<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INDIANA FEDERAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
INDIANA FEDERAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules (6-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
Notes:
<PAGE>
[IFC LOGO]
INDIANA FEDERAL CORPORATION
56 Washington Street
Valparaiso, Indiana 46383
(219) 465-6607
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 24, 1996
Notice is hereby given that the Annual Meeting of Shareholders of Indiana
Federal Corporation (the "Company") will be held at the Waterbird Restaurant at
the Indian Oak Resort, 558 Indian Boundary Road, Chesterton, Indiana, on April
24, 1996 at 10:00 A.M., Indiana time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three (3) directors of the Company;
2. The ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for the fiscal year ending
December 31, 1996; and
such other matters as may properly come before the Meeting, or any adjournments
or postponements thereof. The Board of Directors is not aware of any other
business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned. Shareholders of record at the close of business on March 15, 1996
are the shareholders entitled to vote at the Meeting and any adjournments
thereof. A complete list of shareholders entitled to vote at the Meeting will
be available for inspection by shareholders at the offices of the Company during
the ten days prior to the Meeting, as well as at the Meeting.
You are requested to complete, sign and date the enclosed Form of Proxy
which is solicited on behalf of the Board of Directors and to mail it promptly
in the enclosed envelope. The Proxy will not be used if you attend and vote at
the Meeting in person.
By Order of the Board of Directors
DONALD A. LESCH
Chairman of the Board
Valparaiso, Indiana
March 29, 1996
- -------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED STATES.
- -------------------------------------------------------------------------------
<PAGE>
INDIANA FEDERAL CORPORATION
56 Washington Street
Valparaiso, Indiana 46383
(219) 465-6607
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 1996
--------------------
This Proxy Statement is furnished in connection with the solicitation, on
behalf of the Board of Directors of Indiana Federal Corporation (the "Company"),
of proxies to be used at the Annual Meeting of Shareholders of the Company (the
"Meeting"), and all adjournments of the Meeting. The Meeting is to be held at
the Waterbird Restaurant at the Indian Oak Resort, 558 Indian Boundary Road,
Chesterton, Indiana, on April 24, 1996 at 10:00 A.M., Indiana time. The
accompanying Notice of Meeting and this Proxy Statement are first being mailed
to shareholders on or about March 29, 1996. Certain of the information provided
herein relates to Indiana Federal Bank for Savings (the "Bank"), a wholly-owned
subsidiary and predecessor of the Company.
At the Meeting, shareholders of the Company are being asked to consider and
vote upon the election of three directors of the Company and the ratification of
the appointment of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending December 31, 1996.
VOTING RIGHTS AND PROXY INFORMATION
All shares of Company common stock, par value $.01 per share (the "Common
Stock"), represented at the Meeting by properly executed proxies received prior
to or at the Meeting and not revoked will be voted at the Meeting in accordance
with the instructions thereon. If no instructions are indicated, properly
executed proxies will be voted for the nominees and the adoption of the
proposals set forth in this Proxy Statement. The Company does not know of any
matters, other than as described in the Notice of Annual Meeting of
Shareholders, that are to come before the Meeting. If any other matters are
properly presented at the Meeting for action, the persons named in the enclosed
form of proxy and acting thereunder will have the discretion to vote on such
matters in accordance with their best judgment.
Directors shall be elected by a plurality of the votes present in person or
represented by proxy at the Meeting and entitled to vote on the election of
directors. In all matters other than the election of directors, the affirmative
vote of the majority of shares present in person or represented by proxy at the
Meeting and entitled to vote on the matter shall be the act of the shareholders.
Proxies marked to abstain have the same effect as votes against the
proposal, while broker non-votes have no effect on the vote. A majority of the
shares of the Company's Common Stock, present in person or represented by proxy,
shall constitute a quorum for purposes of the Meeting. Abstentions and broker
non-votes are counted for purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) duly executing and
delivering to the Secretary of the Company a subsequent proxy relating to the
same shares prior to the exercise of such proxy, (ii) filing with the Secretary
of the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, or (iii) attending the Meeting and voting in person
(although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy should be delivered
to Brenda A. Sheetz, Secretary of the Company, at 56 Washington Street,
Valparaiso, Indiana 46383.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on March 15, 1996, will
be entitled to one vote for each share then held. As of that date, the Company
had 4,737,330 shares of Common Stock issued and outstanding. No persons or
entities were known by management to beneficially own more than five percent of
the outstanding shares of the Company's Common Stock as of March 15, 1996.
<PAGE>
At March 15, 1996, all directors, nominees for director and executive
officers of the Company and the Bank, as a group (14 persons), beneficially
owned 577,076 shares, or 11.8% of the Common Stock, which includes shares held
directly, as well as 138,456 shares which are subject to presently exercisable
options and options exercisable within 60 days of March 15, 1996, granted under
the 1986 Stock Option and Incentive Plan (the "Stock Option Plan"), held in
retirement accounts, held by certain of the group members' families,
corporations for which a group member is an officer or director, or held by
trusts of which a group member is a trustee or a substantial beneficiary with
respect to which shares the group member may be deemed to have sole or shared
voting and/or investment power.
PROPOSAL I -- ELECTION OF DIRECTORS
The Company's Board of Directors is composed of eight members.
Approximately one-third of the directors are elected annually. Directors of the
Company are generally elected to serve for a three-year term or until their
respective successors shall have been elected and shall have qualified.
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including their terms of office. The
composition of the Board of Directors of the Company and the Bank is identical.
It is intended that the proxies solicited on behalf of the Board of Directors
(other than proxies in which the vote is withheld as to one or more nominees)
will be voted at the Meeting for the election of the nominees identified below.
If any nominee is unable to serve, the shares represented by all such proxies
will be voted for the election of such substitute as the Board of Directors may
recommend. At this time, the Board of Directors knows of no reason why any of
the nominees might be unable to serve, if elected. There are no arrangements or
understandings between any nominee and any other person pursuant to which such
nominee was selected.
<TABLE>
<CAPTION>
Shares of Common
Term Stock Beneficially Percent
Positions Held in the Director to Owned at March of
Name Age Company Since Expire March 15, 1996(1)(2) Class
- ------------------ --- ---------------------- ----- ------ ------------------- -----
<S> <C> <C> <C> <C> <C> <C>
NOMINEES
--------
Donald A. Lesch 45 Chairman of the Board 1990 1999 68,971 1.4%
Philip A. Maxwell 61 Director 1987 1999 60,051 1.3
Barbara A. Young 46 Director 1990 1999 45,024 *
DIRECTORS CONTINUING IN OFFICE
------------------------------
Peter R. Candela 57 Director, President and 1987 1997 97,344 2.0
Chief Executive Officer
John R. Poncher, M.D. 65 Director 1987 1997 44,535 *
Byron Smith III 47 Director 1987 1997 32,725 *
James E. Hutton 57 Director 1987 1998 55,559 1.2
Fred A. Wittlinger 54 Director 1992 1998 54,119 1.1
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes shares held directly, as well as an aggregate of 129,205 shares
which are subject to immediately exercisable options and options
exercisable within 60 days of March 15, 1996, under the Company's Stock
Option Plan, shares held in retirement accounts or by certain members of
the named individual's family or corporations for which an individual is an
officer or director or held by trust of which an individual is trustee or a
substantial beneficiary, over which shares the individual may be deemed to
have sole or shared voting and/or investment power. The above named
individuals held exercisable options and options exercisable within 60 days
of March 15, 1996 as follows: Chairman Lesch - 23,854 shares; Director
Maxwell - 7,125 shares; Director Young - 25,126 shares; President Candela -
11,600 shares; Director Poncher - 22,125 shares; Director Smith - 7,125
shares; Director Hutton - 7,125 shares and Director Wittlinger - 25,125
shares.
(2) The Common Stock has been adjusted to reflect the 3 for 2 stock split which
occurred on May 31, 1994 and the 4 for 3 stock split which occurred on
February 26, 1993.
2
<PAGE>
The business experience of each of the directors of the Company and the
Bank for at least the past five years is as follows:
DONALD A. LESCH. Effective June 1, 1993, Mr. Lesch became a full-time,
salaried Chairman of the Board of the Company and the Bank. Prior thereto, Mr.
Lesch was an investor and consultant to Gough and Lesch Development Corporation,
a real estate development company located in Merrillville, Indiana.
PHILIP A. MAXWELL. Mr. Maxwell has been a self-employed farmer in
Valparaiso, Indiana since 1959.
BARBARA A. YOUNG. Since January 1, 1994, Ms. Young has served as President
of Benchmark LTD, a real estate development company located in Valparaiso,
Indiana. Prior thereto, Ms. Young was an attorney with the law firm of
Hoeppner, Wagner & Evans, located in both Valparaiso and Merrillville, Indiana.
PETER R. CANDELA. Since 1985, Mr. Candela has served as President, Chief
Executive Officer and Director of the Company and the Bank. Since 1973, Mr.
Candela held a variety of positions with the Bank including Senior Vice
President and Chief Financial Officer.
JOHN R. PONCHER, M.D. Dr. Poncher is a physician engaged in the private
practice of medicine in Valparaiso, Indiana.
BYRON SMITH, III. Mr. Smith is the President of Smith Nuppnau Ready Mix,
Inc., a concrete producer located in Valparaiso, Indiana.
JAMES E. HUTTON. Since June 1993, Mr. Hutton has served as Vice President
in charge of operations for Burrell Professional Labs, Inc., a professional
photo processing company with operations throughout the United States. Prior
thereto, Mr. Hutton was Managing Partner of the Northern Indiana office of Geo.
S. Olive and Co., an accounting firm. Mr. Hutton is a certified public
accountant.
FRED A. WITTLINGER. Since 1988, Mr. Wittlinger has served as President and
Chief Executive Officer of United Consumers Club, Inc., a consumer buying club
franchising corporation located in Merrillville, Indiana.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Meetings of the Board of Directors of the Company are generally held as
required. During fiscal 1995 the Board of Directors held 15 meetings. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of the Company held during 1995 and the total number of meetings held
by all Board committees on which any such director served during 1995.
The Board of Directors of the Company has standing Nominating, Audit and
Personnel Committees, the function and composition of which are set forth below.
The Company's Board of Directors has a Nominating Committee consisting of
the entire Board of Directors of the Company. The Nominating Committee met one
time during 1995. The Nominating Committee recommends to the Board nominees for
election as directors, as well as nominees to fill any vacancies which may exist
on the Board. The Nominating Committee will consider nominees recommended by
others; however, it has not actively solicited nominations nor established any
procedures for this purpose. Pursuant to the Company's Bylaws, nominations must
be delivered in writing to the Secretary of the Company at least 15 days prior
to the date of the annual meeting.
The Company's Audit Committee reviews audit reports and related matters to
ensure effective compliance with regulations and internal policies and
procedures. This Committee also approves the accounting firm selected by
management to perform the Company's annual audit and acts as the liaison between
the auditors and the Board. Members of the Audit Committee include Directors
Hutton (Chairman), Maxwell, Smith, Candela (ex officio) and Lesch (ex officio).
During fiscal 1995, the Committee met two times.
3
<PAGE>
The Bank's Personnel Committee, which acts as the compensation committee of
the Company and the Bank, is responsible for making recommendations to the Board
with respect to salaries for the President and senior officers, as well as fees
for services on the Board of Directors and Board committees. During 1995, the
Personnel Committee was composed of Directors Smith (Chairman), Hutton, Poncher,
Young, Lesch (ex officio) and Candela (ex officio). This Committee held two
meetings during 1995.
DIRECTORS COMPENSATION AND BENEFITS
DIRECTORS FEES. Each non-employee director was paid an annual fee during
1995 of $11,700 for serving on the Company's and Bank's Board of Directors,
except for Director Smith, Secretary of the Board. During 1995, Mr. Smith
received an annual fee of $13,800, of which $10,800 was paid by the Bank and the
remainder of which was paid by the Company. All other non-employee directors
received $8,400 of their annual fee from the Bank and the remaining balance from
the Company. Each non-employee director is paid $150 for each Company or Bank
committee meeting attended, with the exception of the members of the Executive
Committee of the Company and the Bank, who receive a fee of $250 per month,
instead of a per meeting fee, for service on such committee. The Company and
the Bank each pay their own fees to directors for services on their respective
Board committees.
DIRECTORS STOCK OPTION PLAN AWARDS. The Stock Option Plan, as amended in
1993 and approved by the shareholders at the 1993 Annual Meeting, provides for
the granting of formula awards to directors of the Company. The director awards
are part of a policy adopted in 1993 by the Bank's Personnel Committee relating
to the granting of awards to directors, executive officers and certain key
employees under the Stock Option Plan, to be carried out by the Stock Option
Committee. Under this policy, awards may be granted to plan participants by the
Stock Option Committee utilizing objective criteria adopted by the Personnel
Committee and approved by the Board of Directors, after taking into account the
practices of other publicly traded financial institutions and such other factors
as deemed appropriate.
The Stock Option Plan provides for an annual base award of 3,000 option
shares to each non-employee director. The actual amount each director will
receive is determined under the formula so that non-employee directors will
receive a minimum of 1,500 shares and a maximum of 4,500 shares, subject to the
Company achieving a return on equity of at least 10% and a return on assets of
at least .80%. Pursuant to the formula award provision of the Stock Option
Plan, based on 1995 performance, Directors Hutton, Maxwell, Poncher, Smith,
Wittlinger and Young each received an option in February 1996 to purchase 1,500
shares of Common Stock at an exercise price of $21.00 per share. For additional
information concerning stock option awards, see "Compensation Committee Report
on Executive Compensation - Stock Option Awards."
DIRECTORS DEFERRED COMPENSATION AGREEMENTS. The Company has entered into a
Director Deferred Compensation Agreement ("DDCA") with five of its non-employee
directors. The DDCAs are unfunded, non-qualified agreements which provide for
retirement, death and disability benefits for the participants and their
designated beneficiaries. Under the DDCAs, each non-employee director may, for
a period of five years, make an annual election to defer receipt of all or a
portion of his or her monthly director fees into a Guaranteed Investment
Contract ("GIC") Account and/or a Phantom Unit Account.
Deferred amounts allocated to the GIC Account will be credited with
interest at the rate of .667% per month. Deferred amounts allocated to the
Phantom Unit Account are used to "purchase" Phantom Units, each representing a
share of the Common Stock, at the market price of the Common Stock on the date
of the deferral election. Phantom Units are credited with the dividends that
are received by the holders of Common Stock, and are adjusted for any stock
splits or similar events affecting the Common Stock generally. Directors do not
have the option to receive dividends in cash, but may elect to reinvest such
dividends in Phantom Units or in a GIC Account. Upon termination of the
director's service, the Phantom Units are deemed to be sold, and the proceeds of
such sale are distributed to the director in cash pursuant to the payment
provisions of the DDCAs.
At normal retirement (age 65), each director will be entitled to receive
over a 15-year period his or her accrued benefit, which is determined by
annuitizing such benefit over the payment period using a monthly interest factor
of .833%. The DDCAs also provide for disability and death benefits, including a
$10,000 burial expense payment. Until disbursed, the amounts directed to be
deferred are subject to the claims of general creditors.
4
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Personnel Committee, which acts as the compensation
committee of the Company and the Bank, was comprised of Directors Smith
(Chairman), Hutton, Poncher, Young, Lesch (ex officio) and Candela (ex officio).
During 1995, Mr. Lesch served as the Company's and the Bank's Chairman of the
Board and Mr. Candela served as the Company's and the Bank's President and Chief
Executive Officer. During 1995, Directors Hutton, Poncher, Young and President
Candela (or an individual or entity related to such persons), each had loans
outstanding with the Bank in amounts in excess of $60,000. All such loans were
made in the ordinary course of business, were made 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
the normal risk of collectability or present other unfavorable features.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or granted to the Company's Chairman of the Board and Chief Executive Officer.
No other executive officer of the Company was paid compensation in excess of
$100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------------------
Securities
Other Annual Restricted Stock Underlying All Other
Name and Principal Compensation Award(s) Options/ Compensation
Position Year Salary($) Bonus($)(1) ($) ($) SARs (#)(3) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald A. Lesch 1995 $139,992 $ --- --- --- 27,000/--- $ 8,400(4)
Chairman of the Board 1994 119,996 18,099 --- --- 4,500/--- 12,924
1993 58,333 8,850 --- --- 6,750/--- 3,358
- ---------------------------------------------------------------------------------------------------------------------
Peter R. Candela, 1995 160,008(2) --- --- --- 3,000/--- 11,100(4)
President and Chief 1994 156,504(2) 18,880 --- --- 4,500/--- 17,366
Executive Officer 1993 148,440(2) 17,913 --- --- 6,750/--- 16,717
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
(1) Paid pursuant to the Company's Incentive Compensation Plan. See
"Compensation Committee Report on Executive Compensation - Bonus Awards for
1995."
(2) Includes $11,400 in compensation deferred pursuant to Mr. Candela's
Executive Deferred Compensation Agreement. Under the agreement, Mr.
Candela has elected to defer 100% of the portion of his annual salary which
equals the annual base Board fees received by non-employee Directors of the
Bank for attendance at regular Board meetings. Additional terms of Mr.
Candela's agreement are substantially similar to those for the Company's
directors. See "-- Directors Compensation and Benefits -- Directors
Deferred Compensation Agreements" above.
(3) The 1993 options have been adjusted to reflect the 3 for 2 stock split
which occurred on May 31, 1994.
(4) Represents the Bank's 1995 contributions to the Employee Stock Ownership
Plan of $8,400 and $9,600 and to the Bank's 401(K) plan of zero and $1,500
to Messrs. Lesch and Candela, respectively.
5
<PAGE>
The following table sets forth certain information concerning stock options
granted pursuant to the Stock Option Plan to the named executive officers. No
stock appreciation rights have been granted pursuant to the Stock Option Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERMS
-------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR(3) ($/SH) DATE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Lesch 24,000(1) 36.6% $16.7500 07/20/05 $252,816 $640,684
3,000(2) 4.6 20.4375 01/27/06 38,559 97,716
- ---------------------------------------------------------------------------------------------------------
Peter R. Candela 3,000(2) 4.6 20.4375 01/27/06 38,559 97,716
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
(1) Represents options granted by the Stock Option Committee to Mr. Lesch for
his leadership and service since joining the Company on a full-time basis.
Of this amount, options to purchase 16,508 share of Common Stock vested on
July 20, 1995, with the remaining options to purchase 7,492 shares of
Common Stock to vest in two equal installments on January 1, 1996 and 1997.
(2) Represents options granted in January 1996 to the individuals set forth in
the table above based to the Company's performance for 1995. These awards
vest in equal installments over a five-year period from the date of grant,
with the first installment scheduled to vest on January 27, 1997, and each
subsequent installment to vest on each of the next four anniversaries of
such date.
(3) Based on total options granted to employees in January 1996 for the
Company's 1995 performance and the grant of options to Mr. Lesch in July
1995.
The following table sets forth certain information with respect to the
number and value of stock options held by the named executive officers at
December 31, 1995. As of such date, no stock appreciation rights have been
granted pursuant to the Stock Option Plan. The options to purchase 3,000 shares
of Common Stock reported in the immediately preceding tables for the Company's
1995 performance are not reflected in the amounts shown below as they were
granted as of January 27, 1996.
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) FY-END ($)
--------------------------- ----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Lesch --- $ --- 23,854 11,396 $108,131 $52,745
- ------------------------------------------------------------------------------------------------------------
Peter R. Candela 7,000 82,250 18,600 7,650 260,754 35,888
- ------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYMENT AGREEMENTS
The Bank has entered into employment agreements with both Messrs. Lesch and
Candela which provide for an annual base salary in an amount not less than such
individual's current salary. The agreements are for a term of three years each
and provide for one year extension, at the end of the first year as well as any
subsequent year, at the discretion of the Board of Directors upon the board's
review of the remaining term. The agreements provide for termination upon such
individual's death, disability, for cause or in certain events specified by
regulations of
6
<PAGE>
the Bank's primary regulator, the United States Office of Thrift Supervision.
The employment agreements are terminable by Messrs. Lesch and Candela upon 90
days' notice to the Bank.
The agreements each provide for payment to Messrs. Lesch and Candela of
299% of their "base amount" of compensation (as defined under Section 280G(b)(3)
of the Internal Revenue Code of 1986, as amended (the "Code")) in the event
there is a change in control of the Company or the Bank, where employment
terminates involuntarily in connection with such a change in control or within
12 months thereafter. Such termination payment is provided on a similar basis
in connection with the voluntary termination of employment, where the change in
control was at any time or at any price opposed by the Company's Board of
Directors. Assuming a change in control were to take place as of December 31,
1995, the aggregate amounts payable to Messrs. Lesch and Candela pursuant to
this change in control provision would be approximately $418,600 and $478,400,
respectively. The agreements also provide, among other things, for
participation in an equitable manner in employee benefits applicable to
executive personnel.
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENTS
The Company and the Bank have entered into Executive Supplemental
Retirement Income Agreements ("ESRIAs") with Messrs. Lesch and Candela, as well
as with certain other key officers. The ESRIAs are unfunded, non-qualified
agreements which provide for an annual benefit to each executive of an amount
generally equal to a stated percentage (of between 15% and 45%) of the
executive's highest five-year average "base compensation" (which includes
salary, but excludes bonuses and fringe benefits) paid by the Company and/or the
Bank, to be paid over a 15-year period. The ESRIAs also provide for disability
and death benefits, including a $10,000 burial expense payment. In addition,
the ESRIAs for Mr. Candela and Mr. Lesch provide that they will be eligible to
receive their full supplemental benefit in the event they involuntarily
terminate their employment with the Bank and/or the Company prior to reaching
retirement age. Until disbursed, the amounts payable under the ESRIAs are
subject to the claims of general creditors. Assuming Messrs. Lesch and Candela
were involuntarily terminated from the employment of the Company or the Bank as
of December 31, 1995, they would have been eligible to receive, at normal
retirement, an annual benefit of approximately $54,000 and $39,000,
respectively, under their ESRIA. The annual benefit upon retirement at normal
retirement age payable to each such individual under their ESRIA is estimated,
based on assumed salary increases, to be approximately $145,000 and $63,000,
respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Personnel Committee (the "Committee") has furnished the following
report on executive compensation:
COMPENSATION POLICIES. Under the supervision of the Board of Directors,
the Company has developed and implemented compensation policies, plans and
programs which seek to enhance the profitability of the Company, and thus
shareholder value, by aligning closely the financial interests of the Company's
employees, including its Chief Executive Officer ("CEO"), Chairman of the Board
and the Company's other senior management, with those of its shareholders. With
regard to compensation actions affecting the CEO, the Executive Committee of the
Board of Directors, consisting of the members of the Committee, as well as all
of the non-employee members of the Board of Directors, acted as the approving
body.
The executive compensation program of the Company is designed to:
- Support a pay-for-performance policy that differentiates compensation
based on corporate and individual performance;
- Motivate employees to assume increased responsibility and reward them
for their achievement;
- Provide compensation opportunities that are comparable to those
offered by other leading companies, allowing the Company to compete
for and retain talented executives who are critical to the Company's
long-term success; and
- Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in ownership
of Common Stock.
7
<PAGE>
At present, the executive compensation program is comprised of salary,
annual cash incentive opportunities, long-term incentive opportunities in the
form of stock options and restricted stock, and miscellaneous benefits typically
offered to executives by major corporations. Annual base salaries for all
executive officers are generally set somewhat below competitive levels so that
the Company relies to a large degree on annual and longer term incentive
compensation to attract and retain corporate officers and other employees and to
motivate them to perform to the full extent of their abilities. The Committee
considers the total compensation (earned or potentially available) in
establishing each element of compensation so that total compensation paid is
competitive with the market place, based on an independent consultant's survey
of salary competitiveness of other financial institutions. The Committee
intends to be advised periodically by independent compensation consultants
concerning salary competitiveness.
As to Mr. Candela and other executive officers, as an executive's level of
responsibility increases, a greater portion of his or her potential total
compensation opportunity is based on Company performance incentives rather than
on salary. Reliance on Company performance causes greater variability in the
individual's total compensation from year to year. By varying annual and
long-term compensation and basing both on corporate performance, the Company
believes executive officers are encouraged to continue focusing on building
profitability and shareholder value.
SALARIES. In an effort to contain expenses, no salary increases were
granted to executive officers or employees during 1995.
STOCK OPTION AWARDS. The Company's Stock Option Plan is designed to align
a significant portion of the executive compensation program with shareholder
interests. The Stock Option Plan, approved by shareholders in 1987, as amended
and approved by shareholders in 1993, provides for the granting of stock-based
awards. To date, the only type of award granted under the Stock Option Plan to
executive officers and other key employees consists of stock options.
In 1993, the Committee adopted a policy relating to the granting of awards
to directors, executive officers and certain key employees under the Stock
Option Plan, to be carried out by the Stock Option Committee, consisting of
Directors Poncher (Chairman), Maxwell and Smith. Under this policy, awards may
be granted to plan participants by the Stock Option Committee utilizing
objective criteria adopted by the Personnel Committee and approved by the Board
of Directors, after taking into account the practices of other publicly traded
financial institutions and such other factors as deemed appropriate. The
formula adopted is based on a plan participant's grade level and the Company's
return on equity and return on assets for each fiscal year. Plan participants
may receive a base award of stock options covering between 1,000 and 6,000
shares for each year in which the Company's return on equity is 12%. The
participant's base award may be increased or decreased by 25% for each 1% change
in return on equity above or below 12%, to a minimum suggested award of 50% of
the base award or to a maximum of 150% of the base award. In addition, under
the formula, no awards under the Stock Option Plan will be granted in any year
in which the Company does not achieve a return on equity of at least 10% and a
return on assets of at least .80%. Pursuant to the formula award provision of
the Stock Option Plan, Messrs. Lesch and Candela each received options to
purchase 3,000 shares of Common Stock at an exercise price of $20.4375 per share
and other executive officers received options to purchase between 1,250 and
2,000 shares of Common Stock at the same exercise price of $20.4375 per share.
In July 1995, Mr. Lesch also received an award of stock options to purchase
24,000 shares of Common Stock at an exercise price of $16.75 per share which was
granted by the Stock Option Committee based on Mr. Lesch's leadership and
service to the Corporation.
In 1993, Section 162(m) was added to the Code, the effect of which is to
eliminate the deductibility of compensation over $1 million, with certain
exclusions, paid to each of certain highly compensated executive officers of
publicly held corporations, such as the Company. Section 162(m) applies to all
remuneration (both cash and non-cash) that would otherwise be deductible for tax
years beginning on or after January 1, 1994, unless expressly excluded. Because
the current compensation of each of the Company's executive officers is well
below the $1 million threshold, the Company has not yet considered its policy
regarding the new provision.
JOHN R. PONCHER, M.D. JAMES E. HUTTON DONALD A. LESCH (EX OFFICIO)
BARBARA A. YOUNG BYRON SMITH, III PETER R. CANDELA (EX OFFICIO)
8
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of Media General's Composite S&L Index and the
Nasdaq Market Index for the period of five years commencing January 1, 1991 and
ended December 31, 1995.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1/1/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
----------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- - NASDAQ INDEX 100 128 130 156 163 212
- - S&L INDEX 100 162 214 266 255 403
- - INDIANA FEDERAL 100 194 265 399 462 635
</TABLE>
Assumes $100 invested on January 1, 1990.
Total return assumes reinvestment of dividends.
INDEBTEDNESS OF MANAGEMENT
The Bank, like many financial institutions, has followed a policy of
granting loans to eligible officers and directors, generally for the financing
and improvement of their personal residences as well as consumer loans. All
loans to officers and directors are made in the ordinary course of business in
accordance with the Bank's standard underwriting practices and procedures, were
all made in the ordinary course of business, were made on substantially the same
terms, including interest rates and collateral, as these prevailing at the time
for comparable transactions with other persons, and did not include more than
the normal risk of collectability or present other unfavorable features.
9
<PAGE>
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has renewed the Company's arrangement for Ernst &
Young LLP to be its independent auditors for the fiscal year ending December 31,
1996, subject to the ratification of the appointment by the Company's
shareholders. A representative of Ernst & Young LLP is expected to attend the
Meeting to respond to appropriate questions and will have an opportunity to make
a statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1996.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's executive office, 56
Washington Street, Valparaiso, Indiana 46383, no later than November 29, 1996.
Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. The Company has retained Regan &
Associates, Inc. to assist in the solicitation of proxies, for a fee estimated
to be approximately $3,750 plus reasonable out-of-pocket expenses. In addition
to solicitation by mail, directors, officers and regular employees of the
Company may solicit proxies personally or by telegraph or telephone, without
additional compensation.
10
<PAGE>
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
INDIANA FEDERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 24, 1996
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Indiana Federal Corporation, and the survivor of them, with full
powers of substitution, to act as attorneys and proxies for the undersigned to
vote all shares of common stock of Indiana Federal Corporation which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at the Waterbird Restaurant at the Indian Oak Resort, 558 Indian Boundary Road,
Chesterton, Indiana, on Wednesday, April 24, 1996, at 10:00 A.M., Indiana time,
and at any and all adjournments thereof.
I. The election as directors of all nominees listed below:
DONALD A. LESCH [ ] VOTE for all nominees
PHILIP A. MAXWELL [ ] VOTE WITHHELD for all
nominees
BARBARA A. YOUNG [ ] For ALL Except
(INSTRUCTION: To withhold your vote for any individual nominee,
mark "For All Except and write that nominee's name in the space
provided below.)
____________________________________________________________________
FOR AGAINST ABSTAIN
II. The ratification of the
appointment of Ernst &
Young LLP as auditors for
the Company for the year
ending December 31, 1996. [ ] [ ] [ ]
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This proxy may be revoked by: (i) duly executing and delivering to the
Secretary of the Company a subsequent proxy relating to the same shares prior
to the exercise of the proxy, (ii) filing with the Secretary of the Company at
or before the Meeting a written notice of revocation bearing a later date than
the proxy, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of
the proxy).
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting, a proxy statement dated
March 29, 1996 and an Annual Report to Shareholders.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
Date
-------------------- -----------------------------------
Shareholder sign above
-----------------------------------
Please sign exactly as your name appears Co-holder (if any) sign above
on the envelope in which this card was
mailed. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
If shares are held jointly, each holder
should sign.
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN THE ENCLOSED POSTAGE PAID ENVELOPE.
INDIANA FEDERAL CORPORATION
- --------------------------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
