHORT TERM INCENTIVE PROGRAMS
Short-term incentive compensation for the Bank is in the form of an annual bonus
program. A bonus program was approved for the years 1987, and 1992 through 1995.
No bonus plan was established for 1988 through 1991. No bonuses were paid under
the plans approved in 1987, 1992 and 1995. The bonus plan establishes a bonus
pool of funds based upon the Bank's return on assets. A return on assets which
is below a predetermined level will result in no funding being made to the bonus
plan. Funds from the pool are distributed to the participants under a formula
which considers both their salary for that year and the level of their
performance rating. Both officers and staff can qualify to participate in the
bonus program, however, if the individual's performance rating is below a
predetermined level, they will not be eligible for a bonus. A bonus for 1995 was
not paid to employees because earnings thresholds were not met.
The Bank also has other short-term incentive compensation programs for both
officers and staff. These other programs are generally structured as sales
commission programs which are either nominal or material in value. If the
program can result in only nominal values, it typically is paid in addition to
the normal salary earned by the employee. However, if the program can result in
material values, it typically is paid in lieu of a discounted portion of both
the normal salary increase earned and the annual bonus program. In this
instance, the employee loses the discounted portion of the salary increase and
annual bonus even if they do not earn any commissions under the sales incentive
program for which they qualify. Neither the Chairman (Chief Executive Officer)
nor the President (Chief Administrative Officer) are permitted to participate in
any of the sales incentive programs.
LONG TERM INCENTIVE PROGRAMS/STOCK OPTIONS
Long-term incentives are in the form of stock options. Stock options are granted
to encourage and facilitate personal stock ownership by the executive officers
and thus strengthen their personal commitment to Horizon and gain a longer-term
perspective in their managerial responsibilities. This component of an executive
officer's compensation directly links the officer's interests with those of
Horizon's other shareholders. Horizon also recognizes that a stock incentive
program is a necessary element of a competitive compensation program. The
program utilizes vesting periods to encourage key employees to continue in the
employ of Horizon and thereby acts as a retention device for key employees. All
of the shares optioned under this program also carry stock appreciation rights.
PERFORMANCE REVIEWS
The Compensation Committee does make specific review of the performance of the
Chairman/Chief Executive Officer and the President/Chief Administrative Officer
who are the senior executive officers of the Bank. The Compensation Committee
reviews a variety of performance factors in considering the compensation for
each of the Bank's executive officers, including the Chairman and the President.
These factors generally include traditional financial results and indicators
such as revenues, expenses, assets, credit issues, reserves, earnings and ratios
such as return on equity, loans to deposits, and other significant factors and
performance indicators. The business of commercial banking is very complex and
is undergoing changes which generate uncertainties about future events. The
Chairman and the President must give guidance and leadership to nearly all
aspects of this dynamic enterprise, however, in the process are not expected to
work alone. This performance evaluation also recognizes that very often programs
that are initiated at the very top level of the organization are not quick
fixes, nor should they be. And, these programs are generally long term in
nature, bringing benefit to the Bank over many years. For those reasons, the
Compensation Committee also focused on the following issues in determining
performance levels for the Chairman and the President: quality of the
organization, service delivery characteristics, quality of service, leadership
in the community, and risk management.
There are numerous other issues upon which the Chairman, the President and other
executive officers are given performance measurements in setting their annual
compensation. Among these are the continued growth and development of our trust
business, a very major portion of our enterprise; efficient and cost effective
use of technology; the management of change; development of existing and new
services; recruitment of and development of skilled people in the organization;
team building; operating cost controls; improvement of fee income; ability to
meet increased competition; performance of the Bank's investment portfolio;
ongoing development of the Bank's information systems; and a broad variety of
banking and management functions that are typical of a well-managed banking
organization. All management compensation, including that of the Chief Executive
Officer and the other executive officers, is entirely performance related.
<PAGE>
COMPENSATION COMMITTEE MEMBERSHIP
Mr. Reed and Mr. Dabagia, executive officers of the Bank, are members of the
Compensation Committee but do not participate in Compensation Committee
evaluations of their own performances or in voting on their own compensation. As
members of the Committee, they do participate in reviewing the performance of
other officers, engage in the discussion of non-compensation human resource
related issues that the Committee from time to time will review and discuss,
provide technical assistance to the Committee, provide liaison between the
Committee and other management, and undertake to enact the decisions of the
Committee on its behalf. On occasion, Ms. Judy Dodge, Vice President of Human
Resources, also engages in many of the above duties as well, but is not a member
of the Committee.
No other officers, employees or former officers, former employees of the Bank or
individuals requiring disclosure under Item 404 of Regulation S-K are members of
the Compensation Committee. In addition, there are no executive officer/director
interlocks in which an executive officer/director of one company serves on the
compensation committee of another company, which itself has an executive
officer/director serving on the first company's board of directors or
compensation committee.
Robert E. McBride, Chairman Russell L. Arndt James D. Brown
Robert C. Dabagia Larry N. Middleton, Jr. Boyd W. Phelps
Larry E.Reed Susan D. Sterger
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following information is provided with respect to compensation paid by Bank
to each executive officer of Horizon and/or Bank in 1995 whose compensation
exceeded $100,000. Horizon pays no direct remuneration to its executive
officers, all of whom are compensated as officers of Bank.
<TABLE>
<CAPTION>
------------ANNUAL COMPENSATION----------- ---------------Long-term Compensation-------------
--------Awards--------- -------Payouts------------
Securities
------------ANNUAL COMPENSATION----------- Restricted Underlying
Name and Salary Bonus Other Annual Stock Options/ LTIP Other
Principal Position Year (1)(2) (1)(3) Compensation(4) Award(s) SARs(#) Payouts($) Compensation(5)
- ------------------ ---- ------ ------ --------------- -------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry E. Reed 1995 $220,400 -- $5,004 -- -- -- $35,526
Chairman and 1994 $209,100 $11,519 $3,579 -- -- -- $34,739
Chief Executive Officer 1993 $195,400 $26,646 $1,725 -- -- -- $33,084
Robert C. Dabagia 1995 $178,300 -- $6,073 -- -- -- $29,981
President and Chief 1994 $168,100 $9,260 $4,033 -- -- -- $26,798
Administrative Officer 1993 $159,300 $21,723 $1,840 -- -- -- $29,380
Thomas P. McCormick 1995 $121,000 -- $2,301 -- -- -- $12,151
Executive Vice 1994 $114,100 $6,286 $2,396 -- -- -- $ 8,690
President 1993 $103,700 $17,116 $2,316 -- -- -- $14,878
Leon A. Dargis 1995 $107,400 -- $5,666 -- -- -- $14,068
Senior Vice 1994 $100,600 $5,542 $4,898 -- -- -- $12,766
President 1993 $94,000 $7,426 $3,157 -- -- -- $11,326
<PAGE>
<FN>
(1) Salary and benefit numbers included herein for years have been restated to
indicate actual paid, and actual deferred compensation pursuant to each
category of payment
(2) Includes salary amounts paid and salary amounts deferred by the individual
named pursuant to Horizon's Thrift Plan, and Supplemental Executive
Retirement Plan ("SERP").
(3) Includes bonus amounts paid and bonus amounts deferred by the individual
named pursuant to Horizon's Thrift Plan, and SERP.
(4) Includes car allowance and a portion of the group term life insurance
premium taxable to the individual named.
(5) Includes Horizon's contribution to ESOP and Horizon's matching contribution
to Thrift Plan and SERP.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
Messrs. Reed and Dabagia are parties to Agreements with Horizon and Bank which
provide for their continued service as Chairman of the Board and President,
respectively, until December 31, 1998, subject to the right of Horizon and Bank
to extend such Agreements. These agreements are in place to assure that senior
executive decisions are made with the long-term benefit of Horizon and its
shareholders in mind even if those decisions expose the senior executives to
some criticism in the short term. Under the Agreement, Messrs. Reed and Dabagia
are to receive benefit minimums and are to be paid salaries based upon their
then existing salaries with periodic increases in accordance with the salary
administration program applicable to all executives of Horizon and Bank. The
salary administration program is regulated by the Compensation Committee of the
Board and measures individual salaries against published compensation data for
comparably sized financial institutions. If the employment of either is
terminated for reasons other than "cause", as defined in the Agreement, then the
individual shall receive an amount equal to three times his annual salary rate
at that time. There is no change of control arrangement which would benefit
either officer under the stated Employment Agreements.
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on exercise in 1995 by Horizon's
executive officers named in the Summary Compensation Table. The table also sets
forth the number of shares covered by exercisable and unexercisable options held
by such executives on December 31, 1995. None of these options were exercised on
December 31, 1995.
<TABLE>
<CAPTION>
Number of Shares Covered Value of Unexercised In-The
by Unexercised Options on Money Options as of
----Shares Acquired----- ---------12/31/95-------- -------12/31/95 (2)-------
On Exercise Value
Name During 1995 Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry E. Reed -0- -0- 30,000 -0- $258,500 -0-
Robert C. Dabagia -0- -0- 23,000 -0- $205,600 -0-
Thomas P. McCormick -0- -0- 10,000 -0- $ 99,100 -0-
Leon A. Dargis -0- -0- 7,000 -0- $ 57,300 -0-
<FN>
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Market value of shares covered by in-the-money options on December 31, 1995
less option exercise price. Options are in-the-money if the market value of
shares covered thereby is greater than the option exercise price.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Horizon paid its non-employee directors $12,000 each for their services in 1995.
Active officers of Horizon, receive no separate compensation for their services
as directors. There is no additional compensation for meetings of committees of
Horizon Board, special assignments or special meetings.
<PAGE>
DIRECTORS DEFERRED COMPENSATION PLAN
Horizon sponsors a Directors Deferred Compensation Plan, which allows Directors
of Horizon and Bank who are not also employees to elect to defer the receipt of
fees for their services. Fees deferred under the plan accrue interest compounded
annually. Payments of deferred fees are made to participants or their
beneficiaries in a lump sum or monthly installments upon death or disability of
the participants, or as designated by participants, when they are no longer a
member of the Board of Directors or attain a specific age. Participants have no
rights to amounts deferred other than rights as general creditors of Horizon.
PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return
Among Horizon Bancorp Common Stock, S&P 500 Index
and Bank Composite Index
(Total return assumes $100 invested on
January 1, 1990 with reinvested dividends)
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Horizon Bancorp $100.00 $146.67 $206.67 $218.00 $246.00 $274.00
S&P 500 Index 100.00 130.47 140.41 154.57 156.61 215.46
Bank Composite Index 100.00 163.34 215.40 237.45 225.27 358.97
The comparison of total return on investment (change in December year end stock
price plus reinvested dividends) for each of the periods shown, assumes that
$100 was invested on December 31, 1990 in each of Horizon Common Stock, the
Standard and Poor 500 Index and the Standard and Poor Bank Composite Index.
Other companies in the Standard and Poor indices are in general larger than
Horizon, with greater market capitalization, and with shares which trade on a
national exchange. Horizon's shares are not traded on any exchange and trade
only infrequently in the over-the-counter market. Information with respect to
the market price of Horizon's shares was provided by The Chicago Corporation,
the principal market maker for the shares, and does not include mark-ups,
mark-downs or commissions and may not reflect either actual trades or all trades
which occur.
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Directors and executive officers of Horizon and their associates were customers
of, and have had transactions with, Bank in the ordinary course of business
during 1995. Comparable transactions may be expected to take place in the
future. During 1995, various directors and officers of Horizon and their
respective associates were indebted to Bank from time to time. These loans were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present other unfavorable features.
EMPLOYEE STOCK OWNERSHIP PLAN
Generally, all regular employees of Horizon and Bank who are at least 21 years
old and have completed one year of employment with Horizon or Bank are eligible
to participate in the Horizon Bancorp Employee Stock Ownership Plan. Under the
terms of the ESOP, Horizon and Bank, as participating employers may, in their
discretion, contribute Horizon Common Stock to the ESOP or contribute cash to
the ESOP which is invested primarily in Horizon Common Stock. The amount of such
contributions is determined by the Board of Directors. Contributions are
allocated to each participant who completed 1,000 hours of service (as defined)
during the year and is employed by Horizon or Bank on the last day of the year
in the proportion that such participant's compensation (as defined) for the year
bears to the total compensation for all participants for the year. No
participant contributions are required or allowed under the ESOP.
Participants are vested in their accounts under the ESOP on a graduated basis
commencing with 20% after 2 years of service and reaching 100% after 6 years of
service. Distributions to participants or their beneficiaries under the ESOP may
be in a lump sum as a result of retirement or other termination of employment,
death or permanent and total disability. In general, distributions are made in
the form of whole shares of Horizon Common Stock or cash, as elected by
participants. If a participant or beneficiary receives a distribution in the
form of Horizon Common Stock, the shares are subject to a "put" option. The
terms of the put option entitle the participant to require Horizon (or the ESOP)
to repurchase all or any part of the distributed shares at their current fair
market value. The put option right applies when the stock is distributed and, if
the distributee does not elect to exercise the put at that time, the distributee
may again exercise the put option in the next year after the end of year
valuation of Horizon stock held by the ESOP is communicated to the distributee.
Additionally, participants have the right to direct the voting of the shares of
Horizon Common Stock allocated to their accounts on all matters.
After a participant has attained age 55 and completed 10 years of participation
in the ESOP, the participant may begin to elect to diversity his or her ESOP
account by taking a distribution of up to 25% of the Horizon Common Stock
allocated to the account. The stock distributed pursuant to this diversification
election is subject to the put option rights discussed above. Eligible
participants may elect, for a period of up to five consecutive years, to
diversify their ESOP account in this manner; in the sixth year, eligible
participants may elect to diversify up to 50% of the Horizon Common Stock
allocated to their ESOP accounts. This diversification right is cumulative so
that, in the aggregate, in any one of the first five years, no more than 25% of
the total value of the Horizon Common Stock allocated to the account, and in the
sixth year no more than 50% of the total value of the Horizon Common Stock
allocated to the account, is subject to the diversification election.
In August, 1985, prior to the issuance of Horizon Common Stock in connection
with the merger of Horizon and Citizens Michiana Financial Corporation, the ESOP
acquired 30.95% of the issued and outstanding shares of Horizon Common Stock
from individual shareholders. The transaction was financed through a loan of
$3,400,000 from The Northern Trust Company to the ESOP which loan was guaranteed
by Horizon ("1985 Loan"). The acquisition was made by the ESOP with the prior
approval of the Federal Reserve Bank of Chicago ("Federal Reserve"). On January
17, 1995, the ESOP made the final payment on the 1985 loan. Such payment was
made with cash held by the ESOP and with a contribution to the ESOP by Horizon
in the amount of $146,500. The final principal payment on the loan was $297,500.
<PAGE>
On August 26, 1994, the ESOP acquired 172,414 shares of Horizon Common Stock
directly from Horizon at a purchase price of $29.00 per share. The transaction
was evidenced by a Term Note and Security Agreement under which the ESOP, as
borrower, agreed to pay Horizon, as lender, a total of $5,000,006 over a period
of 10 years, in annual installments without interest ("1994 Loan"). The ESOP's
acquisition of the Horizon Common Stock was made pursuant to the prior approval
of the Federal Reserve. The ESOP's obligations under the Term Note and Security
Agreement are secured by a security interest in the Horizon Common Stock
acquired in the transaction and any proceeds therefrom--subject to the release
of such security interest by Horizon as the note is paid. For the year ended
December 31, 1995, a $500,000 principal payment was made by the ESOP to Horizon
from the cash available to the ESOP and 17,241 shares of Horizon Common Stock
were released from collateral and allocated to ESOP participants.
On March 22, 1996, the ESOP borrowed $253,981 directly from Horizon; the
proceeds were utilized by the ESOP to fund its acquisition of a total of 7,312
share of Horizon Common Stock with respect to distributions to participant
during 1995 and the election by eligible participants to diversify a portion of
their ESOP accounts invested in Horizon Common Stock. The transaction was
evidenced by a Term Note and Security Agreement under which the ESOP, as
borrower, agreed to pay Horizon, as lender, a total of $253,981 over 20 years,
in annual installments without interest ("1995 Loan"). The ESOP's obligation
under the Term Note and Security Agreement are secured by a security interest in
the Horizon Common Stock acquired in the transaction and any proceeds
therefrom--subject to the release of such security interest by Horizon as the
note is paid. The first installment under the 1995 Loan is due on December 31,
1996.
For the year ended December 31, 1995, $169,000 was contributed to the ESOP, of
which $5,156 in value of Horizon Common Stock was allocated to the account of
Larry E. Reed, $5,156 in value of Horizon Common Stock was allocated to the
account of Robert C. Dabagia, $4,216 in value of Horizon Common Stock was
allocated to the account of Thomas P. McCormick, $3,379 in value of Horizon
Common Stock was allocated to the account of Leon A. Dargis, and $19,637 in
value of Horizon Common Stock was allocated to accounts of all executive
officers as a group (five individuals, including the above four). The accounts
of Messrs. Reed, Dabagia, McCormick, and Dargis under the ESOP are 100% vested.
THRIFT PLAN
Generally, all regular employees of Horizon and Bank who are at least 21 years
old and have completed one year of employment with Horizon or Bank are eligible
to participate in the Horizon Bancorp Employees' Thrift Plan. For the year ended
December 31, 1995, the Thrift Plan was funded by matching contributions by the
Bank of 100% of participants' salary redirection contributions of up to 2% of
compensation (as defined in the Thrift Plan) and 50% of salary redirection
contributions in excess of 2% of compensation but not more than 6% of
compensation.
Salary redirection contributions by participants and matching contributions by
Bank are allocated to each participant based upon individual contribution
elections. The value of each participant's account attributable to Bank's
matching contributions vests on a graduated basis commencing with 20% after 2
years of service and reaching 100% after 6 years of service. All other accounts
under the Thrift Plan are fully vested at all times. Distribution of benefits
under the Thrift Plan is made in the form of a joint 50% survivor annuity for
married participants and life annuity for single participants. However, the
Thrift Plan allows participants to elect to receive their benefits in the form
of a lump sum or in installment distributions over a period not exceeding 10
years.
For the year ended December 31, 1995, Bank contributed $172,000 to the Thrift
Plan of which $6,000 was allocated to the account of Mr. Reed, $6,000 was
allocated to the account of Mr. Dabagia, $4,918 was allocated to the account of
Mr. McCormick, $4,015 was allocated to the account of Mr. Dargis, and $22,945
was allocated to the accounts of all executive officers as a group (five
individuals, including the above four). The accounts of Messrs. Reed, Dabagia,
McCormick, and Dargis under the Thrift Plan, are 100% vested.
<PAGE>
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLANS
Awards under the 1987 Plan were made by the Compensation Committee, exclusive of
those members who were eligible to participate in the 1987 Plan (the
"Committee"). The Committee selected any key employee of Horizon or Bank to
participate in the 1987 Plan. Awards were granted from time to time until the
earlier of January 20, 1990 or the termination of the 1987 Plan by the Board of
Directors. A maximum of 85,000 shares of Horizon Common Stock could have been
issued under the 1987 Plan. However, options could not have been granted for
more than 42,500 shares during any calendar year. On December 18, 1990, the
Board approved a new Plan, for non-executive officers only, authorizing the
grant of a number of options and Stock Appreciation Rights equal to the number
of those options and Stock Appreciation Rights terminated in 1990, not to exceed
10,000 shares. The new Plan authorized these grants under the same terms and
conditions as the 1987 Plan. All of the options and Stock Appreciation Rights
under the new Plan were granted on January 28, 1991. At December 31, 1995,
options to purchase 82,750 shares of Horizon Common Stock were outstanding under
the Plans, and 1,150 SARs have been exercised under the Plan.
Awards under the Plans include non-qualified stock options ("NSOs") and stock
appreciation rights ("SARs"). SARs were granted only in conjunction with NSOs.
An award cannot be exercised by a recipient until one year after grant.
Thereafter, after the first year and through the second year from the date of
award, an option may be exercised as to not more than 20% of the total option
shares; through the third year as to not more than 40% of the total option
shares; through the fourth year as to not more than 60% of the total option
shares; through the fifth year as to not more than 80% of the total option
shares; and during the sixth year and any time thereafter (during the remaining
term of the option) all or part of the option shares may be exercised. Upon the
death of the recipient, the option is exercisable in full within one year from
the date of the recipient's death. In the event of a change of control of
Horizon (as defined) all outstanding options may be exercised immediately.
The following is provided with respect to those Stock Options:
Name of individual Shares subject to Per share
or number of persons options with stock exercise
in group appreciation rights price
- -------- ------------------- -----
Executive officers with
granted options (4 individuals) 70,000 $31.50 - 22.50
Horizon and Bank employees
with granted options,
(14 individuals, including
above 4) 81,050 (1)(2) $31.50 - 13.50
(1) Net of NSOs and SARs forfeited and reallocated pursuant to the terms of the
Plans.
(2) There were no NSOs or SARs granted in 1995.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Chicago, Illinois, served as Horizon's independent auditors
for 1995. The services performed by Arthur Andersen LLP in this capacity
included conducting an examination in accordance with generally accepted
auditing standards and expressing an opinion on Horizon's 1995 consolidated
financial statements. As of this date, no determination has been made as to
selection of Independent Public Accountants for the year ending December 31,
1996. It is expected that representatives of Arthur Andersen LLP will be present
at the Annual Meeting.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Horizon's executive officers, directors, and owners of more than 10% of Horizon
Common Stock are required to file reports of their ownership and changes in
ownership of Horizon Common Stock with the Securities and Exchange Commission.
Copies of these reports must also be furnished to Horizon. Based solely upon a
review of copies furnished to Horizon, through the date of this Proxy Statement,
or written representation that no reports were required, Horizon believes that
through 1995, all filing requirements of the Securities and Exchange Commission
applicable to Horizon's executive officers, directors, and 10% shareholders
relating to stock ownership were complied with.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder who intends to present a proposal for action at Horizon's 1997
annual meeting of shareholders through the inclusion of such proposal in
Horizon's Proxy Statement relating to that meeting must furnish Horizon such
proposal in writing together with notification of such intention no later than
December 2, 1996, in order to be considered for inclusion in next year's Proxy
Statement.
OTHER MATTERS
Management does not intend, and presently knows of no intention by any other
person, to present to the meeting any action by shareholders other than as set
forth herein. However, the enclosed proxy confers discretionary authority with
respect to the transaction of any other business that may properly come before
the meeting and it is the intention of the persons named in the proxy to vote in
their discretion on any such matter.
Insofar as any of the information in this Proxy Statement may rest peculiarly
within the knowledge of persons other than Horizon, Horizon relies upon
information furnished by others for the accuracy and completeness thereof.
WE STRONGLY URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT
THE EARLIEST POSSIBLE DATE EVEN THOUGH YOU PLAN TO ATTEND THE MEETING. IN THE
EVENT YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
Thomas P. McCormick
Secretary
Michigan City, Indiana
April 15, 1996
AVAILABILITY OF FORM 10-K
A COPY OF HORIZON'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO DIANA E. TAYLOR, CHIEF FINANCIAL OFFICER OF HORIZON, AT 515 FRANKLIN
SQUARE, MICHIGAN CITY, INDIANA 46360.
